Saturday, April 17, 2010

California Lawmaker Moves To Elevate Crime Of Landlord Impersonation To Felony Grand Theft

The San Francisco Chronicle reports:
  • The glut of vacant foreclosed homes has inspired con artists to concoct a new scam: posing as landlords to swindle prospective tenants out of rent and deposit money. Cases of landlord impersonation have jumped throughout California in the past couple of years, according to sheriffs and legal aid clinics.

  • "With a lot of foreclosures, the property sits empty for a long period of time," said Assemblywoman Fiona Ma, D-San Francisco. "What we're finding is that scam artists will come in, change the locks and advertise on Craigslist at a very enticing price. They tell people, if you want to get this deal you need to come back soon with cash for the deposit. People give them the money, sign a lease, get keys and a couple of days later the legitimate owner (an agent for the bank) comes and says, 'What are you doing here?' Then they're out whatever cash they've laid out."

  • Ma is co-sponsoring a bill, AB1800, that would elevate the crime of landlord impersonation to felony grand theft, instead of its current classification as a misdemeanor.

For more, see More scam artists posing as landlords.

Ex-NFLer Swiped Former Teammate's Grandma's ID For Use In Mortgage Scam, Say Cops

In Miami, Florida, USA Today reports:
  • Could a 6-6, 335-pound former NFL player get away with using the identity of a 74-year-old grandmother? That's a question to ask in the wake of Jamie Nails being charged with mortgage fraud. Miami police say the former Miami Dolphin and Buffalo Bill stole the identity of the grandmother of a former Bills teammate, Daryl Porter. Nails is accused of using the identity of Delores Porter to obtain a $510,000 mortgage for a condominium, according to the South Florida Sun-Sentinel. A warrant has been issued for the arrest of Nails, who played in the NFL from 1997-2002, making 51 starts.

Source: Ex-NFLer charged with stealing a granny's ID.

Queens Neighborhood Ranks #1 Nationally In Bogus Home Loan Concentration: Study

In Jamaica, Queens, the New York Daily News reports:
  • Forget Las Vegas. Forget Miami. The No. 1 neighborhood in the U.S. for mortgage fraud is in the heart of Queens. A new study says a section of South Jamaica has the highest concentration of bogus loans in the nation, with zip code 11436 the absolute worst.

  • First American CoreLogic, a mortgage and real estate data company, analyzed 80 million loans from Maine to Malibu from 2004 through last year. The firm says the fraudulent loan rate in the 9 square miles of blue-collar Jamaica is four times the national level and tops other hotbeds of lousy loans like Orlando, Atlanta and Detroit.

  • The zip code the bank singled out includes the four-block area highlighted by the Daily News in 2008 as "Ground Zero" for foreclosures in New York. The fraud included lying about nonexistent income, inflating the value of homes by selling and reselling to co-conspirators, bribing appraisers and stealing deeds and identities. "In Jamaica, we didn't see [only] one type of fraud," said Tim Grace, First American's senior vice president. "It ran the gamut."


  • The borough's elderly - many of whom have owned homes in Jamaica for years - are especially vulnerable, experts say. "They tend to be equity-rich and cash-poor, which is a prime target for any villain," said Assistant Queens District Attorney Greg Pavlides, whose office got 228 mortgage fraud complaints last year - twice the rate in 2005.

For more, see Jamaica, Queens leads the nation in fraudulent home loans.

Bullying Of Tenants In Foreclosure Evictions Continues As Owners, Lenders, Real Estate Agents Blatantly Disregard Federal Law

In Miami, Florida, The Miami Herald reports:
  • All she had was 48 hours to clear out her belongings and vacate the house where she had lived for three years. One day last September, Gladys Flores received an unexpected visit from the owner of the property she rented in Little Havana. She had not seen him for months. Flores had religiously deposited the $600 monthly rent. The landlord came to inform her that the house had been repossessed by the bank.

  • "He told us, `Either I call the police and you take everything out or I put a lock on the door so you cannot get in,' '' recalled Flores, a 53-year-old Peruvian immigrant who lives with her husband and makes a living as a housekeeper. The Flores had no money to rent a moving truck, so they took all their possessions -- in a shopping cart -- and left in fear, without filing a complaint with authorities.

  • Since the onset of the foreclosure crisis, tens of thousands of renters in South Florida have suffered the fate of the Floreses. They have been tossed out by banks and landlords essentially overnight with no mercy, and without any protection from the state of Florida.


  • Not surprisingly, Miami and other municipalities in South Florida are among the cities where the most violations of the Protecting Tenants at Foreclosure Act, signed into law by President Barack Obama last year, are happening. The provisions phase out at the end of 2012. "The law in general is being deliberately ignored,'' said Purvi Shah, a Florida Legal Services attorney who heads the Community Justice Project.(1) "The judicial sector must do its part to ensure compliance with these federal laws.''

  • Under the act, tenants who have an oral or written lease arrangement are entitled to remain in the repossessed home until the end of their lease, unless the purchaser at foreclosure plans to make the property his or her primary residence. Even in this situation or if the tenants have no lease, the purchaser must deliver a 90-day notice to vacate.

