Saturday, March 13, 2010

Inspectors Give Dozens Of High-Rent NYC Tenants The Boot After Discovery Of 60 Resident'l Units Carved Out Of 16-Story "Deathtrap" Sans Proper Permits

In New York City, the New York Post reports:
  • Dozens of families who thought they found luxury housing in a Manhattan landmark were homeless [this week] after city inspectors ordered them out of what one source described as a "deathtrap" that was illegally converted from office space. Inspectors from the Buildings and Fire departments slapped a vacate order on the 16-story landmark building at 1182 Broadway Tuesday after getting a tip that the office building was turned into an apartment building without any permits.
  • But inspectors also found that the building, which can be legally used only for offices, was converted without essential fire-safety systems, including sprinklers, alarms and a second stairway for residents to use in emergencies. "You've got one staircase in this building and no sprinkler system. If there's a fire, what's going to happen? This was a deathtrap," said a source familiar with the city's investigation, which was prompted by a tip phoned in late Monday.
  • The owners, who carved 60 apartments out of the top 13 floors, never received city permits to perform the renovations, or to convert the building to residential. Tenants, many with young children, were devastated by the sudden rush from their homes. [...] The building is owned by Mocal Enterprises, whose principals include Calvin Haddad and his daughter, Dana Haddad, who lives in the building, where monthly rents range from $2,900 to $5,000 for the one- and two-bedroom units.
For the story, see Deluxe tenants are 'evict'ims (Tossed from 'deathtrap' apts.). subdivided

Ex-Real Estate Agent Bagged For Allegedly Scamming Rent Deposits From Would-Be Tenants For Vacant HUD Homes; Used Craigslist, Fake Name, Say Cops

In Indianapolis, Indiana, reports:
  • A former real estate agent conned at least eight people by renting them properties actually owned by a federal agency and then running off with their deposits, prosecutors said. Authorities in three Indiana counties accuse Richard Swoveland, 38, of scamming people by persuading them to rent empty homes the U.S. Department of Housing and Urban Development was in the process of selling.

  • Investigators say the Greenfield man advertised the homes on the Craigslist Web site under a fake name. He allegedly showed prospective renters the homes using a HUD master key. HUD is investigating how he obtained the key, but officials suspect he got it while he was a licensed agent. Swoveland was a licensed real estate agent in Indiana until 2008. Swoveland, who is being held in the Hamilton County Jail, has pleaded guilty to a felony theft charge in that county and faces other charges in Hancock and Marion counties.

For more, see Greenfield man accused of housing scam.

Duo Facing Theft By False Pretenses Charge Accused Of Leasing Vacant Homes In Some Stage Of Foreclosure To Unwitting Tenants, Pocketing Deposits, Rent

In Barstow, California, the Desert Dispatch reports:
  • Barstow Police have arrested two people in connection with recent housing fraud involving foreclosed or pre-forclosure homes that were rented out to unsuspecting tenants. According to police reports, a Barstow code enforcement officer was checking out a vacant, pre-foreclosed home in early February and found tenants living inside the home. The tenants said they were renting from Evelyn Thompson, 50, who was arrested in Colton, Calif. on Wednesday and charged with theft by false pretenses.

  • Edward Tafoya, 52, — who police say assisted Thompson — was also arrested and charged with theft by false pretenses. Police say both are Barstow-area residents.

  • Over the course of the police investigation, additional renters were found to be in the same situation and all were renting from Thompson, who allegedly would pose as a property manager and collect deposit fees and subsequent rent.

For more, see Agent charged with defrauding renters (Police: woman posed as property manager, rented foreclosed homes).

Long Island Man Faces Charges In Alleged $140K+ Home Improvement Ripoff Of 74-Year Old Queens Woman

From the Office of the Queens County, New York District Attorney:
  • Queens District Attorney Richard A. Brown [] announced that a Long Island contractor has been charged with bilking a 74-year-old Queens homeowner out of more than $140,000 that she paid him over two years ago for an extension to her residence that he never started.(1)


  • District Attorney Brown said that, according to the criminal charges, 74-year-old Lilian Miller retained [Ron] Scott to build an extension to her house located [...] in the St. Albans section of Queens on August 4, 2007. At the request of Scott, it is alleged that Ms. Miller gave him that day a bank check in the amount of $138,500 (from a line of credit she obtained against the equity in her home) and a personal check totaling $5,000. [...] It is further alleged that Scott failed to return or perform any work on Ms. Miller’s residence and that despite numerous attempts by Ms. Miller to contact him via mail, telephone calls and emails to recover her funds, she was unsuccessful.

For the entire Queens DA press release, see Long Island Contractor Charged With Stealing $140,000 from 74-Year-Old St. Albans' Woman.

(1) The defendant, identified as Ron Scott, 68, of West Islip, Long Island, faces a three-count criminal complaint charging him with second-degree grand larceny, second-degree criminal possession of stolen property and a violation of New York State Lien Law 79-A (misappropriation of funds of trust). If convicted, he faces up to 15 years in prison.

Texas Woman Hounded By Zombie Bill Collector Over Debt Belonging To Another Belts Back By Filing Federal Lawsuit

In Tyler, Texas, The Southeast Texas Record reports:
  • A Tyler woman is suing a credit collection agency for repeatedly calling her about a debt that is not hers. Seeking $1,000 for each telephone call, Brandy Samuel filed suit against ER Solutions Inc. and Does 1-10 on Feb. 23 in the Tyler Division of the Eastern District of Texas.

  • According to the original complaint, Samuel claims the debt does not belong to her yet the collection agency continues to call her between 10 and 20 times per day. She alleges the defendants are rude and abusive, constantly harassing her and telling her to take over the debt. Samuel claims she has demanded that the creditor stop calling her about someone else's debt but the "defendants continued in their harassing tactics."

  • The plaintiff alleges the telephone calls violate the Fair Debt Collection Practices Act, the Texas Debt Collection Act and are an invasion of privacy. Samuel is asking the judge to award $1,000 for each violation of the Fair Debt Collection Practices Act, costs of litigation, punitive damages and actual damages including humiliation, anger, anxiety, fear, frustration, embarrassment and emotional distress.

Source: Texas woman sues debt collector over harassing phone calls. zombie debt

Friday, March 12, 2010

Chapter 7 Proceeding No Shield For Operators Of Alleged Idaho-Based Loan Modification Racket, Says Bankruptcy Trustee Chasing Nine Officers For $1.3M+

In Coeur d'Alene, Idaho, The Spokesman Review reports:
  • The trustee for a bankrupt Coeur d’Alene mortgage modification company is suing nine former officers for as much as $1.3 million he says they did not earn. Apply 2 Save Inc. closed its doors last May, and filed for liquidation in June. The company allegedly ripped off hundreds of consumers who paid as much as $1,500 for help staving off foreclosure.

  • Few got the help they paid for. Many lost their homes. Dozens of employees, many with debt issues of their own, were not paid for their last weeks of work. “The whole thing was a complete sham from start to finish,” said Ford Elsaesser, the Sandpoint attorney leading the effort to sort out Apply 2 Save’s affairs.

  • He estimated the company received $9 million in revenues during its one-year existence. Slightly more than $1.3 million went to nine officers, some unqualified for the positions they held, or were overpaid for the work they did, and all of whom he said did nothing to protect the consumers they were supposed to be assisting.

  • Elsaesser Tuesday asked the U.S. Bankruptcy Court in Coeur d’Alene to order the officials to account for the money they received, surrender money obtained improperly, and to impose liens to prevent “unjust enrichment.”(1)

Source: Bankrupt company’s officers face suits (Trustee calls Apply 2 Save ‘sham,’ seeks repayments).

