Saturday, October 17, 2009

Special Forces Iraq Vet Returns Home To Find Delinquent Mortgage On His Free & Clear House; Friend Accused Of Using POA To Drain Equity From Property

In Mount Clemens, Michigan, C & G Newspapers reports:
  • When Kevin Robertson, a sergeant with the Army’s Special Forces, returned from this third tour of duty in Iraq in May 2007, he was astounded to find that many of his financial dealings were out of whack. “He started to realize that something was really wrong. He didn’t know what had transacted,” said Elizabeth Geary, Robertson’s friend for at least 10 years.

  • Robertson discovered that a loan totaling $135,000 had been taken out on his home in Mount Clemens. The home was also going into foreclosure. Moreover, another home had been purchased in Robertson’s name in Florida for $340,000. “He went to Iraq and that’s one big nightmare over there, and he comes home and it’s a worse nightmare,” said Geary.

  • How did it all happen? According to Geary, one day before Robertson was deployed in November 2006, he gave power of attorney to a friend, Mark Powell, whom he had met at a gym several years ago in Sarasota, Fla. “He had been convinced by a friend of his over in Sarasota to turn over his power of attorney,” said Geary, adding, “Kevin reluctantly did this and when Kevin came home … this man he took out two loans on this house.” Geary lives in the house on Smith Street that Robertson owns and that Powell took the two loans out on. She said Robertson, who lives in Sarasota because that’s where the Special Forces train, had obtained the Mount Clemens home from his father, who had paid cash for the property and owed no money on it. She added that the Florida home, which Powell bought for $340,000, now appraises for $160,000. Geary said that Robertson gave Powell no such permission to take out either loan or purchase a home.

For the story, see Locals come together to help out soldier who was scammed. DeedContraTheft

Wisconsin Woman Charged With Ripping Off Dad Of $91K+; Used POA To Pocket Mortgage Money From Father's Home, Get Credit Cards

In Eau Claire, Wisconsin, WQOW-TV Channel 18 reports:
  • An Eau Claire woman is accused of stealing more than $91,000 from her dad as his power of attorney. Jill Peterson is charged with four counts of identity theft and forgery. According to the criminal complaint, Peterson told her father that she lost most of the money gambling. She told authorities that as power of attorney, she had no problem getting the money from the bank and that she also took out three credit cards in her father's name and even mortgaged his house. To throw off suspicion, her father says she created a fake website so he could view his bank account which was supposed to have more than $80,000 in it. After telling his daughter he was going to drive to the bank to see how much money he really had, she admitted that it was "all gone." Peterson will make her first court appearance later this month.

Source: Daughter gambles away $91,000 stolen from father. FinancialAbuseOfElderlyAlpha DeedContraTheft

Man Charged With Abusing POA, Looting $122K From Elderly Mom's Bank Accounts; 82-Year Old Woman Left With Big Nursing Bill & No Funds To Pay For Care

In Daytona Beach, Florida, the Daytona Beach News Journal reports:
  • A man who had power of attorney over his mother's affairs faces a felony exploitation charge after police said he emptied her bank accounts of $122,722. William Frank Kunselman Jr., 62, was arrested [...] on a charge of exploitation of the elderly. Daytona Beach detectives said Kunselman's 82-year-old mother, whose name was not provided, has lived at the Good Samaritan nursing home since 2006. She was relying on an income of $39,600 from her Social Security and investments.

  • Police said she had no idea her bills were not being paid at the nursing home, and she now owes $69,000. Kunselman, who wrote dozens of checks to himself from his mother's account, told detectives he has no money to pay for his mother's care.

Source: Man accused of emptying mother's accounts. FinancialAbuseOfElderlyAlpha

Buyer Of Foreclosed House Ignores Existing Lease; Seeks To Immediately Boot Family From Home, Says Tenant

In Bakersfield, California, KERO-TV Channel 23 reports:
  • A southwest Bakersfield family renting a foreclosed home claims the new owner is unfairly trying to kick them out just four days after he bought the home. Earlier this month, Anthony Moore received notice the home he and his family had been renting for the past four years was foreclosed and would be up for sale at an auction. Moore said the home sold [...], and already the owner is pressuring him to get out in 90 days or sooner.


  • Because of the new federal law Protecting Tenants at Foreclosure Act of 2009, Moore said he has the right to stay in the home until April 2010, that's when his lease is up. Congress passed the law in May aimed at protecting renters in foreclosure situations. Under the law, tenants are able to stay in their home until the end of their lease term, except if the new owner has plans to occupy the home then the tenant has 90 days to vacate.

  • Moore said he has been in contact with Monique Cervantes, who identified herself as the landlord. He said Cervantes told him that the owner, Shae Mhlay has no intentions on living in the home. "She's saying that it's not legal, that they don't have to follow the lease and basically told me the first day that the new owner is lethal, is ruthless and wants us out," said Moore. On the County Assessor's Web site, ABC 23 found Mhlay had purchased close to 70 homes since January this year.

For more, see Renter Claims Rights Are Being Violated (Federal Law Aims At Protecting Tenants Rights). RentSigmaSkimming

Overleveraged NYC Apartment Buildings Leave Tenants In Tens Of Thousands Of Units Threatened With Consequences Of Foreclosure

In New York City, National Public Radio reports:
  • Ever since it was purchased in 2007, tenants of the hulking old apartment building on University Avenue in the Bronx have endured cockroaches, leaking pipes, electricity outages and myriad other deprivations and indignities. But the low point probably came last winter, when the boiler ran out of oil. "For two weeks, we had no heat. This room right here? Icicles coming from the ceiling. That's how cold it was," says Luis Correa, 33, standing in the back bedroom of the apartment where he has lived his entire life.

  • The building was long owned by a small landlord who did a good job of maintaining it, Correa and his neighbors say. But one day in 2007, they awoke to find it had been purchased by Ocelot Capital Group, along with 24 other buildings, for the staggering sum of $36 million. Later, when the real estate crash left the owners unable to pay the debt service and keep up the property, the new owners abandoned it.

For more, see Some Tenants Pay The Price For Mortgage Excesses (Anywhere from 70,000 to 100,000 New York City apartment units are in foreclosure or at risk of it right now).

In a related story on an 11,000 unit, 56 building NYC apartment complex in deep financial trouble, see The Wall Street Journal: An Apartment Complex Teeters (High-Profile Tishman/BlackRock Property in New York in Danger of Default). RentSigmaSkimming

The Broken Gavel Awards

Incorrigibles and other assorted knuckleheads seem to infiltrate all fields and occupations. A recent column in The Southeast Texas Record serves as a reminder that the judiciary is no less immune to such infiltration.

Whether its lying to investigators investigating sexual misconduct allegations, soliciting sexual favors in return for leniency, transporting prostitutes across state lines, tax evasion in kickback schemes, lying about neck and back injuries - and later abusing one's position on the bench - in order to cash in on roughly $440,000 in insurance payments following an auto accident, the columnist, Texas attorney John G. Browning, observes that "judges' recent foibles have demonstrated that they, too, are as prone to character flaws as the defendants appearing before them."

For the story, see Legally Speaking: The Broken Gavel Awards.

See also, Reader's Digest: America's Worst Judges (Our Broken Gavel Award winners, and the damage they do). knuckleheaded judges zeta

Friday, October 16, 2009

Psychiatric Patient Dodges Prosecution In Alleged Contract For Deed Scam; Court Officials Say Man Lacks Mental Capacity To Commit Crime

In Cloquet, Minnesota, KQDS-TV Channel 21 reports:
  • By midnight Tuesday, a Cloquet man must be out of his home, which he thought he partially owned. Mike Bond made monthly payments on the house since May 2008, then found out through an eviction notice he had been paying an alleged con artist. [...] "We just lost $30,000," said Bond. "I have over $15,000 in labor and material in this property and now I just have to walk away from it."


