Equitable Mortgage Defense In Eviction Actions - California

Another post involving an eviction action where the person being sued for eviction is claiming to be the owner of the property by invoking the equitable mortgage doctrine as a defense is now posted. For more information, see Equitable Mortgage Defense In Homeowner - Tenant Eviction - Part 3 Addendum.

The post involves a California Supreme Court case where, in an ejectment action, the person in possession of the property and being sued for eviction successfully challenged the title of the "purported" owner who brought the ejectment action by invoking the equitable mortgage doctrine. The purported owner, who actually had the title to the property in his name, was deemed to be nothing more than a mortgage holder and, accordingly, was not entitled to seek eviction against the party in possession, who was considered the true owner of the property.

This case may be of great value to homeowners facing foreclosure (and attorneys representing them) who may have entered into arrangements with foreclosure rescue operators where the homeowners "sold" or otherwise signed over their title to the operator, simultaneously entered into a leaseback agreement, and who ultimately found themselves being evicted by the operator.

While the case was decided in California (and may be of interest primarily to those in California), those in states outside of California may be well advised to investigate the existence of similar court cases in their jurisdictions.

While I understand that, in California, the existence of the Home Equity Sales Contract Act (Section 1695 et. seq. of the California Civil Code) was designed to eliminate many of the abuses that California homeowners facing foreclosure have experienced from some real estate foreclosure investors, this law has apparently not put an end to the home equity theft abuses ocurring in California. See:

• Northern California Woman's Unwitting Sale Of Home Leads To Lawsuit
• Southern California Woman Alleged Victim Of Home Theft, Mortgage Broker Arrested
• More Potential Victims Come Forward In N. Cal. Home Equity Theft Scam
• Elderly California Couple Allege $485,000 "Home Theft"
• California Prosecutors Add 26 Charges Against Alleged House Swindling Trio
• Federal Charges Against Eight; 100+ S. Cal. Homeowners Victimized in $12 Million "Rescue" Scam
• Two Plead Guilty In Combined Foreclosure Rescue/"Straw Buyer" Mortgage Fraud Scam

It may be that asserting claims under California's equitable mortgage doctrine by a California homeowner involved in a foreclosure rescue situation may be an alternative approach (rather than making claims under California's Home Equity Sales Contract Act) in seeking relief in a court of law. equitable mortgage zebra

Equitable Mortgage Defense In A Homeowner - Tenant Eviction

The use of an "equitable mortgage" defense in an eviction where a party was being evicted from a property to which the party claimed ownership of pursuant to the equitable mortgage doctrine (the transaction was that of a purported "sale" of the property followed by a subsequent purported "leaseback" arrangement) was involved in two recent cases. To read more, see

• Equitable Mortgage Defense In Homeowner - Tenant Eviction - Part 2, involving a 2006 Minnesota court case, and

• Equitable Mortgage Defense In Homeowner - Tenant Eviction - Part 3, involving a 2006 California case. equitable mortgage zebra

Equitable Mortgage Defense In Homeowner - Tenant Eviction

The fourth and fifth installments of a multi-part post regarding the defense against an eviction of a tenant in possession of real property who claims to be the equitable owner of said property under the equitable mortgage doctrine have been posted.

The 4th installment involves a 2001 decision of the Colorado Supreme Court involving a financially strapped homeowner who entered into a foreclosure rescue transaction with an investor. For more, see Equitable Mortgage Defense In Homeowner - Tenant Eviction - Part 4.

The 5th installment involves a 1991 New Jersey court decision also involving a financially strapped homeowner who entered into a foreclosure rescue transaction with an investor. For more, see Equitable Mortgage Defense In Homeowner - Tenant Eviction - Part 5. equitable mortgage zebra

Michigan Federal Judge Orders Return Of Home By Foreclosure Rescue Operator

This post is a follow up on a prior post dated January 2, 2007 titled Foreclosure Rescue Operator Violates Federal Law, State Usury Law.

