Saturday, January 02, 2010

Washington Man Cops Plea To Theft; Pocketed $22K+ By Selling Home In Foreclosure, Failing To Pay Mortgage; Unwitting Buyers Failed To Check Title

In Douglas County, Washington, The Wenatchee World reports:
  • A Wenatchee man pleaded guilty to third-degree theft for taking more than $22,000 in payments from a couple for a home he had no title to. Felix Hernandez Martinez, 25, originally charged with first-degree theft in January 2008 in Douglas County Superior Court, pleaded guilty Dec. 21 to the amended charge and was sentenced to 365 days imprisonment with 362 days suspended.


  • The husband and wife in July 2007 signed a purchasing agreement with Hernandez for an East Wenatchee home for $180,000, according to an investigation report, compiled by Detective Dan Dieringer with the East Wenatchee Police Department. Dieringer wrote that the couple gave Hernandez $700 in earnest money, and between July and December of that year, had paid Hernandez $22,500 total in cash payments. The report said no documents from the sale were filed or recorded with the court or the auditor’s office.

  • The report said the couple moved into the home in August 2007 and that they never obtained a title check on the residence to determine whether Hernandez had a clear title to the property. In December of that year, Northwest Trustee Services conducted a foreclosure sale of the East Wenatchee property on behalf of Wells Fargo Bank because of a mortgage default by Hernandez, the report said.

For the story, see Man pleaded guilty to selling home already in foreclosure. rent to own lease purchase option scams yellowstone

Lender's Credit Reporting Error On Paid Off Car Loan Puts Kibosh On Consumer's Home Refinancing Plans

In Winnipeg, Manitoba, CTV News reports:
  • A credit report mistake made by a financing organization has cost a Manitoba family thousands of dollars and has cast a cloud over its Christmas. In June 2008, Nancy Klassen, who lives near Morris, says her family paid off a GM minivan. But when they went to get a lower interest rate on a home they've lived in for 16 years, they were denied.

  • The family found out GMAC Financial had put a mark on its credit report saying they were in arrears on car payments, says Klassen. "We paid...and we paid early," says Klassen. With such a bad credit score, the Klassen family could only get a mortgage at 15 per cent, paying more than $1,500 each month. After months of corresponding with GMAC Financial, the group admitted to the family it made a mistake but will not give compensation until a new mortgage is secured.

For the story, see Credit report error sets family back thousands of dollars.

Repeatedly-Failing Air Conditioner Marks Beginning Of Journey On Rocky Road For One Florida Family

In Manatee County, Florida, the Bradenton Herald reports on the problems faced by local couple Joe and Brittany Baker after a May 2009 repair visit by a service technician mentioned that Chinese drywall might be the culprit for the repeated air conditioner problems in their recently-constructed home. The suspicion was reportedly confirmed a few days later by a home inspector.

  • That was enough to convince Brittany Baker, eight months’ pregnant at the time, to move in with her in-laws while Joe Baker was undergoing U.S. Army training in Colorado. The stress would only escalate, Brittany Baker said.

  • At first, she worried the drywall would affect her unborn baby’s health. “Luckily she’s healthy,” Brittany Baker said.

  • There was the struggle to get the builder, deMorgan Communities, to admit it has used Chinese drywall in the Bakers’ house — followed by its contention that it, too, was a victim and couldn’t do anything for the Bakers.

  • There were the break-ins — at least five, by Brittany Baker’s count — at the unoccupied house, with thieves taking everything from leftover food to camping gear. A neighbor who interrupted one burglary found the thieves had left behind suitcases full of items, including an urn containing her father’s ashes. "That was the biggest stress, the house being broken into over and over,” she said.

  • Then there were the financial worries. The Bakers wondered if they could continue to keep paying the mortgage on a home they no longer felt safe to live in and, if they couldn’t, whether it would jeopardize Joe Baker’s security clearance and assignment to MacDill Air Force Base. After making arrangements with the Army, the Bakers stopped paying the mortgage and moved into the rental house last month. “We really can’t afford to rent a house and pay the bills and pay a mortgage on top of it, but we have to, to make sure our daughter is safe,” Brittany Baker said.

  • Like many others, the Bakers hope to get some relief through the courts. They are among more than 2,100 homeowners who are suing Knauf Plasterboard Tianjin Co. Ltd, a Chinese drywall manufacturer, and more than 600 homebuilders, suppliers, distributors and installers in the massive federal class-action lawsuit. More than 30 Manatee homeowners are among the plaintiffs, and deMorgan is among the defendants. The case is expected to go to trial in March as part of a series of bellwether cases designed to narrow legal issues such as liability.

For the story, see Drywall keeps owners in limbo.

Friday, January 01, 2010

Deteriorating Conditions Threaten Tenants With Loss Of Homes As Another Apartment Building Faces Foreclosure

In St. Paul, Minnesota, KARE-TV Channel 11 reported last week:
  • Melting snow has created a big problem for residents at 1015 York Avenue. Not only is the property in foreclosure, but residents are tired of reoccurring problems. "Water has leaked into nine apartments here," Saint Paul Fire Marshal Steve Zaccard says.

  • The looks and sounds of things proved it wasn't much of a Merry Christmas for some families. "I've been crying all morning, so I'm tired of it," Lorraine Wilson says. "We had all the food on the table, we were sitting and eating and all of a sudden it starting dripping, falling from the ceiling."

  • The snow, rain and ice from the last few days was just too much for the roof above them. The pipe that drains water from the roof froze, leaving the standing water with no where to go but down and through the ceilings. "To be paying rent you shouldn't have to live like this," Wilson says.

For more, see Residents chose to stay despite mold warnings. RentSigmaSkimming

New York Chief Judge On Courts & Recession-Related Cases: "We Are The Emergency Room For Society"

In New York City, The New York Times reports:
  • New York State’s courts are closing the year with 4.7 million cases — the highest tally ever — and new statistics suggest that courtrooms are now seeing the delayed result of the country’s economic collapse. [...] And the increase in New York offers a preview of the recession-related cases showing up in courts across the nation.

