Saturday, January 31, 2009

"Please Turn Off The Water On Your Way Out," Town Officials Tell Owners Abandoning Homes Facing Foreclosure In Battle Against Bursting Water Pipes

In Goshen, New York, The Chronicle reports:
  • A rash of busted pipes is one consequence of the foreclosure crisis in Goshen. Trustee Susan Bloom on Monday night reported that several water mains broke in foreclosed houses where the water was not turned off. Bursting pipes not only damage houses, which need to be repaired before they can be sold, but cost the village money too, Bloom said.


  • Although people involved in foreclosure may no longer care about the condition of the house, [Trustee Marcia Mattheus] said, she urged anyone planning to leave their house vacant to shut off the water first to prevent the destruction that broken water pipes cause.

For the story, see Burst pipes in foreclosed houses causing problems for village.

Go here for more on frozen pipes in vacant homes. frozenpipetheta

Dozens Of Sioux City Tenants In Buildings Owned By One Landlord In Foreclosure Face Boot Today

In Sioux City, Iowa, KMEG-TV Channel 14 reports:
  • Dozens of families, living in a group of properties owned by Duane Meyer, will be kicked out of their homes Saturday as a results of foreclosures. And now, another round of properties could face the same fate.


  • With just hours til they have to be out, some of Duane Meyer's tenants are scrambling to find another place to live. And if moving in the dead of winter isn't hard enough, many of these renters face a financial burden of securing a new place.

For more, see Foreclosure News Sends Dozens More Scrambling For Housing.

For story update, see Confusion for Tenants of Foreclosed. SkimmingKappaRent

Homeowner In Foreclosure Accuses Loan Servicer Of Jerking Her Around; Firm Backs Off After Letter From Local TV Consumer Reporter

In Charlotte, North Carolina, WSOC-TV Action 9 News reports:
  • [C]rystal Price is like so many homeowners who've fallen behind on payments. In 2007 she was three months behind when her mortgage company gave her bad news. "They told me my home is up for foreclosure,” she said.

  • But to save her home, Price entered into a stipulation agreement with her mortgage company. She paid $1,005 for a year and a half, nearly 300 dollars more than her normal payment. She said the company told her that would catch up the loan. But after following that payment plan, Litton told her she was still three months behind.

  • They couldn't give me a reason why. They just told me to look at my payment history to see how that money was applied to the account,” she said. Prince said she looked at the payment history and again talked with Litton loan officers but still got no answers. Price reluctantly signed a second stipulation agreement with Litton for $923 per month for another year and a half. She didn't agree with it, but wanted to save her home.


  • Action 9 sent Litton Loan Servicing corporate office in Houston, TX a letter. No one responded, but Price was informed Action 9 was not authorized to speak for her. However she was told the company would reapply $1,514 to her account to bring her loan current.

For the story, see ACTION 9: Woman Has Problem With Loan Company.

Information For California Tenants Renting Homes In Foreclosure

An article in La Prensa San Diego by attorneys Marc Whitham and Dolores López with the Housing Department at the Legal Aid Society of San Diego, Inc. sets forth an easy to understand explanation of the legal process that tenants in California face when they find themselves renting a home that is in foreclosure.

Among the points in the article is a reminder that, while homeowners get only 3 days notice before eviction after foreclosures, tenants are entitled to 60 days notice before being evicted, and accordingly, should resist any attempt by the new owner or foreclosing lender to bully them out of the premises without first properly serving the 60-day notice upon them.(1)

For the article, see Tenants of Foreclosed Homes Often Short-Changed by New Owners.

(1) It may be important to note that, in the case of a tenant who receives a Section 8 federal rent subsidy (ie. a "Section 8" tenant), it has been reported that federal law prohibits a new owner, including foreclosure purchasers and foreclosing lenders, from evicting Section 8 tenants unless they first go to court and prove they’re being economically harmed by having a tenant remain in a building, or show other good cause. However, many Section 8 tenants panic and don’t fight eviction notices, not realizing they have rights. For more on this point, see Foreclosures hit tenants (Activists: New owners trample on renters’ rights).

For the specific federal regulation on this point, see 24 CFR 982.310(d)(1). Go here for the regulations (24 CFR 982) regulating the Section 8 rent subsidy program, generally. SkimmingKappaRent

Apartment In Foreclosure Spells Opportunity For One Brooklyn Renter

Buried in a recent story on squatters in foreclosed homes, the San Francsico Examiner tells the story of a New York City woman who found herself with a 3,000 square foot brownstone in a fancy part of Brooklyn all to herself - and rent-free.

Originally renting the brownstone with five roommates from the apartment owner, junk-mail solicitations began arriving from foreclosure rescue operators which tipped them all off that their landlord was stiffing the bank and the apartment was headed for foreclosure. An excerpt from the story:

  • [J]ulia and the subletters received a letter from the owner of the building: Everyone had to move out.

  • Julia remembers the day when she was certain that she would stay: Everyone was boxing up their stuff, talking about their new apartments, when she realized that the brownstone was really in limbo and that it was possible that no one would notice if she stayed.

  • "People kept saying to me that it's really hard to kick out a tenant," she says, "And I suspected that the property owner maybe didn't even own the building anymore."

  • Last May, Julia began living alone in the 3,000-square-foot apartment. Because she didn't have to pay rent, she had more time to work on artistic pursuits. She set up an editing suite in one of the spare bedrooms and dedicated most of her time to working on her film, a documentary about coincidence and chaos theory. "I've never made a film before," Julia says, "so there's a lot of anxiety there." However, this rent-free existence suddenly gave her time and space.

For more, see A Tale of Two Squatters.

Caretaker Cops Plea To Forging Deed To Dying Woman's Home, Then Splitting Proceeds With Lover - The Victim's Husband

In Salisbury, United Kingdom, the Daily Mail reports:
  • A carer employed to look after an elderly woman with Parkinson's and dementia started an affair with the patient's husband and then took on her identity when she died.

  • Shirley Forrester was handed a suspended prison sentence today for forgery after she posed as patient Elizabeth Hunt and signed legal papers in her name which allowed her and her lover Raymond Hunt to sell a £160,000 house and share the proceeds. Mr Hunt escaped a court appearance after agreeing a deal with the Crown Prosecution Service, described by the angry judge as 'buying himself out of justice'.(1)

For more, see Carer had affair with her patient's husband then stole her identity when she died.

(1) Hunt was charged with a number of offences which he denied and they were later dropped after he offered to give the money he made from the sale of the house to his deceased wife's children from an earlier marriage. KappaDeedTheft

Another Foreclosing Lender Jumping The Gun? NH Man Finds Himself Locked Out Of Home Without Receiving Prior Notice

In Rochester, New Hampshire, reports on a recently-widowed homeowner facing foreclosure who, through his real estate agent, was in the process of working out a short sale on his home with the lender and a prospective buyer. One day, when returning home after being away for several days, he found himself locked out of his home.