  • Bond says he was making cash payments to Ron Sampson, from whom he thought he was buying the home. "He had an ad posted on Craigslist contract for deed house. It was a quick easy deal." [...] That was until he learned the house was sold in a sheriff's mortgage foreclosure auction on January 6th to Lasalle Bank.(1)


  • Record–keepers [at the Carlton County Court Administrators Office] confirm in 1999, Ron Sampson was civilly committed as mentally ill and dangerous in Carlton county. [...] Cloquet Police say Sampson was also deemed mentally ill and dangerous in Washington County in 1994 and has been in and out of the Minnesota Security Hospital in St. Peter, MN, for treatment. [...] Because Sampson has been committed, court officials say he's treated as not having the capacity to commit a crime. If he gets in trouble, he's sent back to the Security Hospital.

For the story, see Cloquet family loses home in alleged scam by mental patient.

(1) Reportedly, Bond says Sampson got the house from the original owner by having her move out and pay Sampson to take care of her pending foreclosure. rent to own lease purchase option scams yellowstone hijack KappaPhonyLandlordScam

Mass. AG Settles With Straw Buyer In Alleged Foreclosure Rescue Scam That Used Sale Leaseback Deals To Rip Off Equity From Strapped Homeowners

In Boston, Massachusetts, the Worcester Business Journal reports:
  • Attorney General Martha Coakley's office has reached a settlement with Neville Francis, one of 18 defendants accused of taking part in a wide-ranging foreclosure scam.(1) Per a consent judgment, Francis will pay $5,000 in restitution and $1,500 in attorneys' fees and costs. Coakley's office said Francis acted as a "straw buyer" in a scheme along with several real estate brokers, mortgage brokers and attorneys that ran a fraudulent foreclosure rescue program. Francis allowed a mortgage broker to use his name in applying for a loan to purchase a property. Francis took title to the property without paying deposits, or closing costs and had no intention of occupying the property. Francis is the third defendant, and the second straw buyer, to settle with Coakley's office in the case.(2)

Source: Alleged Foreclosure Scammer Settles With Coakley.

For the Massachusetts Attorney General press release, see Straw Buyer Who Participated in Foreclosure Rescue Scheme Enters into Consent Judgment.

(1) The defendants in the case tricked homeowners on the brink of foreclosure into selling their homes while promising that they'd be able to remain in their homes and that they would maintain their homes' equity, according to Coakley's office. However, the alleged scammers would disburse sale proceeds among themselves without paying any fees, and in certain cases, would sell the homes several times among themselves.

(2) According to the Massachusetts AG's Office, it reached a similar settlement in August with straw buyer Marie Betey Mereus. Additionally, this past June, it reached a settlement with closing attorney Valerie Hanserd providing for a payment of $115,000 to resolve allegations over her role in both this foreclosure rescue scheme case and a second related enforcement action against her and Leo Desire Sr. and Primary Mortgage Resource, Inc.

California Tenant Advocacy Group In Forefront In Fight Against Banks, Real Estate Agents Attempting To Illegally Oust Tenants From Foreclosed Homes

In Sacramento, California, NewsBlaze reports:
  • Backed by Tenants Together, California's statewide tenant rights organization, tenants in Sacramento have fought off local realtors and a bank that tried to illegally trick them into moving out of their home after it was foreclosed. Golden 1 Credit Union, through its local realtors at the Bishop Real Estate Group, attempted to drive out tenants after foreclosure in blatant violation of a new federal law. In a letter [...], Tenants Together is demanding that The Bishop Real Estate Group and Golden 1 Credit Union take immediate steps to comply with the law and stop evicting innocent tenants after foreclosure.

  • Mr. and Mrs. Caesar are tenants who have a two-year lease to continue renting their home through September 2010. Golden 1 Credit Union, the lender, took over the property on October 2, 2009. Golden 1 Credit Union quickly dispatched local realtors at The Bishop Real Estate Group to carry out the bank's dirty work - throwing innocent tenants out of their homes after foreclosure. On October 7, 2009, Kendra Bishop of The Bishop Real Estate Group told Mrs. Caesar that she and her husband had to move. Ms. Bishop also handed Mrs. Caesar a threatening letter, informing her that Golden 1 Credit Union had "started eviction proceedings" and urging Mrs. Caesar to accept a "relocation offer" that would expire in 3 days. [...] As soon as the foreclosure occurred, Mrs. Caesar called Tenants Together and learned that, pursuant to the Protecting Tenants to Foreclosure Act,(1) her lease survived foreclosure and that she was entitled to continue renting her home until the lease expires on August 31, 2010.(2)

For more, see Sacramento Tenant Fights Off Realtor & Bank Trying to Illegally Evict Her Family.

(1) This federal foreclosure law was passed this spring and requires (with one exception not applicable here) property owners who come into land through foreclosure to honor all existing leases, and to provide a minimum of a 90-day window for any month-to-month tenants. See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009.

(2) "This behavior is outrageous," commented Gabe Treves of Tenants Together, "The Caesars have every right to stay in their home, yet the realtors and the bank came storming in and demanded that they vacate. Banks and realtors routinely act in blatant violation of the law. That is why we are demanding that they change their policy, commit to following the law, and stop harassing tenants." RentSigmaSkimming

Porn Flick Operator Caused Rent Losses Of $100K/Month, Throwing $25M+ In Real Estate Into Foreclosure, Says South Florida Landlord In Lawsuit

In Miami, Florida, Courthouse News Service reports:
  • A South Florida landlord claims he was ruined by pornographic film-makers who rented his house to make a golf-themed porn flick. Raul Quintana says he never would have rented his house to if he'd known they were going to use it to shoot "Sexing Golfing Experience." Quintana says Bangbros paid him $600 to use his home on Key Largo for a one-day photo shoot. Quintana says the defendants told him they would use the house for "a modeling photo shoot." But Quintana says Bangbros, which operates 17 pornography Web sites, exposed him to ridicule and cost him at least $100,000 a month, as he has "lost the right to rent [his and his family's] units on the island." Before the incident, Quintana says, he had "assets on the island in excess of $25 million in property," all of which is now in foreclosure. He demands damages for fraud, deceptive trade, breach of contract and defamation.

Source: Golf Porn Ruined His Life, Landlord Says.

For the lawsuit, see Quintana v., Inc.

Another HELOC Headache

A column in The Philadelphia Inquirer recounts the story of a Swarthmore, Pennsylvania homeowner who suddenly had his home equity line of credit frozen by his lender after an apparent screw-up regarding the bank's request that he provide them with an IRS Form 4506T.

For the story, see A 'mess' of a paper chase.

Go here for other posts on Frozen HELOCs.

For more on IRS Form 4506T, see IRS Form 4506-T tweaked to battle loan fraud. frozen heloc

Thursday, October 15, 2009

Could Recent Land Court Ruling Impact Title To Any Massachusetts Home Foreclosed Upon In Last 20 Years?

In Boston, Massachusetts, the Boston Herald reports on the recent Massachusetts Land Court ruling that threatens to undo thousands of foreclosures in the state:
  • Experts say the ruling paves the way for thousands of people who’ve lost houses to foreclosure to challenge their homes’ seizures. “The judge has thrown into question every foreclosure performed in the Commonwealth over the last 20 years,” said lawyer Lawrence Scofield, who represents Wells Fargo and U.S. Bank. Scofield said only foreclosures before 1989 are beyond review, as [Massachusetts] state law gives people two decades to dispute land ownership.

  • Market watchers add that the judge’s ruling affects far more than just foreclosed homeowners. For instance, any consumer who owns a house foreclosed on in the past two decades must now worry that a former owner will sue to reclaim the property. Such homeowners could also find it impossible to sell or refinance because of “clouded” titles.

  • In fact, some consumers who’ve tried to buy foreclosed homes in recent months haven’t been able to get mortgages or title insurance because of [Judge Keith] Long’s initial decision. Bank of America and other firms have even pulled some foreclosed homes off of the resale market.

For the story, see Ruling could undo thousands of foreclosures (if link expires, try here).