(1) Accoring to the story, the defendants and the maximum sums they allegedly owe are:

  • Steven Lux, senior vice president for sales, $331,647;
  • Russell Ratshin, senior vice president for technology, $185,953;
  • Jesse Daly, creative director, $170,460;
  • Colleen Damiano, senior vice president for human resources, $158,147;
  • Marc Bonanni, legal counsel, $157,137;
  • Joe Doyle, senior vice president of marketing and business development, $137,030;
  • Richard Dawley, director of retail, $79,487;
  • David Shaidell, network administrator,$71,608; and
  • Enrique Garibay, vice president of software development, $69,913.

Reportedly, former President Derek Oberholtzer, who filed a separate bankruptcy, was not among those sued, but trustee Elsaesser said more litigation may be filed.

NYC Couple Charged With Using Forged Certified Bank Checks To Fleece Dozen Property Owners Out Of $16M+ In Real Estate

From the Office of the Queens County District Attorney:
  • Queens District Attorney Richard A. Brown [] announced that a Flushing man who held himself out as an attorney, accountant and banker and his female accomplice have been charged with stealing more than $16 million from a dozen individuals selling real estate and other assets.

  • District Attorney Brown said, “The defendants are accused of conning twelve property owners out of more than $16 million in assets – including properties located in Oyster Bay, Long Island, Pennsylvania, Texas and California – during seven closings held last Saturday in Queens. In some instances, the defendants are alleged to have promised to double any money the victims brought to the closings, thereby duping their victims out of $310,000 in cash, as well as diamonds, gold and mink coats.”

For the Queens DA press release, see Flushing Couple's Charged With Fleecing 12 Individuals Out Of $16 Million In Real Estate, Cars, Cash, And Other Valuables.

(1) The District Attorney identified the defendants as Matthew McEntee, 50, and Marina M. Mora, 45, both of 157-33 Rose Avenue in Flushing, Queens. The defendants, who are presently awaiting arraignment in Queens Criminal Court, are charged with first-, second-, third- and fourth-degree grand larceny, second degree criminal possession of stolen property, second-degree criminal possession of a forged instrument and first-degree scheme to defraud. If convicted, they each face up to 25 years in prison.

"Walkaway" Homeowners Stay On Lenders' Radar For Unpaid Debt Balances

In Detroit, Michigan, the Detroit Free Press reports:
  • While foreclosures and loan modifications have made it tough for overwhelmed banks to go after walkaway borrowers, there's evidence they are starting to crack down. Lenders are hiring collection agencies. They also are getting deficiency judgments -- court orders that allow banks to collect on mortgage balances. Once an order is in place, lenders can garnish wages, tap bank accounts, seize tax refunds and put liens on other assets to satisfy the debt. These judgments also show up on credit reports. If the lender sells the home after a foreclosure for less than what is owed on the loan, the bank can come after the borrower for the deficiency balance.

  • Many states give mortgage holders as long as five years to seek a deficiency judgment. If a judgment is granted, the bank gets up to 20 years to collect and the option to renew for another 20 years if the debt isn't paid. In Michigan, lenders have six years from the date the last payment was due -- or 36 years on a 30-year mortgage, said Southfield real estate attorney John E. Jacobs.

  • "A lot of people do think ... they don't owe anything on the mortgage anymore," said Michael Greiner, a Warren attorney who specializes in personal bankruptcy. "That's not right. Banks try to collect on these mortgages." [...] "In a couple of years down the road, you will see a lot more of the collections on these debts," Greiner said.

For the story, see Mortgage, tax bills ultimately come back to haunt walkaways.

Possession Of Another Unoccupied House In Foreclosure Swiped In Home Hijacking Scam Disguised As Legitimate "Adverse Possession" Claim

In Puyallup, Washington, KOMO-TV Channel 4 reports:
  • A young couple facing foreclosure says their house was hijacked and rented to strangers without their consent. Eric and Ashlie Bogue found themselves locked out of their own house. "I still own this property. They changed the locks on the door. I can't even get into my own house," said Eric Bogue.

  • The Bogues got behind in their payments. The bank agreed to a short sale. So they moved out to keep the house ready to show at a moment's notice. But when they went to check on the house on Saturday, they saw an entire family moving in with their beds, their clothes and all of the kids' toys, including the son's baseball card collection.


  • The Bogues tracked down paperwork that traces back to one rental agent, Washington Resolution Trust. Peter Dodsondance,(1) the man behind the company, says there's nothing funny going on. "No I'm not trying to do anything shady. What I'm trying to do is save our communities," he said. Dodsondance said he's acting as the custodian of the Bogues' home, which the couple abandoned.

For more, see Couple returns home, finds family of strangers living inside.

See also, KING-TV Channel 5: Puyallup couple says squatters trying to take over their home:

  • The new occupants told [the Bogues] they were making a claim to the house because it had been abandoned. "They told us they were renting it, and that they were doing adverse possession on the property," said Bogue. [...] We showed the adverse possession claims filed on the Bogues' home to a real estate attorney. "What they amount to is some stranger coming in and recording something that looks legal and using that to claim the property. These are not functionally any different than a forged deed," said Gerald Robison. Robison says "adverse possession" claims are being made all over the country and are even promoted on the Internet and in books as perfectly legal.

(1) According to other stories, Dodsondance reportedly:

  • pleaded guilty to felony theft for taking money from an elderly woman in a real estate transaction in 2007,
  • goes by the names Peter T. Dodsondance, Peter T. Dance, aliases that appeared in a trail of courthouse records in both Pierce and King counties,
  • has used seven different social security numbers, including that of a dead man, according to detectives looking into the case,
  • appears to do property managing under a number of different titles: United Plus Property Management, CW & Jones Property Management, Washington Pacific NW Trustee Service, Inc. and a nonprofit, the DodsonDance Foundation, among others.


Unsettled State Income Tax Consequences Of Debt Forgiveness On Short Sales, Foreclosures, Loan Mods Leave Some California Residents In Limbo

In Sacramento, California, The Sacramento Bee reports:
  • Accountants say rising numbers of California taxpayers who did short sales or received loan modifications in 2009 now fear they will be walloped anew by a cash-starved state government intent on taxing their forgiven debt. It's impossible to ease the fears or specifically answer many questions, these accountants say.

  • "We've had quite a few clients fall into that category," said Jennifer Neronde, office manager at Rocklin-based Cramer and Associates CPA. Uncertainty reigns with less than six weeks before the April 15 filing deadline because the forgiven debt question has gotten caught up in a larger tussle over business taxes between the Legislature and Gov. Arnold Schwarzenegger.

For more, see California tax law unsettled on home short sale.

Thursday, March 11, 2010

Minnesota Man Accused Of Sale Leaseback, Foreclosure Rescue Ripoffs Cops Plea To Money Laundering, Tax Dodging Charges; 50+ Victims Clipped For $2.46M

In Minneapolis, Minnesota, the Star Tribune reports:
  • When Timothy Beliveau appeared in federal court Tuesday to plead guilty to money laundering and tax evasion charges,(1) he didn't mention the people who allegedly lost their home equity in his "foreclosure rescue" plan, or the Northwest Airlines pilots who unwittingly helped fund the fraud scheme.(2) Instead, Beliveau, 42, explained to U.S. District Judge James Rosenbaum that he had laundered money by commingling his investors' money with his own, and then using the money to buy luxuries for himself.


