Saturday, February 20, 2010

Memphis Attorney Gets 10 Years For Abusing POAs In $60K+ Theft From Two Clients; Joins Ex-Law Partner Doing 22 Year Stint On Other Charges

In Memphis, Tennessee, MyFox Memphis Channel 13 reports:
  • Shelby County District Attorney Bill Gibbons announced [] that a Memphis attorney pleaded guilty to stealing money from two clients who had given him power of attorney over their financial affairs. 62-year old Joseph Richard Rossie pleaded guilty to the court on two counts of theft of property over $60,000. Rossie was sentenced to 10 years in prison on each count, to be served concurrently. He is scheduled to begin serving his sentence on March 15. Rossie has made restitution as part of the settlement of civil lawsuits filed by the victims.


  • "Mr. Rossie stole a significant amount of money from two clients. As an attorney, he violated their trust for his own personal gain," said District Attorney Gibbons. Rossie is the former law partner of attorney John Parker, who pleaded guilty in 2007 to five counts of theft of property over $60,000 and one count of theft over $10,000. Parker is serving a 22 year sentence in prison.(1)

For the story, see Attorney Pleads Guilty to Client Theft.

(1) If a Tennessee attorney, either in the course of representing you or acting as a fiduciary, screws you out of money or property through dishonest conduct, go to the Tennessee Lawyers' Fund for Client Protection for information on how to recover some or all of your losses from the fund. For other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

Concerns Continue For 25,000 Residents In 11,000-Unit Manhattan Apartment Complex As Foreclosure Action On $3B Mortgage Is Filed

In New York City, The New York Times reports:
  • The lenders at Stuyvesant Town and Peter Cooper Village are expected to begin an uncontested foreclosure action [] against the owner of Manhattan’s largest residential complex, according to bankers and real estate executives. CWCapital, the company that is overseeing the complex on behalf of the owners of $3 billion in mortgages, plans to file the action in State Supreme Court in Manhattan, they said. The owner, a partnership of Tishman Speyer Properties and BlackRock Realty, announced last month that it would turn over the property after defaulting on a $16 million loan payment, rather than wage a battle for control.

  • The foreclosure action is unlikely to immediately affect the 25,000 residents of the two sister complexes overlooking the East River, between 14th and 23rd Streets. But it marks the beginning of what promises to be a lengthy process in which the lenders will take control of the 80-acre complex and run it for an unspecified period before selling it to a new owner.

  • Still, tenants of the 110 buildings are concerned that services and maintenance could deteriorate over time. “It is unfortunate that we find ourselves in this position,” said Daniel R. Garodnick, a city councilman and lifelong resident. He added: “Anything that moves this process toward an orderly restructuring will be in the tenants’ interest. We most certainly don’t want anyone gumming up the works.”(1)

For more, see Worry at Stuyvesant Town as Foreclosure Draws Near.

For story updates, see:

  • Reuters: Lender's agent forecloses on Stuyvesant Town: The trustees for the holders of securitized senior mortgages on Stuyvesant Town/Peter Cooper Village in Manhattan have moved to foreclose after the owner of the apartment complex failed to make the monthly installments on the $3 billion loan (action filed in federal court in Manhattan).
  • New York Post: LeFrak, Ross unfazed by StuyTown suit: New York real estate mogul Richard LeFrak says he and billionaire investor Wilbur Ross are still interested in buying Stuyvesant Town-Peter Cooper Village, despite moves by lenders to foreclose on the apartment complex. [...] Ross told The Post he supports a foreclosure sale, saying it will simplify the sale process.

(1) Reportedly, the Stuyvesant Town foreclosure would come only weeks after a state judge ordered the foreclosure sale of Riverton Houses, a middle-class complex in Harlem. And analysts predict that more complexes bought with enormous loans during the real estate boom will also default. At Riverton, which like Stuyvesant Town was built by Metropolitan Life Insurance in the 1940s, the owner reportedly defaulted on a $225 million mortgage. On behalf of mortgage holders, loan servicer CW Capital will have to pay a transfer tax of an estimated $100 million on the Stuyvesant Town foreclosure when it does take possession of the property, the story states.

Court-Appointed Receiver Offers No Relief For Tenants Without Heat, Hot Water In Brooklyn Building In Foreclosure

In Brooklyn, New York, the Daily News reports:
  • Their Bedford-Stuyvesant apartment building is in foreclosure - and these tenants are feeling forsaken. Tenants at 874 Greene Ave. have suffered for months without heat or hot water even though a court-appointed receiver hired a managing company to make repairs and collect rents. "The only way I get heat is to turn the stove on," said Paulette Walker, 36, who lives in her freezing fourth-floor apartment with her husband and 13-year-old son, Jacob. "I boil water for the steam, turn on the grill and let the burners go."

  • The eight-unit building has been without heat or hot water since the boiler, which has broken countless times, failed again, tenants said. Even their original landlord had a better track record than BPC Management when it came to making repairs, they added. The tenants charge that BPC Management has ignored complaints about the broken boiler, roach infestations and even a leaking roof.

  • "They don't listen; they don't care," said Natasha Favorite, 25, who is eight months pregnant and lives on the second floor with her 3-year-old son, Adonis. "I'm sick of being in this house with no heat and no hot water." Favorite said she has complained to BPC at least 10 times over the past year. Angry tenants in the building have lodged 65 complaints with the Housing Preservation and Development Department since last February. They are working with organizers from Pratt Area Community Council, who are trying to negotiate a timeline for improvements and repairs.

  • "This is the complication of foreclosures," said PACC organizing director Elana Shneyer. "The tenants haven't done anything [wrong], but they get caught in the middle ... without basic services." A BPC Management spokesperson declined to comment. "We can't even bathe the way we want to bathe," said Walker, an unemployed security guard who dumps six big cooking pots full of boiling water into the tub and adds cold water to take a bath. "We really shouldn't have to live this way."

Source: Every tenant's nightmare: No heat, hot water for months in Brooklyn apartment that's in foreclosure.

Years After Retirement, Converted Met 1st Baseman/Now Real Estate Developer Still Hitting Home Runs In NYC

In New York City, Crain's Bew York Business reports:
  • Six months after Mo Vaughn set up Omni New York in 2004, the fledgling real estate firm struck, snapping up a 286-unit affordable housing complex in the Bronx. By the end of its second year, Omni New York had tripled its holdings to a total of 869 units.

  • As far as most people were concerned, however, Mr. Vaughn was still a Mets first baseman, even though his baseball career ended in 2003. “I wanted people to take us seriously and know that we were the real deal,” says Mr. Vaughn, who is seated at a Brooklyn eatery with his partner, Eugene Schneur, explaining his transition from baseball hero to real estate mogul—albeit one whose new uniform includes not just sharply tailored suits but large diamond-encrusted hoop earrings. “I wanted respect.”

  • These days he's got it—not as the American League's former MVP but as the managing director of one of the city's best-regarded and most active buyers and managers of affordable housing. Along the way, Mr. Vaughn and company have earned a place as one of the city's top choices for turning around distressed residential properties.(1)

For more, see Mo Vaughn's home runs (Builds affordable-housing empire scooping up distressed properties).

(1) After the foreclosure mess left by the "white shoe," predatory equity, Wall Street types who, as "wet-behind-the ears" real estate investors, grossly overpaid for multi-unit apartment buildings throughout New York City just before the real estate bubble burst, there should be no shortage of old, deteriorating residential buildings in need of rehab for Vaughn and his partner to sift through and pick from for their firm's future projects.

Nursing Home Office Manager Cops Plea To Ripping Off Residents' Social Security Income Intended To Pay For Housing, Care

In Jasper County, Iowa, the Newton Daily News reports:
  • A woman who worked at a Newton care facility has pleaded guilty to stealing more than $55,000 in federal funds. Kelly Jo Seals, 35, pleaded guilty in federal court to theft of government property on Jan. 25. Seals stole $55,873.82 while working as office manager from February 2005 to May 2007 at Heritage Manor Nursing Home in Newton.