  • But the majority of banks, mortgage companies, real estate agents and foreclosure attorneys in South Florida continue to evict tenants within a matter of days, leaving them, literally, on the street, grass-roots organizations have told me. And the courts have done little to stop them.

  • One of the main obstacles is that most of the tenants -- who in general are immigrants and low-income individuals -- are unaware of these new laws and believe they must leave the moment the landlord or a bank agent knocks on the door with news of the foreclosure. Many of these agents are adept at intimidating tenants. They manipulate them with offers of small amounts of cash for the keys, but later never refund the security deposit.

For the story, see Renters bullied by owners facing foreclosure.

(1) According to their website, Florida Legal Services is a nonprofit organization founded in 1973 provide civil legal assistance to indigent persons who would not otherwise have the means to obtain a lawyer.

Tenants Driven Out Of 112-Unit Complex Loaded With Code Violations; Foreclosing Lender Left Holding The Bag On Apartments Too Unsafe To Inhabit

In Beloit, Wisconsin, WISC-TV reports:
  • A Beloit apartment complex is going into foreclosure just months after dozens of tenants were evicted due to building code violations. Countryside Village Apartments on Beloit's East Side is now mostly abandoned. The city said only about 10 of its 112 units are occupied. City officials said that with no communication from the property owner, there was no choice but for the bank to foreclose. "We've never had to deal with anything like this before," said Tom Clippert, Beloit's director of housing services.


  • The majority of units at the apartment complex have been declared unsafe to inhabit. Residents were evicted due to unlivable conditions, including no heat, severe mold contamination and seepage problems, WISC-TV reported.

For the story, see Beloit Apartment Complex Going Into Foreclosure (Building Cited For Many Code Violations).

For a similar story in a 186-unit residential complex in foreclosure in Columbus, Ohio where, according to one resident, code enforcement officials received complaints about mold, exposed wiring, roaches and a lack of hot water, see The Columbus Dispatch: Renter has roaches aplenty, but no hot water (Living conditions deteriorate at complex after owner defaults).

Recession Leads Chicago-Area Legal Non-Profits, "Big Law" To Form Odd Couple In Utilizing Lawyer Oversupply

In Chicago, Illinois, the Chicago Tribune reports:
  • Cabrini Green Legal Aid ended its 2009 fiscal year with a deficit for the first time in years. Even though it provided legal aid to more poor people than ever before — 5,348 — the not-for-profit could not afford to hire another full-time attorney on its $2 million shoestring budget.(1)

  • Last year's recession also hit Chicago's big law firms that individually generate hundreds of millions of dollars in revenue from corporate clients. They were sitting with an oversupply of lawyers and were forced to lay off hundreds and postpone the starting dates of law school graduates they had hired to begin in the fall of 2009.

  • The opposite ends of Chicago's legal profession found a way to come together out of economic necessity to partially consume the supply of highly educated young lawyers looking for work. Despite several challenges, the unusual experiment has paid dividends. It also has sparked discussions of whether a more permanent model of apprenticeships can be developed that would train law-school graduates at a lower cost and benefit public-interest legal organizations that are suffering from funding constraints while attending to a greater need because of the recession.


  • About 60 first-year associates have gone to work for more than 20 public-interest and legal-aid organizations, estimates Kelly Tautges, director of pro bono services at the Chicago Bar Foundation, which has kept track of the placements.

For more, see With no space at the firm, rookie lawyers find a place in legal aid.

(1) According to their website, Cabrini Green Legal Aid provides free legal services to low-income Chicagoans in four areas of law: family, housing, criminal records, and criminal defense.

Friday, April 16, 2010

Florida Appeals Court Says Mortgage Lender Need Not Pay Condo Maintenance Fees While Dragging Its Feet In Proceeding To Foreclosure Sale

A Florida appellate court recently issued the following decision reversing a lower court ruling that forced a foot-dragging, foreclosing mortgage lender to either proceed with a foreclosure sale or begin paying the monthly maintenance fee on the condominium unit securing its loan. In ruling in favor of the lender, it agreed with a 2009 decision of a sister appellate court that reached the same conclusion in a another case with the same fact pattern:
  • On May 12, 2008, Deutsche Bank National Trust Company filed a mortgage foreclosure complaint, naming the unit owner, Dario Luna, as well as the Coral Key Condominium Association (at Carolina), Inc., as defendants. After seven months of no record activity, the Association filed a motion to compel Deutsche to proceed with the foreclosure sale or pay monthly assessments due to the Association. The trial court granted the motion, explaining that it was fair and equitable for the mortgage holder to pay monthly assessments due to the Association if there is an extended period of delay in the foreclosure proceeding for no good reason. We reverse.

  • After the trial court entered the order appealed, the Third District issued U.S. Bank National Ass'n v. Tadmore, 23 So. 3d 822 (Fla. 3d DCA 2009), which addressed this precise issue. In Tadmore, the court rejected the notion that equity and fairness support an order requiring a bank to pay condominium assessments while foreclosure proceedings are pending since section 718.116(1)(b), Florida Statutes (2009), makes it clear that the first mortgagee is required to pay assessments only after acquiring title, and equity follows the law. Id. at 823-24. We agree with Tadmore and reverse.