For the story, see Loss of wife and home; Banks, with bail-out billions, continue to foreclose on homes. ForeclosureLockOuts

Friday, January 30, 2009

Freddie To Cut Down On Foreclosure Evictions; Will Allow Qualified Occupants To Temporarily Stay, Rent Homes Post-Foreclosure; Extends Eviction Freeze

USA Today reports:
  • Freddie Mac on Friday plans to announce a first-of-a-kind plan that lets homeowners and tenants temporarily stay in homes in foreclosure by renting them back, an effort to stop many of the sudden evictions that have come along with the housing crisis. The program will let thousands of qualified former homeowners, as well as families renting from landlords, enter into a monthly lease on their homes after they have been acquired by Freddie Mac through foreclosure.

For more, see Freddie Mac to let residents rent homes after foreclosure.

See also: Freddie Mac press release: Freddie Mac Extends Eviction Suspension Until March, Launches Rental Option for Foreclosed Borrowers, Tenants.

Fannie, NACA Strike Deal To Modify Troubled Home Loans

The Wall Street Journal reports:
  • Fannie Mae has reached an agreement to work with one of its former critics, Neighborhood Assistance Corp. of America, to prevent foreclosures by reworking home mortgages to make them easier to afford. [...] The agreement with Fannie hasn't been announced but was confirmed by the company and by Bruce Marks, chief executive of the NACA, a Boston nonprofit with a history of holding protests to pressure banks into cooperating with its efforts to provide mortgages on what it considers fair terms.


  • The NACA is negotiating a similar cooperation agreement with Freddie Mac, Mr. Marks said and that company confirmed.

For more, see Fannie Strikes Deal to Modify Loans to Prevent Foreclosures.

Loan Servicer Loses Mortgage Payoff Checks From Short Sale Of Home; Begins Foreclosure On Former Owners

WNYW-TV Channel 5 in New York City reports:
  • A couple who fell on hard times was forced to sell their home for less than they owed on the mortgage just to avoid a credit disaster. But then their mortgage company lost the checks from the sale of the home and started foreclosure proceedings -- on a house they don't even live in anymore.

For the report, see Couple Faces Foreclosure on House They Sold.

Minnesota AG Charges Two More Firms For Pocketing Upfont Fees From Homeowners Facing Foreclosure; Accused Of Making Empty Loan Modification Promises

In St. Paul, Minnesota, Fox9 reports:
  • Minnesota Attorney General Lori Swanson filed lawsuits against two mortgage “foreclosure consultants” Thursday, alleging they targeted homeowners facing foreclosure with “illegal up-front fees” and “empty promises to save their homes.” The lawsuits are against IMC Financial Services and National Foreclosure Counseling Services, both with offices in Florida. With Thursday’s filings, 12 foreclosure consultants have now been sued by the attorney general in the past year.

For more, see Minn. AG Has Sued 12 Foreclosure Consultants in Past Year (Minnesota Attorney General sues two more foreclosure consultants).

See also, Minneapolis Star Tribune: Minn. Attorney General sues foreclosure consultants:

  • [Attorney General Lori] Swanson alleges that these companies charged up-front fees of as much as $1,850 for renegotiating mortgage terms.

Go here for Minnesota AG press release: AG Swanson Expands Litigation Against Fraudulent "Foreclosure Consultants" And Issues Warning To Minnesota Homeowners In Mortgage Trouble To Seek Reputable Help And Steer Clear Of Scam Artists. loan modification

Impediments To Voluntary Loan Modifications

Contained in a recent report(1) issued by the Center For Responsible Lending (CRL) is a list of existing barriers that impede the effectiveness of voluntary mortgage loan modifications between loan servicers and financially strapped homeowners seeking relief from unaffordable house payments:
  1. Mortgage securitization: When servicing securitized loans, servicers are bound by the terms of contracts that may impose legal limitations on modifying loans that are included in investment pools;
  2. Fear of lawsuits: Another legal impediment is fear of investor lawsuits, since most loan modifications will have disparate financial impacts on different classes of investors in any given security;
  3. Financial incentives to foreclose: The way that servicers are compensated by lenders often creates a bias for foreclosing on a mortgage rather than trying to prevent foreclosure. Servicer costs are reimbursed following a foreclosure, but generally not reimbursed for a modification in privately securitized mortgages;
  4. Second mortgages: Between one-third and one-half of the homes purchased in 2006 with subprime mortgages were made with two mortgages, and many more homeowners have open home equity lines of credit secured by their home;
  5. Obstacles to assistance by servicers: Despite repeated attempts and many hours of effort, many homeowners report they repeatedly get put on hold when they call servicers or bounced from one person to another without receiving any meaningful assistance.

For a more detailed discussion of these obstacles to modifying mortgages, see testimony before the Senate Banking Committee presented by Eric Stein, Senior Vice President of the Center for Responsible Lending.

For the CRL (January 2009) report itself, see Continued Decay and Shaky Repairs (The State of Subprime Loans Today).

(1) The report provides an update on the subprime mortgages that triggered the current foreclosure crisis, focusing on the performance of these loans and efforts to stop the ongoing surge of foreclosures.

Scam Artists Arrested At Lender-Sponsored Foreclosure Avoidance Clinic Passing Themselves Off As Bank Employees

Buried in a recent story in the Los Angeles Times is this excerpt highlighting one tactic used by some fraudulent loan modification / foreclosure rescue companies to scam unwitting homeowners seeking relief from unaffordable mortgages:
  • [S]ome fraudulent companies make it seem as though they represent banks or even the government.

  • Evan Wagner, a spokesman for IndyMac Federal Bank, said he was disturbed to see men dressed like bank executives -- with the same blue shirts and official looking clipboards -- show up at a foreclosure avoidance clinic the bank held late last year in Riverside County and approach borrowers waiting in line. "They were clearly representing themselves as bank staff," said Wagner, noting that the men were arrested.

Source: Homeowners warned to avoid foreclosure scams (As the economy declines, more con artists are preying on Southern California borrowers in trouble).

Iowa AG Issues Loan Modification / Foreclosure Rescue Warning

The Iowa Attorney General's Office recently issued a consumer advisory warning Iowans against falling for foreclosure rescue / loan modification scams.

For more, see Beware of “Foreclosure Rescue Scams” (A better bet: Call the free Iowa Mortgage Help Hotline at 877-622-4866).

Two Face Charges Of Pocketing $350K From Investors For Foreclosure Investments; One Alleged Victim Borrowed $100K Against Home To Invest

In Whatcom County, Washington, The Bellingham Herald reports:
  • A Whatcom County developer and a Blaine real estate agent are facing felony theft charges in connection with what prosecutors say was a scheme to steal $350,000 in a phony home purchase transaction.

  • Ross Alan Paterson, 45, of Bellingham, and Victoria Mallahan, 47, of Blaine, face two counts of first-degree theft, with a maximum penalty of 10 years in prison per count. Both were arrested in late December 2008 and booked into Whatcom County Jail.(1)


  • In an affidavit filed in Whatcom County Superior Court, Deputy Prosecuting Attorney Dona Bracke said Mallahan and Paterson acquired the $350,000 in 2007 from three Canadian investors who thought their money would be used to buy foreclosure properties in Whatcom County for later sale at a profit. But Mallahan and Paterson kept the money and the investors got no property, the affidavit says. Nor did the investors get their money back.(2)

For more, see Whatcom County developer, real estate agent face fraud charge.

(1) According to the story, they have entered pleas of not guilty, and both also have denied wrongdoing in court documents filed in connection with civil lawsuits related to the case. They are free on $10,000 bail.