  • According to her plea agreement filed in the United States District Court for Southern District of Iowa, Seals misappropriated funds belonging to Eloise Rhoades, Leona Mills and Opal Mills by converting their Social Security Retirement check funds to her own use. The funds were intended for payment to Heritage Manor for care and housing of Rhoades and the Mills women.

For more, see Woman pleads guilty to stealing funds from Newton nursing home.

Illinois AG Out To Hammer, Nail Home Improvement Contractors For Deceptive Practices, Shoddy & Incomplete Work

The following press releases are from the Office of the Illinois Attorney General in connection with its effort to target wayward home improvement contractors. The civil lawsuits, according to the press releases, generally allege that the defendants have violated the Illinois Consumer Fraud and Deceptive Business Practices Act and the Illinois Home Repair and Remodeling Act by:
  • performing work in a shoddy, unprofessional manner;
  • failing to complete the repair work; and
  • refusing to provide refunds to consumers.

The complaints also allege that the defendants failed to provide homeowners with written contracts and the "Home Repair: Know Your Consumer Rights" pamphlet, as required under Illinois law. In the suits, Madigan generally also asks the court to prohibit the defendants from engaging in the home repair trade in Illinois, and seeks:

  • restitution for consumers,
  • a civil penalty of $50,000,
  • additional penalties of $50,000 for each violation found to have been committed with the intent to defraud,
  • $10,000 per violation found to have been committed against a consumer who is 65 years or older, where applicable.
  • a a court order requiring the defendants to foot the bill for the costs of the prosecution and investigation of the case.

For the press releases, see:

  • Madigan Sues Chicago Contractor For Failure To Fulfill Home Improvement Contracts: The AG's lawsuit, filed in County Circuit Court, alleges that Chicago home repair contractor Robert Leving, who operates a home repair business under the names Right Choice Construction and Elite Construction solicited contracts without a license and collected up to $26,000 in deposits from consumers. The Attorney General's Consumer Fraud Bureau has received six complaints about Leving's work from consumers in the Chicago area.

  • Madigan Sues Rockford Home Contractor For Shoddy Work, Failure To Complete Fence Installations: The AG's lawsuit, filed in Winnebago County Circuit Court, alleges that Rockford contractor Michael J. Thelen, who owns and operates Thelen Services, Inc., solicited contracts to remove or install fences but failed to complete contracted projects or completed them in a substandard manner. Despite consumer requests, Thelen allegedly refused to refund down payments. The Attorney General's Consumer Fraud Bureau has received three complaints since September 2008 about Thelen's work from consumers in DeKalb, Boone and Ogle Counties.

  • Madigan Sues Springfield Contractor For Failure To Fulfill Home Improvement, Roofing Contracts: The AG's lawsuit, filed in Sangamon County Circuit Court, alleges that Springfield-based contractor Jeremy L. Sorenson, who operates JSL Construction, solicited home improvement services from area homeowners without a license and collected more than $72,000 in fees for work that he failed to perform or completed in a substandard manner. The Attorney General's Consumer Fraud Bureau has received six complaints about Sorenson's work from consumers.

  • Madison Sues Washington County Contractor For Failure To Fulfill Home Improvement Contracts: The AG's lawsuit, filed in Washington County Circuit Court, alleges that local home repair contractors Everett and Myra Henson, who operate Henson Construction, Pole Barns & More and Do-It-Rite Home Improvement, solicited contracts and collected fees for work that the contractor failed to perform or completed in a substandard manner. The Attorney General’s Consumer Fraud Bureau has received five complaints about the defendants’ work from consumers in Franklin, Jackson and Washington counties.

  • Madigan Sues Williamsom County Contractor For Failure To Fulfill Home Improvement Contracts: The AG's lawsuit was filed against Williamson County contractor Garret Wilson, who operated Residential Construction Services LLC, for allegedly soliciting home improvement contracts from area homeowners without the proper licenses and collecting more than $47,000 in fees for work that he failed to perform or completed in a substandard manner. The Attorney General’s Consumer Fraud Bureau has received three complaints about Wilson’s work from consumers.

Friday, February 19, 2010

Ex-Central Fla. Closing Agent Feels Heat From All Sides As Feds, Title Underwriter, Bank All Press Legal Actions In Alleged Major Mortgage Fraud Case

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • AS SHE STRUGGLES to defend herself against criminal charges that she assisted with one of the largest mortgage fraud schemes in Florida history, Lisa Rotolo is also having to answer civil lawsuits alleging that her "negligent or fraudulent actions" cost banks and title agencies hundreds of thousands of dollars.

  • In August, First American Title Insurance filed a suit accusing Rotolo of breaching her agency agreement by failing to "conduct business in an ethical and honest manner." As a title agent, Rotolo was responsible for ordering title insurance, getting deeds and mortgages signed and distributing proceeds from real estate sales. Four months later, Chevy Chase Bank weighed in with a suit of its own, stating that Rotolo failed to follow closing instructions in loans made to Sarasota appraiser Heather Kabobel and mortgage broker Jonathan Glucker.


  • Last summer, the Herald-Tribune published a series of stories(1) showing how Rotolo, Kabobel, Glucker and dozens of their associates were involved in a scheme orchestrated by Sarasota real estate agent Craig Adams to maximize loan money by artificially inflating real estate values. Adams turned himself in to the FBI two years ago, and his statements to federal agents resulted in Rotolo's arrest on charges of conspiracy, bank fraud, wire fraud and making false statements in connection with loan applications, court documents filed with the U.S. District Court in Tampa show.

  • Approached at the Sarasota Target store where she now works, Rotolo declined to comment. But her husband, Jay Rotolo, said his wife has been cooperating with law enforcement officials for nearly a year.

For more, see Embattled on 2 sides in flipping case.

(1) See:

Closing Agent Gets 20 Months For Stiffing Title Insurance Underwriter, Others Out Of $470K+ In Policy Premiums, Closing Costs From Real Estate Deals

From the Office of the U.S. Attorney (St. Paul, Minnesota):
  • A 45-year-old woman from Prior Lake was sentenced [] in federal court for stealing more than $470,000 designated for payment of title insurance premiums and recording fees. In St. Paul, United States District Court Judge Paul A. Magnuson sentenced Roseann Wagner to 20 months in prison on one count of wire fraud and one count of failure to file a tax return.


  • In her plea agreement, Wagner admitted operating a scheme to defraud mortgage lenders, borrowers, and a title insurance underwriter from January 2007 to December 2007. Wagner, a licensed insurance agent, owned and operated Tri-Star Title, a title insurance agency. [...] Wagner accepted more than $470,000 from lenders at hundreds of residential real estate closings, knowing the money was to be used to pay closing costs, including title insurance premiums and recording fees. Instead, however, she used the money for her own benefit. Initially, because of Wagner’s fraud, title insurance premiums, title search costs, and recording fees on hundreds of residential mortgage transactions went unpaid.

  • However, when Stewart Title Guaranty Company, the Texas title insurance underwriter for Tri-Star, discovered Wagner had misappropriated the funds, it absorbed the losses of all borrowers and paid the title insurance premiums and other expenses, though it was under no obligation to do so. Wagner also failed to file a tax return or pay taxes on more than $270,000 in 2007. The tax loss from her failure to report income was at least $70,000.(1)

For the U.S. Attorney press release, see Prior Lake woman sentenced for stealing more than $470,000 through mortgage fraud scam.

(1) In Minnesota, any person who has lost money due to the fraudulent, deceptive or dishonest practices, or conversion of trust funds by a licensed closing agent [or licensed real estate broker or salesperson] should contact the state's Department of Commerce's Real Estate Education, Research and Recovery Fund for possible reimbursement. According to their website:

  • The purpose of the Real Estate Education, Research and Recovery Fund is to compensate any person who has lost money due to a licensed real estate broker, salesperson, or closing agent’s fraudulent, deceptive or dishonest practices, or conversion of trust funds. The improper action that was committed must be an activity that required a license. [...] Applicants may be awarded any amount from $0 to $150,000, [...].