For the ruling, see Deutsche Bank National Trust Company as Trustee v. Coral Key Condominium Association (at Carolina), Inc., 4D09-3392 (Fla. 4th DCA April 14, 2010).

C. Florida Judge Reverses Earlier Grant Of Summary Judgment In Favor Of Foreclosing Lender; Questions Veracity Of Court Filings By Foreclosure Mills

In St. Petersburg, Florida, foreclosure defense attorney Matthew Weidner writes:
  • Search this blog and you will see that for months now I’ve been arguing that the “evidence” submitted by Plaintiffs in foreclosure cases does not even come close to meeting the legal and evidentiary requirements for courts to grant summary judgment.

  • After performing extensive legal research to confirm this hunch, I have drafted and filed detailed memoranda, supported by all available case law, that stands for the proposition that the practices used by virtually every foreclosure mill in the state do not provide the evidentiary basis for a court to grant summary judgment.


  • I attach here the most fantastic transcript of a hearing I’ve heard in a long time.(1) This transcript shows a couple things:

    First, the judges in the Sixth Circuit of Florida really, really get it.

    , this particular judge goes far and above to do his job and deliver real, hard, honest legal work.

    , as I mentioned above…the current processes and procedures used by the foreclosure mills do not provide courts the evidentiary or legal basis required to grant summary judgment.

  • But now the big question that comes to mind….now that this judge gets it…and now that my memos and others like my friend and fellow Foreclosure Fighter Mike Wasylik are starting to leak out there… What happens to all the hundreds of thousands of homes that have been foreclose on by improper evidence?

Source: CASE LAW UPDATE - Judges Should Never Grant Summary Judgment in Florida.

(1) The matter involved a rehearing of a previously granted summary judgment in favor of a foreclosing lender. On rehearing, the judge reconsidered his earlier ruling, and after rexamining some of the documents in the case that caused him to question the veracity of the documents being filed in foreclosure cases, generally, reversed his earlier ruling. Representing the foreclosing lender in this case was the Law Offices of David J. Stern, P.A., a notorious assembly line, foreclosure mill law firm operating out of Broward County, Florida.

South Florida Lawyer Masquerading As Foreclosure Defense Attorney While Associated With Notorious Assembly Line Foreclosure Mill Law Firm?

In Palm Beach County, Florida, reports on a foreclosure action in which a homeowner facing foreclosure was allegedly duped into paying a $1,000 legal fee for the services of an attorney who claimed to be in private practice but, in actuality, is listed as being "Of Counsel" on the letterhead of a notorious South Florida assembly line foreclosure mill.

For the post, see Foreclosure Mill Attorney for Marshall Watson or Foreclosure Defense Attorney for Homeowners?

For the court filing on which the above is based, see Motion For Disqualification Of Counsel And For Disgorgement Of Attorney's Fees (filed by the law firm Ice Legal, P.A., West Palm Beach, Florida on behalf of the screwed over homeowner).

Thursday, April 15, 2010

LPS Shuts Down Alleged Bogus Foreclosure Document "Manufacturing" Racket; Pumped Out Over A Million Mortgage Assignments In Last 2 Years

Fraud Digest reports:
  • On April 12, 2010, Lender Processing Services closed the offices of its subsidiary, Docx, LLC, in Alpharetta, Georgia. That office was responsible for pumping out over a million mortgage assignments in the last two years so that banks could foreclose on residential real estate. The law firms handling the foreclosures were retained and largely controlled by Lender Processing Services, according to a Sanctions Order entered by U.S. Bankruptcy Judge Diane Weiss Sigmund (In re Niles C. Taylor, EDPA, Case 07-15385-sr, Doc. 193).


  • Although the Alpharetta office has been closed, Lender Processing Services continues to mass produce "replacement" assignments from its Jacksonville, Florida, and Dakota County, Minnesota offices. Law firms retained by Lender Processing Services also often use their own employees, posing as officer of Mortgage Electronic Registration Systems, to produce the needed Assignments.

  • Since the vast majority of homeowners do not retain counsel in foreclosure proceedings, this flawed system has worked very effectively for the last few years, with courts all over the country rarely questioning why so many mortgage companies had officers in Alpharetta, Georgia, or why Trusts that closed in 2005 and 2006 were just obtaining Mortgage Assignments in 2009 and 2010. Most courts never even questioned why companies long-dissolved, such as Option One, could still be executing documents years after the dissolution.

  • While the closing of the Alpharetta office may be a sign that these fraudulent activities will finally be exposed and addressed, for the time being, it is just a matter of an unsatisfactory end of one small facet of an enormous and far-reaching problem.

Source: Fraud Digest - April 13, 2010 news item.

Thanks to "Deontos .is" for the heads-up on this story.