  • Six pilots and one flight attendant told the Star Tribune in 2007 that they had sunk more than $1.5 million into two of the Mound man's real estate ventures. Some took out second mortgages on their homes and raided savings for the cash, hoping to offset pending salary cuts. They said they believed their money would be used to help people who were struggling to keep paying for their homes.

  • People like Telsche Paulson, 87, who was trying to hang on to her Minneapolis duplex after her husband died and her downstairs tenants moved out. Beliveau's company sent her a letter offering to save her home from foreclosure. One of the investors bought the property and sold it to one of Beliveau's relatives. But Paulson ultimately lost her home and moved to Farmington. She received $116,972 from a state fund for victims of unscrupulous real estate professionals.(3) Beliveau's plea agreement says the fraud he committed resulted in losses of $2.46 million for more than 50 victims.

For more, see Equity skimmer admits to crimes (A mortgage company owner told a court he's guilty of money laundering and tax charges).

For the U.S. Attorney press release, see Mound man pleads guilty to charges in connection with real estate fraud scheme.

(1) For the indictment, see U.S. v. Beliveau.

(2) See NWA pilots say they were misled in foreclosure venture (A Minnesota couple's investment and real-estate programs are under federal investigation).

(3) See State Recovery Fund To Cough Up $116K+ To Compensate Elderly Victim Of Bogus Sale Leaseback Equity Stripping Scam Involving Licensed Real Estate Agent.

Maryland Feds Continue "Money Store" Sale Leaseback, Equity Stripping, F'closure Rescue Racket Prosecution; Nail Loan Officer With 11-Count Indictment

From the Office of the U.S. Attorney (Greenbelt, Maryland):
  • A federal grand jury has indicted Rolando Alonzo Cousins, a/k/a “Junior,” age 31, of Bowie, Maryland, for conspiracy to commit mail fraud, mail fraud, and money laundering, in connection with a massive mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, but left them homeless and with no equity. [...] According to the 11-count indictment, Cousins was a Senior Loan Officer with the Metropolitan Money Store (MMS), located in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners.(1)

For the entire press release, see Senior Loan Officer with Metropolitan Money Store Indicted in Mortgage Fraud Scheme.

(1) According to the press release, the indictment alleges that from September 2004 through June, 2007, Cousins, Joy Jackson, Jennifer McCall, and others, operating through several companies, including the Metropolitan Money Store, fraudulently promised to help homeowners avoid foreclosure, keep their homes, and repair their damaged credit by directing the homeowners to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a one-year period, during which time the defendants would help the homeowners obtain more favorable mortgages, improve their credit rating and eventually return title to their homes to them. Cousins, Jackson, McCall, and others told the homeowners that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. In fact, the indictment alleges that Cousins, Jackson, McCall, and others paid approximately $10,000 to each of the straw buyers to participate in the scheme; fraudulently bolstered the credit of the straw buyers so they could qualify for more favorable mortgages; obtained fraudulently inflated loans on the properties in the straw buyers names; served as straw buyers themselves; stripped away the bulk of the homeowners equity proceeds and converted that money to their own personal use; and stopped making the mortgage payments on the homes, resulting in the homes being foreclosed upon.

Joy Jackson and Jennifer McCall pleaded guilty to their role in the scheme and were sentenced to 151 months in prison and 135 months in prison, respectively. Nine other co-conspirators also pleaded guilty and were sentenced, according to the press release.

Lender, Loan Servicer Committed Deceptive Trade Practice By Threatening Foreclosure On Homeowner In Full Compliance With Loan Mod Agreement, Says Suit

In Jefferson County, Texas, The Southeast Texas Record reports:
  • A woman has filed suit against a loan servicing agency and a mortgage company after she claims they have threatened to foreclose on her home. Lisa D. Perkins claims she owns a home at [...] in Port Arthur. Defendant Mortgage Electronic Registration Systems currently owns the mortgage on the home and defendant Litton Loan Servicing is the mortgage servicer for Mortgage Electronic, according to the complaint filed Feb. 17 in Jefferson County District Court.

  • On Aug. 1, 2009, Perkins entered into a loan workout with Litton. Under the plan, Litton promised to modify Perkins' mortgage as long as she complied with all terms of the plan, the suit states. Perkins has complied with all the plan's terms, yet Litton still notified her of its intent to foreclose on her home on March 2, the complaint says. "Plaintiff relied on these misrepresentations by Defendants to her detriment," the suit states.

  • By foreclosing on her home, Perkins claims Litton and Mortgage Electronic violated the Texas Deceptive Trade Practices Act and breached their contract with her. [...] Now, Perkins is seeking an ex-parte temporary and permanent injunction from the court demanding that Litton and Mortgage Electronic refrain from foreclosing on her home, the suit states. In addition, she seeks actual, consequential and statutory damages, attorney's fees, costs, pre- and post-judgment interest and other relief to which she may be entitled.

For the story, see Woman seeks TRO to stop foreclosure.

OneWest Bank "Shared Loss" Agreement With Feds Leads To Screwing Over Borrowers Seeking Loan Modifications, Says Attorney For Couple Facing F'closure

In Elk Grove, California, reports:
  • A couple facing foreclosure from OneWest Bank has joined the growing number of homeowners, attorneys and real estate professionals who believe the bank would rather foreclose than modify a loan. [...] The Cravalhos said their original lender, IndyMac Bank, agreed to a loan modification in the summer of 2008 that would have offered them a 3 percent interest rate for five years. But then IndyMac was seized by the Federal Deposit Insurance Corporation (FDIC), which sold the bank's assets to a group of investors who formed OneWest Bank in March 2009. Tom Cravalho said OneWest Bank has refused to honor the original agreement or discuss new terms.

  • The Cravalhos' attorney believes OneWest is more interested in reimbursement from the FDIC for the bad loan under a so-called "shared loss" agreement than it is in modifying the Cravalhos' mortgage. "They're going to make a lot more money getting Tom and Mona out of their house than they would leaving them in their house. A lot more money," said attorney Sean Gjerde. Gjerde explained that under the shared loss arrangement, OneWest could resell the home, collect an FDIC reimbursement, and actually end up with more money than it paid for the original IndyMac loan.(1)


  • The Cravalhos are suing OneWest Bank in Sacramento County Superior Court claiming the bank violated state law by not taking adequate steps to help them avoid foreclosure. They have also filed for personal bankruptcy, which stalled a courthouse auction originally scheduled last fall.

For the story, see Homeowners claim bank prefers FDIC bailout over house payments.

(1) Go here for a video presentation on an explanation of the sweetheart deal that the Indymac/One West boys were given by the FDIC.

Homebuyer Files Suit To Halt Foreclosure; Says Seller "Owner-Financed" Sale, Then Mortgaged Premises To 3rd Party & Failed To Make Loan Payments

In Jefferson County, Texas, The Southeast Texas Record reports:
  • A Beaumont couple claims a mortgage company is attempting to foreclose on their property even though they say they have made the required monthly payments. Antonio R. and Hilda L. Trista Candelaria filed a lawsuit March 1 in Jefferson County District Court against Edward Williams, Citimortgage, Carolyn Ciccio, Tommy Jackson, Misti Montalvo, Selim Taherzadeh, Cara Featherstone and David Moon.

  • The Candelarias claim they own property in Beaumont, which they purchased from Williams on Feb. 19, 2002. After Williams sold the Candelarias the property, he turned around and mortgaged the same property to Corinne Palmer Anold, who transferred the note to Citimortgage, according to the complaint.