Pair Sought On Charges Of Securing Execution Of Document By Deception In Connection With Possible Rent Skimming Scam Leaving Victims Facing F'closure

From a press release from the Midland, Texas Police Department:
  • The White Collar Division of the Midland Police Department is in the final stages of an investigation involving several citizens who were defrauded by people who purchased residences from them under false pretences. The citizens found out that the business was not making payments on mortgages as was their original agreement, placing them further into debt - a type of real estate fraud.

  • Jason Morrison and Marcus Rosenberg with Vanguard Properties purchased homes from unsuspecting victims, four persons, who are now close to foreclosure on their homes. On February 11, 2009, warrants were issued for Morrison (3-08-76) and Rosenberg (3-25-76) for Securing Execution of Document by Deception. Morrison was arrested on February 12, 2009, and Rosenberg, and Odessa resident, is still outstanding. The Midland Police Department White Collar Division is asking that any citizens who feels they might have been a victim, to contact police. Victims can contact the Midland Police Department White Collar Division at 685-7108.

Source: Midland Police Arrest One in a Real Estate Fraud Investigation.

Allegations Of "Lawyer Renting" By Loan Modification Outfit Among Charges Currently Under Probe By Florida AG In Five New Investigations

In South Florida, the Sun Sentinel reports:
  • The Florida Attorney General's Office has opened five new investigations this year, with four centered in South Florida, involving foreclosure rescue and mortgage modification companies, a key enforcement concern for regulators. Businesses being examined on allegations they took fees upfront for their services, in violation of state law, include: Foreclosure Relief Systems LLC, also doing business as Foreclosure Rescue Services, of Miami and Miami Beach; Pendulum Financial Group, also doing business as Blue Fox Financial, of Plantation; and Lender Forensics LLC, also doing business as National Modification LLC, of North Palm Beach.

  • The law offices of Thomas Dvorak, of Fort Lauderdale, are being investigated on allegations an attorney allowed a foreclosure rescue group to operate out of his office under the firm's name [ie. "lawyer renting"], state officials said. Save Our Dream LLC, of Orlando, is being examined for possible violations involving residential foreclosure proceedings.

Source: State investigating five mortgage modification firms (Four of the operations examined are in South Florida).

HUD: Watch Out For Upfront Fee "QWR" Scams

From the Department of Housing and Urban Development:
  • Beware of entities contacting you to prepare a qualified written request (QWR) for a fee. Section 6 of RESPA, per 12 U.S.C. § 2605, provides that a borrower may send a QWR directly to a loan servicer for information relating to the servicing of a federally related mortgage loan. When sending a QWR, you should be specific about the problems that you are encountering in terms of your loan servicing. You may send a QWR directly to your lender without outside assistance. For guidance on how to prepare a QWR, please use the following link: Sample Complaint to Lender. Note that HUD is the primary federal agency responsible for enforcement of RESPA.

Source: Loan Servicing Scams.

Go here for a sample qualified written request.

Thursday, February 18, 2010

St. Louis Man Invests $137K+ To Buy, Rehab Home, Then Loses It For $6K In Municipal Foreclosure Sale; Says City Failed To Notify Him Of Pending Action

In St. Louis, Missouri, the St. Louis Post Dispatch reports on Mark Siebels, a local real estate investor who bought a burned-out two-family building in south St. Louis for $37,500 four years ago, invested an additional $100,000 to rehab it, and then lost it for $6,000 in a city foreclosure sale triggered by his failing to pay periodic vacant building registration fees. He says he had no clue about the sale, and did not receive any notice thereof.
  • Matt Moak, a city attorney in charge of the problem properties unit, said the city foreclosed on the property late last year because Siebels failed to pay a vacant-building registration fee. The city charges the owners of vacant buildings with code violations a $200 fee every six months. Moak was unsure Monday what the code violations were on the Siebels property. The fee is a way to deter investors from leaving land derelict, he said.

  • And if the notices are ignored, the property can be foreclosed on.In Siebels' case, the notices — numbering in "double digits," according to Moak — were sent to an address in Jefferson County. But he had moved by then. Siebels acknowledged he should have updated the city with his new address in Kirkwood. But he can't believe an innocent mistake could cost him the property, which he insists he has been maintaining.

  • City officials say they deal with hundreds of a properties each year and can't afford to track down homeowners. Many simply don't want to be found. Moak said it's Siebels' fault for not filing the address change, pointing out that notice of the foreclosure auction was published in the Post-Dispatch.


  • Alan Baker, a local real estate attorney, said Siebels could sue to try to turn back the sale of the property. The case would likely hinge on whether the city gave "reasonably calculated notice"(1) that it was foreclosing on his property, he said. "The ultimate answer lies with a judge," Baker said.

For more, see Rehabber puts 4 years into duplex, loses it to city.

(1) The words "reasonably calculated notice" come directly from the U.S. Supreme Court in at least two rulings that voided foreclosure sales in which the foreclosing entity did a miserable job at trying to track down property owners to provide them with notice of the pending actions. See Jones v. Flowers, 547 U.S. 220, 126 S. Ct. 1708 (2006):

  • [W]e have stated that due process requires the government to provide "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections."

citing Mullane v. Central Hanover Bank & Trust Co., 339 U. S. 306, 314 (1950):

  • An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. [citations omitted].

Go here for the links to the transcript of the oral argument, and the various briefs filed in Jones v. Flowers, referenced above, filed by the Public Citizen Litigation Group attorneys who successfully represented the improperly-foreclosed-upon homeowner in the U.S. Supreme Court.

$300K Proceeds From Reverse Mortgage Part Of $750K Ripoff From Victimized Senior; POA Called "License To Steal From The Elderly"

In Honolulu, Hawaii, the Honolulu Advertiser reports:
  • A trusting 82-year-old 'Aiea man is struggling to restore his financial footing after giving away his durable power of attorney to a female acquaintance who used it to raid his bank account and obtain credit cards and a reverse mortgage that plunged him into staggering debt.(1)

  • Friends who are helping the elderly man said cash losses and new debt from years of financial exploitation could top $750,000, with no guarantee of getting any of it back. The 'Aiea man's predicament, now under investigation by the state Department of Human Services Adult Protective Services, is an example of how powers of attorney — used since ancient times to allow individuals to act on behalf of others in business transactions and other affairs — have become a license to steal from the elderly.(2)

For more, see More Hawaii seniors financially exploited (Lawmakers considering ways to guard against exploitation; Couple helping exploited widower pick up the pieces ).

(1) According to another report (see Couple helping exploited widower pick up the pieces), the ripped off funds consisted, in part, of the proceeds from an alleged fraudulently obtained mortgage on the elderly man's home in the amount of approximately $300,000.

(2) Reportedly, most often the thieves are relatives or caregivers who take advantage of a senior's poor health or diminished mental capacity to gain control of bank accounts, homes and other assets for their own benefit, according to elder law experts and other advocates for the elderly. "It's a huge problem," said Bruce Bottorff, associate state director of AARP. "We continue to do education and outreach because it is so prevalent and, frankly, underreported. People need to be vigilant as the population grows older."

Disbarred Attorney Cops Plea To Looting $3M+ From Escrow Account Used To Close Real Estate Transactions; 15 Deals Left Unfunded

From the Office of the U.S. Attorney (Minneapolis/St.Paul, Minnesota):
  • [Earlier this month] in federal court in Minneapolis, Minnesota, [] 38-year-old [now-disbarred in Minnesota(1)] lawyer [Jason Eric Fischer] from Hudson, Wisconsin, pleaded guilty to mortgage fraud by stealing more than $3 million from the escrow account at the real estate title and settlement company he jointly owned.