NY Court Slams Loan Modification Racket For Ripping Off Homeowners In Financial Distress; Holds Owner Personally Liable For Damages, Penalties

From the Office of the New York Attorney General:
  • Attorney General Andrew M. Cuomo [] announced a favorable decision in a lawsuit filed by the Attorney General against American Modification Agency, Inc. (“Amerimod”), formerly one of the largest foreclosure rescue companies in the country, and its owner and president Salvatore Pane, Jr. New York Supreme Court Justice Emily Jane Goodman found that Amerimod and Pane engaged in fraudulent, deceptive, and illegal business practices that violated New York’s consumer protection and real property laws.


  • The Court [] ruled [among other things] that Amerimod violated New York’s distressed property consulting statute, Real Property Law § 265-b, by charging illegal, upfront fees for its loan modification services, failing to provide contracts in the language of its customers, especially Spanish, and failing to provide homeowners with the legally required notice of their right to cancel within five business days.

  • The decision and order holds Pane personally liable for engaging in fraudulent and illegal acts, noting that Pane appeared in numerous commercials touting Amerimod’s services, approved expenditures and the content of marketing, and made multiple misleading statements to the press.(1)

For the entire New York AG press release, see Cuomo Announces Favorable Decision In Lawsuit Against New York-Based "Amerimod" Loan Modification Company (Court Rules That Company Fraudulently Charged Homeowners Illegal Fees for Loan Modifications It Never Delivered; Thousands of Homeowners Victimized Nationwide).

In a related story on the Amerimod loan modification racket and its owner and president Salvatore Pane, Jr., see The New York Times: One Last Place to Get Fleeced on a Mortgage.

For the relevant court documents in this litigation, see:

(1) In footnote 3 of her ruling (see permanent injunction, pg. 12), Justice Goodman indicates that the Court will forward the Decision and Order, and the Judgment in this case to the office of the District Attorney, presumably for a consideration of possible criminal charges.

Jury Convicts Real Estate Agent In Mortgage Payment Skimming Scam Involving Naive Homebuyers, Unwitting Straw Purchaser

In Kitchener, Ontario, The Record reports:
  • A former Cambridge real estate agent was found guilty [] of defrauding clients in three shady house deals. Steven Stojadinovich, 49, was also convicted by a jury in Superior Court in Kitchener of six counts of forgery while scamming naïve buyers in 2005 and 2006.


  • David Embro and his former wife, Natasha, thought they had bought their first house through Stojadinovich by assuming an existing mortgage. After making payments directly to Stojadinovich for about six months, they were suddenly evicted with their four young children. The family had to move so quickly, loading what they could into a single truck, that many of their belongings were left behind and ended up in the garbage.

  • It turned out the Embros had never actually owned the [] property despite giving Stojadinovich $11,000 as a down payment and making “mortgage” payments, often in cash, when he came to the house.


  • Central to the deals [...] was Ryan Dewulf, a young man with a good job and good credit whom Stojadinovich had befriended. Dewulf was sued and had to declare bankruptcy after Stojadinovich repeatedly used him to buy properties he could then resell with assumable mortgages.

For more, see Cambridge realtor convicted of scamming naïve buyers.

NYC Man Cops Plea To Attempted Sale Of Commercial Building He Didn't Own

From the Office of the Manhattan District Attorney:
  • Manhattan District Attorney Cyrus R. Vance, Jr., [] announced the guilty plea of HENRY VARGAS, 36, who attempted to sell a commercial building he did not own to the New York Road Runners, a Manhattan not-for-profit running organization that offers year-round races, including the ING New York City Marathon. VARGAS pled guilty to Attempted Grand Larceny in the First Degree and Forgery in the Second Degree. VARGAS is expected to receive a sentence of 5 to 10 years in state prison pursuant to [the] plea.


  • VARGAS admitted in court [] that he fraudulently passed himself off as the majority owner of the building, located at 21-41 Lenox Avenue, just north of Central Park, using false statements and forged documents to trick investors into believing that he was the majority owner of the LLC that actually owns the building. In the fall of 2008, VARGAS entered into a contract to sell the building to the New York Road Runners for $8.5 million. Pursuant to that agreement, the New York Road Runners made a $1 million down payment into an escrow account.

For the Manhattan DA press release, see District Attorney Vance Announces The Guilty Plea Of Henry Vargas.

Wednesday, April 14, 2010

Oregon Regulators Open Probe Into Portland-Based Firm's Finance Activities In Connection With Homeowners Facing Foreclosure

In Portland, Oregon, The Oregonian reports:
  • State regulators have opened a formal civil investigation into a mortgage lender affiliated with the Aspen Capital investment firm. Some of Aspen Capital's executives created the lender,Gregory Funding, in 2004 to offer high-interest rate loans to borrowers on the verge of foreclosure.

  • The firm's executives said their goal was to help people in a financial pinch while turning profits for investors. But about 49 percent of the firm's mortgages issued in the Portland area over five years fell into foreclosure, according to The Oregonian's analysis of property records. That failure rate is within the range of poorly performing subprime loans that ignited the recession.