  • The Candelarias faithfully paid their monthly mortgage payments to Williams, but remained unaware of the subsequent mortgage Williams issued, the suit states. "Apparently Defendant, Edward Williams, did not pay the mortgage even though he was paid by your plaintiffs," the suit states.(1)

For the story, see Couple seeks order to stop trustee's sale of property.

(1) If the Candelarias took possession of the home prior to Williams' mortgaging of the premises, the Candelarias' ownership interest in the home may have priority over the mortgage now in foreclosure. Under Texas law (and the laws of most states), a purchaser of, or mortgage lender secured by, real estate is charged with constructive notice of all claims of a party in possession of the property that the purchaser or lender might have discovered had he made proper inquiry. Madison v. Gordon, 39 S.W.3d 604; 2001 Tex. LEXIS 5; 44 Tex. Sup. J. 410, (Tex. 2001). See also, footnote 2 of this post for more on the duty of a bona fide purchaser in Texas to inquire into the rights of persons in possession of real estate.

For other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire. See also, The Bona Fide Purchaser for Value of a Legal Estate Without Notice.

Claim Of "Pro Bono" Representation While Failing To Disclose Loan Mod Fees Clipped From Clients Among Bad Acts Landing Lawyer From Hell In Hot Water

In a recent ruling from a Federal bankruptcy court in northern California, Bankruptcy Judge Alan Jaroslovsky writes [my emphasis added, not in the original]:
  • Attorney Deborah Pimentel is in the business of filing fraudulent bankruptcy petitions. She has filed at least 27 bankruptcy petitions for clients in this district, most in the last 90 days. Most of these filings, including those above, were made without the minimum documents required to commence a good faith case. These cases all lacked a list of creditors. Several lacked a Statement of Social Security Number and even a filing fee. Several are filed in a court of improper venue.

  • When these cases began to show up, the court staff assumed that Pimentel was a new bankruptcy lawyer — there are many these days — and attempted to help her file proper cases. Deputy clerks patiently explained to Pimentel and her staff that without a filing fee the case would have to be dismissed and without a proper list of creditors and a Statement of Social Security Number the court could not notify her client's creditors of the bankruptcy. Only after Pimentel's repeated failure to correct deficiencies and disregard for attempts to help did the deputy clerks come to realize that Pimentel was completely uninterested in filing proper cases. At that point, the court was required to act.


  • Pimentel produced fee disclosures stating that she received no compensation, and originally represented to the court that her services were "pro bono." Upon questioning, however, she admitted that she charged each of her clients several thousand dollars for "loan modification" services.


  • The court has no way of knowing if Pimentel is performing any sort of valuable service for her clients or is merely preying on their desperation. If Pimentel had only paid a little more lip service to the formalities of bankruptcy filings, the court would be content to dutifully dismiss each of her fraudulent cases without making serious inquiry into her schemes. However, by her cavalier disregard of basic filing requirements Pimentel created a great deal of extra work for a hard-pressed clerk's office. The court is now compelled to sanction Pimentel for her conduct.

For more, see In re: Deborah Pimentel, Misc. No. 10-101, No. 10-10481., 10-10480, 10-10494, 10-10509 (USBC N.D. Calif. March 8, 2010).

Wednesday, March 10, 2010

S. California Duo Get 27+ Years In Home Title-Snatching Scam Using Forged Land Documents, Stolen I.D.s; 88-Year Old Alzheimer's Patient Among Victims

From the Office of the Los Angeles County District Attorney:
  • A 48-year-old man was sentenced [] to 27 years, four months in prison for helping defraud nearly a dozen victims through a sophisticated real estate fraud scheme. Deputy District Attorney Clay Peters of the Real Estate Fraud Section said jurors convicted Joseph Little of 40 counts on Dec. 8, 2009. Co-conspirator Dwight Rolland Shelton, 40, was convicted of 51 counts. Los Angeles Superior Court Judge Robert Perry, who presided over the trial, said restitution would be addressed at a later date. Judge Perry sentenced Shelton to 29 years, four months state prison on Jan. 28. [...] Five other defendants involved in the scheme pleaded before trial.


  • Over a period of nearly 18 months, Little and Shelton orchestrated a complex scheme that involved a fictitious person and a “straw buyer” who were used to obtain home loans on properties that were either not being sold by the victims, or were not being bought by the alleged purchaser, prosecutors said.

  • This resulted in financial losses to civilian victims and lenders, as well as the temporary loss of title by the homeowner-victims. In total, the defendants received $780,000 in monies obtained through fraudulent transactions.(1)


  • Among the defendants’ victims was an 88-year-old widower with Alzheimer's disease, whose home was paid in full. He suffered a financial loss of more than $125,000, prosecutors said.

For the L.A. County DA press release, see Man Sentenced to More than 25 Years in Real Estate Fraud Case.

(1) According to the DA's press release, prosecutors said the monetary loss to the civilian victims was greater as this figure does not reflect attorneys and private investigators fees and lost work wages. Financial institutions also lost hundreds of thousands of dollars in loans that were not repaid and, in some cases, in properties that had to be resold at a loss.

NYC Man Gets 3 To 9 For Using Forged POA To Pocket $300K+ In Loan Proceeds By Draining Equity In Unwitting Mother-In-Law's Queens Condo With Mortgage

From the Office of the Queens County District Attorney:
  • Queens District Attorney Richard A. Brown [] announced that an international businessman who resides in Manhattan has been sentenced to three to nine years in state prison for having used a forged power of attorney to unlawfully obtain a mortgage on his mother-in-law’s condominium in the Little Neck section of Queens and steal more than $300,000. The condominium had been free and clear of any mortgages prior to the theft.

  • District Attorney Brown said, “The victim had accepted the defendant as family and, in turn, he thanked her by draining the equity from her condo, stripping her of all financial security. In seeking justice in this case, it was important that the defendant not only pay for his crime but take steps to repay his mother-in-law the monies he had stolen.”

  • The District Attorney identified the defendant as Shih Siang Shawn Liao, 35, of [...] Manhattan. [...] As part of his sentence, Liao also signed a confession of judgment admitting that he owed a debt, including late charges, totaling $444,892 – payable to Chase Home Finance and his mother-in-law, Fanny Lam. A confession of judgement authorizes the victims to enter judgment against the defendant for the owed amount. The amount represents Liao’s civil liability to the two parties in connection with his illegal activities.

For the entire Queens DA press release, see Manhattan Businessman Sentenced Up To Nine Years In Prison For Stealing Over $300,000 By Surreptiously Taking Out Mortgage On Mother-In-Law's Queens Condo.

Use Of Forged Land Documents In Title-Hijacking & Home Equity-Snatching Swindles On The Radar At Hillsborough County Registry Of Deeds

From the Hillsborough County, New Hampshire Regsitry of Deeds:
  • Preventing mortgage fraud and identity theft is a top priority of your Hillsborough County Registry of Deeds office. The Register's office has made a conscious effort to be on the look out for documents that may involve deed or mortgage related fraud. For your protection, consider subscribing to our "FREE" Property Fraud Alert website for real-time monitoring and notification of any potential fraudulent activity of interest to you. Your security does matter!!!!

  • Unfortunately, it's all too easy for a criminal to record a fraudulent deed making it appear as if they now own your home. Once they've done this, they can use your name as collateral on a mortgage or even attempt to sell your home to an unsuspecting buyer. Don't let this happen to you!

  • To sign up for this free service, go here and click on "BEGIN HERE" to register. The service will notify you if a document is recorded with your name and you will be given the option to be notified by "Email" or by "Phone". If you have any questions regarding this or are having trouble signing up, please call 1-800-728-3858 for assistance.

Go here for other counties making this service available throughout the country.