Go here for Judge Long's rulings in this case (Oct. 14 ruling, March 26 ruling). title insurance legal issues EpsilonMissingDocsMtg

Foreclosure Rescue Operator To Cough Up $690K+ To Resolve Arizona AG Civil Charges In Alleged Sale Leaseback Equity Stripping Scam

In a recent press release, the Office of the Arizona Attorney General announced the settlement of a civil lawsuit it brought against a local foreclosure rescue operator(1) who peddled sale leaseback arrangements to homeowners facing foreclosure, purportedly to help them avoid the loss of their homes.(2)
  • In March, [Arizona Attorney General Terry] Goddard filed a lawsuit on behalf of his office and the Arizona Department of Financial Institutions against an alleged foreclosure rescue operation believed to have defrauded some 270 Arizonans of their homes. In the suit, Goddard alleged that between 2003 and 2007, Richard Winer, 33, of Tempe, through his limited liability companies - Taken Care of Investments, LLC; Homeowner Solutions, LLC; Bourbon Street Property Management, LLC; and Filibuster, LLC - victimized homeowners facing imminent foreclosure with fraudulent offers to help them stay in their homes.


  • According to court documents, Winer and his salespeople persuaded struggling homeowners to deed him their homes in return for assuming their monthly mortgage payments and paying off the full value of their delinquent payments. Winer charged homeowners a monthly fee equivalent to the mortgage payment to remain in the home as a renter. Neither the owner’s mortgage lender nor servicer was notified of the transfer of title.

  • These owners-turned-renters had the option to repurchase the house from Winer within one year for a fee of approximately $15,000, if they met all of the conditions of the sale-leaseback agreement. If the owner-turned-renter violated any of the conditions, such as by making even one late rental payment, the option to repurchase the home became void and the individual was subject to immediate eviction. The State’s lawsuit claimed that homes obtained under this scheme were resold within two weeks to investors who paid a commission to Winer. Almost all of the owners-turned-renters proved unable to repurchase their properties, at which time the investor sold or refinanced the home at full market value, earning profits in the tens or, in some cases, hundreds of thousands of dollars.

For the press release, see Goddard Wins $1.37 Million for Consumers in Two Mortgage Fraud Cases.

For earlier post on this lawsuit, see 400 Sale Leasebacks Are Disguised Equitable Mortgages, Says AZ AG In Invoking State Consumer Fraud Act, TILA In Suit Against Foreclosure Rescue Firm.

For the related court documents in this case, see:

(1) According to the terms of the settlement, Richard Winer must:

  • Pay $391,500 in restitution to homeowners victimized by their alleged scheme,
  • Pay $150,000 in civil penalties to the Attorney General’s Office,
  • Pay $150,000 in civil penalties to the Arizona Department of Financial Institutions,
  • Refrain from participating in any manner in any financial institution or enterprise licensed by the Arizona Department of Financial Institutions.

(2) In similar settlements of lawsuits brought by other state Attorneys General in alleged sale leaseback, foreclosure rescue, equity stripping scams, see:

More Borrowers Using Court System To Save Homes From Foreclosure

CNNMoney reports:
  • During the housing boom, mortgage lenders were doling out the dough, giving loans to people who could never have qualified before. Now, homeowners and government officials are increasingly taking these institutions to court, alleging unfair and predatory practices. While many of these suits are still winding their way through the legal system, some banks have already settled for millions of dollars.


  • "Borrowers are looking to the legal system for help in keeping their houses," said Gary Klein, a partner in Boston-based Roddy Klein & Ryan, which focuses on consumer law. "There are more cases pending than I've ever seen in my 23-year career."

  • Homeowners are seeking the courts' help either individually or as part of class action lawsuits. With foreclosures continuing to rise, borrowers are looking to force banks to modify unaffordable loans or to stop them from foreclosing on homes. Often, they also seek money. To be sure, banks have faced unfair lending lawsuits for years and have paid millions of dollars in settlements. But the recent housing boom was fueled by questionable and exotic loans that many borrowers had no hope of repaying.

For more, see Predatory-lending lawsuits on the rise (Homeowners and government officials are taking mortgage lenders to court for unfair lending practices). EpsilonMissingDocsMtg UndoMortgageLoans TILAdelta

Ex-NBAer Leaves Adoptive Mom Homeless; Duped Her Into Signing Over Home, Failed To Make Payments On Subsequent Financing, Resulting In Foreclosure

In Cambridge, Massachusetts, The Detroit News reports:
  • Rumeal Robinson got famous for his performance under pressure -- two free throws with three seconds left in overtime to clinch Michigan's 1989 NCAA basketball championship.(1) But the Cambridge, Mass., public school security officer who raised Robinson after finding him abandoned at age 10 says he has fallen far from the image of someone you can count on. Helen Ford, 65, took Robinson into her home, and accuses him of cheating her out of her house.(2)

  • Ford cried while describing to a Detroit News reporter how she was evicted in April from the home on Rumeal Robinson Way in Cambridge where she and her deceased husband Louis raised nine children and provided temporary care to many more. "I didn't know I was signing my house over. I thought I was taking out a mortgage because my son asked me for help," Ford said. "He said he would make the payments and I thought all these years he was making the payments until the constable came and told me I was being evicted."

  • She unwittingly signed papers in 2003 that sold the home for $600,000. The property has since changed three times and finally went into foreclosure. Her attorney bought time for her to remain in the home, but he now is uncertain if there is any way to get the place back.

  • Ford lives in a two-bedroom apartment. She said she doesn't sleep well because, for the first time in her life, she is alone. She had raised five of her own, four adopted children and provided temporary care for many more foster children in the five-bedroom house. She was honored for her dedication during the halftime of a Boston Celtics game in 2006.

For more, see U-M hoops hero Rumeal Robinson accused of swindling mom, others.

In a related story, see Broward-Palm Beach New Times: That's Foul (Hoops hero Rumeal Robinson blew a fortune on strippers, got indicted, and left his mom homeless).

(1) According to the story, his famous free throws downed Seton Hall, 80-79, and landed Robinson on the cover of Sports Illustrated. His adoptive parents accompanied him to the 1990 National Basketball Association draft in New York, where he was selected 10th overall in the first round by the Atlanta Hawks. He never lived up to expectations, and ended up literally bouncing around the NBA, playing for the New Jersey Nets, Charlotte Hornets, Portland Trail Blazers, Los Angeles Lakers and Phoenix Suns, the story states.

(2) No stranger to accusations of real estate hanky panky, Robinson was indicted by federal authorities in Iowa for his part in an alleged swindle of more than $2 million involving a proposed resort development called Harmony Cove in his native Jamaica. He was released last month on $50,000 bond, the story states. DeedContraTheft

Short Sales Coupled With Lease-Buyback Option A Way To Help Those Facing Foreclosure Stay In Their Homes?

In Manteca, California, The Stockton Record reports on local homeowner Rachael Vasquez and her attempt to stay in her home despite a pending foreclosure on her family's three-bedroom home:
  • Vasquez has opted for what appears to be a growing trend - albeit one that should be approached with caution and isn't without its down side - in the Central Valley for struggling homeowners. She struck a deal with an investor to purchase her home as a short sale then entered into a lease-option agreement to buy it back in three years. Vasquez will pay rent for 36 months and will then repurchase her home for $234,000, 130 percent of what she sold it for on short sale.

  • Manteca ReMax agent Christine Papworth, [...] crafted the local lease-buyback program a year ago, and has completed about 65 sales with investors. Papworth has worked the deals with one main investor, the Land Group of Modesto. She also is close to reaching an agreement with a group of Stockton investors represented by Grupe Real Estate broker Jerry Abbott. Abbott said his group has two lawyers reviewing the program to make sure there are no pitfalls.(1) [...] He added that he worries banks would reject offers once they know a lease/buyback is being offered to the seller that it approved for a hardship.(2)

For more, see Home program savior or sketchy? (Buyback investor deals risky, some experts say).