In an order and accompanying opinion dated this past Friday (2-9-07), a Michigan Federal judge has officially declared the foreclosure rescue arrangement at issue in the case an equitable mortgage, and has ordered the foreclosure rescue operator to reconvey the title to a house back to the homeowner (the original "rescue" transaction took place in June, 2003). In addition, the judge has ordered that the homeowner is:

• entitled to statutory damages of $2,000 for the rescue operator's failure to comply with the disclosure requirements of the Federal Truth In Lending Act ("TILA"),

• entitled to additional statutory damages of $2,000 for the rescue operator's failure to respond to the homeowner's notice of rescission, in violation of the TILA,

• entitled to a rent credit for $6,700 for rent payments paid to the rescue operator on the leaseback agreement for the period of time immediately after the "rescue" transaction was consummated and the time that the homeowner defaulted on the "leaseback",

• not liable for over $25,000 in "origination fees and other settlement charges" paid on his behalf when the sale leaseback arrangement was consummated.

Implicit in the court order is that the homeowner has obtained the benefit of an interest free loan on the money advanced by the "rescue" operator from the date the initial "foreclosure rescue, sale leaseback" was consummated ( June 11, 2003) until the date of the court order (February 9, 2007), a little over 3 1/2 years.

In addition, the court awarded the operator approximately $6,500 for amounts advanced for property taxes and insurance on behalf of the homeowner, and 7% interest on the equitable mortgage (commencing 2-9-07). The court has given the homeowner 90 days to satisfy the unpaid balance of the court-declared equitable mortgage (approximately $186,000), at which point the "rescue" operator will be free to foreclose on his equitable mortgage.

The amount of attorney's fees that the operator will have to pay to the homeowner's attorney as a result of its losing this case has yet to be determined by the court and, unless the parties reach a settlement on this issue, will be the subject of a future court order.

There is no indication in the record as yet as to whether the operator will appeal this decision.

For the court order and opinion, see

Moore - Summary Judgment Order

Moore - Summary Judgment Opinion

Click here for other Moore v. Cycon court documents in this case. equitable mortgage zebra

Equitable Mortgage Doctrine In Illinois (Updated)

For those readers interested in information on the equitable mortgage doctrine as applied in Illinois, see:

Equitable Mortgage Doctrine In Illinois - Part 1, and

Equitable Mortgage Doctrine In Illinois - Part 2. equitable mortgage zebra

Equitable Mortgage Cases in Massachusetts

For those readers interested in information on the equitable mortgage doctrine as applied in Massachusetts, I have a brief post that may be of some interest. See Equitable Mortgage Cases in Massachusetts, at the companion blog. equitable mortgage zebra

Equitable Mortgage Doctrine In Illinois

For those readers interested in information on the equitable mortgage doctrine as applied in Illinois, see Equitable Mortgage Doctrine In Illinois - Part 1. equitable mortgage zebra

Finding Equitable Mortgage Court Cases On The Internet

For those of you interested in researching the equitable mortgage cases of your home states on the Internet, I have a brief post on the companion blog regarding this issue that may be of some use. See Search Tips For Finding Equitable Mortgage Cases On The Internet. equitable mortgage zebra

Using Equitable Mortgage Defense Against Eviction In A Foreclosure Rescue Situation

For those interested in how an equitable mortgage defense could possibly be used by a financially strapped homeowner in an eviction action by a foreclosure rescue operator, see Using Equitable Mortgage Defense Against Eviction In A Foreclosure Rescue Situation (Part 1 of a multi part post). equitable mortgage zebra

Equitable Mortgage Doctrine In California

For a post containing links and citations to some of the equitable mortgage doctrine cases decided by the California Supreme Court, see Equitable Mortgage Doctrine In California. These cases could be helpful for those representing homeowners who have signed away their homes to foreclosure rescue operators. See, for example, Michigan Federal Judge Orders Return Of Home By Foreclosure Rescue Operator.

(revised 3-8-07 7:22 pm) equitable mortgage zebra.