  • In his plea agreement, Fischer admitted that from 2006 through May 2009, he orchestrated a scheme to divert funds from the escrow account at Real Source Title, a company he jointly owned and managed. The company, which had offices in Mahtomedi and Burnsville in addition to Illinois and Hudson, Wisconsin, routinely accepted wire transfers and checks from buyers and lenders. Those funds were to be held in escrow for the sole purpose of closing residential real estate transactions.

  • To further his scheme, Fischer represented to buyers, lenders, underwriters, and others that the money deposited into the company’s escrow account was, in fact, used only to close real estate transactions. He made those representations by producing and mailing false HUD-1 settlement statements to people of interest. In truth, however, Fischer regularly withdrew escrow-account money to pay for personal and business expenses as well as fund prior company real estate transactions.

  • Between 2006 and May 2009, Fischer diverted approximately $3 million from the escrow account at Real Source Title; and by May 2009, the account was depleted and unable to fund 15 loans. As a result, buyers, sellers, lenders, underwriters, and others suffered significant financial loss.(2)

For the U.S. Attorney press release, see Lawyer pleads guilty to more than $3 million mortgage fraud scheme.

(1) For the disbarment order, see In re Petition for Disciplinary Action against Jason Eric Fischer.

(2) If a Minnesota attorney, either in the course of representing you or acting as a fiduciary, screws you out of money or property through dishonest conduct, go to the Minnesota Client Security Board for information on how to recover some or all of your losses from the fund.
For other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

Fight To Successfully Recover Home Stolen, Mortgaged Out From Under Leaves Elderly Couple Exhausted, Out Thousand$ In Legal Fees

In Frostproof, Florida, The Ledger reports:
  • An elderly couple whose house in Frostproof was targeted for real estate fraud has reclaimed the home but might never recover money spent in a two-year legal battle. The outcome of a Feb. 5 court hearing means Albert and Nancy Pascell would have to pursue further legal action if they hoped for financial reparations. They are unlikely to do that, despite racking up thousands of dollars in legal bills, said their daughter, Nancy Houle of New York. "My parents are exhausted, both financially and emotionally," said Houle, whose parents are in their late 70s. "It's disrupting our entire lives every single day. We vowed we weren't going to talk about it any more. We're going to move on. We're done."(1)

For more, see Frostproof Deed Fraud Victims Regain Home (Frostproof couple reclaims house but might never recover legal expenses).

(1) According to the story, Polk County property records show two people with Tampa addresses, Maria Blanco and Armando Borges, recorded a quit-claim deed on Nov. 10, 2007, claiming the Pascells, who live part of the year in New York, had granted them ownership of the property. The Pascells said their signatures were forged. The same day the deed was filed, Blanco and Borges secured a $48,000 mortgage on the property, said the Pascells' lawyer, Keith Merritt of Lakeland.

Reportedly, the Pascells sued Blanco and Borges as well as the South Florida mortgage lender, 8 & 62 Corporation Profit Sharing Plan Trust. At a hearing last October in Polk County civil court, Circuit Judge Charles B. Curry voided the fraudulent deed and conveyed title to the Pascells. The Polk County Sheriff's Office has issued two warrants for Blanco's arrest, a spokeswoman said.

Lender Found Liable For Role In Broker's Forgery Scam That Mortgaged 70-Year Old Woman's Home Out From Under Her

From a press release from the law office of Orange County, California attorney Douglas J. Pettibone:
  • 70-year-old Arizona resident Mona Dobben stands up and takes down a 20-billion-dollar Mortgage Company by winning a $100,000.00 judgment which includes punitive damages. American Home Mortgage (AHM) was found liable for aiding and abetting a fraud perpetrated on Dobben by an unlicensed real estate broker (In Re: American Home Mortgage Holdings, et al.; United States Bankruptcy Court District of Delaware; Case No: 07-11047 (CSS)).

  • Dobben is represented by Orange County attorney Douglas J. Pettibone who alleges Dobben is victim of loan fraud by an unlicensed real estate broker and convicted felon Patrick Downey. According to Pettibone, Downey stole Dobben's identity, forged Dobben's signature and submitted false loan documents to AHM without Dobben's knowledge. Trial Judge Christopher Sontchi said, "It shocks the conscious of the court what went on here".(1)

  • After Dobben received foreclosure notices from AHM she discovered the fraud and contacted AHM for help who turned a deaf ear and never responded. AHM then filed Bankruptcy. In the bankruptcy court Dobben claimed AHM aided and abetted the fraud perpetrated upon her by Downey and that her claim against AHM should not be discharged in the AHM bankruptcy.

For more, see Mortgage Company Liable for Aiding and Abetting Real Estate Broker Fraud (70-year-old Arizona resident, Mona Dobben stands up and takes down a 20-billion-dollar Mortgage Company by winning a $100,000.00 judgment which includes punitive damages).

(1) Reportedly, Judge Sontchi awarded actual damages of $32,000.00. However, given Dobben's deteriorating credit score and the clear emotional distress displayed in the courtroom, the court granted her treble damages. The total award was a judgment in the amount of $100,000. Following the trial AHM immediately appealed the judgment. The appeal is currently pending.

Wednesday, February 17, 2010

2nd Pa. Attorney To Go Down In Alleged Scam That Peddled Bogus Sale Leasebacks That Purported To Save Homeowners From Foreclosure

In Philadelphia, Pennsylvania, the Bucks County Courier Times reports:
  • Attorney and Doylestown Township Supervisor Jeffrey Bennett will plead guilty to criminal charges of conspiracy, mail fraud and wire fraud, and conspiracy to commit money laundering Wednesday in Philadelphia. [...] [Defense attorney Gavin] Lentz announced his client's intentions Monday afternoon, less than a week after Bennett's law partner - Stephen Doherty - pleaded guilty to similar charges in U.S. District Court. The pair ran Doylestown Township's Bennett & Doherty P.C.

  • Bennett, Doherty and three others were indicted two months ago on charges of skimming equity from homes of owners facing foreclosure in a mortgage fraud scheme.(1) [...] The five defendants are accused of conspiring to obtain fraudulent mortgages totaling $14.6 million for at least 35 struggling homeowners, [...]. The mortgages generated money for the defendants but often cost the victims their homes.

  • "(Bennett) got involved with an unscrupulous mortgage broker, that mortgage broker being Ed McCusker," Lentz said. "It's unfortunate that McCusker was as unscrupulous as he was and, unfortunately, (Bennett) was involved with him."


  • Residents involved in the program complained that, in some cases, they thought their troubled mortgages were being refinanced. But, at settlements organized by the defendants, they unknowingly signed away their properties to third parties and ended up paying rent in houses they no longer owned. The transactions did pay off the homeowners' original mortgages but, authorities claimed, the money left over - the home's equity - was divided up by the defendants.

For more, see Supervisor to plead guilty in fraud case (Doylestown Township Supervisor Jeffrey Bennett "wants to move on with his life," his attorney said).

For the indictment, see U.S. v. McCusker, et al.

(1) Also charged were Upper Makefield's Ed McCusker, head of the now-defunct Axxium Mortgage Inc., his wife, Jacqueline, and Mount Laurel mortgage broker John Bariana, the story states. foreclosure rescue equity stripping

Seattle FHLBB Goes After Wall Street Firms In Attempt To Force Them To Buy Back Soured Mortgage-Backed Securities

In Seattle, Washington, The Wall Street Journal reports:
  • The Federal Home Loan Bank of Seattle has launched a series of lawsuits against Wall Street banks, seeking to force them to buy back souring mortgage-backed securities. In 11 separate lawsuits filed in late December in King County Superior Court in Washington, the Seattle bank alleges that it was misled by underwriters about the quality of $4 billion of securities it purchased as investments at the height of the housing boom. The Seattle bank is seeking to force the firms to repurchase the securities, plus interest.

For more, see Home Loan Bank Sues Wall Street Firms (requires paid subscription; if no subscription, try here, then click link for the story).