(1) One potential pitfall for the investor is that the deal could be recharacterized as an equitable mortgage (and possibly, an usurious equitable mortgage, if the overall profit to the investor exceeds any applicable limit on the charging of interest under state law). In that case the homeowner, in the event of a default or failed buyback attempt, can only be ousted from the home after a lawsuit to foreclose the investor's equitable mortgage, and not through a tenant eviction action. Go here for some case law on Equitable Mortgage Doctrine In California.

(2) Failure to fully disclose any contemporaneous side deals to the lender/loan servicer approving the short sale, or any lender financing the short sale, could land the participants in these deals in hot water. See:

Overleveraged 11,000-Unit NYC Apartment Complex Teetering On Foreclosure

In New York City, The Wall Street Journal reports:
  • One of the biggest, most high-profile deals of the commercial real-estate boom is in danger of imminent default, say people familiar with the matter, signaling the beginning of what is expected to be a wave of commercial-property failures. The sprawling Manhattan apartment complex known as Peter Cooper Village and Stuyvesant Town -- acquired for $5.4 billion in 2006 by a venture of Tishman Speyer Properties and a unit of BlackRock Inc. -- is running out of cash. As of the end of September, it had $33.7 million left of the $400 million in interest reserves set up to service its debt, according to the people familiar with the matter. At its current burn rate of about $16 million per month, the reserve could be depleted before the end of the year, the people said. Others have said the venture could avoid default until February.


  • Lenders who financed the deal first projected the complex's net operating income would triple to $336 million in 2011 from $112 million in 2006, according to Deutsche Bank AG. But net income is projected to be $139 million this year, according to Realpoint LLC, a credit-rating agency.

  • Investors who bought into the deal were confident that real-estate manager Tishman Speyer would be able to greatly boost profits by raising rents in Manhattan's sizzling apartment market. But today, the 56-building, 11,000-apartment property is suffering from a slowing New York economy, a lawsuit that has hindered the owner's ability to convert rent-controlled units to market rentals, and the debt load.

For more, see An Apartment Complex Teeters (High-Profile Tishman/BlackRock Property in New York in Danger of Default).

See also, New York Magazine: WSJ: T Minus Four Months Until Stuyvesant Town Defaults.

Wednesday, October 14, 2009

Lenders' Problem "Entirely Of Their Own Making" Says Judge In Affirming Earlier Ruling That Puts Title To Foreclosed Massachusetts Homes Into Question

In Boston, Massachusetts, The Boston Globe reports:
  • A Massachusetts Land Court justice's ruling today puts into question the ownership of hundreds -- and possibly thousands -- of foreclosed properties in the state.

  • Justice Keith C. Long affirmed his own March decision that invalidated foreclosure proceedings involving two Springfield homes because the lenders did not hold clear titles to the properties at the time of sale. In today's reconsideration of that ruling, Long described a convoluted process in which ownership of the mortgages changed multiple times without being properly recorded. He said the problems lenders now face are "entirely of their own making," and if they seek a change in law they should look toward the Legislature.

  • "The issues in this case are not merely problems with paperwork or a matter of dotting i's and crossing t's,'' Long said in a 27-page decision. "Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts Legislature."

  • The decision comes seven months after Long’s initial ruling, which came as a shock to many who deal with distressed properties. Lenders believed they could complete foreclosure transactions and later produce formal proof they held the mortgages.

  • Since March, some lenders have stopped selling foreclosed properties out of fear the sales later could be voided, and title companies have refused to insure them. The logjam has impaired efforts by communities and nonprofits to buy and rehabilitate foreclosed homes in some of the state's hardest hit areas. It has also made it difficult for individuals to buy foreclosed homes.

Source: Judge reaffirms crucial foreclosure sale ruling.

For the full text of the ruling in this consolidated case, see U.S. Bank, N.A. v. Ibanez; Wells Fargo Bank, N.A. v. Larace. EpsilonMissingDocsMtg

Statewide Ban On Upfront Fees For Loan Modifications Now Includes Attorneys, Out Of State Operators Who Solicit California Homewoners

In Sacramento, California, The Sacramento Bee reports:
  • Loan modification firms that promise to help struggling borrowers get their mortgages rewritten have been banned immediately from asking for cash upfront. Attorneys, too, who specialize in loan modifications are no longer allowed to ask consumers for payment before they perform services. The ban expires on Jan. 1, 2013. The abrupt change in California law comes after Gov. Arnold Schwarzenegger Sunday signed Senate Bill 94, by Sen. Ron Calderon, D-Montebello. As an urgency measure, the bill takes effect immediately.


  • Loan-modification firms have made relentless pitches to borrowers through radio and television ads, postcards and telephone calls. Many desperate people have turned to them, often coughing up a few thousand dollars for help that didn't come. "This is a huge problem, and the signing of this (bill) will help," said Tom Pool, spokesman for the California Department of Real Estate. He said the department has 1,300 complaints on file and has issued 400 cease and desist orders against loan modification firms. The law banning advance fees applies to firms in California or elsewhere that solicit clients in California.

For more, see Loan modification firms banned from demanding upfront fees.

Nevada Homeowners Saddled By IndyMac With "Exploding ARMS" To Freeze Foreclosure By Joining Class Action?

In Las Vegas, Nevada, the Las Vegas Review Journal reports on homeowner Luis Armando Benito and others who allege to have been duped into unaffordable adjustable rate mortgages from IndyMac Bank that "exploded" on them shortly after obtaining the loans:
  • Today, Benito and other locals with Indymac mortgages are fighting back -- and making progress. They have joined a federal class-action lawsuit against Indymac Mortgage brought by attorneys Matthew Callister and Brooke Bohlke. Their clients' homes range in value from $150,000 to more than $1 million.

  • Among many allegations, the attorneys contend OneWest "breached the loan agreements/contracts by failing to disclose the following: APR, method of determining the finance charge, balance, actual finance charge, total payments, amount financed, number of payments, and due dates. OneWest breached the loan agreements/contracts by doubling Plaintiffs mortgage payments when the mortgage 'arms' came due."

  • Although they come from vastly different backgrounds, the homeowners share a common story of how creatively they were qualified for their loans. Some of the loan documents contained more fiction than a Stephen King novel.


  • The list of homeowners taking action grows as they learn about the lawsuit. "Somebody's got to bite the bullet and say, 'We're going to freeze foreclosures on single family homes,'" Callister says. "If it takes the court system's intervention, then so be it." Once a troubled Indymac borrower learns of the lawsuit, Bohlke says, "We've been able to stop foreclosures with 24 hours' notice." With about 1,000 Indymac mortgage loans heading into default in Southern Nevada alone, the phones at the law office figure to keep ringing for some time to come.

For the story, see Homeowners whose mortgages fizzled fight back with class-action lawsuit. UndoMortgageLoans TILAdelta

Class Action Status Sought For Elderly Homeowners Persuaded To Borrow Against Home To Invest In Alleged Ponzi Scheme

In Constantine, Michigan, the Kalamazoo Gazette reports:
  • For more than three decades, Orrin and Jama Bowlby have enjoyed a quiet life on Patterson Road in this rural St. Joseph County community. But in the last eight months, the Bowlbys’ simple life has been turned upside down. They say Portage insurance company American Benefit Concepts Inc., which is facing several lawsuits from dissatisfied clients and an investigation by the state, persuaded them to invest in a California-based Ponzi scheme. And it may end up costing them their home.


  • The Bowlbys aren’t alone. Ann Arbor attorney Joseph Spiegel, who filed one of the three lawsuits pending against ABC, said the Bowlbys are among approximately 70 older homeowners in Michigan who were allegedly persuaded by ABC salesmen to take out new mortgages on their homes and invest the proceeds in Diversified Lending Group Inc. Spiegel’s suit seeks class-action status for an estimated 250 ABC clients in Michigan who invested with Diversified Lending Group, a California real-estate-investment company that was charged with securities fraud earlier this year. It promised investors 12 percent annual returns with no risk. Spiegel said he and West Bloomfield attorney Anthony Trogan represent about 160 ABC clients who claim they’ve lost about $7 million.