  • New York’s judges are wading into these types of cases by the tens of thousands, according to the new statistics, cases involving not only bad debts and soured deals, but also filings that are indirect but still jarring measures of economic stresses, like charges of violence in families torn apart by lost jobs and homes in jeopardy.


  • Society’s problems come to us,” New York’s chief judge, Jonathan Lippman, said. “We are the emergency room for society.” [...] Judge [Anil C.] Singh of the [Manhattan] Civil Court said that, from his bench, it was hard to see signs of a recovery. “I would describe it as a train wreck,” he said, “and I think it’s going to get worse for the next couple of years.”

For more, see The Recession Begins Flooding Into the Courts.

Bank Liable For $400K For Failing To Disclose Contamination Of Property Sold To Local Couple

In Kalkaska County, Michigan, the Traverse City Record Eagle reports:
  • A Kalkaska County jury ordered a local bank to pay a Williamsburg couple $400,000 after the bank allegedly failed to disclose contamination on property the couple purchased. Larry and Theresa Lelito bought a 5-acre parcel on M-72 just west of Kalkaska from Alden State Bank in December 2003. The Lelitos later discovered it was contaminated with trichloroethylene (TCE), and sued the bank for fraud.


  • The Lelitos bought the parcel for $150,000 and subsequently spent $300,000 to construct an office building there. The property's previous owner told Larry about the contamination in 2006, said the Lelitos' attorney, Robert A. Steadman. [...] Steadman said the property's previous owner testified during trial that he told the bank about the contamination, though bank officials testified they didn't remember that conversation.

For the story, see Couple awarded $400K in suit against bank (Suit alleged bank failed to disclose contamination).

Thursday, December 31, 2009

Title Agents Ripped Off $700K In Closing Proceeds, Says Prosecutor; Late/Foreclosure Notices Tip Off Unwitting Homeowners Of Alleged Theft

In Freehold, New Jersey, the Asbury Park Press reports:
  • A Monmouth County grand jury has handed up an indictment accusing two sisters who ran a pair of Freehold title agencies of pocketing more than $700,000 from clients and using the money to buy luxury cars and travel. Rebecca Marchese-DePeri-Grande, 37, of Jackson and Meredith Miller, 34, of Brick were arrested Monday following the indictment.(1) The pair had been under investigation since 2005 after authorities received complaints from customers of both the R.M.J. and Spectrum title agencies, according to a statement issued by Monmouth County Prosecutor Luis A. Valentin.


  • According to Valentin, the pair used money from various escrow accounts associated with the businesses that was supposed to be turned over to banks for cover closing costs and refinancing fees was instead used to purchase Ferraris, lavish homes and travel. The total amount of the alleged theft is about $786,000, and at least 15 victims have been identified, Valentin said.

  • Customers of the businesses — neither of which is currently conducting business — initially discovered the missing money after they began receiving late notices and foreclosure notices from lenders.

For the story, see Monmouth County grand jury indicts sisters on theft, conspiracy charges.

For the Monmouth County DA press release, see Two Title Agency Owners Indicted in Connection with Theft of Over $780,000 from Clients.

(1) According to the story, both women are charged with second-degree counts of conspiracy, misappropriation of entrusted property, theft by failure to make a required disposition and misconduct by a corporate official. Additionally, Miller is charged with theft by deception and two counts of writing bad checks, the story states. EscrowRipOffKappa

Utah Woman Charged With Filing Phony $1M Lien On Home Of Boyfriend's Deceased Wife; Pair Attempted To Rip Off Estate's Heirs, Investigator Says

In Utah County, Utah, Deseret News reports:
  • A Pleasant Grove woman accused of working with [...] boyfriend [Martin MacNeill] to steal his adopted daughter's identity faces criminal charges. Gypsy Willis, 33, was charged [...] in 4th District Court with one count of identity fraud, two counts of false and inconsistent material statements and one count of wrongful lien.


  • When MacNeill's wife passed away, the house had been in her name, said Doug Witney, the lead investigator in the case. He said MacNeill had not wanted to go through probate or pay taxes, so instead acted as his deceased wife's attorney, pretended she was still alive and had the property transferred to his name.

  • The same day the transaction went through, Witney said, Willis filed a $1 million lien on the house, which is illegal because there was no reason to file the lien. Witney said it was probably done to discourage MacNeill's children from claiming rights to the house because one of his daughters was trying to obtain custody of her three adopted younger sisters at the time. When the federal government realized what was going on, it had an agent act as an intended buyer of the house and a few days after Willis went to remove the lien, she and MacNeill were arrested.

For the story, see Pleasant Grove woman charged in identity theft case. DeedContraTheft deed theft

Woman Accused Of Abusing POA By Misspending Institution-Bound Dad's Money; Gov't May Seize Family Home To Cover Nursing Home Bills

In Elkhorn, Nebraska, WOWT-TV Channel 6 reports:
  • Regina Garcia has power of attorney over her father’s retirement fund. Now she needs an attorney after being charged with misspending almost $16,000 of that money. [...] Garcia’s elderly father is an Alzheimer’s patient who owes nearly $20,000 to an Elkhorn nursing home. She’s accused of using his retirement money to pay her own bills instead of his.

  • Douglas county attorney Don Kleine said, “They’re being taken advantage of, they’re being exploited by someone who understands they have this amount of money and take it from them not for the benefit of the person who has the incapacity but for themselves.”


  • The county attorney is concerned that if Garcia’s father can’t pay his nursing home bill then taxpayers will have to pick up the cost. Garcia claims the government is in the process of seizing her father’s home to pay for his nursing home cost. If convicted of the charge of Abuse of a Vulnerable Adult she faces up to five years in prison.