Another NYC Foreclosure Rescue Federal Lawsuit Settled

A foreclosure rescue lawsuit brought by a couple in a Brooklyn, New York Federal Court was settled privately by the parties involved earlier this year. The homeowners in this case brought suit against foreclosure rescue operator Principle Investors Realty, and individuals Frankie L. Freeman, Edith A. Lorick, attorneys Fred D. Way, III (remember him from yesterday's posts) and Appolo Pitton, and Kevin Waite, who ultimately ended up with the title to the home. When the homeowners approached the operators for help in "saving" their home, they (the foreclosure rescue operator) allegedly proceeded to engage in an equity stripping, foreclosure rescue deal that ultimately forced the homeowners out of their home. According to the allegations contained in the lawsuit:

• "But instead of helping the Hineses save their home, Freeman induced them to transfer their deed to his associate, defendant Edith A. Lorick ("Lorick"), who took out a new mortgage on the property that exceeded the Hines's previous mortgage by more than $100,000; distributed the proceeds of the new mortgage to himself and his co-conspirators; and demanded monthly rental payments from the Hineses that he knew they could not afford. Unable to make the payments, the Hineses were forced to move out of their home."

According to the lawsuit, the property was ultimately sold for $100,000 more than the amount of the subsequent mortgage taken out by Lorick, and nearly $200,000 more than the payoff amount on the homeowners' original mortgage. The homeowners allegedly only received $10,000 in the transaction.

This lawsuit brought claims (not unlike many of the claims brought in those New York cases I reported on in yesterday's posts) against those involved for:

• Equitable Mortgage (NY Real Property Law Sec. 320),
• Violations of the Federal Truth In Lending Act,
• Violations of the Federal Real Estate Settlement Procedures Act,
• Common law fraud,
• Conspiracy to commit fraud,
• Violations of New York State General Business Law Sections 349 & 350 ("The Deceptive Practices Act"),
• Conversion,
• Unjust Enrichment and Constructive Trust,
• Legal Malpractice

Representing the homeowners in this case were attorneys from the firms Chadbourne & Parke, LLP and Patterson Belknap Webb & Tyler LLP.

For the complete lawsuit, see Complaint - Hines-Johnson vs. Principle Investors Realty, Frankie L. Freeman, et al.

Editor's Note:

It's hard not to notice that the attorneys and law firms representing the homeowners who are alleged foreclosure rescue victims are no longer only sole practitioners and attorneys from the non-profit legal services firms. Some law firms that are getting involved in these cases (such as those in this case and in the New York cases I reported on yesterday) appear to be pretty large firms that are better known for corporate law and complex litigation. Further, given the financial straits that these homeowners are invariably in, it's hard to imagine that the cases are being handled on anything other than a pro bono or contingency fee basis. It may very well be that the area of consumer protection law involving the representation of homeowners who have had business dealings with foreclosure rescue operators is becoming an emerging area of law for civil litigators.

For commentary on the emergence of this area of law, see, for example, Litigating Foreclosure Rescue Scams (An Emerging Area of Consumer Law), and my April 5, 2007 post on this point, Litigating Foreclosure Rescue Scams. equitable mortgage zebra

Trying To Recover A Home After A Foreclosure Rescue, "Equity Stripping" Transaction

It is quite common for a financially distressed homeowner (for purposes of this post, I am only considering a homeowner with a "significant" amount of equity in their home) to be approached by, and subsequently do business with, someone promising to help the homeowner "rescue" his/her home from foreclosure. In doing so, the homeowner's title to the home quite commonly ends up in the "home rescuer's" name, or possibly, in the name of some third party stranger.

Sometimes, the homeowner is fully aware that they are signing over their home title; other times, they sign it over unwittingly. Sometimes, the "home rescuer" procures the title either through fraud or forgery. The transaction typically also involves an oral or written understanding that leaves the homeowner believing that they will be entitled to buy back their home within a certain time period.

There are times when the "home rescuer", either after or simultaneously with taking title to the property of a financially strapped homeowner, proceeds to "strip the equity" from the property either:

(A) by getting a mortgage on the property for more than what is currently owed and where the rescuer pockets the difference, or

(B) by selling the property to a third party (who may finance the purchase with a mortgage) and where, again, the rescuer pockets the excess proceeds,

in either case, while the homeowner maintains possession of the home, both before and after the equity stripping.