  • Diversified was a Ponzi scheme,” said David Gill, the court-appointed receiver overseeing Diversified Lending Group’s assets during the lawsuit. “The only way it could pay the returns it promised was by taking in and paying out money from new investors.”

For more, see Mortgage nightmare: Retired couple face foreclosure after 'too good to be true' investment (Orrin and Jama Bowlby, a retired couple in Constantine, say they were convinced by insurance company American Benefit Concepts Inc. to take out a loan on their house and invest the money into am alleged Ponzi scheme. Now they are at risk of losing their home to foreclosure).

Cop Accused Of Duping Girlfriend Into Signing Over Her Share Of Jointly-Owned Home, Then Giving Her The Boot

In Elk Grove, California, the Elk Grove Citizen reports:
  • Authorities arrested and jailed former Elk Grove City Council Member Michael Leary(1) for allegedly committing real estate fraud on Oct. 2. A warrant was served on Oct. 1 for his arrest when Sacramento County Sheriff’s Department investigators suspected that he forged real estate documents and unlawfully evicted his then-girlfriend from their house in Elk Grove’s Laguna West area. Leary, 49, now faces the felony charges of grand theft, forgery and recording a false document, the Sacramento County District Attorney’s Office announced on Oct. 2.


  • His former girlfriend Alyc Maselli claimed that Leary deceived her into believing they had equal ownership of a house they bought for $610,000 on Marina Cove Circle in 2005. Investigators believe that he forged the grant deed where he claimed 90 percent ownership of the home, without her knowledge. Leary allegedly had this altered document notarized.


  • Maselli claimed she did not know about Leary’s allegedly altered deed until last January when he evicted her from the house. Her attorney reportedly informed her that she did not have the title to the home as of 2006.

For more, see Ex-council member Leary arrested for alleged real estate fraud.

(1) Reportedly, Leary is a Sacramento County Sheriff’s Department lieutenant who co-managed the Rio Cosumnes Correctional Center outside Elk Grove. His agency declined to release an official statement about his criminal case. A Sheriff’s department spokesperson said that Leary was placed on administrative leave, according to the story. DeedContraTheft

Buyer Of Foreclosed New Hampshire Home Seeks Death Declaration For Prior Owner Lost At Sea To Clear Cloud On Property Title

In Brentwood, New Hampshire, reports:
  • The owners of the former Stratham homestead of Stephen Woods of Exeter, who has been missing since he is believed to have fallen off his boat in 2005, are seeking to have him officially declared dead. In October 2005, Woods and his son, Asher Woods, planned to sail aboard their 41-foot ketch from Rockland, Maine, to Rye, where it would be docked for the winter. While the pair left Rockland, they never made it to Rye. A search by the Coast Guard found the boat with only Asher Woods on board six days after they departed. According to authorities, Asher said his father fell overboard without a life jacket near Boothbay Harbor, Maine. The boat, the Naobi, was found 133 miles east of Provincetown, Mass.

  • Four years later, the current owners of the former Woods home at 55 Bunker Hill Avenue are looking to declare Stephen Woods dead “in order to quiet the title of his home,” court documents state. A legal notice ran in The Exeter News-Letter on Tuesday, Oct. 6, and will run once a week for four successive weeks. [...] The notice is a part of the process in legally declaring his death.


  • Since Stephen Woods was lost at sea, no jurisdiction has been able to give a death certificate, said attorney John McGee. Although he is presumed dead as a result of being lost at sea, no formal proceedings have established his death as a legal fact.


  • The Woods home went to foreclosure after Stephen Woods’ death, according to court records. His wife mortgaged the home to Option One Mortgage Corp., but defaulted on the mortgage and the home was foreclosed on. A foreclosure deed was given to the current owners.

For the story, see Home owners seek to have man lost at sea declared dead. quiet title

Tuesday, October 13, 2009

CT Feds Indict Two In Alleged "Short Sale" Flipping Scam Using Straw Buyers To Dupe Lenders Into Accepting Less Than Full Payment On Underwater Loans

From the Office of the U.S. Attorney (Bridgeport, Connecticut):
  • Nora R. Dannehy, United States Attorney for the District of Connecticut, [...] announced that a federal grand jury sitting in Bridgeport has returned a two-count indictment charging SERGIO NATERA, 35, of Bridgeport, and ANNA McELANEY, 38, of Norwalk, with one count of conspiracy to commit bank fraud and one count of bank fraud. NATERA and McELANEY are licensed real estate agents and the charges stem from an alleged “short sale” mortgage fraud scheme involving four properties located in Connecticut.


  • The indictment alleges that in 2007 and 2008, NATERA and McELANEY conspired to defraud financial institutions of the full proceeds due to them on four separate real estate transactions in Bridgeport (2), Monroe and Wallingford. The indictment alleges that NATERA and McELANEY created straw buyer transactions in order to negotiate with mortgage holders to allow sales of the properties to occur without paying the mortgages in full. During the negotiations with the mortgage holders, NATERA and McELANEY knew that legitimate purchasers already had executed purchase and sale agreements with the property owners to purchase the property at higher prices.

  • On each of the transactions, NATERA and McELANEY are alleged to have arranged for two closings to take place, the first from the property owner to the straw buyer at the short sale price, and the second from the straw buyer to the legitimate purchaser at a higher price. The indictment alleges that the mortgage lenders did not know about the second closing and received no proceeds from the second closing.(1)

For the U.S. Attorney press release, see Two Connecticut Real Estate Agents Charged with Engaging In Short Sale Mortgage Fraud Schemes.

(1) For other stories on alleged short sale flipping scams, see:

California Man With History Of Real Estate Scam Accusations Bagged Again In Alleged Foreclosure Rescue Racket

In Stockton, California, The Stockton Record reports:
  • Benjamin Ferdin did not trust the man who had taken money from his father to save him from foreclosure. [...] So Ferdin set up a kind of sting, baited with the promise of more money. When the supposed high-roller showed up at his father's house Oct. 4, Ferdin called the police, and Jesse Manuel Munoz, 33, was arrested.(1) It was not the first time.

  • "He had a habit down here of selling properties that he didn't own," Merced County Deputy District Attorney Walter Wall said. "It sounds like he's up to doing the same thing again." In Merced, Wall said, Munoz ran a major real estate scam. Having obtained master keys to a development there, he would take prospective buyers on tours of model homes, take deposits from them and then vanish.


  • In April, Munoz pleaded guilty to multiple counts of fraud. He was sentenced to nine months' time served, a suspended 10-year prison sentence and three years' probation. He also was ordered to pay restitution. Wall said the plea was negotiated in an attempt to maximize restitution of victims. [...] In June, Munoz was arrested again, on a warrant that had been issued in Spokane County, Wash., in 2008 for similar frauds. He was extradited to Spokane County, where he posted bail. Spokane County Deputy Prosecuting Attorney Robert Sargent said he had expected Munoz to plead guilty at his next court appearance on Nov. 13.

For the story, see Man faces charges in alleged real estate scam in Stockton.

(1) Reportedly, Stockton Police Department Detective Ken Southwick [...] said Munoz would offer to rescue Stockton homeowners from foreclosure or, failing that, buy their home and sell it back - if they would just give him $1,000 to get started. According to a complaint filed in San Joaquin County Superior Court, Munoz now faces four counts of grand theft and four counts of real estate fraud. According to the story, Munoz clipped Ferdin's father for $5,800.

Nevada AG Bags Two, Seeks Another In Alleged Scam That Used Unwitting Homeowner's Stolen I.D. To Pocket Proceeds From Fraudulently Obtained Mortgage

In Las Vegas, Nevada, the Las Vegas Sun reports:
  • Two Las Vegas men have been arrested on several charges of theft, mortgage fraud, identity theft and forgery against senior citizens, Nevada Attorney General Catherine Cortez Masto said [...]. Thomas F. Gentile, 56, and Julio C. Martinez, 61, are in custody after they were allegedly involved in a scam to obtain a mortgage loan against a property owned by Gentile's former employer, without knowledge or consent, Masto said. An arrest warrant has been issued for a third man, 30-year-old Justin M. Sabo of Huntington Beach, Calif., whose whereabouts are unknown.