Thanks to Mike Dillon at for the heads-up on the news release.

Another BofA Blunder: Files Suit To Foreclose On Former REO Sold To Retired Ex-Cleveland Cop For Cash, Then Issues Apology For Foreclosure Fiasco

In Naples, Florida, the Naples Daily News reports:
  • It was retirement incarnate. Then, the foreclosure lawsuit came. Warren Nyerges, 45, left his law enforcement career and moved to Golden Gate Estates late last year with his wife. He was spending his days preparing his backyard for grass, painting the interior of his home and joking about the snow he abandoned in Cleveland.

  • I’ve had nothing but a ball. To come down here, it’s a life dream,” Nyerges said. To top it all off, the couple’s single-story, 2,700-square-foot home was paid off. Nyerges said he even offered $5,000 more than Bank of America was asking, quickly sealing the deal with title insurance.

  • But on Feb. 18, a man came to the couple’s home with a lawsuit. Bank of America had begun foreclosing on the property, and Nyerges’ dream was temporarily put on hold.


  • In a statement, Bank of America said officials are still trying to determine what happened. "Bank of America sincerely apologizes to Mr. Nyerges for this inconvenience. We are currently researching the matter and are stopping the foreclosure,” the statement said. "We are still in the process of identifying the root cause that created this issue.”

For more, see Foreclosure lawsuit fiasco upends Estates man’s retirement.

Tuesday, March 09, 2010

BofA Again In Spotlight For Allegedly Reckless Conduct; Illegally Seized Borrower's Home, Says Lawsuit

In Allegheny County, Pennsylvania, the Pittsburgh Post Gazette reports:
  • A Hampton woman is suing Bank of America, saying one of its contractors wrongly repossessed her home, padlocked the doors, shut off the utilities, damaged the furniture and confiscated a pet parrot, though her mortgage payments were on time. Angela M. Iannelli, 46, suffered "severe emotional distress, embarrassment and ridicule" as a result of the company's "de facto foreclosure process and seizure proceedings," attorney Michael Rosenzweig wrote in the suit, filed Monday in Allegheny County Common Pleas Court.

  • The suit accuses Bank of America and its contractor, Ebensburg-based Snyder Property Services, of trespass, unfair business practices, defamation, libel and other offenses during the October foreclosure of Ms. Iannelli's home [...]. She is seeking an unspecified amount in compensatory and punitive damages.

  • Bank of America instructed Snyder Property Services to "enter, seize, padlock, 'winterize' and take possession" of Ms. Iannelli's house, the lawsuit said, cutting water lines and electrical wiring, pouring anti-freeze down her drains and "stealing" her pet parrot, Luke.

For more, see Woman says Bank of America wrongly repossessed home.

See also WTAE-TV Channel 4: Bank Sued Over 'Invasion' Of Wrong House, Pet Theft, Damages (Angela Iannelli Says Bank Of America Mistakenly Targeted Home For Foreclosure).

Long Island Judge Hammers Wells w/ $155K Tab For Oppressive, Heavy Handed, Egregious Conduct For Pre-Sale Lockout Of Homeowner In Foreclosure

In a court ruling issued March 5, 2010, Suffolk County, New York Supreme Court Justice Jeffery Arlen Spinner clobbered another rogue foreclosing lender for its improper conduct in connection with the carrying out of a foreclosure action. This time, it was Wells Fargo, who felt the wrath of Justice Spinner.(1) According to the ruling, Wells locked out a homeowner in foreclosure before the legal action was complete and, for its conduct, was ordered to pay the aggrieved homeowner:
  • $200 in damages for the trespass to homeowner's possessory interest in the property,
  • $4,892 in damages representing the value of the personal possessions lost as a direct result of Wells Fargo's actions in trespass,
  • $150,000 in exemplary damages, which, in effect, serves as a reminder to Wells Fargo and any other lender to refrain from engaging in this kind of crap in the future.

A couple of excerpts from Justice Spinner's ruling follows [my emphasis added, not in the original]:

  • In the matter before the Court, it is apparent that Plaintiff [ie. Wells Fargo] has perpetrated a trespass against the real property of Defendant [homeowner facing foreclosure], which is actionable and subjects Plaintiff to liability for damages. Distilled to its very essence, trespass is characterized by one's intentional entry, with neither permission nor legal justification, upon the real property of another, [citation omitted].


  • Here, the Court is constrained to find that the conduct of Plaintiff in this matter was both willful and wanton, as evidenced by not one but two unauthorized entries into Defendant's dwelling, occurring in complete derogation of Defendant's right of possession. This conduct becomes even more glaring when consideration is given to the fact that Defendant affirmatively notified Plaintiff that he had secured the property and that it was not abandoned and still contained his personal property.

  • Even so, Plaintiff maintains that it has entered the property under a color of right, which turns out to be illusory under the circumstances. In spite of these declarations, Plaintiff willfully took it upon itself to enter the property on more than one occasion, doing so unreasonably and without notice, in direct contravention of the terms of its mortgage promulgated to Defendant by its assignor. This is even more distressing when it is considered that Plaintiff breaches its obligations to Defendant under the mortgage, running roughshod over Defendant's rights with a specious claim that it is acting to protect its rights and the property. In short, the conduct of Plaintiff was nothing short of oppressive and would best be described as heavy handed and egregious, to say the very least.

  • Certainly, the trespass was willful and calculated and was not accidental in any way and the Court finds that Plaintiff did not act in good faith. Under these circumstances, an award of both actual and exemplary damages is necessary and appropriate in order to properly compensate Defendant for the losses he has sustained by way of Plaintiff's shockingly wrongful conduct as well as to serve as an appropriate deterrent to any future outrageous, improper and unlawful deeds.

  • The Court finds the appropriate measure of damages for the trespass to Defendant's possessory interest in the property to be in the amount of $200.00. The Court further finds that Defendant is entitled to recover $4,892.00 representing the value of the personalty lost as a direct result of Plaintiff's actions in trespass. Finally, the Court finds that Defendant is entitled to recover exemplary damages from Plaintiff in the amount of $150,000.00.

For the entire ruling, see Wells Fargo v. Tyson, 2010 NY Slip Op 20079 (Sup. Ct., Suffolk County, March 5, 2010).

Thanks to "Deontos .is" for the heads-up on the court ruling.

(1) Back in November, 2009, Justice Spinner nailed IndyMac Bank for its own egregious conduct in another foreclosure action. See L.I. Judge Gives Foreclosing Lender Verbal Horse-Whipping As He Wipes Out Mortgage Debt, Cancels Lien For "Repugnant, Shocking, Repulsive" Conduct.

Ohio Supreme Court Clips Title Agent For $20K For Unauthorized Practice Of Law; Allegedly Prepared Deeds To Real Estate, Forged Attorney's Signature

From a recent ruling from the Ohio Supreme Court:
  • [The] Ohio State Bar Association [the "OSBA"], alleged that respondents, Kimberly A. Dalton and Precision Land Title Agency, Inc. ("Precision Title"), had engaged in the unauthorized practice of law by preparing and completing two real estate general warranty deeds and by forging an attorney's signature on one of them. The Board on the Unauthorized Practice of Law agreed, concluding that the respondents had practiced law in violation of Ohio attorney licensure requirements, and recommends that we enjoin respondents from engaging in the practice of law, require respondents to disclose their clients to the [OSBA] and board and notify their clients of their conduct, and require respondents to pay a civil penalty. We agree that respondents engaged in the unauthorized practice of law, and we therefore impose the sanctions the board recommends.(1)

The Ohio Supreme Court imposed a civil penalty of $20,000, which, according to their legal analysis contained in the ruling, is non-dischargeable in a Federal bankruptcy proceeding.