  • Another Aspen affiliate, FC Help, helped halt foreclosures by buying homes from struggling borrowers at less than market value, then paying off their delinquent loan. The firm offered to rent the home back to the resident or sell it back for a profit. In response to questions from The Oregonian, state regulators said earlier this year that they would review Aspen's lending and foreclosure-rescue affiliates to see if they violated consumer protection laws.

For more, see State regulators open civil investigation into Aspen Capital's mortgage affiliate.

See also, The Oregonian: Foreclosure rescues by Aspen Capital affiliate -- a lender of last resort -- failed nearly half the time.

Another Couple In Foreclosure Successfully Stalls Legal Action Against Home; Lender Fails To Prove It Had Right To Foreclose

In Miami, Florida, the Daily Business Review reports:
  • Diana and John Cirigliano can’t wait to face off with Wells Fargo at a foreclosure trial. A Miami-Dade circuit court judge last month sided with them, when he ruled that the lender had failed to prove it had the right to foreclose on their Miami Beach condo.


  • The couple represents a small but growing group of home owners who are scoring victories in their fight against foreclosures. The Ciriglianos recently persuaded the court to deny their lender’s motion to sell their condo at a foreclosure auction because the lender couldn’t prove it was the true owner of the loan.(1)

  • In the on-going battle between lenders and homeowners facing foreclosure, some persistent owners are pushing to have a judge — not the lender — decide the future of their home. Their defense: Lenders are increasingly unable to show proper documents proving they have the right to seize their homes.


  • Defense lawyer Thomas Ice in West Palm Beach said he has two foreclosure suits set for trial later this month. In both cases, the home owners successfully questioned the lenders’ right to take their properties. “You should see more of them [go to trial] if they are well defended and you have a fair judge,” said Ice, with Ice Legal in West Palm Beach. "[Lenders] made enough mistakes and don’t have all the paperwork they need to properly get a summary judgment so they should be denied and go to trial.”

For more, see Mortgage Meltdown: Distressed homeowners take on lenders in court.

(1) According to the story, Wells Fargo couldn’t prove it owns the loan originally made in 2005 by now-defunct Greenpoint Mortgage Funding. Proving ownership can be difficult at a time when loans are bundled, securitized and sold multiple times to numerous investors. The loans are owned by a trust, which often hires a loan servicer to collect the mortgage payments from borrowers. When the notes were sold and resold, they were to be endorsed as part of the transfer to a new buyer, the story states. In this case, two things reportedly worked against Wells Fargo, according to the homeowners' Miami lawyer, Arturo Alfonso:

  • The loan had not yet been assigned to Wells Fargo when the lender filed suit against the couple in May 2008,
  • It failed to provide documents — called securitization agreements — that were filed with the Securities and Exchange Commission that showed who owned the note.

They couldn’t show any evidence of how the loan went from Greenpoint to Wells Fargo,” Alfonso reportedly said. “We asked for the agreements but they never gave them to us.”

Florida Bar Boots 13, Suspends 11 Others Among 27 Attorneys Disciplined For Conduct Unbecoming An Officer Of The Court

The latest issue of The Florida Bar's quarterly gossip sheet is out, listing attorneys licensed in the state who have been recently disciplined for ripping off client cash, playing fast and loose with escrow/trust funds, and otherwise engaging in conduct unbecoming an officer of the court. Some examples:
  • During the course of representing a client in a foreclosure matter, one attorney created fraudulent letters and lied under oath;

  • Another attorney represented a company in a foreclosure sale and received $308,000 to be held in trust for use at the sale. When the funds were not needed for the foreclosure, he pocketed the cash for his own purposes, without the permission of the client. He subsequently failed and refused to return the funds to the client;

  • A third attorney formed a real estate law group and entered into an agreement with a non-lawyer. Under the terms of the agreement, she became responsible for approximately 600 client files (believed to be primarily foreclosure rescue, loan modification, or similar cases). When the business relationship was severed, she abandoned all legal representation and she failed to notify the clients and the courts of her termination of services. She also failed to refund clients fees;

  • A fourth attorney received $80,000 from clients to be used for a loan transaction. The intended borrower subsequently died and the attorney simply kept the cash for his own benefit without the clients' permission.

No word yet on any run on The Florida Bar's Clients' Security Fund.(1)

For the rest of this quarter's reported escapades, and the form of discipline meted out to these scheming solicitors, see Florida Supreme Court Disciplines 27 Attorneys.

(1) The Florida Bar's Clients' Security Fund compensates people who have been victims of of misappropriation or embezzlement of cash or property by a Florida-licensed attorney. For those ripped off by dishonest attorneys in other states and Canada, see:

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

Atlanta Feds Indict Three In Alleged Reverse Mortgage Fraud Conspiracy

From the Office of the U.S. Attorney (Atlanta, Georgia):
  • JONATHAN ALFRED KIMPSON, 27, of Lithonia, Georgia, and GIA HARRIS, 26, of Atlanta, Georgia, have been indicted by a federal grand jury on charges of conspiracy to commit financial institution fraud involving so-called "reverse" mortgages. KIMPSON was also charged with aggravated identity theft and wire fraud. KELSEY TORREY HULL, 38, of Lithonia, Georgia, was charged on February 25, 2010, in a Criminal Information related to the same scheme, on a charge of financial institution fraud and conspiracy.