Indy Pair Get 5+ Years In Mortgage Scam Using Unwitting Victims' Stolen I.D.s To Score $23M+ In Home Loans

In Indianapolis, Indiana, The Indianapolis Star reports:
  • [Beverly A. Ross, 51,] was sentenced to more than five years in prison for her role in a multi-million dollar mortgage fraud scheme.(1) [...] Ross's partner in the scheme, Donella Locke, 60, Indianapolis, was sentenced to 71 months in prison last month and must pay $2.3 million to 13 different lenders who were defrauded. Locke went to trial and was convicted in September.

  • The two women were arrested in 2008 after authorities discovered they used other people's credit information to obtain more than $23.5 million in loans on more than 30 expensive properties in Indianapolis, Fishers, Carmel, Zionsville and other Indiana communities. Few payments were made on the properties, and Ross filed five bankruptcy petitions to help keep some of the properties from going into foreclosure, according to the press release. The investigation began in 2005 when one of Ross's relatives discovered she used his credit information to buy and lease properties and vehicles.

Source: 2nd woman sentenced in mortgage fraud scheme.

(1) Ross was reportedly ordered to serve 63 months in prison and repay $5.6 million to 21 lenders she defrauded as part of a plea agreement, according to a press release from U.S. Attorney Tim Morrison's office.

Attorneys Offering Dubious Loan Modification Services To Financially Strapped Homeowners Hits National Media

In Dallas, Texas, CBS News reports:
  • [Dallas-area homeowner Warren Jacobs] unwittingly became one of the many thousands of homeowners authorities allege have been taken in by unscrupulous or incompetent loan modification attorneys who rushed into a burgeoning legal niche: helping financially struggling homeowners re-negotiate their mortgages. Ripoffs of homeowners have become so commonplace that state bar associations from Florida to Arizona are warning their members of the many ethical pitfalls awaiting those who exploit the mortgage crisis.

  • The California State Bar launched a task force a year ago to examine thousands of homeowner complaints about foreclosure lawyers. Currently, the California Bar is investigating more than 400 attorneys who are suspected of ripping off thousands of homeowners across the country.The organization that licenses and disciplines California's more than 250,000 lawyers already has suspended or obtained the resignations of 15 lawyers while disciplinary charges are pending.


  • "The complaints are still going through the roof," said Suzan Anderson, the Bar's lead mortgage fraud prosecutor, who receives more than 30 complaints daily and expects many more lawyers to lose their licenses. Many of the complaints, like Texas homeowner Jacobs', are about do-nothing attorneys.

For more, see Lawyer Misconduct Rises With Foreclosure Record (Hundreds Of Foreclosure Attorneys Investigated In Calif. For Duping Desperate Homeowners).

Tuesday, February 16, 2010

Florida Appeals Court "Deep-Sixes" Rubber-Stamped Foreclosure Judgment; Kicks Case Back To Trial Court For Further Proceedings

Another rubber-stamping trial judge has ostensibly been caught with egg on his face by a state appeals court in a mortgage foreclosure action. This time, a three-judge panel of Florida's 2nd District Court of Appeal "threw the flag" on Sarasota County Circuit Court Robert B. Bennett, Jr. for what should be the equivalent of a 15-yard penalty (and subject to a league fine) in a National Football League game.

In a unanimous decision, the appellate court reversed a summary judgment of foreclosure in favor of a lender which was granted, according to the court, "[d]espite the lack of any admissible evidence that U.S. Bank validly held the note and mortgage[.]"

The facts in the case, as copied & pasted from the court's written opinion [except for the addition of the footnote and bold text, which is my own handiwork], follows:

  • On December 14, 2007, U.S. Bank filed an unverified mortgage foreclosure complaint naming the Jean-Jacqueses and BAC as defendants.(1) The complaint included one count for foreclosure of the mortgage and a second count for reestablishment of a lost note. U.S. Bank attached a copy of the mortgage it sought to foreclose to the complaint; however, this document identified Fremont Investment and Loan as the "lender" and Mortgage Electronic Registrations Systems, Inc., as the "mortgagee." U.S. Bank also attached an "Adjustable Rate Rider" to the complaint, which also identified Fremont as the "lender."

  • Rather than answering the complaint, BAC responded by filing a motion to dismiss based on U.S. Bank's lack of standing. BAC argued that none of the attachments to the complaint showed that U.S. Bank actually held the note or mortgage, thus giving rise to a question as to whether U.S. Bank actually had standing to foreclose on the mortgage. BAC argued that the complaint should be dismissed based on this lack of standing.

  • U.S. Bank filed a written response to BAC's motion to dismiss. Attached as Exhibit A to this response was an "Assignment of Mortgage." However, the space for the name of the assignee on this "assignment" was blank, and the "assignment" was neither signed nor notarized. Further, U.S. Bank did not attach or file any document that would authenticate this "assignment" or otherwise render it admissible into evidence.

  • For reasons not apparent from the record, BAC did not set its motion to dismiss for hearing. Subsequently, U.S. Bank filed a motion for summary judgment. At the same time, U.S. Bank voluntarily dismissed its count for reestablishment of a lost note, and it filed the "Original Mortgage and Note" with the court. However, neither of these documents identified U.S. Bank as the holder of the note or mortgage in any manner. U.S. Bank did not file the original of the purported "assignment" or any other document to establish that it had standing to foreclose on the note or mortgage.

  • Despite the lack of any admissible evidence that U.S. Bank validly held the note and mortgage, the trial court granted summary judgment of foreclosure in favor of U.S. Bank. BAC now appeals, contending that the summary judgment was improper because U.S. Bank never established its standing to foreclose.

For the rest of the appellate court's opinion, including its ruling reversing the trial judge and its analysis of the Florida law applied in this case, see BAC Funding Consortium Inc. v. Jean-Jacques, et ano., Case #2D08-3553 (February 12, 2010).(2)

Go here for BAC Funding's appellate brief, describing the sloppy, careless conduct of the lender and its assembly line, foreclosure mill attorney in prosecuting this case (available online courtesy of

(1) Listed as attorney for the foreclosing lender in this case is Florida Default Law Group, PL, of Tampa, Florida. This outfit has attained some level of notoriety as an alleged foreclosure mill law firm/"foreclosure factory."

(2) I remind my friends in Florida that, to the extent this ruling constitutes binding precedent in future cases, it is binding not only on the trial courts within the jurisdiction of the 2nd District Court of Appeal, but probably on all trial courts throughout Florida. See Pardo v. State, 596 So. 2d 665 (Fla. 1992), in which the Florida Supreme Court stated:

  • This Court has stated that "the decisions of the district courts of appeal represent the law of Florida unless and until they are overruled by this Court." Stanfill v. State, 384 So. 2d 141, 143 (Fla. 1980). Thus, in the absence of interdistrict conflict, district court decisions bind all Florida trial courts. Weiman v. McHaffie, 470 So. 2d 682, 684 (Fla. 1985). The purpose of this rule was explained by the Fourth District in State v. Hayes:

  • "The District Courts of Appeal are required to follow Supreme Court decisions. As an adjunct to this rule it is logical and necessary in order to preserve stability and predictability in the law that, likewise, trial courts be required to follow the holdings of higher courts--District Courts of Appeal. The proper hierarchy of decisional holdings would demand that in the event the only case on point on a district level is from a district other than the one in which the trial court is located, the trial court be required to follow that decision. Alternatively, if the district court of the district in which the trial court is located has decided the issue, the trial court is bound to follow it. Contrarily, as between District Courts of Appeal, a sister district's opinion is merely persuasive." 333 So. 2d 51, 53 (Fla. 4th DCA 1976) (footnote and citations omitted).

I trust my friends throughout Florida who are appealing rubber-stamped foreclosure judgments in scenarios similar to the one in BAC Funding will try to get some "mileage" out of this ruling.

More On Multiple Hat-Wearing Vice Presidents & Their Role In Residential Mortgage Foreclosure Actions

Recently stumbled upon while floating around in cyberspace is a Motion For Sanction Of Dismissal With Prejudice filed in July, 2009 by legal counsel for a defendant/homeowner in a 2008 mortgage foreclosure action (Indymac Federal Bank FSB v. Israel A. Machado - Case #50-2008 CA 037322) in Palm Beach County, Florida.