For the facts of the case, and the court's application of the relevant law, see Ohio State Bar Association v. Dalton et al., 2010 Ohio 619 (March 2, 2010).

(1) According to the Ohio high court:

  • “The unauthorized practice of law is the rendering of legal services for another by any person not admitted to practice in Ohio under Rule I and not granted active status under Rule VI, or certified under Rule II, Rule IX, or Rule XI of the Supreme Court Rules for the Government of the Bar of Ohio.” Gov.Bar R. VII(2)(A). “In Land Title Abstract & Trust Co. v. Dworken (1934), 129 Ohio St. 23, 1 O.O. 313, 193 N.E. 650, we made clear that the practice of law embraces the preparation of legal documents on another's behalf, including deeds which convey real property.” Disciplinary Counsel v. Doan (1997), 77 Ohio St.3d 236, 237, 673 N.E.2d 1272.

Florida HOAs Begin Looking To "Reverse Foreclosure" Tactic To Stick Lenders With Title To Unwanted, "Upside Down" Condos

In Miami, Florida, The Miami Herald reports:
  • Revenue-starved condominium and homeowners associations struggling to keep the taps running and the lawns mowed have found a novel way to squeeze money from units that don't pay what they owe. It's called a reverse foreclosure, a tool that can force banks to pay association maintenance fees when unit owners don't.


  • Here's how a reverse foreclosure works: When a home or condominium owner stops paying the mortgage, the bank files a notice of foreclosure to safeguard its stake. After that, some banks deliberately delay the process of taking back the property. They take their time because, if it's like most South Florida properties, the delinquent unit is worth less than the outstanding mortgage. In the lingo of the trade, such units are "upside-down.'' Banks are in no rush to have upside-down properties on their books.

  • Delaying foreclosure can be a nightmare for homeowner and condo associations. When people stop paying the mortgage, they invariably stop paying their maintenance fees. As long as a foreclosure is in limbo -- and the process can take years if a bank wants to slow things down, associations say -- unpaid maintenance fees pile up.

  • Under a reverse foreclosure, the association files its own foreclosure notice and takes title, which is its right after the homeowner stops paying maintenance fees. The association can't sell because of the bank's lien. But it can renounce its claim on the property in court and ask the judge to give the title back to the bank. Then the bank has to pay the fees. It's a hardball tactic, but condo and homeowner associations say they have been forced to resort to it because the Legislature, beholden to lenders and their lobbyists, refuses to make the banks take over the units and cover the unpaid bills.

For more, see Desperate condo, homeowner groups given new way to grab overdue fees (A new maneuver called reverse foreclosure helps condo and homeowner associations collect badly needed overdue maintenance fees).

In a related story, see Blanket receivership: Another way to get someone to pay overdue fees (Blanket receiverships are still another new method to give condos desperate for maintenance money a chance to collect what is owed).

Avoiding The Tax Man For Owners Of Homes Sold In Foreclosure & Short Sale Situations

In Palm Springs, California, The Desert Sun reports:
  • It has become clear that more taxpayers have debt cancellation income than ever before. As the “Great Recession” heated up this past year, credit card lenders increasingly agreed to accept reduced payoffs from troubled borrowers and forgive the rest. As well, more lenders foreclosed on homes or agreed to short sales. In each case, the borrower has debts that are either partially or entirely forgiven.(1) And under the tax code, debt forgiveness is a taxable event. Ouch. To experience financial upheaval, and then to have to pay tax on top of it all is truly a case of putting salt in the wound. Fortunately, there are several exceptions to the recognition of debt forgiveness as taxable income.

For more, see Debt forgiven, not forgotten by tax season.

(1) It's important to keep in mind that a homeowner that has had his/her home sold in a foreclosure or short sale situation should first determine whether the lender has actually forgiven any of the unpaid debt. There have been a number of published reports that indicate that lenders are increasingly refusing to grant debt forgiveness and, instead, are going after homeowners for the unpaid balance of the mortgage loan in a foreclosure or short sale situation (see, for example, Detroit Free Press: Mortgage, tax bills ultimately come back to haunt walkaways).

If the debt hasn't been forgiven, there is no income tax issue to address; rather, the concern should be on whether (or when) the lender is going to begin chasing the now-ex-homeowner for the balance owed (ie. by garnishing wages, tapping bank accounts, seizing tax refunds and slapping liens on other assets to satisfy the debt).

For those who have obtained debt forgiveness from their lenders and seek information on how to handle the reporting of it (even if the debt cancellation is tax-exempt, the information still has to be reported to the IRS) on their tax forms, consult the following IRS sources:

It requires noting that, when receiving a Form 1099 from lenders, the information contained thereon should be checked to make sure it is correct. Whether by intentional malfeasance or merely inexcusable incompetence, lenders have been known to report incorrect information on these forms. See, for example, Foreclosing Mortgage Lender Screw-Up Results In Whopping IRS Tax Bill For Ex-Homeowner.

In conclusion, California residents obtaining debt forgiveness might be subject to state income tax on the amount of debt cancelled, regardless of whether they are legally able to avoid the Federal income tax. See The Sacramento Bee: California tax law unsettled on home short sale.

Monday, March 08, 2010

Trustee Ordered To Cough Up The Cash In Wrongful Foreclosure; Conducted Auction Despite Notification By Owner's Court-Appointed Rep Of Pending Sale

In King County, Washington, The Seattle Times reports:
  • A King County judge [...] ordered one of the West Coast's major players in the foreclosure industry to pay more than $230,000 to the estate of a disabled senior citizen whose Whidbey Island home was wrongfully auctioned off after she fell behind on payments. Legal experts say it appears to be one of the first home-foreclosure cases to reach a jury verdict in Washington.

  • At a foreclosure auction on Feb. 29, 2008, Quality Loan Service Corp. of Washington sold Dorothy Halstien's home for about $83,000 — even though her court-appointed guardian notified the company 11 days earlier of a signed contract to sell the house for $235,000 by mid-March. The auction meant Halstien lost more than $150,000 of her home equity.(1)


  • At the auction, an investor bought Halstien's house for $1 over Quality's opening bid and flipped the property six months later for $235,000, getting the equity that Halstien, a retired factory worker, had built up over decades. Superior Court Judge Barbara Mack's order finalizes a jury verdict in late January that found Quality and its San Diego-based parent company, Quality Loan Service Corp., violated the state Consumer Protection Act and breached its contract with Halstien.

For more, see Washington company must pay estate in wrongful auction.

(1) Reportedly, while Quality had the discretion under state law to postpone the foreclosure, it blindly followed WaMu's instructions to proceed with foreclosure, said Frederick Corbit, senior attorney at Northwest Justice Project, a not-for-profit statewide law firm that provides free civil legal assistance and representation to low-income people and communities throughout Washington, which represented the estate's court-appointed guardian, Dianne Klem. "The trustee is not a repo agent," Corbit said. "Any reasonable trustee would have postponed the sale for three weeks."

C. Fla. Circuit Court Chief: Foreclosure Mill Law Firms' "License Could Be On The Line" Regarding State "Supremes" Directive To File Proper Paperwork

In Sarasota, Florida, Sarasota Herald Tribune columnist Tom Lyons writes:
  • Law firms that some call "foreclosure mills" handle loan default cases by the thousands for financial institutions that were not the original lenders. Some have filed odd documents in their court cases. Many claim loan documents are lost, but that ownership of the note was transferred, perhaps multiple times, and that the foreclosing bank is now the owner or trustee.