  • Acting United States Attorney Sally Quillian Yates said, “These defendants are charged with profiting from the corruption of an FHA-insured program designed to assist seniors with either cash for equity in their home or with funds toward the purchase of a home. These defendants allegedly altered real estate records, used fake documents, and posed as realtors. This abuse of the system took money away from qualified senior citizens who need these funds. With these charges, we have taken the first steps to stop this crime and to reverse the damage these crimes have caused.”

For the entire U.S. Attorney press release, see Three Members Of A "Reverse" Mortgage Fraud Ring Charged (Fraudsters Profited from FHA-Insured Reverse Loans Intended to Benefit Seniors).

Tuesday, April 13, 2010

Foreclosed Homeowners Getting Caught Flat Footed By Subsequent Legal Actions By Lenders For Collection Of Unpaid 2nd Mortgage Loans

The Wall Street Journal reports:
  • After losing her condo in San Diego to foreclosure last year, Charissa Kolich thought that at least she was free of mortgage bills. But Wells Fargo & Co., which holds a home-equity loan made five years ago to Ms. Kolich, last month filed a lawsuit against her in the Superior Court of California, San Diego County, seeking to collect the nearly $72,000 it said she still owed on that second mortgage. "This was all kind of a shock," says Ms. Kolich, a food-service administrator recently diagnosed with inoperable brain cancer.

For more, see Second Mortgages Vex Borrowers.

Pennsylvania Victim Of Nationwide "Operation Homewrecker" Sale Leaseback Foreclosure Rescue Scam About To Lose Home To Foreclosure

In Chester County, Pennsylvania, The Philadelphia Inquirer reports:
  • Nothing short of a miracle, it seems, will keep Melissa Miller in the house in Honey Brook, Chester County, that has been part of her family for more than a century. Despite her best efforts, it goes to sheriff's sale Thursday. The house is Miller's home, but she has not owned it since 2006, when she tried to save it with an "unconventional refinancing" and ended up being scammed out of the legal title to the property.

  • Miller, 40, is one of 350 victims of a complicated mortgage-fraud scheme federal prosecutors have dubbed "Operation Homewrecker."(1) [...] "I literally gave my house to these people without knowing," Miller said in an interview. "I never had any intention of losing my house, let alone selling it."

  • From 2004 to 2006, the mortgage-fraud scheme entangled homeowners who were in financial trouble. "These are not people who overextended themselves and bought McMansions," said U.S. Attorney Ellen V. Endrizzi, one of the government prosecutors handling the case. "These are people who fell on hard times. It's so heartbreaking because nothing can be done for them."

For more, see Mortgage scheme costing Chesco woman her home.

(1) According to the story, the alleged sale leaseback, foreclosure rescue equity stripping scam was led by Charles Head of Los Angeles, and there are currently 16 defendants remaining from two 2008 Federal indictments (for the original indictments, see U.S. v. Head, et al. - Head #1, and U.S. v. Head, et al. - Head #2). All defendants have opted for jury trials, according to documents filed March 5 in U.S. District Court for the Eastern District of California in Sacramento. Charges against them include mail fraud and conspiracy to commit mail fraud, money laundering, and related offenses, U.S. Attorney Ellen V. Endrizzi said. Though some defendants already have pleaded guilty, trials for the others probably will not start until May 2011, the story states.

Go here for more on the Sacramento, California Feds "Operation Homewrecker" nationwide investigation into the alleged scam that targeted homeowners in dire financial straits, fraudulently obtaining title to over 100 homes and stole millions of dollars through fraudulently obtained loans and mortgages, and here for other posts on this alleged foreclosure rescue scam.

Alabama Family Faces Foreclosure On Recent Home Purchase; Escrow Agent Failed To Pay Off Former Owner's Existing Mortgage Out Of Closing Proceeds

In Dothan, Alabama, the Dothan Eagle reports:
  • A Dothan family is scrambling to save their new home after it appears the money that was supposed to pay off the existing mortgage on the home has disappeared. Foreclosure on the home is scheduled for April 27, just 20 days after Chester and Judy Nolin moved into their new home in Dothan.

  • The Nolins recently bought a house in Dothan after selling their home in Ozark. They got a realtor and applied the money gained from the sale of the Ozark home to the Dothan home. The amount did not completely satisfy the mortgage amount, so they borrowed additional money. The realtors suggested using local company Title Pro Closings to handle the closing, which appeared to go smoothly in late January.

  • According to the Nolins and their attorney, David Hogg, Title Pro Closings was supposed to pay the existing mortgage holder to satisfy the mortgage. However, as the Nolins were beginning to decorate their new home this week, they learned their Whitfield Estates home was on the list for foreclosure. “They’re out of their house in Ozark, about to be put out in Dothan,” Hogg said. “They have learned the money from the equity in their house in Ozark was never applied to pay off the existing mortgage on their new home in Dothan.”