For the story, see Daughter Charged With Stealing Dad's Retirement (Nursing home bill past due).

Real Estate Agent Accused Of Sleazy Practice In Alleged Attempt To Illegally Force Renter Out Of Foreclosed New Jersey Home

In Wildwood, New Jersey, The Philadelphia Inquirer reports:
  • On Memorial Day weekend, a man knocked on the door of Sheila Walker's Wildwood apartment and presented her with an offer: $1,500 to vacate in three weeks. The three-unit building had been seized in foreclosure. According to Walker, 45, neither the man nor the real estate office he represented ever told her that New Jersey law gave her the right to stay put.(1) She panicked, she said. How would she find an affordable place at the start of the busy summer season?


  • "She was just beside herself," said Donna Jago, director of citizen relations [for New Jersey's Department of the Public Advocate], who first spoke with Walker in July. "She didn't know where to turn, and she was dealing with a Realtor that was giving her misinformation."

  • Walker said that the office of Jean Ball, a RE/MAX agent in Northfield, told Walker to stop paying her $750 rent as part of the cash-for-keys deal. In August, Walker was served an eviction notice for failure to pay rent. She said she felt duped. Ball would not comment for this story. Her online profile says she specializes in bank-owned properties in South Jersey. [...] Because Walker had receipts showing that she had paid her rent on time, Jago said her office was able to get the eviction dismissed.

  • Jago said Walker's case was not unusual. She has helped others who faced unlawful evictions. "Some of these Realtors, I think they know exactly what they're doing," Jago said. "Some of them don't."

For the story, see New rules seek to protect tenants.

(1) New Jersey's laws are stricter than those in most states. They forbid the eviction of tenants - with or without a lease - from foreclosed buildings without cause, such as failure to pay rent or occupancy by a new owner, the story states. See also: Foreclosure Eviction Of Residential Tenants "Almost Always Illegal In New Jersey," Says State Public Advocate.

Wednesday, December 30, 2009

Certain Non-Owner-Occupied Homes Eligible For New Florida Statewide Foreclosure Mediation Program

A review of the Florida media reports announcing the recent institution of a statewide foreclosure mediation program for foreclosure actions reveals that some of the stories may be creating an incorrect impression that the program applies only to owner-occupied, homesteaded properties, or are silent as to the affect on homes that are occupied by individuals other than the owner-borrower.

With respect to homesteaded properties, the program applies automatically, unless the lender and owner-borrower both agree to opt-out or unless effective pre-suit mediation that substantially complies with the managed mediation program requirements has been conducted.(1) The foreclosing lender is required to foot the upfront outlay for the cost of the mediation, and which is recoverable in the judgment of foreclosure.

With respect to non-homesteaded residential properties occupied by individuals other than the owner-borrower, a reading of the plain language of the Administrative Order indicates that, while not automatically applying to such properties, it allows the owner-borrower to opt into the program. The owner-borrower is required to split the upfront outlay for the cost of the mediation with the foreclosing lender.(2)

The mediation program does not apply to vacant homes,(3) and apparently, also does not apply to a home occupied by the owner-borrower as a "second" (ie. non-primary, vacation, etc.) home, although neither the Florida Supreme Court's Administrative Order, nor the Report of Florida Supreme Court’s Task Force on Residential Mortgage Foreclosure Cases expressly mention non-primary, "second" homes.(4)

Click here for the Administrative Order of the Florida Supreme Court.

(1) See Administrative Order, page 2-3: "Under this program, all foreclosure cases in the state courts that involve residential homestead property will be referred to mediation, unless the plaintiff and borrower agree otherwise or unless effective pre-suit mediation that substantially complies with the managed mediation program requirements has been conducted."

In addition, the Order provides that "A borrower may opt out of the process by declining to participate upon being contacted by the mediation manager, or by not completing the pre-mediation requirements of foreclosure counseling and submission of financial documentation to the mediation manager." Administrative Order, page 4.

(2) See
Administrative Order, page 9-10: "The Court further approves the Task Force recommendation that cases involving properties that are occupied by individuals other than the borrower may opt into the managed mediation program, at equal cost to the parties, and that structural improvements, such as open calendars, be employed by courts to allow cases to move as quickly and smoothly as possible."

See also,
Report of Florida Supreme Court’s Task Force on Residential Mortgage Foreclosure Cases, page 41: "These cases may be either tenant-occupied or occupied by other members of the family but not the borrower, or have unspecified occupants. [...] The Task Force recommends that these properties be given the choice to opt into managed mediation at equal cost to the parties."

(3) For owners of vacant homes that are delinquent on their mortgage payments, not yet in foreclosure, and wish to be covered by this mediation program, there appears to be two options:
  • Move into the home and, in good faith, make it your primary (not secondary) residence, in which case the mediation program is mandatory (see footnote 1, above), or
  • Stick a tenant, family member, or "unspecified occupant" in the home (again, in good faith), in which case the owner-borrower, according to the Order, could opt into the mediation program upon commencement of the foreclosure action (see footnote 2, above).

(4) For owner-borrowers of non-primary, "second" homes that are delinquent on their mortgage payments, not yet in foreclosure, and wish to be covered by this mediation program, renting out the property to a tenant or letting a family member use the premises might, arguably, allow the owner-borrower to opt into the program upon commencement of the foreclosure action (see footnote 2, above).

Florida Foreclosure Task Force Report Highlights Sleazy Lawyer Conduct From Both Sides Of The Bar

The following excerpt from the Florida Supreme Court Task Force On Residential Mortgage Foreclosure Cases gives example of some of the sleazy conduct of some attorneys in foreclosure actions:
  • [I]t is critical that these [law] firms be candid, clear, and truthful and accurate in connection with pleadings and affidavits filed with the Courts. A leading plaintiff’s lawyer and a major plaintiff’s law firm have been the subject of a public reprimand and sanctions due to untruthful filings with the courts.