(2) Reportedly, in a sworn statement filed as a part of her civil suit against Mallahan and Paterson, investor Wanda Florczyk said she and her husband borrowed $100,000 against their home to invest with Mallahan, after they heard about her investment business from their son, a plumber. The son learned about Mallahan when he did some work for a business associate of Mallahan's.

Thursday, January 29, 2009

Pro Bono Net Receives Sponsorship From International Accounting Giant

A recent PR Newswire press release contains the following announcement:
  • Pro Bono Net, a national non-profit organization that works to increase access to justice through innovative uses of technology and increased volunteer lawyer participation, today announced it has received sponsorship from KPMG LLP as part of the U.S. audit, tax and advisory firm's commitment to corporate citizenship.

  • Over the past 10 years, Pro Bono Net has created a broad and powerful network of non-profit legal aid providers, courts and bar associations across the United States. This network uses two innovative web-based platforms -- and -- to recruit and support volunteer lawyers and to provide direct information and self-help tools for low-income people facing legal problems.(1)

For the rest of the press release, see Pro Bono Net Announces KPMG Sponsorship.

(1) is an online resource for lawyers serving the public good, providing access to training, resources and opportunities to make it easy to volunteer. offers state-based legal referrals, know-your-rights information and a variety of self-help tools.

NY AG Probe Targets Upstate Sale-Leaseback Foreclosure Rescue Operator, Says Firm's Lawyer; Company's Ch. 11 Bankruptcy Filing Dismissed

In Albany, New York, The Albany Business Review reports:
  • Rivertown Investments LLC, an Albany, N.Y., company that bought properties on the brink of foreclosure(1) before going out of business last summer, won’t be able to liquidate its assets in bankruptcy court.

  • U.S. Bankruptcy Judge Robert E. Littlefield Jr., dismissed the Chapter 11 cases at the request of government lawyers who accused Rivertown and its real estate holding company, Momentum Properties LLC, of “gross mismanagement of the estate.” The dismissal comes at a time when Rivertown’s attorney has said the New York state attorney general’s office is investigating the firm.

  • Rivertown attorney Justin Heller of Nolan & Heller LLP in Albany has said he’s not aware of any consumer fraud at Rivertown. No charges have been filed against the company. The attorney general’s office won’t comment.

For more, see Rivertown bankruptcy case dismissed.

For earlier stories, see:

(1) According to the story, Rivertown would buy a client’s home, pay off the mortgage and other debt, and lease the home back to the client for 18 months or so until the client could repurchase the home. Rivertown’s portfolio reportedly includes 56 properties in Albany, Troy, Delmar, Saugerties and many others downstate, in Pennsylvania and in New Jersey. It’s unclear what the dismissal of the bankruptcy case will mean for the people who sold their homes to Rivertown and continue to live in them, the story states.

It may very well be that those sale-leaseback deal could be voided in the event there is a provable fraud involved. If there is no provable fraud, the arrangements could possibly still be voided if the deals can be recharacterized as equitable mortgages. Further, given the continuous occupancy and possession of those people who sold and leased backed their homes, there may be New York case law that supports the proposition that any subsequent purchasers or encumbrancers (ie. mortgage lenders) of the homes involved are not bona fide purchasers, thereby disqualifying them from the protection of the recording statutes and leaving their interests subject to being voided by the now-former homeowners. See:

  • Phelan v. Brady, 119 N.Y. 587; 23 N.E. 1109; (NY 1890): "Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in possession is able to establish." [citations omitted].
  • Ward v. Ward, 503624,2008 NY Slip Op 4984; 52 A.D.3d 919; 859 N.Y.S.2d 774; 2008 N.Y. App. Div. LEXIS 4816 (App. Div. 3d Dept. 2008);
  • Doyle v. Siddo, 31 A.D.3d 697, 818 N.Y.S.2d 474, 2006 N.Y. App. Div. LEXIS 9569 (N.Y. App. Div. 2d Dep't, 2006).

Miami Homeowner Marches Into Court, Gets Judge To Stall Foreclosure & Rip Up Lender's Court Filing; Receives Congrats From Other Lawyers In Courtroom

In Miami, Florida, reports:
  • Luis Molina is not a lawyer and he has never played one on TV. But that didn’t stop him from putting on his best suit, marching into a Miami courtroom this month and going up against an attorney with 30 years of experience to stop a foreclosure proceeding against his family’s home.

  • Molina did such a good job of representing himself(1) that the judge in the case thought he was a lawyer and punctuated his ruling in Molina's favor by tearing up the other side’s motion for summary judgment and throwing it over his shoulder.

  • I felt like a million dollars,” Molina told, describing his day in Judge David C. Miller's courtroom in Florida’s 11th Judicial Circuit Court. “I felt like if there was anything in my life that I had done correctly, it had to be that. Every single lawyer after the fight came over and shook my hand.”(2)


  • He doesn’t recall now exactly what he said during the very brief proceeding.(3) Neither does Judge Miller, who handled dozens of cases that day. But he remembers this: “It was a good argument. Whatever it was convinced me to vacate the judgment and stop the foreclosure.” Even then, the judge said, Molina didn’t seem to understand that he’d prevailed. “He kept talking and I didn’t know why he was talking. I said, ‘Would it make you happy if I just ripped it up? Here, I’m tearing it up!’ “I don’t make a practice of that,” Miller said. “I don’t want people to think I’m some crazy judge tearing stuff up down in Miami, but that time I did. … It was a funny hearing.”

For more, see The home you save could be your own (In foreclosure crisis, more Americans representing themselves in court).

For posts that reference the failure of mortgage lenders and their attorneys to prove ownership of the promissory note when starting foreclosure actions, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) According to the story, Molina and other pro se litigants told that when they found attorneys willing to take their cases, the lawyers didn’t know a lot of basic information about foreclosure defense that is available on Internet web sites.

(2) Reportedly, Molina said many of the 30 to 40 observers in the courtroom who applauded his victory mistook him for a lawyer, patting him on the back and asking for his business card. “The guy from legal aid asked me where did I get my pleading from,” meaning his legal argument, Molina said. “I said I got it at Office Depot. I thought he meant, where did I get my folder?

(3) According to the story:

  • [Molina] said he kept asking the other side for documents to which he was entitled under the legal process of discovery. The most important document he sought was the original loan note. To have standing in a foreclosure proceeding, a financial institution must show that it possesses the note, and can document the chain of sales and assignments by which it was obtained. In today’s financial world, home loans are sold and resold many times to various investors, often as part of highly complex securities transactions, and true ownership is often unclear. Instead of providing the documents, Molina said, the plaintiff’s lawyers filed a motion for summary judgment in which they asked Judge Miller to simply declare them the winners of the case and grant the foreclosure. Molina showed up for the Jan. 6 hearing on that motion and told the judge that the plaintiffs had not complied with his requests for discovery. KappaMtgDocsMissing

Almost Every Loan File Reviewed Had Missing, Incomplete Documents, Says Ohio AG In Civil Suit Against Now-Defunct Mortgage Brokerage

From the Office of the Ohio Attorney General:
  • A Cleveland-area mortgage broker failed to give consumers all the information they needed about their new loans, according to a lawsuit filed today in Cuyahoga County Common Pleas Court by Ohio Attorney General Richard Cordray. The suit charges Prime Option Financial Services, LLC (Prime Option) and Mark Belter, its leader, with several violations of consumer protection laws for allegedly failing to provide required information to consumers signing home mortgage loans. “This company failed to give consumers required documents about their mortgage loans, and in some cases, it gave them forms that were incomplete,” said Attorney General Cordray.