See, for example:

1) Homeowner gets hard lesson in foreclosure rescue plans (Texas)
2) Madigan Sues Another Mortgage Foreclosure "Rescuer" (Illinois)
3) Attorney General Abbott Files Emergency Action Halting Bogus Foreclosure Rescue Operation (Texas)
4) Three Defendants Added To Federal Indictment In Foreclosure Scam Targeting Homeowners In Default (California)
5) Mortgage fraud cases multiply, hit more homeowners (California)
6) False Hopes - Inland homeowners facing foreclosure encounter scams under guise of refinancing (California)
7) State sues mortgage companies in homeowners scam (Illinois)


For those attorneys who represent homeowners in situations like this and who are trying to find an approach to undo the legal mess that their clients might find themselves in, see Exercising Options To Buy, Rights Of Intervening Interests, Notice, Bona Fide Purchaser, Duty Of Inquiry, & Other Stuff, which attempts to raise some legal issues that may be of some value in formulating such an approach.

I am not suggesting that there is some "magic trick" in getting back the homeowner's property in this type of situation. However, I am clearly suggesting (as I think I have suggested in my posts on the "equitable mortgage doctrine") that, in some but not all cases, there are certain issues of real property law that could potentially benefit the homeowner in getting their home back in certain situations that, probably because the financially strapped homeowner cannot afford legal counsel, appear to be going unaddressed. I say this based on the numerous media reports that I have seen (and on some of which I have posted blog entries throughout this blog).

Further, even if the legal mess can't be completely undone, the financially strapped homeowner's legal rights under local real estate law might create enough leverage to negotiate a satisfactory financial settlement by and among (A) the homeowner, (B) the rescue operator, (C) the subsequent purchaser and/or encumbrancer, and (D) possibly also the title insurance company who may have insured the title to the home for the subsequent purchaser and encumbrancer when they acquired their interests in the home from the rescue operator. equitable mortgage zebra

Defending Against Eviction And Voiding Title Transfers In Foreclosure Rescue Transactions

Additional posts are available containing a survey of selected state court cases regarding the application of the equitable mortgage doctrine. These cases could be useful in building a case to both void title transfers and defend against homeowner evictions in foreclosure rescue transactions. See Equitable Mortgage Defense In Homeowner-Tenant Evictions:

• Part 6 - a Massachusetts case,
• Part 7 - cases from from Idaho, Ohio, Oregon, Alabama, and South Dakota.
• Part 8 - a couple of Washington State cases. equitable mortgage zebra

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Voiding Title Transfers In Foreclosure Rescue Transactions

For those involved with the legal issues in dealing with (and attempting to void) title transfers in foreclosure rescue transactions, see:

• Equitable Mortgage Doctrine In Washington State, and
• Voiding A Title Transfer In A Foreclosure Rescue Transaction - a collection of several cases and stories dealing with attempts to void title transfers (not involving claims of equitable mortgage). equitable mortgage zebra

Business Week On Foreclosure Rescue

BusinessWeek.com has a general article on foreclosure rescue that reports on one homeowner who paid an upfront fee to a foreclosure rescue consultant and ended up losing the home anyway; it gets comments from two foreclosure rescue operators (an upfront fee operator and a New York sale - leaseback operator), and also gets comments from two consumer advocates regarding the foreclosure rescue process.

One foreclosure rescue operator, Albany, N.Y.-based Rivertown Financial engages in sale-leaseback transactions in New York, New Jersey and Pennsylvania and its chief executive, Geoffrey Goldman, said that "There's nothing inherently sinister about sale leaseback transactions. Businesses do it all the time."

For more, see Foreclosure rescue plans pose questions, or see

Frauds compound the pain of foreclosures (Homeowners paying to save their houses and end up losing them anyway) (reported on MSNBC.com).