  • Judges continue to see affidavits of amounts due and owing signed by law firm employees, and cost affidavits charging very high service of process fees for process serving firms owned by the law firm principals. To some extent, it is fair to be concerned whether the press of the case load is interfering with a judge’s ability to police the conduct of the firms before them in these usually uncontested, unopposed foreclosure cases.

  • There are also issues on the defense bar side of the equation. Lawyers are advertising for clients to pay them, and they will delay foreclosure. Defenses based on loan closing irregularities are being pleaded without any good faith investigation, in some cases after the statute of repose has already expired. Boilerplate motions to dismiss and discovery requests are filed without ever being set for hearing or for motions to compel.

  • Not infrequently, an answer is filed raising multiple defenses without any discovery, and the attorney then subsequently withdraws from the case due to nonpayment of fees. Nonpayment of fees would seem to be somewhat foreseeable for a defendant who is in foreclosure. Defense lawyers should litigate in good faith, defend in a timely fashion, and not manipulate the courts or the case for simple purposes of delay.

Source: Florida Supreme Court Task Force On Residential Mortgage Foreclosure Cases, page 21.

DC AG Targets Tax Lien Investor In Alleged Legal Fee Ripoff Of Delinquent Taxpayer-Homeowners

In Washington, D.C., the Washington Examiner reports:
  • A prolific purchaser of D.C. property tax liens is the subject of a District government lawsuit filed on behalf of delinquent taxpayers who are threatened with having to pay high legal fees in order to reclaim their properties. D.C. Attorney General Peter Nickles last week filed a consumer protection lawsuit in D.C. Superior Court against Chicago-based Aeon Financial LLC, [...].

  • D.C. law allows tax lien holders to recoup some expenses, but Aeon "has engaged in a pattern of charging and collecting impermissible or excessive legal fees" of nearly $6,000 per property, the District alleges in court documents. Those are costs that many homeowners "will falsely believe that they must pay."

For more, see D.C. sues aggressive tax lien buyer over 'excessive' fees.

Dubious Deals, Questionable Circumstances Mark NYC Speculator Who Stiffed Lenders Out Of $6.4M On 20 Mortgages Secured By 10 Homes Now In Foreclosure

In Jamaica, Queens, United Press International reports:
  • Three years ago, Lloyd Varma, a man of no visible wealth, convinced 10 different banks to hand him 20 separate mortgages to buy 10 homes across southern Queens. Amazingly, he did this in 51 days just before the housing market collapsed - getting loans for $6.4 million with no money down.

  • Then, one by one, Varma defaulted on each loan, and by the end of 2007, eight of the homes were in foreclosure - a kiss of death to a neighborhood's property values. Today, banks own four of the houses, while the others are in the process of being foreclosed. Varma's trail of wreckage highlights a fatal flaw in the system: Banks blindly handed over money to borrowers like Varma without thoroughly checking them out.


  • [Nonprofit Neighborhood Economic Development Advocacy Project's Josh] Zinner said Varma's ability to get so many mortgages so quickly raised questions about what Varma disclosed about his liabilities on his mortgage applications. At one point last year, Varma filed for bankruptcy, listing only three of his properties - not the 10 he owned. Varma's not talking. Reached by cell phone, he replied, "I am having trouble hearing you" before the line went dead. His lawyer, Nan Bedesi, also declined comment, saying, "I don't have to answer your questions."


  • Even though he has not paid the mortgage, Varma is trying to evict tenants for not paying rent. Just this month, he served eviction papers on families living in two of his foreclosed homes: 107-22 113th St. and 107-28 113th St. Dain Chandradat, 16, said her mother stopped paying rent after Varma quit paying gas and electric bills at the 107-28 address. "It's ridiculous," said Dain, a junior at John Adams High School. "They send notices they're going to shut off the gas and the electricity, so we pay the bills. We have the receipts."

For more, see He burst the bubble! Real estate speculator Lloyd Varma defaulted on 20 loans for 10 Queens homes.

Ohio Man Gets 57 Months For Scamming Real Estate Investors, Slapping Bogus Liens On Unwitting Homeowners' Property, Running Rent Skimming Racket

In Colimbus, Ohio, The Columbus Dispatch reports:
  • A Licking County man was sentenced to nearly five years in prison this morning in connection with a mortgage scam that defrauded more than 40 people. Common Pleas Judge Jon R. Spahr sentenced Joseph C. McClain, 31, of Heath, to four years and 11 months imprisonment. [...] McClain pleaded guilty this month to 25 counts of grand theft. He faced more than 37 years in prison on the charges, which stem from defrauding investors of his real-estate-investment company out of more than $400,000 and using the money to pay bills, buy vehicles and take a cruise.

  • The complex scheme involved taking investors' money for the purpose of buying and refurbishing homes and then reselling them. Instead, he kept the money and fabricated statements that showed the investments growing. He also put liens on homes and gave them to investors to prove that they owned interest in the properties, all without the real owners' knowledge.

  • In other cases, he told owners that he would sell their homes but instead rented them without paying the mortgages. McClain also had employees call the mortgage companies and pretend to be the homeowners to keep the companies from contacting the real owners when the mortgages were not paid.

Source: Mortgage scammer sentenced to nearly five years.

Tuesday, December 29, 2009

Schack Slams "Fat Cat Bankers On Wall Street" In Failed Court Cost Ripoff; Calls CEO Dimon The "Fattest Cat" At JPMorgan Chase

In Brooklyn, New York, the New York Law Journal reports:
  • A Brooklyn judge has rejected a bank's request for $9,112 in costs for producing subpoenaed documents, calling the claim an example of the excess and greed among "fat cat bankers on Wall Street." JPMorgan Chase, a non-party in an action to confirm an arbitration award, sought 25 cents per page and $25 per hour for producing 18,248 pages of subpoenaed documents demanded by the petitioner. In a blistering 11-page decision, Brooklyn Supreme Court Justice Arthur Schack granted JPMorgan Chase only $1,250.27, or about one-seventh of the amount the bank requested.(1)


  • "Clearly, Chase's arbitrary $25.00 per hour ... fee for the unsubstantiated 182 hours of research by person or persons unknown only helps to unjustly enrich 'a bunch of fat cat bankers on Wall Street,'" Justice Schack wrote in Matter of Arbitration of Klein v. Persaud, 8007/09. "This Court is not a collection vehicle to further enrich already rich bankers."