  • An Attorney General investigation of residential mortgage loans brokered by Prime Option found that almost every loan reviewed had missing or incomplete documents. For example, the following required documents often were found to be missing or incomplete: Mortgage Loan Origination Disclosure Statements, which disclose fees paid to the broker; escrow disclosure forms, which estimate the monthly cost of a loan; and Ohio Homebuyers’ Protection Act Informational Documents, which explain consumers’ rights.

  • The investigation also found that Prime Option failed to store or dispose of business records containing consumer information as required by the federal Gramm-Leach-Bliley Act, which is designed to protect personal financial information and prevent identity theft. The lawsuit charges Prime Option and Mark Belter with violating the federal Real Estate Settlement Procedures Act and the Ohio Consumer Sales Practices Act.

For more, see Mortgage Broker Sued for Loan Disclosure Violations. UndoMortgageLoans TILAdelta

Courtroom 676: Ground Zero For Philly Foreclosure Diversion Program

In Philadelphia, Pennsylvania, the Philadelphia Daily News reports:
  • [O]n any Thursday, City Hall Courtroom 676 looks and feels more like a swap meet than a court. Under a high, ornate ceiling, painted in palatial gold and dark red, the huge, marble-walled room, illuminated by four brilliant chandeliers, is filled with the constant buzz of deal-making, demands, counterproposals and compromise.

  • A grandfather clock is stuck on 6:46, the only nonmoving object of the perpetual-motion machine that is Foreclosure Prevention Court. Except for the empty judge's bench, every usable square foot of space, including the jury box, is crammed with humanity - lenders' lawyers talking with borrowers' lawyers, housing counselors talking with both, a hundred or more homeowners in danger of losing their houses waiting silently to find out their fate, their eyes filled with equal parts fear and hope. Tears are not uncommon.


  • Because of the incredible volunteer response by hundreds of Philadelphia lawyers, [Common Pleas Judge Annette] Rizzo said, the foreclosure-prevention program is costing the cash-poor city nothing. [...] It works so well, Rizzo said, that Philadelphia is serving as the model for foreclosure-prevention programs in Boston, Pittsburgh, Cook County (Illinois), Prince George's County (Maryland), Louisville and the entire state of New Jersey. Courtroom 676 has a steady stream of observers from across the country, searching for a way to stem the tidal wave of foreclosures.

For more, see The miracle of Courtroom 676: Saving lives, one address at a time.

In a related Philadelphia Daily News story, see For foreclosure-prevention help, just dial 215-334-HOME:

  • [T]he foreclosure-prevention program's lawyers and counselors charge nothing, and, unlike the heavily advertised hype artists, they have saved hundreds of homes. "All you have to do is call our Save Your Home Philly Hotline - 215-334-HOME - and a Community Legal Services lawyer will get you into the program," [mayoral adviser Terry] Gillen said.

Go here for more on Philadelphia's Residential Mortgage Foreclosure Diversion Pilot Program.

City Of Baltimore, Wells Fargo Slug It Out As Lender Seeks Dismissal Of Reverse Redlining Lawsuit

In Baltimore, Maryland, The Maryland Daily Record reports:
  • Attorneys for the city of Baltimore and Wells Fargo traded arguments in federal court about the viability of the city’s first-of-its-kind “reverse-redlining” lawsuit against the nation’s biggest consumer bank. The San Francisco-based bank has asked the judge to dismiss the case, in which the city claimed Wells Fargo systematically targeted Baltimore’s black neighborhoods and borrowers for high-rate subprime loans — a practice the city alleged is illegal under the federal Fair Housing Act.

For more, see Attorneys spar in 'reverse-redlining' suit against Wells Fargo (when link expires, try here).

See also, The Baltimore Sun: City says Wells Fargo mortgages were predatory (Bank says complaint doesn't prove that subprime loans hurt black neighborhoods).

For the lawsuit alleging predatory lending filed by the City of Baltomore, see:

Courts, Public Defenders, Legal Aid Programs Feeling Budget Squeeze As Financial Resources Go Down While Demand For Services Skyrocket

CBS News reports on the state budget problems that are squeezing court systems, public defenders offices, and legal aid programs around the country.
  • [P]ublic defenders and legal aid programs are facing their deepest budget cuts in years just as the recession creates more demand for their services. "The courts may be facing a 'perfect storm' of funding shortfalls," according to a report from the National Center for State Courts. All but a handful of states are dealing with budget deficits, and court systems across the nation are on the chopping block [...].

Because of the priority courts give to criminal cases, civil cases (ie. foreclosures, evictions, etc.) are expected to begin jamming up court systems nationwide, if they aren't already doing so.

For the story, see Poor Economy Hits Courts, Hurts Programs For Poor (Public Defenders, Legal Aid Programs Imperiled As Economic Meltdown Hits Courts).

Wednesday, January 28, 2009

Countrywide To Temporarily Freeze All Pennsylvania Foreclosures As Part Of $150M Suit Settlement With State AG

Reuters reports:
  • Countrywide Financial Corp has agreed to provide an estimated $150 million in mortgage relief and cash assistance for Pennsylvania homeowners to settle a state lawsuit over its lending practices, officials said on Wednesday.

  • Countrywide, once the nation's largest mortgage lender and now part of Bank of America Corp, also agreed to freeze foreclosure proceedings until it determines whether borrowers are eligible to take part in the settlement. [...] The settlement would provide them with loan modifications, relocation assistance and foreclosure relief as well as waivers of default or delinquency fees, Pennsylvania Attorney General Tom Corbett said.

Source: Countrywide settles Pa. lawsuit for $150 million.

West Virginia Loophole Allows For Judicial Double-Dipping As Some Judges Simultaneously Collect Pension, Paychecks

In Kanawha County, West Virginia, an opinion column in The West Virginia Record comments:
  • Kanawha Circuit Judge Charles King doesn't want to talk about how he found a legal loophole to rip off the taxpayers and enrich himself. We don't blame him. When it's your job to serve as a trusted arbiter of disputes between others who put their fates in your hands, the last thing you'd want is for word to get out that, when the robes come off, you play the legal angles for cash. Judge King "retired" last October after 20 years on the bench. He sent in a resignation letter to Gov. Joe Manchin.


  • King retired in October and won re-election in November. Now he's back on the bench -- collecting his judicial salary and his pension at the same time. That was the cash-point of the letter. It enabled King to double-dip on West Virginia taxpayer coffers, gaming [the] state pension system so he can work and collect a pension at the same time. Indeed, Judge King cynically knew what his future would bring.

  • King's 'legal' ploy -- retire and then rejoin the bench two months later -- lets him "earn" a taxpayer-supported paychecks of up to $188,000 per year. You can buy a lot of fancy robes with that.

  • Called on the carpet for his similar subterfuge, Cabell Circuit Judge Alfred Ferguson was quick to note that his deal is "perfectly legal," arguing that since he paid into the pension system, he's just collecting what is rightfully his.

For more, see Judicial hustle.