Editor's Note:

Based on the information in my recent posts on foreclosure rescue as well as in earlier posts, it appears that there are more cases being brought by financially strapped homeowners seeking to have sale-leaseback, foreclosure rescue deals declared to be equitable mortgages. Successfully asserting an equitable mortgage claim will recharacterize the sale-leaseback as a secured loan between the foreclosure rescue operator and the homewoner, subject to state usury laws, and possibly Federal consumer protection laws (ie. Federal Truth-In-Lending Act and the Homeowner Equity and Protection Act).

The usury point could be a significant issue in a state like Florida. Its civil usury statute (where interest exceeds 18% per year) requires a forfeiture of the right to collect interest on the loan and requires the creditior to pay a penalty of double the amount of interest actualy reserved or collected (Fla. Statute Section 687.04). Its criminal usury statutes (where interest exceeds 25% per annum), call for a forfeiture of the creditor's entire loan, in addition to those penalties commonly associated with misdemeanor and felony crimes (Fla. Stat. Section 687.071).

Further, if the transaction is tainted with elements of fraud, deception, or unfair business practices, the transaction will also be subject to the state's unfair and deceptive trade practices laws, as well as to common law claims of fraud, conspiracy, and constructive trust, among others. Also, as was the situation in one recent case I reported on, a claim for legal malpractice was brought against an attorney who was supplied by the foreclosure rescue operator to the homeowner, and who purportedly "represented" the homeowner in the transaction when the homeowner signed away his home to the operator.

Finally, in a state like New York, stringent regulations (including criminal sanctions) have been imposed in the form of the Home Equity Theft Prevention Act to protect homeowners facing foreclosure when dealing with foreclosure rescue operators, both those who purchase from the homeowner as well as those who provide fee-based "foreclosure consulting" to the homeowner. No doubt that state regulators will be out there vigorously enforcing this statute. (Other states with anti home equity theft statutes can be found in the sidebar on the right side of this page.)

Financially strapped homeowners generally may not have the sophistication in matters of business, finance, and law to appreciate the nuances of the law to be able to know his or her rights, much less find experienced legal counsel to handle cases like these. However, I think we are seeing the beginning of a legal environment where attorneys and investigators, whether from legal services firms, from private firms (both small and large), or from state and local government law enforcement and regulatory agencies, will be out there finding them, prepared to bring the appropriate legal action to vigorously enforce both the statutes regulating the foreclosure rescue industry, as well as to enforce the laws that are a product of case law which has been around for a century or two. equitable mortgage zebra

Foreclosure Rescue Operator Ordered To Return Homes To A Dozen Victims

In a 2005 Nebraska Supreme Court decision, two Omaha area foreclosure rescue operators were ordered to restore title to the homes of a dozen homeowners who the operators fraudulently induced into signing over their home titles, or reimburse them for their damages.

In addition, the operators were also ordered to pay approximately $378,000 in attorneys' fees to the lawyers for the victimized homeowners for violations of the state's Consumer Protection Act.

In this case, the homeowners all testified that the operators offered to loan them money to stop foreclosure so that they (the homeowners) could keep their homes, but never disclosed that the operators were actually taking title to the homes. The operators testified to the contrary, asserting that the terms of the transaction were fully explained to each plaintiff and that each plaintiff understood that he or she was conveying title to the home to defendants. In ruling in favor of the homeowners, the court made a specific finding that the homeowners' testimony was credible and that of the operators was not.

One notable point in this case is the illustration of a well-known legal rule regarding the signing of a contract and how it applies in a case like this one. This legal rule, as described by the Nebraska high court, is this:

• “[o]ne who signs an instrument without reading it, when he can read and has the opportunity to do so, cannot avoid the effect of his signature merely because he was not
  informed of the contents of the instrument.”

Having said that, the Nebraska high court went on to state:

• "[t]he general rule that one who fails to read a contract cannot avoid the effect of signing it applies only in the absence of fraud [...] Restated, the rule that one who signs a contract is bound by its terms does not apply where the controversy is between the parties and the execution of the instrument was induced by fraud."