  • Schack called the bank's CEO, James S. Dimon, the "fattest cat" at JPMorgan Chase, citing Dimon's compensation of nearly $20 million in 2008.

For more, see Judge Slashes 'Fat Cat' Bank's Bill for Subpoenaed Documents.

(1) According to the story, the judge reduced the bank's hourly fee from $25 to $6.55 -- the minimum wage in Indiana, where the judge believed the work may have been done, at the time the documents were produced. "[T]he Court ... is guided by the principal that '[o]rdinarily, the retrieval and evaluation of documents should be done by the lowest-level person consistent with accurate and reliable identification of the material called for,'" Schack wrote. The 182 hours worked by JPMorgan Chase employees therefore came to $1,192, not $4,550, the judge concluded.

Schack then awarded JPMorgan Chase an additional one cent per page for the estimated cost of the paper, plus an additional two cents for "toner, copier maintenance and electricity." At three cents per page for only 1,939 pages, instead of 25 cents per page for 18,248, the bank deserved $58.17, not $4,562, Schack concluded. The judge ordered Klein to pay JPMorgan Chase a total of $1,250.27. (In chiseling down the cost reimbursement request for reproducing the documents, Schack noted that of the 18,248 pages that JPMorgan Chase produced, the bank placed 16,317 pages online, as opposed to printing them. For those pages, the bank only deserved compensation for labor and not supplies, Schack wrote, calling the bank's claim "disingenuous." Accordingly, he understandably refused to grant alleged multi-billion dollar "fat cat" JPMorgan Chase the three cent reimbursement for each of those pages it placed online.)

Reportedly, Simmons, Jannace & Stagg, the law firm that represented Chase, did not return calls for comment.

Fla. Supremes Order F'closing Banks To "Produce The Note" In Establishing Statewide Mediation Program; Open To Both Homestead & Tenant-Occupied Homes

In Tallahassee, Florida, the Orlando Business Journal reports:


  • [Foreclosure defense attorney Roy Oppenheim] noted that mediation “forces banks to bring someone who has the ability to make a decision to the table.” Another significant part of the order requires lenders to prove they hold the note.(2)Plaintiff’s counsel is not permitted to respond to the certification with ‘unknown,’ ‘unsure,’ ‘not applicable,’ or similar nonresponsive statements,” the order states.

  • Oppenheim said [...] that the recommendation is significant because the task force found it to be a form of unfair practice. “It’s what we call legal fiction. Legal fiction is a nice way of saying a lie,” he said.

For more, see Fla. Supreme Court requires mediation in foreclosures.

(1) With respect to owner-occupied, homestead properties in foreclosure, the Florida Supreme Court order provides:

  • Under this program, all foreclosure cases in the state courts that involve residential homestead property will be referred to mediation, unless the plaintiff and borrower agree otherwise or unless effective pre-suit mediation that substantially complies with the managed mediation program requirements has been conducted.

See Order, page 2-3.

With respect to residential properties in foreclosure that are occupied by individuals other than the borrower, the Florida Supreme Court order provides:

  • The Court further approves the Task Force recommendation that cases involving properties that are occupied by individuals other than the borrower may opt into the managed mediation program, at equal cost to the parties, and that structural improvements, such as open calendars, be employed by courts to allow cases to move as quickly and smoothly as possible.

See Order, page 9-10. According to the Task Force recommendation, "These cases may be either tenant-occupied or occupied by other members of the family but not the borrower, or have unspecified occupants. [...] The Task Force recommends that these properties be given the choice to opt into managed mediation at equal cost to the parties." See Task Force recommendation, page 41.

(2) According to the Task Force recommendation, page 21.:

  • Judges should also recognize their responsibility to ensure that in uncontested cases, the necessary evidentiary basis has been laid for the entry of summary judgment. In particular, judges should take every step to insure that the original note is produced, that the note is held in due course by the plaintiff with a right under the note to foreclose, and that the note is cancelled upon entry of the final judgment.

According to the Task Force recommendation, page 20:

  • Complaints alleging lost note should only be filed upon a good faith investigation. These problems have caused the Task Force to recommend a requirement that pleadings be verified.

Editor's Note: In the event the foreclosing lender fails to produce the note and the presiding judge is inclined to allowing the foreclosure proceeding to continue, the homeowner (or his/her counsel) might consider filing a motion to require the lender to post a "lost note / lost instrument bond" in the face amount of the promissory note, plus 5 years of interest to protect the homeowner against loss that might occur in the event the purportedly lost note magically reappears in the future in the hands of another seeking enforcement thereof (in Florida, five years is the statute of limitations for the enforcement of a promissory note in Florida). For example, a lender wanting to foreclose a $500,000 mortgage should be required to to put up a five year bond for $500,000 plus five years of interest at the statutory interest rate (ie. if statutory rate is 10%, the amount of the bond should also cover $250,000 of interest - $50K/ year x 5 years - for a total of $750,000). In Florida, a court is prohibited from entering a judgment against a debtor based on a lost, destroyed or stolen note unless the creditor adequately protects the debtor against thepossibility of such a loss. Sec. 673.3091(2), Florida Statutes states:

  • [T]he court may not enter judgment in favor of the person seeking enforcement [of a lost, destroyed, or stolen instrument] unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

It appears that this statute also applies in the event the foreclosure is uncontested and the homeowner fails to appear in the action.