For other posts on the sometimes questionable judgment exercised by some of the members of our esteemed judiciary, go here and go here. knuckleheaded judges zeta

Texas Court Voids Home Title Transfer By 87-Year Old Widower To Caretaker; Evidence Proved Fraudulent Promises Were Made At Time Of Conveyance

In Beaumont, Texas, The Southeast Texas Record reports:
  • Liberty County District Judge C. T. Hight correctly returned a home to an old man who signed it away, the Ninth District appeals court in Beaumont decided. Hight heard enough evidence to find that Peggy Ballard Williams defrauded Melvin Kaufman, three justices ruled.

  • Kaufman, who was 87 when he conveyed his property to Williams, testified that she broke a promise to take care of him and keep him out of a nursing home. She testified that she promised nothing and received the property as a gift.

  • Hight held that she made the promise and never intended to keep it. Ninth District Justice Hollis Horton wrote in a Jan. 8 opinion, "Based on the testimony before it, the trial court's conclusion finds support in the evidence."(1)


  • He wrote, "Cancellation of a deed is a proper remedy when promises are fraudulently made with no intention of carrying them out at the time of the deed's execution."

For the details on how the 87-year old homeowner was found by the court to have been tricked into signing over the deed to his home to Williams, the great-niece of his deceased wife, see Appellate judges uphold Liberty County court finding of fraud in property dispute.

For the ruling of the Texas appellate court, see Williams v. Kaufman, NO. 09-07-00535-CV, 2009 Tex. App. LEXIS 37 (Tex. App.--Beaumont, January 8, 2009).

(1) According to the story, Justice Horton added, "Although none of the witnesses except Williams and Kaufman claimed to have any knowledge of the promise Williams allegedly made to Kaufman, we are not aware of any cases holding that corroboration of a promise is required in order for a court to find a witness's testimony about the promise credible." This goes to show that, even when there are no witnesses to the scam other than the victim and the scam artist, and none of the alleged fraudulent statements made by the scammer were reduced to writing, a victim can still bring a lawsuit and win by giving testimony that is more believable than the scammer's testimony. Unlike a criminal case, which requires proof beyond a reasonable doubt in order to prevail, winning a civil case in a "he said, she said" situation requires simply that one party be slightly more believable than the other. KappaDeedTheft

Failure To Receive 60-Day Notice, Being Bulldozed Into Unfavorable Agreements Among Complaints From California Tenants In Homes Facing Foreclosure

In San Mateo, California, a story in the San Mateo County Times on the problems facing local tenants renting homes in foreclosure contained the following excerpt on the affect of new rules in effect to help tenants in these situations:
  • [S]hirley Gibson, an attorney with the nonprofit Legal Aid Society of San Mateo, said the new rules have done little to stop the flood of renters coming to her for help. She holds drop-in clinics around the county three times a week for homeowners facing foreclosure and, more recently, renters being told they have to leave their homes. The clinics are packed, and only getting busier.

  • Common complaints are tenants not being given 60 days' notice to vacate, as required by California law, and tenants not being given 24-hour notice before a landlord visit. Gibson said many of the people she counsels are low-income, non-English speakers who are pressured into signing agreements that are not in their favor. "I've seen tons of this over the last couple of months," she said. "We have a huge population of chronically underemployed and these folks are always at the edge of their income, and the landlords and realtors have a hard time respecting the rules."(1)

For the story, see Duplex foreclosed on, renter struggles to stay (Amid foreclosure, renter struggles to stay).

For an article directed to California tenants living in homes in forecloure, addressing some of their legal rights, see see Tenants of Foreclosed Homes Often Short-Changed by New Owners.

(1) It may be important to note that, in the case of a tenant who receives a Section 8 federal rent subsidy (ie. a "Section 8" tenant), it has been reported that federal law prohibits a new owner, including foreclosure purchasers and foreclosing lenders, from evicting Section 8 tenants unless they first go to court and prove they’re being economically harmed by having a tenant remain in a building, or show other good cause. However, many Section 8 tenants panic and don’t fight eviction notices, not realizing they have rights. For more on this point, see Foreclosures hit tenants (Activists: New owners trample on renters’ rights).

For the specific federal regulation on this point, see 24 CFR 982.310(d)(1). Go here for the regulations (24 CFR 982) regulating the Section 8 rent subsidy program, generally. SkimmingKappaRent

Foreclosure Mediation Now Available In All 88 Ohio Counties

In Columbus, Ohio, WTTE-TV Channel 28 reports:
  • The Ohio Supreme Court says a foreclosure mediation program it launched less than a year ago is now available in all 88 counties. The high court provides step-by-step instructions to common pleas courts around the state to try to reach solutions in foreclosure cases. The local courts gather information from homeowners and lenders to reach a mutual agreement.

  • Some courts are using court staff, while others are using contract mediators. Others are using volunteers. Counties began joining the program after it launched in February. Local courts are to submit data to the Supreme Court so that the effectiveness of the county programs can be measured.

Source: Foreclosure mediation available in Ohio counties.

For the Ohio Supreme Court's "11 Step Program," see The Foreclosure Mediation Program Model.

L.A. Mayor, State Real Estate Commisioner, Others Caution Public On Loan Modification Fraud; "Scam Peddler" Sightings Up Sharply

In Los Angeles, California, the Los Angeles Times reports:
  • Alarmed by a huge increase in swindlers trying to take advantage of families whose homes are in foreclosure, Mayor Antonio Villaraigosa and a host of bankers, legal aid lawyers and law enforcement officials [Monday] called on the public to beware of people peddling loan modification scams.


  • From the ubiquitous orange signs on freeway off-ramps that blare “Modify Your Payment” to men impersonating bank executives going door to door, homeowners in trouble are being targeted relentlessly.

  • Jeff Davi, commissioner of the California Department of Real Estate, said his department has had to “shift resources” to keep up with the scammers. His office has 292 open investigations and expects to begin filing cases at a rapid rate, he said.

For more , see L.A. officials warn of foreclosure scams.

Three Months Jail Time For Two In SoCal Rent Scam; Judge Cuts Some Slack As Both Repay Victims; Craigslist Ads Used To Reel In Tenants

In Vista, California, the North County Times reports:
  • Two Orange County men who posed as landlords and rented out foreclosed homes, taking thousands of dollars from unsuspecting victims, left a Vista courtroom in handcuffs Monday. Linda Smith, who had fallen prey to their scam, whispered a loud "yes" in an otherwise quiet courtroom as Superior Court Judge Daniel Goldstein sentenced Alexander Braslavsky, 34, and Anthony Patrick Marshall, 38, each to 90 days in jail. [...] Braslavsky, of Irvine, and Marshall, of Mission Viejo, each pleaded guilty in September to a felony charge of grand theft.

  • Before announcing their sentences, Goldstein said he wanted to give each man a year behind bars. But the two men already had repaid the victims in exchange for a maximum sentence of 90 days. "I'm placing a great deal of weight on the fact that you made the victims whole," Goldstein told them.


  • According to [Deputy District Attorney Anna] Winn, the two men would dress in suits and ties to meet the victims, telling them that Braslavsky was the owner and Marshall was his real estate agent. The pair would show the home, make a deal with the victim, hand over a set of house keys and take the victim's money, Winn said. Each victim paid between $3,350 and $4,500 to the pair, she said.(1)

For more, see Men get jail for scamming renters (Carlsbad couple among SoCal victims).