A second point worth noting is that this case illustrates another method of attacking foreclosure rescue transactions. Unlike the equitable mortgage cases reported elsewhere on this blog (in which proof of fraud is not necessary), the homeowners' action in this case were based on allegations of fraud, civil conspiracy, unjust enrichment, rescission, and violations of Nebraska’s Consumer Protection Act and Uniform Deceptive Trade Practices Act (and importantly for private practice attorneys that are considering handling these types of cases, the $378,000 fee award was based on an attorney fee provision contained in the state Consumer Protection Act, and also involved the application of a "contingency fee" or "lodestar" multiplier that increased the "lodestar amount" (the base fee) by 30 percent).

Sources:

Rising foreclosures fuel fraudulent offers of aid (Seizures, byzantine terms spring from promises to help owners keep homes) (MSNBC website)

High Court Slams Foreclosure Scamsters, (WOWT, Channel 6 News - Omaha, NE)

Eicher v. Mid America Financial Investment Corp.. 270 Neb. 370, 702 N.W.2d 792 (2005) (made available online by Findlaw.com)

Counsel For Homeowners:

Mark C. Laughlin, Andrea F. Scioli, and Tamara D. Borer, of Fraser, Stryker, Meusey, Olson, Boyer & Bloch, P.C.,

Catherine Mahern, of Milton R. Abrahams Legal Clinic (Creighton Legal Clinic - Creighton University School of Law)

D. Milo Mumgaard, of Nebraska Appleseed Center for Law in the Public Interest

(revised 4-23-07) equitable mortgage zebra

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Usurious Loans Masquerading As Sale Leasebacks ?

I have put together a collection of four cases that I stumbled over while looking for something else online. They involve potential or actual usurious loans that were disguised as sale leasebacks of personal property. Since usury is always a possibility when a court deems a deed to be an equitable mortgage, these cases may provide some additional insight as to how the courts analyze fact patterns when determining when a financial arrangement in the form of a sale leaseback should be respected, and when it should be disregarded and treated as a loan. To read more, see Usurious Loans Masquerading As Sale Leasebacks ?, on my companion blog.
equitable mortgage zebra

Florida Court Rules That "Foreclosure Rescue Eviction" Not A Landlord-Tenant Matter

A Florida appellate court ruled last month that a Miami-area foreclosure rescue operator cannot evict a homeowner who signed away title to her home in a "sale-leaseback-buyback option" arrangement until a determination is made as to who the true owner of the property is and effectively ruling that the Florida Residential Landlord Tenant Act is not applicable to such a transaction unless and until such a determination favorable to the operator is made.

The case involved a situation where, at some point after a financially strapped homeowner signed away the title to her home to a foreclosure rescue operator, the operator attempted to evict her. The homeowner asserted the defense that she was the true owner. The lower court ruled that, pursuant to the applicable provisions of the Florida Residential Landlord Tenant Act, she had to pay into the court registry the rent that was called for in the leaseback of her home while the court proceedings were pending.

According to the appellate court's opinion:

• "[The homeowner] alleges she was tricked into conveying her home to Equinamics in a transaction which is impressed with characteristics of a sale, but in reality is a disguised loan secured by her home. If this is accurate, then Equinamics is not an owner of [the homeowner's] residence but rather a lender who must proceed to oust [her] via a foreclosure action."

The court then made this observation:

• "Based upon the facts of this case, it is apparent that the transaction by which Equinamics received title to the Minalla residence was not an ordinary real estate transaction. Likewise, the circumstances under which Minalla continued to remain on the property after she executed the special warranty deed to Equimanics was not possessed of the trappings of a usual landlord tenant relationship."

Ultimately, in reversing the lower court ruling to the contrary, the appellate court ruled as follows:

• "[T]here is a factual dispute in this case concerning who is the true owner of the property. Because the trial court's order requiring payments by Minalla of monies into the registry was made without conducting an evidentiary hearing concerning the nature of the transaction and who is the true owner of the residence, the court erred in imposing the payment requirement upon her."