  • Problem is, they rarely show a clear chain of transfers back to the original lender. Often, the documents are not only vague but also of fresh vintage. Some are only created, signed and notarized after the foreclosure is filed. And signatures authorizing the transfers make fun reading. Some people listed as vice presidents and the like often are not, and were never even employees of the companies named. They work for companies that are hired to create the documents.

  • When accused of using sham documents, the response has sometimes been that the signers were somehow authorized to sign, a claim some judges have rejected.(1)


  • In uncontested cases, most still slip by, and [Sarasota County Circuit Court Chief Judge Lee] Haworth says judges have too many cases to do the checking that a defense lawyer would do. But there is bigger news that should help, Haworth says.

  • Last month, Florida's Supreme Court decided that attorneys filing foreclosure cases will no longer be presumed blameless when they claim a right to foreclose based on faulty documents.(2) The foreclosure mills normally rely on an army of assistants and clerical workers, and lawyers claiming that an assistant's error led to a faulty filing have rarely been called to task. That's about to change, Haworth says.

  • Some may still gamble in cases where they expect no opposition lawyer will be checking the documents. But if they take the time and effort, most should be able to do things right and establish their claims, Haworth said. If not, he said, they'll have a problem. "I'm looking forward to see how they do comply," Haworth said. "Their license could be on the line."

For the story, see Documents insufficient in foreclosure case.

(1) Go here for more on fabricated mortgage assignments.

(2) See:

Bankruptcy Court Denies Lender's Request To Proceed With Foreclosure Of Delinquent Mortgage On Real Estate Inherited From Deceased Owner

The following facts have been taken from a recent ruling from a Federal bankruptcy court in Missouri:
  • Father buys real estate, financing the purchase with a loan from Bank/Creditor secured by a deed of trust.
  • Father dies four weeks later.
  • Daughter, as sole survivor, acquires through inheritance Father's real estate, subject to the secured debt.
  • Daughter encounters financial problems and defaults on mortgage payments, causing Bank/Creditor to initiate a foreclosure action.
  • Daughter files for Chapter 13 bankruptcy to stop the foreclosure.
  • Daughter proposes Chapter 13 payment plan which provides that she will pay certain amounts to cure pre-petition arrears on the Bank/Creditor's claim. Daughter also proposes to make post-petition payments to the Bank/Creditor outside of the Daughter's Chapter 13 plan. (The Loan Documents were never modified to show the Daughter as a borrower or obligor. Accordingly, the parties do not dispute that Daughter has no personal liability to the Bank/Creditor for the amounts owed under the loan documents.)
  • Bank/Creditor files request to lift the automatic stay for the purpose of completing the foreclosure action.

The issue before the Court is whether Daughter may defeat Bank/Creditor's request for relief from the automatic stay by including in her Chapter 13 bankruptcy plan the Creditor's claim against property that the Daughter acquired through a pre-petition inheritance, even though the Daughter was never in privity with Bank/Creditor on a promissory note or deed of trust in which the property was pledged as security, and modify the rights (ie. "cram down") of Bank/Creditor.

Relying in large part on the U.S. Supreme Court ruling in Johnson v. Home State Bank, 501 U.S. 78, 111 S.Ct. 2150, 115 L.Ed. 2d 66 (1991), the bankruptcy court held that Daughter was permitted to handle the payments on the Bank/Creditor's secured loan as proposed, despite the lack of privity, and the Bank/Creditor's request to lift the automatic stay was denied.(1)(2)

For the court's ruling, see In re: Rhonda M. Holmes, Case No. 10-41140-399, Motion No. 8., 10 (USBC E.D. Missouri, East. Div., March 3, 2010).

(1) Apparently sensing the possibility that some clever real estate operators and others might attempt to use this ruling as a basis for acquiring real estate subject to existing mortgages or deeds of trust without formally assuming the loan with the lender, and then look to invoke the "cramdown" provisions of 11 U.S.C. §1322(b)(2) to legally screw it by modifying its rights through a subsequent Chapter 13 filing, the Missouri Eastern District's Chief Bankruptcy Judge Barry S. Schermer concluded his ruling with the following admonition to those opportunists:

  • This holding is limited to the facts presented here, specifically, a ruling on a motion for relief from the automatic stay where a debtor obtained real property by inheritance or operation of death, rather than by a conveyance of realty from one party to another unrelated party.

  • This Court expresses grave concern that litigants will try to extend this holding to a situation where a stranger to a loan acquires real property serving as collateral for the loan, and then tries to defeat a lender's request for stay relief by modifying the lender's rights through his subsequent Chapter 13 case. Those parties should remember, among other things, that Bankruptcy Code section 362(d)(4)(A) requires a court to grant relief from the automatic stay:

  • (4) with respect to a stay of an act against real property . . ., if the court finds that the filing of the petition was part of a scheme to delay, hinder, and defraud creditors that involved ... (A) transfer of all or part ownership of, or other interest in, such real property without the consent of the secured creditor or court approval. 11 U.S.C. §362(d)(4)(A).

(2) An issue not addressed in this case is the (incorrect) belief of many that a lender could invoke the "due-on-sale" clause in a mortgage when title to real estate containing less than five dwelling units is transferred to a surviving relative upon the death of the owner in order to proceed with foreclosure, even if the mortgage loan is not in default. According to Federal law, a lender "may not exercise its option pursuant to a due-on-sale clause upon ... a transfer to a relative resulting from the death of a borrower." See 12 USC 1701j–3(d)(5) - Preemption of due-on-sale prohibitions (Exemption of specified transfers or dispositions). See also, Federal law protects those who inherit homes.

Chicago Feds Charge Closing Agent In $500K+ Real Estate Escrow Swindle; Ripoff Of Insurance Premiums Due To Title Underwriter Among Allegations

From the Office of the U.S. Attorney (Rockford, Illinois):
  • A federal grand jury in Rockford [] returned a seven-count indictment charging KIRBY SEAN MCKEE ("McKee"), age 50, of Davis, Illinois, with having embezzled more than $500,000 in funds that had been placed in escrow accounts and insurance premiums. McKee is charged in the indictment with embezzling money, funds and premiums of A Title Escrow Company, Inc. ("ATEC") and Stewart Title Guaranty Company, ("Stewart").(1)


  • The indictment alleges that McKee embezzled more than $500,000 that had been provided by title insurance customers to ATEC and placed in escrow accounts. [...] The indictment [...] also charges McKee with having embezzled title insurance premiums ATEC had collected from its customers on behalf of Stewart. Instead of remitting those premiums to Stewart, the indictment charges that McKee embezzled and misappropriated those premiums to his own use and for the use of ATEC.

For the entire press release, see Former Freeport Title Company Manager Indicted On Federal Insurance Embezzlement Charges.

(1) According to the indictment, ATEC was a title and escrow company located in Freeport, and was a registered agent of Stewart, a Texas-based title insurance company. The indictment states that ATEC had, in the Freeport area, sold title insurance policies issued by Stewart.

Sunday, March 07, 2010

Central Florida Judge Admits Foreclosure Ruling Subsequently Reversed On Appeal Wasn't His Best Work

In Central Florida, Sarasota Herald Tribune columnist Tom Lyons writes:
  • When a ruling is reversed by an appellate court, the judge faulted sometimes grumbles. So I didn't know what to expect when I asked Circuit Court Judge Robert Bennett about an appellate court ruling that overturned a house foreclosure he had granted.(1) The three-judge panel said a bank that was not the original lender had not proven it had the right to foreclose, because the documents filed did not show how, or if, mortgage ownership had ever been transferred to the bank.