Go here, go here, and go here for posts on phony landlord rent scams.

(1) According to the story, how the pair got keys to the homes is a bit unclear, Winn said, but she suspects Marshall, a licensed real estate agent, was able to access lock boxes containing the keys and made copies of them. After the hearing, Winn said it was the men's parents, not the men themselves, who fronted the money to pay back the victims. Winn said she believes there may be more victims out there."I just find it hard to believe that there are only four," she said. PhonyLandlordScamZeta

Tuesday, January 27, 2009

Foreclosing Lender Claims Mortgage Is Nine Years In Arrears; 68-Year Old Homeowner Says "Prove It!" As Bank Admits It Can't Find The Promissory Note

In Decatur, Georgia, The Atlanta Journal Constitution reports:
  • [C]itigroup and Wells Fargo say [68-year old Zella Mae] Green has failed miserably as a homeowner and is nine years behind on her payments. And they want to take the house. “Nine years? There ain’t no way,” Green said. “Ain’t no way you can stay someplace for nine years without paying anything.”

  • Determining whether a homeowner is truly years behind on a mortgage seems like a straightforward question. But Green and a string of lenders have been arguing about the matter in court for years now — with no resolution in sight. Her lawyer says the lenders have not even proven who owns the mortgage, let alone established how much Green owes.


  • Green’s case illustrates the complexities of the modern mortgage market and just how difficult it can be to unwind the history of a mortgage. Most mortgages are originated by one lender, then sold — often repeatedly — to other lenders or groups of investors. Other companies are often brought in to process payments and manage escrow accounts.


  • I’m just trying to find out two things: What Ms. Green’s proper loan balance is and who she owes it to,” [her bankruptcy attorney Howard Rothbloom] said. So far, who owns the mortgage has not been resolved.

  • A lender proves ownership of a mortgage by producing the “promissory note,” the document signed at closing in which the borrower agrees to the debt. The note is valuable and can be bought and sold by lenders. But like a personal check, it is only valuable in its original form. Green’s lenders have admitted in court documents they can’t find her note. Legal experts say that’s a big deal.

  • There is no excuse for the inability of mortgage lenders to know where the note is,” said Frank Alexander, an Emory University law professor and a leading expert on real estate law. “Without the note, you have virtually nothing. That is the one thing that is always locked in a vault.”

For more, see Mortgage market clouds who owns woman’s house.

For posts that reference the failure of mortgage lenders and their attorneys to prove ownership of the promissory note when starting foreclosure actions, Go Here, Go Here, Go Here, Go Here, and Go Here. KappaMtgDocsMissing

Woman Probed For Taking Out $400K+ Mortgage On Friend's Home Without His Knowledge Arrested For Draining $100K+ From His Bank Accounts

In Anchorage, Alaska, the Anchorage Daily News reports:
  • Local businesswoman Samantha DeLay-Wilson knew when to expect her longtime friend's disability check to hit his bank account, and, while he was in Central America, she slipped into his house, used his checks and drained more than $100,000 from it, according to charges filed Thursday.(1)

  • Court records indicate DeLay-Wilson, 62, is also under investigation for taking out a mortgage worth more than $400,000 against a home her ex-boyfriend and friend of 12 years owns in San Francisco -- without him finding out about it for years.

For more, see Woman accused of stealing checks (FELONIES: Total was in the hundreds of thousands, records say).

(1) DeLay-Wilson was arrested and booked into jail Thursday on 16 felony counts of scheming to defraud, forgery and theft after she allegedly stole 14 checks from the friend, according to the story. The charges filed Thursday are not DeLay-Wilson's first run-in with the law. Reportedly, in 1998, she was accused of duping two Anchorage men, including one who lost his life savings, into lending her $500,000 that she would pay back with interest. She didn't. Facing up to 10 years in prison, DeLay-Wilson pleaded no contest in 1999 to a count of scheming to defraud and was sentenced to serve seven months, a police detective told the Anchorage Daily News.

Bakersfield Cops Probe Two Property Managers Accused Of Failing To Turn Over Rent To Over A Dozen Landlords, Leaving Some In Danger Of Foreclosure

In Bakersfield, California, KBAK/KBFX TV Channels 29/58 report:
  • Court records show two women who are under investigation for their ownership of a local property management firm also have a history of white collar crimes. Bakersfield police are looking into fraud allegations against Kristi Smart and Michelle Gamero of now-defunct Elite Property Management LLC.(1)

  • More than a dozen property owners have come forward saying Smart and Gamero have been collecting rent from tenants for months but not turning the money over to the property owners. Some of the property owners said they are now in danger of losing their rental properties to foreclosure.

For more, see Business owners under fraud investigation have criminal past.

(1) According to the story:

  • In 1992, Smart was convicted of writing more than $2,500 in bad checks;
  • In 1997, she was convicted of forging checks. Smart was sentenced to two years at Central California Women's Correctional Facility in Chowchilla.
  • In 1997, Gamero was convicted of embezzling nearly $130,000 from a former employer. She was sentenced to three years at CCWCF in Chowchilla.

Legal Aid Lawyers Save Day For Massachusetts Couple Facing Foreclosure; Counsel Helps Reach Agreement Allowing Homeowners To Buy Back Home

In Uxbridge, Massachusetts, The Metrowest Daily News reports on a local couple who were able to dodge the loss of their home to foreclosure with the help of a local non-profit law firm:

  • "When all hope was lost, they came in like a white knight. I wasn't in a position to hire a lawyer, but they came in and took care of everything," said Michael Damon by phone from Cape Cod, where he is training for a second tour in Iraq, beginning in June. "That's why we're so adamant about helping legal aid."

  • Now, nearly a year later, Lisa Damon told a crowd of a few hundred lawyers who filled the State House's Great Hall of Flags yesterday, her family is close to re-purchasing the house. With the help of their lawyers, they were already able to reach an agreement to keep living in their house through the process, she said. [...] The Damons' recent history was the centerpiece of a morning of lobbying by Massachusetts lawyers for legal aid organizations such as the one that helped them. [...] Unlike criminal cases, civil courts do not automatically appoint an attorney for people who cannot afford one.

For more, see Free lawyers helped couple stay in home.

Indiana Lawmakers Consider Bill Allowing Tenants To Void Leases In Homes That Fall Into Foreclosure

In Indianapolis, Indiana, the Post Tribune reports:
  • Renters would have the power to void their leases if the properties where they live fall into foreclosure under a bill that passed the Senate Judiciary Committee on Wednesday. Tenants would be guaranteed notification if the property is foreclosed on, and then would be able to break their lease so they could find somewhere else to stay, rather than risk getting tossed out when someone new buys the building. The Senate Judiciary unanimously adopted the proposal, which will next head to the full Senate for consideration.

For more, see Bill would aid renters in foreclosed properties.

See also, WTHR-TV Channel 13: Lawmakers look to tighten up laws on mortgage foreclosure.

Monday, January 26, 2009

Detroit-Area Sheriff Asks Governor To Declare State Of Emergency, Six Month Moratorium On Foreclosure Sales

In Detroit, Michigan, The Detroit News reports:
  • Wayne County Sheriff Warren Evans has written a letter to Gov. Jennifer Granholm calling for a state of emergency on the foreclosure crisis in the state's largest county. Evans, a Detroit mayoral candidate, is asking Gov. Granholm to exercise an executive order for a six-month moratorium on foreclosures in Wayne County.