  • The three men, using the false identification, got a $65,000 mortgage loan against the former employer's property. The victims were senior citizens who had paid cash for their home and did not hold a mortgage on the property, Masto said. The lenders also were victimized when they approved an application without knowing it was false, Masto said. The elderly couple received a notice of foreclosure for non-payment, and they contacted the attorney general's office. Since the couple are senior citizens, several counts alleged in the criminal complaint could increases their sentences if the three men are found guilty, Masto said.

Source: Vegas men arrested in alleged mortgage scam against elderly.

For the Nevada Attorney General press release, see Attorney General Announces Arrest In Connection With Mortgage Scam Against Senior Citizens.

Florida Judge Rejects Motion To Force Convicted Deed Theft Scammers To Sign Over Home Back To 92-Year Old Victim

In New Port Richey, Florida, The Suncoast News reports:
  • Eloise Mudway, 92, has waited nearly five years for the return of her house. On Friday, she learned she would have to wait at least two more weeks. Pasco Circuit Judge Shawn Crane declined to grant a motion that could have forced the couple convicted of stealing Mudway's house to deed it back to her. [...] Assistant State Attorney Mike Halkitis filed the motion last month after a jury found Joseph and Cynthia Clancy guilty of grand theft from a person over the age of 65. Evidence at trial showed the couple bilked Mudway into signing a document that transferred her 2,900-square-foot house to Cynthia Clancy. The house is valued at more than $350,000. The Clancys each face up to 30 years in prison when they are sentenced Oct. 22.

  • Halkitis said he plans to ask Crane to grant the motion again at the sentencing. If that fails, Mudway's best hope to regain her home could be a lawsuit she filed against the Clancys in 2005. A hearing in the civil case is scheduled for November.

For the story, see Pasco woman, 92, still waiting to reclaim home.

Too Good To Be True Rent To Own Ads Making The Rounds On Craigslist?

In San Francisco, California, NBC Bay Area reports:
  • The latest round of "too good to be true" offers are making their round on Craigslist in the form of rent to own ads. The postings offer the homes far below market rate and claim you can "take over the mortgage." Recently a one bedroom condo in Saratoga was posted on Craigslist for just $350 a month. The advertisement said the home was in foreclosure and a tenant could become the owner by taking over the monthly mortgage.

For more, see The Craigslist Deal That's Too Good to Be True (Rent to own ads are not all they are cracked up to be).

Monday, October 12, 2009

Ohio Appeals Court Ruling Finding Wells Fargo "Lacked Standing" In Foreclosure Allowed To Stand; State High Court Declines Review Of Lender Appeal

From the Law Offices of Marc Dann:
  • In a significant victory for consumers and particularly victims of predatory lending the Ohio Supreme Court [see Case Announcement #2009-1030 - Wells Fargo Bank, N.A. v. Jordan; three of seven Justices dissenting(1)] on Wednesday [Sept. 30, 2009] quietly let stand what may turn out to be a landmark decision prohibiting banks, trusts and other loan servicing entities who cannot prove ownership of a mortgage note from foreclosing on Ohio homeowners.

  • Following a trend originally initiated by U.S. District Judge Christopher Boyko, Northern District of Ohio in Federal Court,(2) The 8th District Court of Appeals (Cuyahoga County) ruled in June of this year that banks, loan servicers and trusts did not have standing to pursue foreclosure of homes in Ohio if they could not prove that they owned the mortgage note at the time of the filing of the complaint.(3)


Attorney Dann goes on to make this observation regarding the effect of a court's lack of jurisdiction in a foreclosure action could potentially have on the current status of title to real estate that has gone through the foreclosure process in the past:

  • [S]ince Ohio Law has long recognized that the issue of Jurisdiction can be raised by a party in a lawsuit at anytime, there may be thousands of judgments granting foreclosure that are void putting the title to those properties in question. Ohio Courts have the inherent power to vacate the prior void ab initio judgments in foreclosure. Patton v. Diemer (1988), 35 Ohio St.3d 68, 70, 518 N.E.2d 952.

For more, see Ohio Supreme Court Lets Wells Fargo v. Jordan Stand (Foreclosure Plaintiffs Who Do Not Own the Mortgage at the Time of Filing Lack Standing to Pursue Cases).

Thanks to Richard Davet for the heads-up on this story.

(1) Apparently, three of the seven justices of the Ohio Supreme Court were eager to weigh in on this issue, only to be outvoted by their four colleagues. Maybe the four didn't feel this was the right case to create statewide precedent with.

(2) For Judge Boyko's ruling, see In re Foreclosure Cases, Case 1:07-cv-02282-CAB (N.D. Ohi0 2007).

(3) In Wells Fargo Bank, N.A. v. Jordan, 2009-Ohio-1092, 2009 Ohio App. LEXIS 881, Judge Frank D. Celebrezze Jr. writing for a unanimous panel of the 8th District held that in order to bring a lawsuit in Ohio the plaintiff must have an genuine interest in the subject matter of the lawsuit:

  • {¶ 21} “A party lacks standing to invoke the jurisdiction of a court unless he has, in an individual or a representative capacity, some real interest in the subject matter of the action. State ex rel. Dallman v. Court of Common Pleas (1973), 35 Ohio St.2d 176, 298 N.E.2d 515, syllabus. The Eleventh Appellate District has held that ‘Civ.R. 17 is not applicable when the plaintiff is not the proper party to bring the case and, thus, does not have standing to do so. A person lacking any right or interest to protect may not invoke the jurisdiction of a court.’ Northland Ins. Co. v. Illuminating Co., 11th Dist. Nos.2002-A-0058 and 2002-A-0066, 2004-Ohio-1529, at ¶ 17 (internal quotations and citations omitted). The court also noted that ‘Civ.R. 17(A) was not applicable unless the plaintiff had standing to invoke the jurisdiction of the court in the first place, either in an individual or representative capacity, with some real interest in the subject matter. Civ.R. 17 only applies if the action is commenced by one who is sui juris or the proper party to bring the action.’ Travelers Indemn. Co. v. R.L. Smith Co. (Apr. 13, 2001), 11th Dist. No.2000-L-014.” Wells Fargo Bank, N.A. v. Byrd, 178 Ohio App.3d 285, 2008-Ohio-4603, 897 N.E.2d 722.”

It went on to hold, "If plaintiff has offered no evidence that it owned the note and mortgage when the complaint was filed, it would not be entitled to judgment as a matter of law.” EpsilonMissingDocsMtg

NY Court Kiboshes Town's Attempt To Seize Mentally Unfit Homeowner's $200K+ Property For $13K In Back Taxes

In Lewisboro, New York, The Lewisboro Ledger reports:
  • Lewisboro erred in foreclosing on a resident’s property without ascertaining that the man was mentally fit, a state judge has ruled. State Supreme Court Judge Gerald Loehr ordered last month that the town must return Richard Egloff’s Lake Kitchawan home to him in exchange for the payment of $13,000 in back taxes.

  • According to the judge’s order, provided to The Ledger by Mr. Egloff’s lawyer, Thomas Decea, Judge Loehr ruled that Mr. Egloff was “incompetent at the time of the foreclosure” due to mental illness, and that the town’s seizure of the property, worth more than $200,000 according to court papers, was “invalid.” The town had confiscated the property in May 2008 after foreclosing on the property for non-payment of property taxes. In June, Mr. Egloff sued the town alleging that his rights had been violated, and that the town had ignored his mental illness.

For more, see Judge rules town must return seized house.

Go here for a copy of Judge Loehr's preliminary judgment against the town.