The homeowner is being represented by attorney James A. Bonfiglio, Boynton Beach, Florida.
Minalla v. Equinamics Corp., (Fla. App. Ct., 3rd Dist. March 21, 2007) (Court decision made available online courtesy of the Florida Third District Court of Appeal)

Postscript:

The court in this case reveals the following in a footnote:

• that the homeowner has brought claims against the foreclosure rescue operator under the Federal Truth in Lending Act giving her a right to rescind under 15 U.S.C. § 1635 and Reg. Z 226.23, and damages under 15 U.S.C. § 1640 (a);
• that the arrangement is alleged to be a Home Ownership and Equity Protection Act Amendments (HOEPA) loan under 15 U.S.C. § 1602 (aa) and Reg. Z 226.31, giving right to an additional basis to rescind under § 1635 and enhanced actual damages under § 1640 (a)(4);
• that the arrangement is alleged to violate Florida's usury statute, § 687.02(1), Florida Statutes (2005);
• that the homeowner has brought a quiet title claim; and
• that the homeowner seeks declaratory relief on the basis that enforcing the arrangement as a true "sale lease option" would enforce an illegal equity skimming contract in violation of section 697.08, a third degree felony, which it claims allows Minalla civil damages as being "against public policy.

There seems to be some pretty interesting issues for Florida practitioners in this case, particularly the usury and illegal equity skimming claims coupled with the equitable mortgage / disguised loan issue. This may be a case worth keeping an eye on.
For more on attorney James A. Bonfiglio, see:

• West Palm Beach Attorney Representing "A Dozen" Foreclosure Rescue Victims; and
• Facing foreclosure? Beware of 'rescue firms' offering to help you. equitable mortgage zebra

South Florida Homeowner Victimized By Foreclosure Rescue Operator

A suburban Miami woman who was victimized by a foreclosure rescue operator is featured today in a story published by Reuters and appearing in the San Diego Union Tribune. Reportedly, she was solicited in June by a "door to door foreclosure rescue operator" who offered her financial help on an $89,000 mortgage on her home. According to the article:

• Nine months later, her $89,000 mortgage has ballooned into a $234,000 loan, her monthly payments have doubled and she faces foreclosure on a house she no longer owns.

For the rest of the story, see U.S. sub-prime crisis exposes mortgage scams.

-----------------------------------

Editor's Note:

Hopefully, an experienced, competent South Florida real estate attorney (someone who also knows his/her away around a courtroom and knows how to make legal arguments in front of a judge and jury) will come forward and help the victimized homeowner in this story. Such an attorney will be aware of the fact that just because she signed away her home, it doesn't mean she can't get it back.

Quoting from Guest v. Claycomb, 932 So. 2d 567 (Fla. App. Ct. 5th Dist. 2006), which, in turn, quotes from the Florida Supreme Court decision in Williams v. Grogan, 100 So.2d 407, 410 (Fla. 1958), a Florida appeals court stated:

• "The rule is well established in Florida and elsewhere to the effect that when a person acquires title to property through the influence of a confidential relationship or otherwise obtains an advantage which he should not in good conscience be permitted to retain, a court of equity will prevent the abuse of the confidence and grant relief on the broad principle that one should not be permitted to be unjustly enriched under such circumstances at the expense of another." (quoting from Williams v. Grogan, 100 So.2d 407, 410 (Fla. 1958))

• "The Court proceeded to explain that the court of equity will grant relief in such instances by imposing a constructive trust "which is created by operation of law" and "is not within the statute of frauds and may be proved by parol evidence." Id."

Further, if the financially strapped homeowner who signs away their home never relinquishes possession of the property, Florida law (and the law of many other states as well) is that actual possession of the property serves as notice to subsequent purchasers and encumbrancers of all rights and equities that the person in possession may have, in which case, the woman's ownership rights to her home, as adjudicated by a court, should be superior to the rights of any subsequent purchaser or (foreclosing) mortgagee. Having constructive notice of the woman's occupancy will eliminate any entitlement to claim the status of "bonafide purchaser".