  • Hogg said he has had no success reaching anyone at Title Pro Closings. He fears other homebuyers (and sellers) may have been affected. The matter is under investigation by the Houston County Sheriff’s Department. No arrests have been made at this point. “We’re doing everything we can to protect the Nolins,” Hogg said.

Source: Family in shock after foreclosure notice on home supposed to be paid for.

Ohio Attorney Gets Off With Hand Slap For Engaging In Lawyer-Renting Racket With Alleged Upfront Fee Foreclosure Rescue Operator

In a recent ruling by the Ohio Supreme Court, attorney Christopher C. Harwood dodged a bullet and got off with a hand slap for his association with an alleged Ohio forclosure rescue racket in which he, in essence, allowed himself to be "subleased" out by the alleged racket to homeowners facing foreclosure.

The foreclosure companies, American Foreclosure Professionals, Inc. and Foreclosure Assistance USA, Inc., charged between $900 and $1,200 for the services they provided and informed customers that the fee included legal representation arranged and paid for, in part, by the companies. The foreclosure companies asked their customers to execute a request for legal services and then forwarded the executed request and the client's contact information and goals, e.g., keeping or selling the property, to attorney Harwood. He received $100 to file an answer in each case referred to him.(1)

The court agreed with a recommended six-month license suspension, with the entire period stayed upon the condition that Harwood commit no further misconduct.(2) Apparently, Harwood is not currently in private practice as the ruling noted that he now works as a staff attorney for a Kentucky court of appeals judge.

For the ruling, see Cincinnati Bar Assn. v. Harwood (Slip Opinion), 2010-Ohio-1466 (4/7/2010).

(1) In the same month that Harwood voluntarily terminated his relationship with the foreclosure companies and stopped accepting their referrals, the Ohio Attorney General filed a complaint against American Foreclosure Professionals, Inc. and Foreclosure Assistance USA, Inc. in the Hamilton County Court of Common Pleas alleging violations of, inter alia, the Ohio Consumer Sales Practices Act, R.C. 1345.01 et seq. The attorney general alleged that the foreclosure companies (1) failed to deliver services within the prescribed period of time, (2) knowingly sold services to consumers that carried no substantial benefit and resulted in detrimental reliance by the consumer, and (3) made false or misleading representations to consumers.

(2) The court made this, among other, observations on this case:

  • These associations present "the same ills as have respondent's alliances — insufficient attorney-client communication and case preparation, nonattorney promotion of the lawyer's legal services, the aiding of the unauthorized practice of law, and the sharing of legal fees. Together, these failings signal the surrender of an attorney's ability to exercise independent professional judgment on a client's behalf and manifest an overarching breach of the lawyer's duty of loyalty to the client." Patterson at ¶ 33, citing Willard.

Monday, April 12, 2010

Massachusetts AG: BofA Loan Officer Funneled Homeowners Seeking Loan Mods From Lender To His Own Private Company To Screw Them Over With Upfront Fees

In Boston, Massachusetts, The Boston Globe reports:
  • A former mortgage loan officer with Bank of America Corp. is being sued by the Massachusetts attorney general's office for allegedly demanding illegal fees from homeowners who sought help to avoid foreclosure.

  • Attorney General Martha Coakley said [] her office has sued Christian Hayes of Danvers in Suffolk Superior Court for allegedly "targeting and preying upon Massachusetts residents" who were seeking loan modifications from Bank of America. Instead, the state says, Hayes "deceptively funneled" homeowners' requests to his company, Foreclosure Alternatives, and demanded as much as $1,500 in up-front fees without offering legitimate help. It is illegal in Massachusetts to require up-front fees from homeowners seeking help to stave off foreclosure.

For more, see State alleges ex-loan officer 'preyed' on owners.

See also, The Salem News: Danvers man is sued by AG over alleged mortgage con (Hayes falsely held himself out to be a lawyer, according to the attorney general, and he allegedly told one homeowner that his connection with Bank of America gave him "exclusive access" to the bank's loan modification process for homeowners).

Miami Feds Bag Wells Fargo Loan Officer, Dozen Others In Alleged $16.9M Mortgage Fraud Racket

In Miami, Florida, the South Florida Sun Sentinel reports:
  • Federal officials have charged 13 individuals in an alleged elaborate $16.9 million mortgage fraud scheme targeting sales of luxury condominimum units in downtown Miami and single family homes in Coral Gables, according to an unsealed superseding indictment. According to court documents, the fraud ring – which included a real estate broker and a Wells Fargo Bank loan officer – recruited "straw" buyers to make fradulent loan applications to Wells Fargo, inflating their salary and deposit figures so they could qualify for loans in excess of $1 million. At closing, those charged then diverted millions by skimming the difference between the inflated purchase price and what actually was paid to the seller, officials said.

For more, see Thirteen charged in Miami luxury condo mortgage fraud scheme.

For the U.S. Attorney (Miami, Florida) press release, see Thirteen Mortgage Fraud Defendants Indicted In $16.9 Million Bank Fraud Scheme Involving High End Condominium Units.