For the lawsuit, see Egloff v. Town of Lewisboro, et al.

For an earlier post on the original story, see Schizophrenic Employee Says In Suit Town Stiffed Him On Five Years Back Pay, Then Seized His $200K Property For $11K In Delinquent Real Estate Taxes.

Co-Owner Gets Reduced Penalty In Title Agency Scam; Mortgages Unrecorded On 3000+ Deals, Insurer Stiffed On Premiums, Lienholders Left Unpaid

In St. Paul, Minnesota, the Star Tribune reports:
  • The Minnesota Commerce Department, which has accused a Twin Cities title company and an affiliated insurance company of keeping the money from more than 3,000 real estate mortgage transactions, has agreed to a settlement with a co-owner in which she'll pay a fraction of her penalty as long as she stays out of the business.

  • In an enforcement action [in August] against Jennifer K. Frantz, the department listed her penalty at $500,000 but said that she'll only have to pay $7,500 of it as long as she complies with other parts of the settlement. Frantz was a co-owner of Zen Title and TitleSource, doing business as TitleDirect. Besides keeping mortgage money, the Commerce Department said it failed to remit $196,000 in premiums to an insurer and failed to make $1.3 million in mortgage payoffs to prior lenders. The companies are in Mounds View.

  • In addition, Frantz's license as a real estate closer and notary were revoked and she is barred from any work that requires a license from the department. "She's been barred from the industry. That's her main penalty," said department spokesman Bill Walsh. Frantz's attorney, Tom Kelly of Minneapolis, said the settlement reflects that she was a minor stakeholder in the company.

  • In March 2008, the department ordered the companies to pay $2 million in civil penalties.(1) After negotiations, Frantz reached the August settlement. Walsh said that order still stands against the other two owners, Charles E. Bethel and Trent C. Jonas.

  • In the document ordering the $2 million in penalties, the department said the companies caused losses to lenders and exposed homeowners to disputes that can cloud property titles. It also said an $800,000 mortgage that wasn't recorded was for one of the owners. Walsh said the department has referred the case for criminal prosecution. "What they did was criminal. They essentially closed mortgages and did not finish. They did not send the money on, they did not pay the loans," Walsh said, calling it a "huge fraud." Some of the mortgages were in Minnesota and some in other states, he said. Kelly said he did not expect criminal charges to be brought against his client. Neither Bethel nor Jonas could be reached for comment [...].(2)

Source: State OKs deal in real estate loan case (A settlement with a co-owner of Zen Title and TitleSource cuts her share of a $2 million penalty to $7,500 and a ban from the industry).

See also, Minneapolis/St. Paul Business Journal: Title firms co-owner settles with state.

Thanks to Bill Collins of Crossroads Abstract, Rochester, NY for the heads-up on this story.

(1) See Minneapolis/St. Paul Business Journal: Title firms hit with $2M fines (The DOC contends that the companies, which operated out of the same office, failed to record more than 3,000 mortgages on real estate deals they closed and failed to make more than $1.5 million in payments to mortgage lenders and insurers, among other charges).

(2) According to the Minnesota Department of Commerce website, all licenses held by this outfit have been revoked. EscrowRipOffKappa title insurance legal issues

Amendment To NJ Tenancy Complaint May Create Hurdle For Foreclosure Rescue Operators Attempting To Boot Homeowners In Sale Leaseback Deals Gone Sour

A press release from The Law Office of Michael D. Mirne discusses the hurdles foreclosure rescue operators in New Jersey may be facing when attempting to boot homeowners from their houses in the context of sale leaseback, "home saver" arrangements:
  • Under ordinary circumstances, a landlord can expect that an action filed for non-payment of rent will result in a Judgment for Possession within about 4 weeks of the time the action is filed. The expediency of this process is attractive to most landlords who are often struggling to pay their own bills, and cannot afford to subsidize a tenant who is not paying rent. At an eviction trial, the Judge reads a preliminary set of instructions, which includes the statements that (1) he or she may not force the landlord to wait for rents, and (2) all outstanding rents must paid by the day of Court or the tenant will be evicted.

  • However, Landlords who have acquired title to the property from the tenant,(1) and Landlords who have given the tenant an option to purchase may not have the right to have their cases heard in Landlord Tenant Court.

  • The body of the Tenancy Complaint has been recently amended to include an inquiry as to whether the Landlord acquired title to the property from the Tenant, or alternatively, if the Landlord gave the tenant an Option to Purchase the Property. Since both of these conditions would substantially affect the equitable property rights of the tenant, the cases brought under these conditions are not easily resolved on a summary basis.

  • To put it simply, Judges in Tenancy Division, who are often swamped with a heavy caseload of relatively simple matters, are reluctant to make the factual inquiries necessary to resolve a dispute when the ultimate issue affects the ownership of the property.(2) The unfortunate(3) result is that these matters are routinely transferred out of Tenancy Division into the Law Division (or even worse, the Chancery Division), where the parties can spend the next 12 months exchanging discovery, attending Court Ordered mediations, and waiting for trial. More importantly, the Tenancy Judge very often orders that the tenant does not need to pay rents to the Landlord until the Law Division has an opportunity to rule of the issues of the case. Under the Rules of Court, the Transfer out of Tenancy Division can be requested by the Judge, sua sponte (on his own initiative), or by one of the parties (usually the tenant).

For the press release, see Information for Landlords who Acquire Title from their Tenants.

(1) A typical sale leaseback arrangement.

(2) A judge in the Tenancy Division may lack jurisdiction to make rulings that adjudicate title to property. Further, regardless of what judicial division hears the case, a court could make a finding that the sale leaseback foreclosure rescue deal between the operator and the homeowner is an equitable mortgage, in which case an eviction of the homeowner would be rendered legally impossible without the operator first filing a lawsuit to foreclose on its equitable mortgage (exactly the scenario the operator wanted to avoid in the first place when it structured the financing transaction with the financially strapped homeowner as a sale leaseback, coupled with an option to repurchase).

(3) Or fortunate, depending on one's perspective.

Last Minute Legal Aid Help Thwarts Real Estate Agent's Attempt To Illegally Boot Tenants From Recently Foreclosed Home

In New Haven, Connecticut, the New Haven Independent reports on a Bridgeport-based real estate agent who, on behalf of a mortgage lender, attempted to force the tenants out of a foreclosed house in violation of the recently enacted Protecting Tenants At Foreclosure Act,(1) which, among other things, requires lenders to respect any existing tenant leases, and provide at least 90 days notice when vacating month-to-month renters. In fear of getting the boot, the tenants were referred to a local legal aid lawyer, who put a stop to the failed eviction scam.
  • [Local legal aid attorney Amy] Marx — who has found ways to help other tenants stay in foreclosed-upon homes — blasted the realtor and OneWest for “a shockingly flagrant violation” of the new law. Foreclosers are entitled to offer cash-for-keys deals, she said. But not to present them as the only option. It has to happen “only in the context of an honest conversation of what the tenants’ options are,” Marx said.

  • Marx said she’s confident the law will protect them in the meantime. She worries about other tenants who don’t have City Hall relatives to steer them to legal-aid lawyers. “Miss Walters is extremely lucky. She knew someone who knew someone” who knew someone else who could help, Marx observed. “What we are really worried about are the countless tenants out there who do not know about the law and will not get the chance to fight back against the bank the way Miss Walters is now doing.”

For the story, see Foreclosure Law Has Her Back.