Ex-Philly Title Recording Dept. Employee Charged With Preparing Bogus Deeds For Pay; Some Unwitting Owners Had Property Sold Out From Under Them: Feds

In Philadelphia, Pennsylvania, The Philadelphia Inquirer reports:
  • A former worker in the Philadelphia Records Department was charged [...] with taking fees to prepare about 100 unauthorized deeds, teaching one person how to prepare fake deeds, and helping that person file the phony documents. Ramon Pabon, 62, allegedly used his home computer to facilitate the scheme. "Some owners of the property were victimized as they were unaware that their properties had been sold," according to the charges in federal court.

  • Investigators said Pabon had admitted he helped prospective buyers find owners of properties they were interested in, helped people wanting to sell their homes find buyers, and prepared deeds. He was paid $200 to $250 above the $156.50 fee paid to the city by the property owner, according to authorities.

  • City Inspector General Amy Kurland said in a statement that Records Commissioner Joan Decker was beefing up security standards in the Recorder of Deeds Office, where Pabon worked as a title registration aide. She declined to say whether other arrests were planned, but said the investigation was continuing.

Source: Former deeds worker charged with real estate fraud. DeedContraTheft deed theft

Quality Control Employee Canned By Lender After Cooperating With Feds In Loan Probe, Suit Alleges

In Denver, Colorado, the Denver Business Journal reports:
  • A former employee [reportedly an ex-“high-risk specialist” in quality control] of Aurora Loan Services LLC alleges in a lawsuit filed [last week] that the company fired him in retaliation for helping federal investigators who were looking into one of its loans. [...] One person in the legal department “lamented” that providing the information could mean Aurora Loan Services would have to buy back the loan, costing the company money, the suit says. On Sept. 4, 2008, the company’s human resources office told [ex-employee Michael] Walker he was fired, the lawsuit says.

  • Instead of commending Mr. Walker for his honest and diligent work, (Aurora Loan Services) claimed that Mr. Walker’s provision of this information had violated ALS’ so-called “zero-tolerance policy for privacy violations” and fired him, the lawsuit says.
For more, see Fired loan-firm employee sues, alleging retaliation for helping feds.

Miami Feds Announce New Fraud Cases; Organizers, Real Estate Brokers, Straw Buyers, Recruiters, Title Agents Bagged In Alleged Double HUD-1 Scams

From the Office of the U.S. Attorney (Miami, Florida):
  • Jeffrey H. Sloman, Acting United States Attorney for the Southern District of Florida [and other law enforcement authorities] announced two new multi-million dollar mortgage fraud prosecutions.


  • On December 15, 2009, a federal grand jury returned a six-count Indictment charging ten defendants in a mortgage fraud scheme, which resulted in the approval and disbursement of approximately $7.9 million in mortgage loans.(1) [...] On December 15, 2009, a federal grand jury returned a five count Indictment charging five defendants for their participation in [another] mortgage fraud scheme.(2)

For the U.S. Attorney press release, see 15 Defendants Charged In Two Separate Mortgage Fraud Cases Involving Almost $10 Million In Fraudulent Loans.

(1) The Indictment named the following defendants:

  • Greta Medina, the alleged organizer of the scheme,
  • Margaret Roberts, a real estate broker,
  • Dania Arguelles, alleged straw buyer recruiter,
  • Martin Mere, alleged straw buyer recruiter,
  • Melissa Ann Scher, Alfonso Velasco, Adan Vasquez, Yohamel Caballero, and Alberto Lopera, alleged straw buyers,
  • Karim Goding, title agent.

Medina and Goding allegedly caused the lender to loan more money than it otherwise would have loaned by preparing and submitting to the lender a false HUD-1 Settlement Statement with an inflated purchase price. The defendants then concealed the fraudulent scheme by creating a second version of the HUD-1 Settlement Statement to be provided to the seller reflecting the actual purchase price of the property. At closing, the defendants diverted millions in loan proceeds by skimming the difference between the inflated purchase price and the price actually paid to the seller for the property.

(2) The Indictment named the following defendants:

  • Julio Llanessa and Laura Fernandez a/k/a “Laura Llanessa, the alleged organizers of the scheme,
  • Fausto Guzman, alleged straw buyer accused of receiving $30,000 for obtaining for two loans – one in the amount of $1.5 million and the other in the amount of $100,000,
  • Ryan T. Dosen, title agent, and Emma Betancourt, title agent employee.

Title agents Dosen and Betancourt allegedly participated in the preparation of a false HUD-1 Settlement Statement for the property, which reflected a fraudulently inflated sale price of $2 million. A second HUD-1 Settlement Statement, which the defendants did not disclose to Countrywide, revealed a sales price of $1.68 million. It was based on the represented $2 million sale price that Countrywide approved the $1.6 million in loans.

Monday, December 28, 2009

Alleged Arizona-Based Upfront Fee Loan Modification Racket Violated State Law, Says Illinois Homeowner In Lawsuit Seeking Class Action Status

In Chicago, Illinois, Mortgage Relief Group dba Mortgage Assistance Group, an outfit alleged to be headquartered in Glendale, Arizona, cheated people in mortgage rescue scams, a class action claims. The lawsuit, filed in state court in Cook County, alleges violations of the Illinois Mortgage Rescue Fraud Act (765 ILCS 940/1. et seq.), and the Illinois Consumer Fraud And Deceptive Practices Act (815 ILCS 505/1. et seq.).

For the lawsuit, see Von Essen v. Mortgage Relief Group LLC, dba Mortgage Assistance Group (lawsuit available online courtesy of Courthouse News Service).