  • "Not only is Wayne County experiencing a time of great public crisis, disaster and catastrophe, public safety is imperiled by the number of foreclosed citizens living on the street or committing crimes with the actual intent of being jailed," Evans' letter said.

Source: Sheriff Evans asks governor for moratorium on foreclosures in Wayne.

Mortgage Servicer's Libel Suit Against "Victim" Of "Engineered" Foreclosure To Begin Today; Firm Admits Loan Was Current When Legal Action Started

In Dallas, Texas, reports:
  • On the surface, the trial scheduled to begin Monday morning in the Dallas courtroom of U.S. District Judge Jane J. Boyle is your basic libel suit. Orix Capital Markets, a $1 billion financial services company, says its reputation is being seriously damaged by allegations posted on a Web site that mocks its very name.

  • Indeed, the Web site’s shocking claims of massive fraud and deceit by a prominent member of the mortgage-servicing industry have captured the attention of high-powered attorneys and others immersed in the current foreclosure crisis.


  • Cyrus Rafizadeh, a defendant in the libel case, says the lawsuit is the work of an evil corporate giant determined to silence him, a 20-year-old law student, “computer nerd” and self-taught expert on mortgage securitization and trusts.

  • Rafizadeh says he is using his Web site,, to expose a vast scam by Dallas-based Orix, information that is directly related to the current U.S. mortgage meltdown and is of vital interest to investors, regulators and taxpayers.


  • The libel suit was filed as a counterclaim to a 2006 suit against Orix by a company called Super Future Equities, in which Cyrus Rafizadeh was a corporate officer. SFE owned shares in the securitized mortgage trust that held the loan on his family’s foreclosed apartment complex. Rafizadeh said much of the material in SFE’s lawsuit, which was dismissed by Judge Boyle in December 2007, was the fruit of his thousands of hours of research into Orix, the mortgage-servicing industry, real estate trusts and the securitization process.(1)

For more, see Libel trial begins over mortgage scam charges (Current showdown is latest chapter in 8-year, Texas-sized legal drama).

(1) According to the story, Rafizadeh told that he became interested in the topics after Orix foreclosed on the family’s Louisiana property. Orix, “engineered the default because they figured out you make more money in foreclosure and default than if the borrower makes all the principal and interest payments,” which his family was doing, he reportedly said to

The story further reports that Orix attorney Greg May acknowledged to, as noted by Cyrus Rafizadeh, that principal and interest payments were not in arrears when Orix foreclosed on the Louisiana property. “The monthly payments of principal and interest were being made but there were big deferred maintenance and life-safety issues on the property,” May reportedly said. “It was a slum and they were running it as a slum.” A state court judge agreed with Orix that the Rafizadehs had failed to maintain the property as required by the loan and, further, ruled that fraud had been committed in obtaining financing for its purchase, according to the story. In 2004, the court entered a judgment of nearly $11 million for Orix.

Ohio AG Files Civil Charges Against Upfront Fee Loan Modification Firms Offering Help To Homeowners Facing Foreclosure

From the Ohio Attorney General's Office:
  • Ohio Attorney General Richard Cordray has filed a lawsuit against two Cincinnati-based foreclosure rescue companies accused of failing to deliver on their promises to save consumers from foreclosure. The suit, filed in the Hamilton County Court of Common Pleas, charges Foreclosure Assistance USA, Inc. (FA USA) and American Foreclosure Professionals, Inc. (AFP) with several violations of Ohio consumer protection law.(1)

  • "These companies have been sending direct-mail solicitations that specifically refer to the foreclosure lawsuit an individual consumer is facing by its unique case number," said Attorney General Cordray. "The companies said they could offer immediate assistance in saving the consumer's home from foreclosure, but they failed to do so. They promised work-out agreements, but did not deliver."

For more, see Foreclosure Rescue Companies Sued for Deceptive Practices.

(1) According to the story, the lawsuit charges the companies with violating Ohio's Consumer Sales Practices Act, Credit Services Organization Act and Debt Adjusters Act. The Attorney General's Office currently has four unresolved complaints against AFP, with damages ranging from $700 to $900 each. The office also has four unresolved complaints against FA USA, with alleged damages between $900 and $1200 each.

Florida Foreclosure Defense Attorney Draws Overflow Crowd For One-Day "Boot Camp" In Tampa

In Tampa, Florida, The Tampa Tribune reports:
  • Millions of homeowners across the nation have been sued by lenders who seek foreclosure. Their biggest cheerleader may be April Charney. The lawyer with the Jacksonville Area Legal Aid agency wants to shout from the top of her lungs that every one of them - regardless of circumstance - should fight back. Problem is, she said, there aren't enough lawyers who take these cases, and many don't have enough training to be successful.


  • On Thursday, Charney spent the day with 200 lawyers and other real estate professionals. Part of her requirement for the one-day, boot-camp-style training: 20 hours of pro bono service. "I've been drafted for this work," she said of her position with the legal aid group, which represents low-income clients for free. "I'm trying to train other recruits."


  • Catherine Peek McEwen, a U.S. bankruptcy judge in Tampa, attended and said she wants to gain a better understanding of foreclosure law. "I think the learning curve was up a notch for the Tampa Bay area," she said. "The state court judges are going to have more to chew on if these lawyers get in front of them."

For more, see Lawyer Provides Foreclosure Arsenal.

Defect In Serving Notice Of Legal Action, Subsequent/Innocent Buyer's Failure To Probe Rights Of Occupants Leads Court To Void Sale Of Foreclosed Home

A 2006 decision of a New Jersey trial court provides another example of the problems a foreclosing creditor causes for itself and others when it chooses to serve delinquent property owners with notice of a foreclosure action by publishing a legal notice in a local newspaper (ie. known as constructive service - service by publication) without first making a diligent search and inquiry of the names and the whereabouts of the property owners in a manner satisfactory enough to establish that face-to-face service (ie. known as personal service) upon the property owners is not possible.

The decision also addresses the problems a property purchaser has when asserting bona fide purchaser status when it buys property subject to the occupancy of someone other than the seller, and fails to inquire as to the nature of any property rights (either recorded or unrecorded) that the occupants may have in the home.

For the long version of this post, including links to court decision and other relevant cases, see Faulty Service Of Process In Tax Foreclosure, Failure To Investigate Rights Of Persons In Possession Leaves Unwitting Buyer Empty Handed.

Go here and go here for other posts on foreclosures involving faulty notifications to property owners. foreclosure faulty notice ScrewUpProcessServing

California Court Hammers Foreclosure Rescue Operator For $280K Plus Attorney Fees In Sale-Leaseback Foreclosure Rescue Deal

A November, 2008 decision by a California appeals court affirmed a lower court ruling that awarded a homeowner facing foreclosure monetary and exemplary damages in the amount of $280,000 (plus the homeowner's legal fees) from a real estate broker / foreclosure rescue operator to whom she sold her home in a sale-leaseback arrangement which violated the California Home Equity Sales Contract Act (Section 1695 through 1695.17, California Civil Code).