(1) This federal foreclosure law was passed this spring and requires (with one exception not applicable here) property owners who come into land through foreclosure to honor all existing leases, and to provide a 90-day window for any month-to-month tenants. See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009. RentSigmaSkimming

Sunday, October 11, 2009

Media Intervention Clears Up Another Mortgage Servicer Screw Up That Left Victimized Homeowners Fearing Foreclosure

In Tulsa, Oklahoma, KJRH-TV Channel 2 reports:
  • Every time the phone rang at the Beeghlys the last few months, they panicked. They say chances were good it was their mortgage company, making collection call after collection call. [...] Lindsey and Eric say CitiMortgage insisted they had missed four monthly payments this year. The Beeghlys were told their automatic payments had been declined because of insufficient funds in their bank account. Yet their bank statements showed those payments had cleared. "They lost four payments of ours." And each time, Lindsey says they felt pressured into making another payment, afraid they might be forced into foreclosure. [...] Essentially, the Beeghlys made two house payments for each of those four months, causing several bounced check charges from other payments they had to make every month. And even though Lindsey says she sent the mortgage company the proof that those original payments and cleared their bank several times, it didn't help. "It's just a lot of hassle that we shouldn't have had to deal with for a problem that wasn't ours."

  • So Lindsey finally called the 2News Problem Solvers and we contacted CitiMortgage. They assigned a specialist to work directly with the Beeghlys to help solve the problem surrounding their home mortgage. And things started to happen quickly. "It was taken care of, they refunded us for the four full payments." Lindsey says in amounted to four thousand bucks in all, including all those bounced check charges. And the mortgage company wrote letters to the credit bureaus to clear up the Beeghly's credit report. CitiMortgage told Lindsey they eventually discovered those four missing payments had been sent to the credit card division, even though the Beeghly's don't have a credit card with them. "It's a huge burden lifted off us." And they no longer panic everytime the phone rings.

For the story, see Missing Mortgage Payments.

Lender Loses REO For Failure To Pay Real Estate Taxes; Original Foreclosed Owner Buys Back Home At County Tax Auction For $10K

In Holland, Michigan, The Michigan Sentinel reports:
  • The house on West 16th Street still doesn’t have curtains and boxes need to be unpacked, but the path home was longer than a simple drive in a moving truck for Claudia Zamora. She lived at this house on West 16th Street with her family for 12 years until divorce and a nearly $1,000 house payment became too much, and the bank foreclosed. [...] But now she’s back and free of a mortgage because the bank that took her property back failed to pay the taxes.


  • Once a year, the county auctions off the properties. Someone tipped off Zamora that her property was among those to be auctioned last month. [...] Before the auction began, the auctioneer asked the crowd whether anyone was buying back lost property. “And I raised my hand up,” Zamora said. Her West 16th Street home was No. 13 on the list. “Nobody else bid on it. Not even online,” she said. “I was in shock; I was in tears; I couldn’t believe I got my house back.” Since she lost the house in 2006, Zamora and her children have moved five times. [...] The crowd applauded her when she got the property.

  • There are rules to the annual county tax auction. You must have the cash in hand. Three years of taxes, plus county’s fees totals $10,030. That’s the price she paid, in full, to get her home back.

For the story, see Foreclosure story has happy ending (Woman wins own home back at auction).

2005 Bankruptcy Reform, Electronic Filing Requirements "Impede Consumers Trying To Save Their Homes From Foreclosure" Says Attorney In Federal Suit

In Chicago, Illinois, Courthouse News Service reports:
  • The combination of Bush-era bankruptcy law reform and a new electronic filing rule in the Northern District of Illinois bankruptcy court reduced competition among lawyers, increased legal fees and hindered the public from trying to rescue their homes from foreclosure, a lawyer argues in a federal lawsuit. Attorney Thomas Holstein claims that the two actions, which he describes as "two sides of the same coin," are "overly broad and restrictive." In particular, Holstein says the mandatory electronic filing rule adopted by the bankruptcy court just months after the Bush reforms went into effect wrongfully "impedes consumers trying to save their homes from foreclosure under Chapter 13."


  • Holstein argues that the filing of a bankruptcy case is "an entirely clerical act" that doesn't require the skills of a licensed attorney. However, the bankruptcy court's mandatory e-filing rule holds that only lawyers are allowed to register for the service, Holstein says. He bases his challenge on federal antitrust law, which he says favors competition and is based on the principle that increased competition stimulates lower prices in the public interest.

For more, see Lawyer Says E-Filing Rule Is Anticompetitive.

Woman Fraudulently Obtains Property Tied Up In Bankruptcy Case, Then Pockets Refinancing Proceeds, Say California Feds

From the Office of the U.S. Attorney (San Jose, California):
  • Vallejo, Calif., resident Myra Holmes was indicted by a federal grand jury with concealment of assets and bank fraud, United States Attorney Joseph P. Russoniello announced.


  • The indictment accuses Holmes of enriching herself by convincing her father – who had previously filed for Chapter 11 bankruptcy – to convey to her, without consideration and without notifying or obtaining the permission of the bankruptcy court or the bankruptcy trustee, his interest in the Vallejo property where she lived. The indictment further alleges that after Holmes obtained her father’s interest in the property she withdrew the equity from the property through a refinancing mortgage loan, which she procured with a fraudulent refinancing application. According to the indictment, as a result of her fraudulent refinancing application, Holmes received a refinanced mortgage, which increased the outstanding mortgage on the Vallejo property from approximately $180,000 to approximately $338,000; [...]. To date, Holmes has not repaid the bankruptcy estate for the funds she took out of the Vallejo property in the November 2005 refinancing.(1)

For the press release, see Vallejo Woman Charged With Mortgage And Bankruptcy Fraud (Defendant Used Fraudulent Deed to Obtain More Than $130,000 in Equity From Residence in Bankruptcy Proceeding).

For the indictment, see U.S. v. Holmes.

(1) According to the indictment, Holmes legitimately owns a 50% interest in the home, with her father holding the remaining 50% interest. The indictment states that the bankruptcy trustee in her father's case had filed court papers seeking a sale of the entire property (including Holmes' 50% share, despite the fact that she herself was not under the jurisdiction of the bankruptcy court) in order to get at and apply her father's 50% share of the sale proceeds to outstanding debts owed to his creditors, leaving her with half the home sale proceeds, but forcing her out of the house. The actions she is accused of may have been an attempt to thwart the bankruptcy trustee in his/her desire to liquidate the property.

Elderly California Retiree Files Suit Alleging Negligence, Fraud, Elder Financial Abuse In Attempt To Undo Predatory Loan & Fight Off Foreclosure

In Carmel Valley, California, The Monterey Herald reports:
  • A Carmel Valley woman is facing the loss of her home of 50 years after she allegedly was led into a risky investment in the failed real estate investment firm Cedar Funding Inc. Margaret Bennett, 75, a retired government worker, is trying to stave off the foreclosure sale of her home in which she raised six children as a single mom. She filed a civil suit [...] that accuses a Monterey mortgage broker and the foreclosing bank of putting her into the predicament.


  • Her suit alleges that she was effectively duped into borrowing $600,000 on her home and putting $470,000 of that money into Cedar Funding — just 15 months before the real estate investment company sank into bankruptcy.(1) Cedar Funding owner David Nilsen was indicted on federal fraud charges last month [go here for Nilsen indictment].

For more, see Woman sues broker, bank over Cedar Funding investment (Retiree invested $470,000).

(1) According to the suit, Bennett went to mortgage broker Heidi Daunt in September 2006 to see about getting a $130,000 loan on her home, which was then valued at about $1 million, according to the story. She wanted to pay off a home-equity line of credit and to consolidate other debts. Her only source of income was about $2,000 a month from Social Security and her pension, she said. The suit alleges Daunt proposed that Bennett get a $600,000 loan instead from Washington Mutual, and put most of the money into Cedar Funding. According to the suit, Daunt told Bennett that her income would increase because Cedar Funding investors were making 10 percent on the company's real estate loans, the story states. The monthly payments on the $600,000 loan came to nearly double Bennett's monthly income, the suit alleges. The loan application to Washington Mutual stated Bennett's monthly income was $8,000, a figure used "without (her) knowledge or approval," the suit alleges.

The suit accuses the defendants of negligence, fraud, elder financial abuse and other wrongful actions. It contends they should have known the loan and investment strategy was unsuitable for Bennett, with her limited financial means and lack of financial savvy. The suit alleges she was taken advantage of by people motivated by greed.