Some Raise Questions On Judges' Role In Foreclosure Actions In Light Of Rulings Favoring Homeowners

The Wall Street Journal reports:
  • A group of state and federal judges presiding over foreclosures are wiping away borrowers' mortgage debt, invalidating foreclosure sales and even barring some foreclosures outright. The decisions in recent months by a handful of judges in states including Massachusetts, New York and Texas mark a new phase in the judiciary's battle to stem the rising tide of foreclosures by punishing mortgage companies for paperwork mistakes and alleged mistreatment of borrowers.(1)

  • The number of judges taking such action remains small, and most foreclosures go through without a challenge. But the growing number of rulings against lenders' claims is raising questions among some legal experts about judges' impartiality.

For more, see Foreclosure Challenges Raise Questions About Judicial Role.

(1) For two recent examples, see:

Mass. AG Charges Attorney With Recording Forged Mortgage Assignments In Attempt To Hijack $1M+ In Loan Payoff Proceeds From Pending Real Estate Sales

From the Office of the Massachusetts Attorney General:
  • [A] Marblehead attorney was arraigned in Cambridge District Court in Medford for his role in a million dollar mortgage hijacking scheme. Leon Gelfgatt, age 49, is charged with Attempted Larceny, and Uttering (2 counts).

  • Massachusetts State Police assigned to Massachusetts Attorney General Martha Coakley’s Office arrested Gelfgatt [...] as he allegedly attempted to retrieve over $1.3 million dollars in mortgage funds in connection with a sophisticated mortgage fraud scheme.


  • According to authorities, Gelfgatt allegedly identified properties which were under agreement and scheduled for an imminent sale. He then allegedly recorded false documents at the Registry of Deeds indicating that his fake company was the new holder of any mortgages on those properties. He allegedly sought through this scheme to cause mortgage payoff funds to be delivered to the fake company, rather than to the rightful mortgage holders.

For the Massachusetts AG press release, see Marblehead Attorney Arraigned in Connection with Million Dollar Mortgage Hijacking Scheme.

(1) According to the press release, Gelfgatt entered a plea of not guilty and was ordered held on $1 million cash bail by Judge Roanne Sragow. In the event that Gelfgatt posts bail, he has to surrender his Russian passport and wear an electronic monitoring bracelet, the press release states.

Massachusetts Closing Attorney Gets 2 To 3 In Mortgage Stacking Racket; Pocketed $2M+ In Scam; Title Insurance Underwriter Left Holding The Bag

From the Office of the Massachusetts Attorney General:
  • Attorney General Martha Coakley’s Office announced the sentence of [...] former Somerville real estate attorney [Kevin Carey, age 49, of Middleboro] in connection with making false statements on mortgage applications and associated documents and using the funds secured from the loans for his own purposes, rather than paying off existing loans as directed by the new lenders. [... S]uperior Court Judge D. Lloyd MacDonald sentenced Carey to two to three years in State Prison, followed by 10 years probation. Carey is also ordered to pay $2.6 million in restitution.(1)


  • While practicing as a real estate lawyer in Somerville and Medford, Carey engaged in a scheme called “mortgage stacking” on four residential properties he or his family members owned. The scheme involved serially refinancing the loans on these properties, without paying off the existing loans. Carey was also the agent for a New England title insurance company which allowed him to issue title insurance policies on mortgage transactions he processed.


  • Carey “stacked” three mortgages on a home in Medford, two mortgages each on two different properties in Everett, and one mortgage on his personal residence in Medford. [...] When he received the proceeds of the loans, Carey did not pay off the existing mortgages on these properties, but rather used the funds for his own benefit. Carey issued title insurance policies or commitments in connection with the transactions, and the lenders were therefore protected, but ultimately the title insurance company suffered the financial loss. As a result of this scheme Carey stole over $2 million. The lenders remained unaware of the problem because Carey continued to make monthly payments on all of the loans.(2)

For the Massachusetts AG press release, see Former Somerville Lawyer is Sentenced to 2 – 3 Years in State Prison in Connection with Mortgage Stacking Scheme.

(1) Carey pled guilty to the charges of Larceny Over $250 (8 counts) and Willfully Making a False Statement Regarding Financial Condition or Assets (7 counts), according to the press release.

(2) According to the press release, a database search by Fannie Mae flagged the multiple mortgages on one of the properties, triggering a notification to one of the lenders. The lender then notified the title insurance company of the problem. Lawyers for the title insurance company then referred the matter to the Attorney General’s Office, according to the press release.

Georgia Man Used Stolen IDs In Failed Attempt To Buy His Own Properties Facing Foreclosure Using Short Sales, Say Atlanta Feds

In Atlanta, Georgia, the Atlanta Journal Constitution reports:
  • A 37-year-old Atlanta man is accused of stealing people's identities, and then using those identities to attempt to purchase his own foreclosed property. Brent Merriell was arrested Tuesday, according to the U.S. Attorney's Office. He faces two counts of making a false statement to the FDIC and four counts of aggravated identity theft.

  • Merriell apparently obtained several million dollars worth of loans in his name, and in the names of family and friends, from Omni National Bank. On March 27, Omni was taken over by the FDIC. By October, Merriell was delinquent on loan repayments and faced foreclosure on 14 properties, according to Patrick Crosby with the U.S. Attorney's Office. Merriell then asked the FDIC to allow him to "short sale" two properties each to seven new purchasers at greatly reduced amounts.

  • But the new purchases were being made in the names of people whose identities had been stolen, and the sales contracts were forged and counterfeited, Crosby said. Merriell was arrested before any of the sales could be completed. If convicted, Merriell could face up to 30 years in prison, and fine of up to $1,000 for each false statement charge.

Source: Man accused of attempting to buy homes with stolen identities.

Sunday, December 27, 2009

Title Agent Gets Five Years For $1.3M+ Escrow Swindle; Pocketed Cash While Failing To Pay Off Existing Loans In Homeowner Refinancing Transactions

In Fort Lauderdale, Florida, the South Florida Business Journal reports:
  • Stephen Lalonde, 43, of Fort Lauderdale, was sentenced [last week] to five years in prison in connection with a $1.3 million mortgage fraud scheme. According to court records and statements made in court, Lalonde stole more than $1.3 million at real estate closings as part of a scheme to defraud legitimate borrowers, lenders and Spectrum Title, an Oakland Park title insurance company in connection with six real estate closings.