The 29-page document features the ostensibly, ever-growing-in-notoriety, multiple corporate hat-wearing vice president Erica A. Johnson-Seck, and her alleged antics in connection with signing documents in foreclosure actions while purporting to be acting as an authorized corporate officer for multiple foreclosing institutions simultaneously. It makes for some interesting reading if you're into this kind of stuff.(1)(2)

For more, see Motion For Sanction Of Dismissal With Prejudice.

Go here for the transcript of the corresponding deposition taken of Ms. Seck in the lawsuit, and go here for links to other posts on Erica Johnson-Seck, all available online courtesy of 4closureFraud - Fighting Foreclosure Fraud by Sharing the Knowledge.

(1) By the way, listed as attorney for the foreclosing lender in this case is Florida Default Law Group, PL, an outfit who has attained some level of notoriety in its own right as an alleged foreclosure mill law firm/"foreclosure factory."

(2) The motion makes reference to two earlier cases in which Ms. Johnson-Seck receives a less-than-honorable mention:

Ohio Appeals Court Gives Reminder On Importance Of "Real Party In Interest" Rule

In a recent ruling by an Ohio Court of Appeals in which it unanimously reversed a trial court's decision to grant what ostensibly was a rubber-stamped summary judgment in a foreclosure action, the three-judge panel gave this reminder of the importance that a foreclosing entity be a "real party in interest" in order to bring the lawsuit (reference to "Moore," below is a reference to the defendant/homeowner):
  • {¶ 21} Civ.R. 17(1) requires that a civil action be prosecuted by the real party in interest. A real party in interest is one who is directly benefitted or injured by the outcome of the case rather than one merely having an interest in the action. Mickey v. Denk, Cuyahoga App. No. 90484, 2008-Ohio-3983, citing State ex. rel. Village of Botkins v. Laws, 69 Ohio St.3d 383, 387, 1994-Ohio-518, 632 N.E.2d 897. The purpose behind the real party in interest rule is “to enable the defendant to avail himself of evidence and defenses that the defendant has against the real party in interest, and to assure him finality of the judgment, and that he will be protected against another suit brought by the real party at interest in the same matter.” Morelli v. Walker, Cuyahoga App. No. 88706, 2007-Ohio-4832, citing Shealy v. Campbell (1985), 20 Ohio St.3d 23, 24, 485 N.E.2d 701.(2)

  • {¶ 22} This action was filed by Sovereign Bank on December 27, 2006, one day after a letter was issued from Flagstar Bank to Moore stating that Flagstar Bank had assigned the loan to Countrywide Mortgage. Another document in the record indicates that on May 23, 2007, “MERS, Mortgage Electronic Registration Systems, Inc., as nominee for Lenders Choice Mortgage LLC (Assignor)” transferred and assigned the note and mortgage to Flagstar Bank, FSB. On this record, genuine issues of material fact exist as to who is the real party in interest and the trial court erred in granting judgment in favor of Flagstar Bank.

For the ruling, see Flagstar Bank, FSB v. Moore, 2010-Ohio-375 (February 5, 2010).

(1) Refers to Rule 17 of the Ohio Rules of Civil Procedure.

(2) For other Ohio appellate court rulings related to this point, see Lender Not Entitled To Foreclosure Judgment Due To Failure To Prove Promissory Note Ownership, Says Ohio Appeals Court.

Federal Judge Refuses To Intervene In Alleged Rubber-Stamping, Rocket Docket System Of Handling F'closures Against "No-Show" Homeowners In C. Florida

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • A federal judge has issued a warning to Florida's homeowners in foreclosure: You'd better fight if you want your rights. U.S. District Judge James Moody threw out a lawsuit that claimed the judicial system in Sarasota and Manatee counties violates the rights of homeowners who do not contest their foreclosure.

  • Two homeowners who filed the lawsuit, both of whom have since lost their houses, cited a study that found lenders used incorrect or fraudulent paperwork in three of every four foreclosure cases. The lawsuit called for a halt to all foreclosures until judges could verify all documents filed by lenders, to keep property from being taken by fraud or mistake.

  • But Moody, in his order throwing out the case, wrote that Florida's homeowners must defend their rights or raise any claims in the state foreclosure actions. "Though participating in the state court proceedings may be personally difficult for them, the opportunity is available," Moody wrote of the plaintiffs.

For more, see Judge: Homeowners must fight for rights.

(1) The Florida Supreme Court recently enacted new procedural rules designed to help Florida's judicial system better cope with the flood of foreclosures. See Fla. High Court Enacts Procedural Rules To Apply In Residential F'closre Mediations; Seeks To Tamp Down Use Of "Lost Note" Affidavits, "Sewer Service."

Monday, February 15, 2010

Hawaii Feds Win Conviction Of Man Who Used Straw Buyers In Sale Leaseback Foreclosure Rescue Ripoffs; Pocketed $430K+ In Two Equity Stripping Scams

In Honolulu, Hawaii, the Star Bulletin reports:
  • A Nevada businessman was convicted Wednesday of 22 felony counts, for swindling banks and two struggling homeowners on Oahu out of their homes and loan proceeds. A federal jury convicted John Gilbert Mendoza, 58, on one count of conspiracy, 10 counts of mail and wire fraud, two counts of loan fraud, six counts of money laundering and three counts of failure to file a tax return,(1) the U.S. Attorney's Office announced [last] week. Five others have pleaded guilty in connection with the scheme and are awaiting sentencing.

  • U.S. Attorney Florence Nakakuni said the evidence showed Mendoza, president of a Nevada corporation with bank accounts in Hawaii, had befriended Hawaii homeowners facing foreclosure. He told them he had a plan to stop foreclosure proceedings that would allow them to keep their homes.

  • But instead, Mendoza organized the sale of the homes to third-party straw buyers, who took out loans in their names and used falsified information concerning income, who was going to live in the home and who would make monthly payments. After obtaining the loans, Mendoza deposited the proceeds totaling more than $431,000 into his own accounts. When the loans were defaulted on, the properties were foreclosed on and sold.

For the story, see Swindler is convicted of 22 felony counts.

For an earlier post announcing the indictments in this case, see Hawaii Feds Indict Five In Alleged Straw Buyer Foreclosure Rescue Scam.

(1) The conviction on the Federal tax charges should serve as a reminder that, if you can't bag the perpetrators of these scams with proof beyond a reasonable doubt on the substantive criminal charges, you can generally count on them to fail to file their tax returns and pay the income tax on the illegal profits thereon. Accordingly, you can nail them for that, the same way the Feds put alleged gangster Al Capone out of commission.

Role Played By Unlicensed "Broker" In Foreclosure Rescue Ripoff Violated State R/E License Law, Enough To Sink Sale Leaseback, Says C. Fla. Civil Jury

In Sarasota, Florida, the St. Petersburg Times reports:
  • In 2005, Thomas Cook told 68-year-old Yolanda Rodriguez that the St. Petersburg company he worked for could help save her home from foreclosure. Instead, Garco Inc. got the deed to the house, and Rodriguez, who was evicted, lost as much as $200,000 in equity.(1) But on Thursday, a Sarasota County jury found that the transaction that cost Rodriguez her home was invalid because Cook, acting as a broker on the deal, did not have a Florida real estate license.

  • The verdict paves the way for Rodriguez to get back her 2,300-square-foot Englewood pool home. It could also provide legal ammunition for others who have lost their houses to "foreclosure rescue" companies like Garco and its owner, Gideon Rechnitz,(2) whose real estate license was revoked for alleged fraud in 1990. "A licensed real estate agent would not have been allowed to do anything Thomas Cook did," says Elizabeth Boyle, a Gulfcoast Legal Services(3) attorney who represented Rodriguez.