The Florida Supreme Court, in Florida Land Holding Corp. v. McMillen, 135 Fla. 431, 186 So. 188 (Fla. 1938) stated the following:

"This Court had before it a similar set of facts in the case of Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, when this Court said:

• "Actual possession is constructive notice to all the world or anyone having knowledge of said possession, of whatever rights the occupants have in the land. Such possession when open, visible and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115; Tate v. Pensacola G.L. & Dev. Company, 37 Fla. 439, 20 So. 543; McAdams v. Wachab, 45, Fla. 482, 33 So. 702. This court also specifically held in the case of Crozier, et al., v. Ange, 85 Fla. 120, 95 So. 426, that 'where at the time property is mortgaged it is actually occupied by others than the mortgagor, the mortgagee is thereby put upon notice to inquire as to the rights of the occupants.' 19 R.C.L. 421, Sections 201 and 202.

One final point on this case. If a Florida attorney takes on a case like this, and would like the possibility of obtaining a court ordered attorney fee award, he/she may have to assert claims of violations of Federal or Florida consumer protection laws (which entitles an attorney representing a prevailing plaintiff to a fee award to be imposed upon the accused fraudster), in addition to asserting claims of fraud, constructive trust, or any other equitable claims that may be applicable. See my prior post, Voiding A Title Transfer In A Foreclosure Rescue Transaction, which discussed a Nebraska case where the attorney for a dozen victims of a foreclosure rescue operator was granted a $378,000 fee award (imposed on the foreclosure rescue operator) for successfully asserting violations of the Nebraska Consumer Protection Act (in addition to fraud and conspiracy), and which involved the application of a contingency fee risk multiplier in calculating the fee award, which is allowed in Florida on state law claims. The case was Eicher v. Mid America Financial Investment Corp., 270 Neb. 370, 702 N.W.2d 792 (2005).

With regard to the application of contingency fee risk multipliers in Florida, see generally, Bell v. U.S.B. Acquisition Company, Inc., 734 So.2d 403 (Fla. 1999), which discusses Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145 (Fla. 1985), where the Florida Supreme Court discusses what the contingency fee risk multiplier is based on and how it is calculated and applied.

While these cases may be difficult to make (which is why you need a sharp attorney), those having or creating the impression that nothing can be done for the woman featured in the article are simply uninformed. equitable mortgage zebra

Egregious Conduct By Credit Card Issuers Consistent With That Of Predatory Mortgage Servicers

(revised 3-10-07)

Top officials from the major credit card issuers testified on Wednesday which highlighted some of the egregious practices their companies engaged in that soaked consumers out of millions of dollars. Click here to see yesterday's NBC Nightly News video covering the hearing, report by Lisa Myers.

Click here to view C-Span's 3-7-07 coverage of the Senate hearings (Be sure you have the most recent version of the Real Player).

While not a home equity theft issue, per se, the egregiousness of the conduct decribed in the hearings is not inconsistent with the conduct of predatory mortgage servicers when collecting bogus fees from financially strapped homeowners, which is an issue I have reported on in the past and is a home equity theft isssue.

The obvious approach by these large financial companies appears to be to try and get away with as much as possible for as long as possible, and when Congress finally gets around to hauling them into a hearing to answer questions, they simply say they're sorry and promise not to do it again.

Now that Congress is controlled by, arguably, the more "consumer friendly" of the two major parties, I suspect that at some point they will address the problems of predatory mortgage servicing.

For previous posts on predatory mortgage servicing, and links to relevant background information, see:

• Private Property Rights Deferred: Has Predatory Mortgage Servicing Destroyed the American Dream
• Predatory Mortgage Servicing Destroying The American Dream?
• Predatory Mortgage Servicing Practices
• Predatory Mortgage Servicing

For Attorneys and Law Students Only

A point that was stressed by one of the witnesses in the hearing was that the credit card issuers weren't doing anything illegal when they were soaking the consumer with high fees, increased interest rates, universal default provisions, etc. My question simply is:

• Why aren't the credit card contracts that purportedly allow the issuers to rip off the consumers considered unconscionable "contracts of adhesion?"

My understanding is that such a claim is an equitable claim, which may not be subject to the arbitration provisions that the major financial corporations are notorious for sticking into all their credit card contracts. Accordingly, such a claim could be litigated in a court of law as a class action lawsuit, rather than as an individual case in front of an arbitrator (If I'm wrong, somebody please correct me).

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