  • The legitimate borrowers were trying to re-finance and payoff existing mortgages. However, Lalonde kept the loan proceeds and did not use the money to payoff the borrowers’ pre-existing loans. He was charged with mail fraud and making false statements.(1)

Source: Broward man sentenced in $1.3M mortgage fraud.

For the U.S. Attorney (Fort Lauderdale) press release, see Fort Lauderdale Operator Of Title Agency And Mortgage Companies Sentenced To 60 Months On Mortgage Fraud Scheme.

Go here for Ripoff Report on Stephen Lalonde.

(1) According to the Federal prosecutor's press release, Lalonde was also ordered to pay restitution in the amount of $1,897,268.05 to the victims in this case, which included Stewart Title Guaranty Corporation, the insurance company that underwrote the title policies issued in connection with the subject transactions, and that ultimately wound up holding the bag as it had to cover the substantial losses suffered in this matter. EscrowRipOffKappa

Title Agent Accused Of Swiping $2.7M+ In Escrow Funds Due To Lienholders In Home Refinancing Scam; Local Chief Deputy Prosecutor Among 12+ Victims

In Allen County, Indiana, The Journal Gazette reports:
  • Just over a month after the state suspended his license, a Fort Wayne title insurance broker faces criminal charges accusing him of misappropriating more than $2.7 million in title funds. Joseph A. Garretson, 36, [...] is charged in Allen Superior Court with conversion or misappropriation of title insurance escrow funds, corrupt business influence and unlawful loan origination activities, all felonies. Garretson is accused of arranging mortgage refinancing loans for a number of area clients and then not using the money to pay off the initial loans, causing mortgage holders to default, according to court documents.

  • In October, Allen County Chief Deputy Prosecutor Michael McAlexander took a call from a man expressing concern about the length of time it was taking for his previous mortgage to be paid off after he refinanced using title insurance, settlement and escrow services from Garretson and Fort Wayne Title [...].

  • McAlexander realized he also had used the services of Fort Wayne Title and, after contacting his original mortgage holder, found his loan also had not been paid off using the proceeds of the refinancing, according to court documents.

For more, see Mortgage refinancing scheme alleged (Broker accused of arranging new loans, not paying off old).

(1) According to the story, the criminal filing details more than a dozen other instances occurring from January 2006 to November 2009 in which Garretson allegedly failed to pay off mortgage loans in refinancing transactions and regular mortgage transactions, leaving customers on the hook for the remaining original loan amounts. EscrowRipOffKappa

NH Woman To Stand Trial In $550K Vegas Escrow Scam; Blames Now-Convicted Employee For Swindle That Left Existing Mortgage Unpaid In Real Estate Sale

In Hudson, New Hampshire, the Nashua Telegraph reports:
  • A Hudson woman is set to stand trial in Las Vegas next month on charges that she stole $550,000 from a lending company while working as an escrow officer several years ago. Sheila K. Jones, 46, of [...] Hudson, has pleaded not guilty to charges of felony theft and insurance fraud and is free on $10,000 bond pending the Jan. 19 trial. Conditions of the bond agreement did not prevent her from leaving Nevada, where she lived before moving to Hudson this past summer.


  • Jones is accused of stealing the $550,000 from an escrow account that she opened to hold proceeds from the sale of a $650,000 Las Vegas home. She’s also accused of lying to an insurance company by telling them the [trust] deed [ie. mortgage] had or would be paid off, according to an indictment handed down by the Clark County District Attorney in Las Vegas. [...] Reached Tuesday, Jones and her lawyer said it wasn’t Jones who committed the thefts, but employees who were working for her. [...] Jones’ lawyer, T. Augustas Claus of Las Vegas-based Legal Resource Group, said one of Jones’ employees has already pleaded guilty to stealing and is in jail.

Source: Police say Hudson woman stole $550k.

(1) According to the story, Jones currently goes by the name Sheila Mitchell. At the time of the alleged swindle, she reportedly went by the name Sheila K. Williams. EscrowRipOffKappa

Failure To Properly Serve Junior Lienholder Not Fatal To Foreclosure Sale Where 1st Mtg Balance Exceeded Home Value; Court Says "No Harm, No Foul"

The Wisconsin Law Journal reports:
  • Last year, the Wisconsin Court of Appeals addressed what remedies were available to a junior lienholder who failed to participate in a foreclosure action. Effectively, the court limited the bank to purchasing the mortgagor’s right of redemption. (JP Morgan Chase Bank, N.A., v. Green, 2008 WI App 78, 753 N.W.2d 536)

  • On Dec. 17, it addressed a corollary to that issue – what happens when a junior lienholder did not participate because it was not properly served. Effectively, the court adopted a “no harm, no foul” rule: because the value of the house was insufficient to cover the first mortgage, the junior lienholder suffered no harm from not being served. The court concluded, “the only reasonable inference from the record is that the value of the property at the time of the sheriff’s sale was no more than the amount of the first mortgage. It follows that there is no reason to believe that [the bank] would have benefited from exercising any of the rights of a junior lienholder.”(1)

For more, including the highlights from the case, see Remedy vacated in foreclosure action (Lienholder’s position can’t be improved).

For the court ruling, see Federal National Mortgage Association v. Lewis, No. 2008AP2, 2009 Wisc. App. LEXIS 959 (December 17, 2009).

(1) The issue of whether the first mortgage holder had legal standing to bring the foreclosure action in the first place was not raised by the junior lienholder in this case. If it had, and if it was then determined that the first mortgage holder's legal standing was questionable or lacking, the outcome in this matter may have been different. SewerServiceAlpha sewer service