  • Rodriguez's case is thought to be the first in which a jury verdict hinged on whether someone involved in property transactions for a foreclosure rescue company is subject to the Florida Real Estate License Act.(4) But it is not the first case against Rechnitz and Cook to go to trial. In October, another Sarasota jury awarded $93,467 to Wanda Costa, who claimed the men scammed her out of her Port Charlotte home in violation of Florida's Deceptive and Unfair Trade Practices Act. That verdict is under appeal.

For more, see Second jury finds fault with controversial foreclosure rescue deals.

(1) Reportedly, Rodriguez, now 72, said she stopped paying rent because foreclosure rescue operator Gideon Rechnitz failed to make promised repairs. He evicted her and her deaf brother in 2006 and had all of their possessions, including family photos, loaded into portable storage units, the story states. Rodriguez reportedly said she was unable to retrieve the items because they were stored in Rechnitz's name. Everything was sold at public auction, and brother and sister spent weeks in a Salvation Army shelter and cheap hotels before landing in a small apartment with donated furniture, according to the report.

(2) Rechnitz, not unknown to the reporters at the St.Petersburg Times, has been the subject of several Times articles.

(3) Gulfcoast Legal Services is a non-profit law firm providing free legal aid to income eligible residents of the greater Tampa Bay, Florida area, having offices in Pinellas, Manatee, Sarasota and Hillsborough counties; and is dedicated to providing comprehensive, personal legal advocacy, counseling and education to vulnerable individuals and families.

(4) Florida law defines a broker as someone paid for acting on behalf of another person in real estate transactions. Reportedly, in a sworn deposition before trial, Cook called himself "a broker" and acknowledged he had been paid $1,975 for his dealings with Rodriguez. By finding for Rodriguez on the licensing issue, the verdict voided the entire transaction and set the stage for a March hearing in which Circuit Judge Lee Haworth could return the deed to her.

Peddling Bogus Sale Leasebacks To Homeowners In Danger Of Foreclosure Among Criminal Allegations Facing Missouri Pair, Say St. Louis Feds

In St. Louis, Missouri, the St. Louis Business Journal reports:
  • A St. Charles developer and mortgage broker and a Lake St. Louis woman have been indicted on multiple mortgage fraud charges. Jeremy Beadle, 37, of St. Charles, was president of Network Ventures, a business engaged in mortgage processing and real estate brokerage, and also the rehabilitation of real estate properties in need of repairs. Beadle also operated and managed Premier Mortgage Funding, a mortgage brokerage company, owned by Network Ventures. Rebecca Domecillo, 48, of Lake St. Louis, was an officer of Network Ventures and also participated in the operations and management of Premier Mortgage Funding.

Among other allegations:

  • [B]eadle offered to purchase real estate properties from individuals who needed to refinance the mortgages on their residences because they were in danger of foreclosure. Beadle offered to buy these properties for a price in excess of the balance of the existing mortgage and told the sellers they could rent the properties and he would apply the rent payment to the mortgage. But Beadle failed to make the mortgage payments as agreed, and these properties were foreclosed, resulting in losses to the mortgage lenders, according to the indictment.

For more, see St. Charles developer indicted on mortgage fraud charges.

Fla. High Court Enacts Procedural Rules To Apply In Residential F'closre Mediations; Seeks To Tamp Down Use Of "Lost Note" Affidavits, "Sewer Service"

In Tallahassee, Florida, The Associated Press reports:
  • Lenders will be required to pick up the tab for investigating and verifying ownership and then try mediation before foreclosing Florida home mortgages under new rules approved Thursday by the Florida Supreme Court.(1) The rules are designed to help Florida's judicial system better cope with a flood of foreclosures. They follow a December administrative order by Chief Justice Peggy telling local judges to adopt a uniform mediation program.(2)


  • The rules and corresponding legal forms were proposed by a pair of Florida Bar panels. "They found that many cases were being filed by plaintiffs that didn't' own the mortgages any more," said Miami lawyer Mark Romance, who chairs the Civil Procedures Rules Committee. Romance said other cases were being filed against people who no longer owned the homes.

For the story, see Justices Adopt Fla. Foreclosure Mediation Rules (Supreme Court requires mediation to help cope with flood of Florida foreclosure cases).

(1) The court's new rules address the ever-proliferating use of "lost note" affidavits by foreclosing lenders' attorneys, and "sewer service" engaged in by process servers delivering the lawsuits to homeowners. See Case No. SC09-1460 and Case No. SC09-1579 (consolidated): In Re: Amendments To The Florida Rules Of Civil Procedure, pp.3-6:

  • First, rule 1.110(b) is amended to require verification of mortgage foreclosure complaints involving residential real property. The primary purposes of this amendment are (a) to provide incentive for the plaintiff to appropriately investigate and verify its ownership of the note or right to enforce the note and ensure that the allegations in the complaint are accurate; (b) to conserve judicial resources that are currently being wasted on inappropriately pleaded ―lost note counts and inconsistent allegations; (c) to prevent the wasting of judicial resources and harm to defendants resulting from suits brought by plaintiffs not entitled to enforce the note; and (d) to give trial courts greater authority to sanction plaintiffs who make false allegations.

  • Next, the Task Force proposed a new form Affidavit of Diligent Search and Inquiry. In its petition, the Task Force explained that many foreclosure cases are served by publication. The new form is meant to help standardize affidavits of diligent search and inquiry and provide information to the court regarding the methods used to attempt to locate and serve the defendant. We adopt this form as new form 1.924, with several modifications. [...]

(2) The December, 2009 court order adopted last August's recommendations by the court’s Task Force on Residential Mortgage Foreclosure Cases.

Sunday, February 14, 2010

Ohio Appeals Court Rejects "Rubber Stamp Method" In Adjudicating Foreclosure; "Servicer Switch" Caused Payment Posting Screw-Up, Says Homeowner

The following facts have been extracted from a recent ruling of an Ohio appeals court involving a residential foreclosure action:
  • Flagstar Bank files a complaint commencing a foreclosure action against homeowners Moore and Braxton, alleging a default in the loan payments.

  • Homeowners file an answer to the complaint, asserting the following affirmative defenses: (1) failure to state a claim; (2) plaintiff was not the real party in interest; and (3) payment.

  • In connection with the "payment" defense, Moore averred in court papers to have made his monthly payments to Flagstar Bank and continued to do so through December 2006.

  • Moore averred in court papers that after he sent his December 2006 payment to Flagstar Bank, he received a letter dated December 26, 2006, advising that the note had been assigned to Countrywide Mortgage and was no longer serviced by Flagstar Bank; Moore's December payment was returned.

  • According to Moore, at no time prior to the December 26 letter was he advised that the note had been assigned and/or that he was to direct payment other than to Flagstar Bank.

  • Moore further averred in court papers that after receiving the December 26 letter, he called Flagstar Bank and Countrywide Mortgage and both claimed the note was in default and that no payment on it would be accepted.

  • According to Moore, none of the payments made on the note from August 2006 through November 2006 were returned to him. Moore submitted copies of the checks (and postage receipts) sent to Flagstar Bank from June 2006 through November 2006.

  • Moore also averred in court papers that he never received notice of being in default on the note.

  • Flagstar Bank did not file a reply brief in the trial court addressing any of Moore's contentions.

Despite the bank's failure to reply to any the homeowners' contentions, the magistrate found that no genuine issues of material fact existed and the bank was entitled to judgment as a matter of law. Moore and Braxton filed objections to the magistrate's decision. The trial court overruled the objections and rubber-stamped the bank's motion for summary judgment.

On appeal, Moore and Braxton contended that the trial court erred in granting the bank's summary judgment motion. The bank did not filed a brief on appeal, and, as noted above, did not file a reply brief in the trial court.