  • Bennett's reaction? The higher court was totally right, he said. "I'm willing to fall on my sword on this one," Bennett said. "It wasn't a very good piece of judge work."(2)

  • To be fair, many judges have done much the same thing in similar cases, partly because most foreclosures had long been so routine. If contested at all, it was rare that anyone claimed a major financial institution had not proven any link to the mortgage. Now, just a couple of years since Bennett's ruling on a foreclosure case he cannot even recall, that sort of claim has become commonplace. Of the dozen or so lawyers I've heard from who fight foreclosures -- a common specialty these days -- all mentioned that issue. "This issue of standing, it's common throughout the state," said circuit Chief Judge Lee Haworth.


  • Bennett's ruling happened before all this became as ordinary in Southwest Florida as sunshine. Few judges then thought to doubt that a bank had standing to foreclose.

For the story, see Documents insufficient in foreclosure case.

(1) See BAC Funding Consortium Inc. v. Jean-Jacques, et ano., Case #2D08-3553 (February 12, 2010). 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

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

(2) Hopefully, Judge Bennett's reversed ruling was attributable to him simply having an off day. After all, even Babe Ruth struck out from time to time.

Minnesota Mortgage Broker Gets 24 Months In $800K+ Real Estate Escrow Ripoff

From the Office of the U.S. Attorney (St. Paul, Minnesota):
  • A 41-year-old Brooklyn Center mortgage broker was sentenced today in federal court for using for personal benefit money deposited on behalf of clients into the escrow account at his mortgage title company. In St. Paul, United States District Court Judge Richard H. Kyle sentenced Terry Louis Lemke to 24 months in prison on one count of wire fraud and one count of money laundering in connection to this crime. Lemke was charged via an Information on August 3, 2009, and pled guilty on August 14, 2009.

  • In his plea agreement, Lemke admitted defrauding clients from June 2006 through 2007 by falsely representing to them that the funds they provided him as owner of All Metro Title, a mortgage brokerage company, were being held for their real estate transactions. Instead, Lemke was using that money for personal benefit. In total, Lemke defrauded clients of more than $800,000.(1)

For the U.S. Attorney press release, see Brooklyn Center mortgage broker sentenced on charges related to mortgage fraud.

(1) To the extent Lemke may have held a state license as a closing agent, the Minnesota Department of Commerce's Real Estate Education, Research and Recovery Fund could potentially find itself on the hook for some or all of the monetary losses suffered by any victims of the swindle. 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, [...].

Brother Cops Plea To Screwing Siblings Out Of $200K Of Equity In Home Inherited From Deceased Mom

In Napa County, California, the St. Helena Star reports:
  • A Napa man has pleaded no contest to swindling his siblings out of about $200,000. Stephen Beal Berg, 67, was named as executor in his mother’s trust after she died Aug. 5, 2006, leaving her property to Berg and his four siblings, according to the Napa County district attorney’s office. Her home [...] was the most valuable of her assets, prosecutors said. In the summer of 2007, Berg told his siblings the home would go into foreclosure if he didn’t buy it from the trust. They agreed to allow him to take possession of the home, refinance the loan and distribute the remaining cash among the siblings, prosecutors said.

  • Berg paid off the existing loans with an adjustable rate mortgage from Countrywide Financial Corp. and borrowed an additional $221,000 based on the home’s equity, they said. Instead of dividing the cash between his siblings, he kept it for himself, prosecutors said. In addition, he was renting the home to others and keeping the payments, Deputy District Attorney Michael Mautner said. Berg stopped making payments on the home, which went into foreclosure in November 2009, according to the DA’s office. Area probate counsel and the siblings brought the case to the Napa Police Department, which launched an investigation in September. The district attorney’s office filed charges early this year.

For the story, see Napa man took $200,000 from family.

Cousin, Niece Get Year & A Day After Copping Pleas To Abusing POA To Loot Accounts, Sell Home Out From Under Senior Thought To Be On Deathbed

In Multnomah County, Oregon, the Corvallis Gazette Times reports:
  • An 83-year-old woman was in court to watch as two relatives who wiped out her savings and sold her home were sent to prison. Court records indicate the relatives expected Evelyn Roth to die when she was diagnosed with a cancerous growth on her esophagus in February 2008. Instead, she made a remarkable recovery. Then she learned that a cousin and a niece, who had obtained power of attorney, had sold her Portland home and her car, pocketed the proceeds and emptied out her accounts. They even prepaid her funeral.

  • Roth's cousin, Virginia Ann Kuehn, 66, and her oldest niece, Kathleen Sue Jingling, 53, pleaded no contest to seven counts of first-degree criminal mistreatment, aggravated theft and first-degree theft. Multnomah County Circuit Court Judge John Wittmayer sentenced each [] to a year and a day in prison, followed by five years probation. The extra day ensures they will serve their sentences in a state prison rather than a county jail.


  • Neither Kuehn nor Jingling said anything in court. Jingling did sign a check for $12,000, which was given to Roth. They've paid back more than $145,000 of the estimated $325,000 that Roth lost, Deputy District Attorney Chuck Mickley said.

  • Roth and her friends want others to know there are resources to combat such crimes. In this case, Irma Mitchell-Phillips, a Multnomah County adult protective services investigator, worked closely with Portland police Officer Deanna Wesson, who specializes in elder abuse, and Mickley, a Multnomah County prosecutor who was named late last year to focus on financial elder abuse crimes. "A lot of times, a lot of elderly and vulnerable people think their family is not going to do them wrong, but that's not the case. We see family involved over and over again," said Mitchell-Phillips, who attended Monday's sentencing.

For the story, see Theft victim watches as 2 relatives sent to prison.

Wisconsin Regulator Orders Firm To Refund Fees Received From Unlicensed Loan Modification Services

In Milwaukee, Wisconsin, the Milwaukee Journal Sentinel reports:
  • A regulator has ordered a Janesville foreclosure consultant not to sell mortgage modification services and to refund fees it has charged to customers. Rightway Solutions Inc. has been operating without an "adjustment service company" license needed to provide services to help debtors modify mortgages, the Wisconsin Department of Financial Institutions says.


  • Rightway and Gorniak are ordered to refund any fees charged to adjustment service customers in Wisconsin since Feb. 27, 2009. By March 26 of this year, Rightway must forward to DFI the refund checks and stamped envelopes to each customer, along with letters telling the customers about the refund, the order states.

For more, see State orders Janesville firm to stop mortgage modification service.

For the Wisconsin DFI order, see In re: Rightway Solutions Inc. / Marietta J. Gorniak.

Arizona Jury Convicts Real Estate Agent Facing Foreclosure Of Stripping Fixtures, Appliances From Home; Used Craigslist In Attempt To Unload Goods

In Phoenix, Arizona, KNXV-TV Channel 15 reports:
  • Maricopa County Attorney Andrew Thomas announced [] that a man who stripped an Anthem home and put the items for sale on Craigslist was convicted of fraud after a five day trial. Kailish Bhatt, 44, was accused of illegally removing fixtures from the home that was in foreclosure. Thomas said this was the first conviction involving a 'home stripping' case. According to the FBI, Bhatt, a real estate agent, was arrested in April 2009 when he accepted $2,000 from an undercover agent after putting an ad on Craigslist attempting to sell kitchen cabinets, granite countertops, a double oven, microwave and dishwasher. Officials said the home was an investment property and not his residence.

Source: Man convicted after selling items stripped from Anthem home.

In a related story, see County attorney cracks down on 'home stripping' crimes.