For the long version of this post, see California Appeals Court Affirms $280K Damage Award For Homeowner In Sale-Leaseback Foreclosure Rescue Deal.

Upfront Fees For Loan Modifications In California Prohibited Once Notice Of Default Is Recorded On Home In Foreclosure

Contrary to what some loan modification firms doing business with California homeowners may believe, a Consumer Alert appearing on the California Department of Real Estate ("DRE") website makes clear that charging upfront fees from California homeowners for providing loan modification services is prohibited once a Notice of Default has been recorded against an owner's home by his/her mortgage lender.(1)

The alert goes on to state that, when a Notice of Default has not been recorded against an owner's home, it may be permissible for a California licensed real estate broker to assist in working out a loan modification or otherwise negotiate a possible resolution to a mortgage problem with the lender or loan servicer and seek payment in advance for their services, provided certain requirements are met.(2)

In such a case, however, the broker cannot have a homeowner sign an agreement until it has been submitted to the Department of Real Estate for review and the broker has received permission from them to use it and collect the advance fee. Permission is granted by DRE through their issuance of a “no objection” letter to the real estate broker regarding the use of the agreement.

For more, see Consumer Alert - Advance Fees and Loan Modification Services.

(1) California Civil Code Section 2945 through 2945.11, which regulates "foreclosure consultants", forbids anyone who falls under the definition of a “foreclosure consultant”, as well as a real estate licensee, from collecting any advance fees for these types of services if a Notice of Default has been recorded against an owner's property. California licensed lawyers when rendering services in the course of their legal practice(s) are exempt from this prohibition, according to the California Department of Real Estate.

(2) Of course, this presumes that the nature of the services provided by a non-attorney real estate broker doing loan modifications is such that it doesn't constitute the unlicensed / unauthorized practice of law.
Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law.

Sunday, January 25, 2009

CNBC On Upfront Fee Loan Modification / Foreclosure Rescue Scams

CNBC's nightly consumer finance program On The Money ran a segment last week on upfront fee loan modification / foreclosure rescue scams.

For the video (6:23), see Fraud At Your Front Door (or go here for a summary of the report).

Loan Modification Firm's Instructions To Withhold Mortgage Payments From Lender During Negotiations Leaves Two Homeowners Facing Foreclosure

In Burlington, North Carolina, WFMY News 2 reports on two area homeowners who claim were screwed out of thousands of dollars from loan modification firms and, after following their instructions to withhold the mortgage payments while the purported negotiations with the lenders were ongoing, were left facing foreclosure.

For the story, see What's Worse Than Losing Your House?

Three Miami Women Accused Of Cheating Housing Authority Of Federal Rent Subsidies Close To Winning $60K Lawsuit Settlement

In Miami, Florida, The Miami Herald reports:
  • The proposed settlement figure is small -- $60,000 for three women who said they were wrongly denied housing benefits in Miami-Dade County. But the lawsuit that emerged from the fight provides a window into the far-reaching problems that plagued the county's Housing Agency and Section 8 voucher program.

  • Last summer, Prudence Jones, Nola Farquharson and Alexandra Coronado filed suit against the county, arguing they were denied rent subsidies through an unfair system that failed to provide applicants' proper notice or the right to a hearing. In denying housing benefits, the county contended Jones lied about undisclosed income, Farquharson had a secret border and Coronado didn't live where she claimed.

  • All three denied the allegations -- and all may be vindicated [...] when county commissioners vote on a $60,000 settlement that also calls for extensive training for Miami Dade Housing Authority hearing officers and staff, and more oversight.

For more, see Miami-Dade may pay 3 who were denied rent subsidies (County commissioners are expected to vote Thursday to settle a lawsuit seeking to restore rental benefits to three needy local residents).

Alleged Fraud By Federally Subsidized Renters Involving Housing Assistance Benefits Leaves Landlord Of 50-Unit Building Facing Foreclosure

In Fairhope, Alabama, the Press Register reports:
  • Some Spring Run Apartments residents say the bills came without warning. Internal Revenue Service records had revealed that certain residents had under-reported their income to the U.S. Department of Housing and Urban Development, and now they faced eviction if they failed to pay back rent.

  • Some of the back-rent bills were $3,000 or more, representing the federal housing authority's share of pay they had allegedly hidden for the past year, according to former tenants. Rent in government-subsidized housing is based on each tenant's income. And so, also without warning, many Spring Run residents moved out of Spring Run without paying the bills, federal housing officials said.

  • Now, the federal government may foreclose on the property within a month or two. Officials with The Mitchell Company in Mobile, the 50-unit apartment complex's owner, said they are struggling to make mortgage payments because more than half of the tenants either left or were evicted after the back-rent bills were sent early last year.(1)

For more, see Feds may foreclose on Fairhope apartments (Problems over back rent at federally subsidized complex date from late 2007).


For other stories on Federally subsidized tenants allegedly cheating the government out of housing assistance payments, see:


For a story of three Miami, Florida women who sued the Miami Dade Housing Authority for allegedly stripping them of their housing benefits after accusing them of lying about their qualifications for housing entitlements, see Dade commissioners to vote on $60K housing settlement.

(1) Reportedly, the trouble over back-rent began in late 2007, when the managers of Spring Run Apartments began using the federal government's Earned Income Verification system. Using a tenant's Social Security number, a housing manager can find the income reported by that person to the Internal Revenue Service the previous year. If discrepancies are found, the tenant must be charged for the rent that would have been paid if accurate income information was provided. The property managers' inquiries using IRS records discovered that the occupants of more than 30 of the Spring Run complex's 50 units had under-reported income in the previous year and now owed back rent, the landlord said. But instead of paying the bills, many tenants left without notice.

Fannie Targets Florida Condos With Tougher Lending Rules

The Miami Herald reports:
  • Lending giant Fannie Mae is slapping tough new requirements on mortgages for Florida condos, moves that analysts believe will make it even more difficult to sell units in buildings already starved for residents and struggling financially.(1)


  • The company, wracked with financial problems of its own and in conservatorship with the federal government, said it singled out Florida after a review of its mortgage loans revealed record-high default and foreclosure rates among condo owners. It also cited the excessive number of condos listed for sale, which has driven down prices.

Among the new rules:

  • No more than 15 percent of unit owners can be 30 days or more past due on association fees,
  • For new condo buildings and condo conversions, at least 70 percent of units must have been sold or put under contract. That's up from 49 percent previously,
  • Fannie will have to review condo buildings itself to make sure they meet Fannie requirements -- at the lender's expense. Before, Fannie relied on the lenders to perform these reviews.

For more, see New rules raise the bar for condo mortgages in Florida (In a move that will make it even more difficult to qualify for a condo loan, Fannie Mae is putting a host of new conditions on mortgages for condominiums in Florida).

In another new Fannie Mae rule, which reportedly applies nationwide, buyers qualifying for a mortgage loan conforming to Fannie Mae guidelines who fork up less than a 25% downpayment will be clipped for an additional 3/4% fee (see Fannie Mae's added fee to crunch condo buyers).

(1) According to the story, the new rules come at a time when condo buyers already face difficulties getting mortgages. Many banks over the past two years have dramatically pulled back on condo lending, requiring down payments of up to 40 percent in new buildings. Some lenders even have blacklisted condo buildings, citing a high risk of price declines and defaults.