The Ohio appeals court reversed the summary judgment granted in favor of the bank. In reaching its decision, the court stated:

  • The party moving for summary judgment [ie. the bank] bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Dresher v. Burt (1996), 75 Ohio St.3d 280, 292-293, 662 N.E.2d 264. Once the moving party satisfies its burden, the nonmoving party [ie. the homeowner] "may not rest upon the mere allegations or denials of the party's pleadings, but the party's response, by affidavit or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Mootispaw v. Eckstein (1996), 76 Ohio St.3d 383, 385, 667 N.E.2d 1197; Civ.R. 56(E). Doubts must be resolved in favor of the nonmoving party. Murphy v. Reynoldsburg (1992), 65 Ohio St.3d 356, 358-59, 604 N.E.2d 138.

Because of the bank's failure to respond to any of the homeowners' claims set forth in his filed affidavit, the Ohio appeals court found that the bank failed to meet its burden of showing that there was no genuine issue of material fact as to who is the real party in interest, the claimed default, and as to whether the bank provided Moore a notice of being in default. Accordingly, summary judgment was deemed inappropriate.(1)

For the court ruling, see Flagstar Bank, FSB v. Moore, 2010-Ohio-375 (February 5, 2010).

(1) Fortunately for Moore, he was in a position to pursue an appeal of the trial court's ruling, an option few homeowners facing foreclosure are in a financial position to avail themselves of. It wouldn't surprise me if the trial judge (and the magistrate) felt, in the back of their minds, that the homeowner was not in a position to appeal their dubious ruling, thereby allowing them to simply "rubber-stamp" the judgment and "keep the foreclosure 'rocket docket' conveyor belt moving forward."

This type of rubber-stamping conduct on the part of some in the judiciary is, I suspect, what New York judge Timothy J. Walker had in mind when, in his recent ruling in Deutsche Bank Natl. Trust Co. v McRae, 2010 NY Slip Op 20020 [Allegany County, January 25, 2010], made this observation expressing his concern for unrepresented homeowners in foreclosure actions:

  • For the unrepresented homeowner, the issues of standing and real party in interest status of the foreclosing party are never considered. Without such scrutiny, there is a risk that the courts will give the judicial "seal of approval" to foreclosures against unrepresented homeowners who have little, if any, understanding of these issues, much less the legal significance thereof. To quote my colleague in Kings County, "[a]llowing this case to proceed on behalf of a plaintiff without standing at the commencement of the action would [also] open the door to potential fraud and place in jeopardy the integrity of title to the property to be foreclosed." [Citigroup Global Markets Realty Corp. v. Bowling, 25 Misc 3d 1244; 2009 NY Slip OP 52567U (Kings County, December 18, 2009)].

Even homeowners who have legal representation may be facing impediments in defending themselves as a result of some judges adopting questionable practices when hearing foreclosures. One Central Florida attorney writes in his blog that, overwhelmed by their caseloads, two judges in Pinellas County, Florida have been said to have adopted practices that, in my view, are consistent with use of the "rubber stamp method" of adjudicating foreclosures (see Matt Weidner Blog: An Anarchist’s Strategy To Dismiss Every Foreclosure In Florida):

  • Things have gotten so bad for the judges that I’m told at least two Circuit Court Judges in Pinellas County (Linda Allan and Douglas Baird) have announced they were no longer going to hear Motions to Dismiss filed by Defendants in foreclosure cases, but were going to start just denying them across the board without even having a hearing on the matter. Now that’s one way to deal with the crisis. It’s an unconstitutional, unfair and totally biased approach that completely ignores the law and the rights of the citizens these judges took an oath to serve, but it is one way to deal with the crisis. (Look for Appeals To Come If This Practice Really Begins to Take Hold.)

Connecticut Real Estate Agent Cops Plea In Short Sale Scam

In Bridgeport, Connecticut, The Bridgeport reports:
  • A Bridgeport man has pleaded guilty to one count of bank fraud stemming from his involvement in a “short sale”(1) mortgage fraud scheme. Sergio Natera, 35, a licensed real estate agent who lives in Bridgeport, admitted his involvement in the crime in Bridgeport federal court on Feb. 11.


  • According to court documents and statements made in court, Natera worked with another real estate agent to defraud Regions Bank, which held two mortgages on a residential property in Bridgeport. On Dec. 5, 2007, the other real estate agent, who was a listing agent for the property, received an offer to purchase the property for a price of $132,500, according to a release from the U.S. Attorney’s Office.

  • However, Natera subsequently communicated to Regions Bank that the highest offer to purchase the property was for $102,375 by BOS Asset Management LLC, an entity that Natera controlled, the release said. The bank reportedly agreed to a short sale of the property for the lower price, and released its mortgages on the property. On June 9, 2008, Natera, through BOS Asset Management, sold the property for $132,500 to the original bidder on the property, according to the release.

For more, see Bridgeport resident pleads guilty to mortgage fraud.

For earlier post on this case, see 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.

(1) A short sale transaction involves a mortgage holder or lender entering into an agreement to release a mortgage or lien on real property in exchange for payment of less than the total amount owed on the underlying debt.

New Hampshire Man Faces Charges Of Illegally Pocketing Upfornt Fees, Failing To Make Good On Promises In Separate Loan Modification, Refinance Scams

From the New Hampshire Department of Justice:
  • [Eric W.] Eliason [aka Ricky Masci], 30, of Tamworth New Hampshire, is charged with crimes that occurred in connection with his business, Deaf and Hard of Hearing Mortgage Consultants.(1) The first set of complaints allege that the defendant took up-front money to assist hard of hearing victims in completing a loan modification of their home mortgage. The complaints allege that numerous representations were made to the homeowners that the modification was in process, and then that the modification was denied. It is further alleged that the defendant had never contacted the mortgage company to perform a modification. It is also alleged that Eliason intended to take advantage of the victim’s physical condition that impaired the victim’s ability to manage their property or financial resources or to protect their rights or interests.

  • A second set of complaints allege that the defendant attempted to broker a re-finance of a home loan for another hard of hearing couple. It is alleged that he obtained up-front fees with the promise that in the event the re-finance was not completed, money would be refunded. No loan was obtained, and no money was refunded. Eliason was not licensed to conduct any of these transactions.

For the NHDOJ press release, see Arrest for Class A Felony Theft with extended term of imprisonment, Class B Felony Mortgage Fraud, Class A Misdemeanor Mortgage Fraud.

(1) Eliason faces charges of Theft by Deception, Failure to Obtain a Debt Adjustment License, Untrue Statement and Fraudulent Business Practice; and Failure to Obtain a Mortgage Originators License and Untrue Statements, according to the NHDOJ press release.

Signing Over Deed & Handing Over Keys To Distressed NYC Rental Complex Not As Easy As It Sounds; Proposed Transfer Estimated To Cost $90M In Fees

In New York City, Bloomberg reports:
  • Tishman Speyer Properties LP and BlackRock Inc. haven’t handed Manhattan’s biggest apartment complex to creditors as they pledged two weeks ago, in part because of questions over payment of about $90 million in taxes. The companies said Jan. 25 they would cede control of Stuyvesant Town-Peter Cooper Village to lenders after missing a payment on the $3 billion mortgage.

  • Even in foreclosure, any property transfer in Manhattan requires payment of city and state taxes, and Tishman is negotiating with CWCapital, the special servicer for the senior debt, over who must pay them, said Rafael Cestero, New York City’s commissioner of Housing Preservation and Development. “The reality is they can’t just turn back the keys,” Cestero said in an interview. “There are some impediments.”

  • Under New York law, the party that owns the property and is getting rid of it must pay the taxes on the transfer, according to Owen Stone, a spokesman for the New York City Department of Finance. Otherwise, the burden shifts to the receiver of the property, he said. “CW doesn’t want to pay the $100 million so they’re going to have to negotiate this,” said Cestero, estimating the taxes. “They have not initiated foreclosure proceedings.” Transfer taxes for the city and the state equal 3.025 percent of the “consideration,” or the price of the real property, said Joshua Stein, a partner in the real estate practice group of law firm Latham & Watkins LLP in New York.

For more, see Stuyvesant Town Ownership Hinges on $90 Million Tax.