Proposal To Make Florida Non-Judicial Foreclosure State Dies In Committee

In Tallahassee, Florida, The Palm Beach Post reports:
  • Proposed legislation that would allow banks to foreclose on Florida homes without going to court died in a House committee Monday, giving supporters scant hope for success this year. "We knew this was a big change in Florida law and we were asking a lot for it to happen in one session," said Anthony DiMarco, executive vice president for government affairs for the Florida Bankers Association. "When you have this kind of policy change, it can take more than one year."

For more, see Nonjudicial foreclosure bill dies in House committee.

WaMu Lending Practices Were Laced With Fraud, Encouraged The Screwing Over Of Borrowers, Say Senate Investigators

In Washington, D.C., The Associated Press reports:
  • The mortgage lending operations of Washington Mutual Inc., the biggest U.S. bank ever to fail, were threaded through with fraud, Senate investigators have found. And the bank's own probes failed to stem the deceptive practices, the investigators said in a report on the 2008 failure of WaMu.

  • The panel said the bank's pay system rewarded loan officers for the volume and speed of the subprime mortgage loans they closed. Extra bonuses even went to loan officers who overcharged borrowers on their loans or levied stiff penalties for prepayment, according to the report being released Tuesday by the investigative panel of the Senate Homeland Security and Governmental Affairs Committee.

For more, see Investigation finds fraud in WaMu lending (Senate report: Failed bank’s own action couldn’t stop deceptive practices).

See also, The New York Times: Memos Show Risky Lending at WaMu.

Mortgage Holders' Lawyers Say Alleged N. Texas Rent Skimming Operator "Has Siphoned Rents From The Properties ... To Fund An Extravagant Lifestyle …"

In Dallas, Texas, continues its coverage on the probe into an alleged rent skimming racket that left would-be home sellers facing foreclosure:
  • CBS 11 is learning more about the alleged business practices of [] North Texas man [Matthew Misczak,] accused of cheating dozens of clients across the country. He's accused of taking tens of thousands of dollars and people's homes. Angry customers say the business man is living the good life, and they're paying for it.


  • Misczak filed for bankruptcy.(1) Court papers reveal lawyers for the mortgage holders found Misczak 'has siphoned rents from the properties... To fund an extravagant lifestyle…'


  • Adria Allen worked for Misczak for four months before leaving. She remembers when Misczak suddenly moved out of his office in a Watauga strip mall. "I asked 'why did we move?' They said they were embarrassed with the way it looked." The next thing she knew, Misczak's new office was inside a Farmers Branch chiropractor's clinic.

For more, see: Customers: We Paid For Extravagant Lifestyle.

(1) See Experts: Taxpayers May Have Paid Forclosure Losses:

  • Records show when Misczak filed for bankruptcy in 2008 he had more than 100 houses. Former employees claim he still has about 60 houses in his name, though it's still unclear how many of them have been foreclosed on and how many of those had taxpayer-backed loans.

California AG: Jail Sentences "A Warning Shot To Loan-Modification Consultants: If You Swindle Homeowners, You Face Serious Time Behind Bars"

From the Office of the California Attorney General:
  • In a clear "warning shot" to unscrupulous loan-modification consultants, Attorney General Edmund G. Brown Jr. [] announced that two women have each been sentenced to one year in jail and ordered to repay dozens of homeowners who were charged thousands of dollars in up-front fees for non-existent foreclosure-relief services.

  • Marianne Curtis, 69, of Costa Mesa and Mary Alice Yraceburu, 46, of Riverdale, who operated Fresno and Orange County-based Foreclosure Freedom, pleaded guilty last month to 71 criminal counts, including grand theft, conspiracy and unlawful foreclosure consulting. Both will serve one year in Orange County jail and an additional four years of probation.(1)

For the California AG press release, see Brown Prosecution Sends Phony Foreclosure Consultants To Jail And Recovers Stolen Funds.

For the charging document, see People v. Curtis, Yraceburu.

(1) "Curtis and Yraceburu shamelessly exploited homeowners desperate to avoid foreclosure, charging up to $1,800 in up-front fees for loan modifications that were never delivered," Brown said. "Today's jail sentences send a warning shot to loan-modification consultants: If you swindle homeowners, you face serious time behind bars."

Idaho Regulator Issues C&D Order Against Alleged California Loan Modification Racket

From the Idaho Department of Finance:
  • The Idaho Department of Finance announced the issuance of a cease and desist order [] against California-based "Relief Law Center," stemming from alleged unlawful mortgage modification solicitations targeted to Idaho homeowners. "These solicitations are among the most deceptive we have seen," Finance Department Director Gavin Gee said.

  • Mailers from "Relief Law Center," also doing business as "USA Loan Auditors," were directed to Idaho homeowners and falsely represented that Idaho homeowners’ mortgage loans were part of a predatory lending investigation. Gee called the Relief Law Center’s tactics "reprehensible," and said the deceptive mailer was nothing but a ploy to lure financially strapped homeowners to make a telephone call leading to a pitch for payment of $1,200 in upfront fees.

For the Idaho Department of Finance press release, see California Company Ordered to Cease and Desist Mortgage Modification Solicitations in Idaho.

Minn. Regulator Files Suit Against Closing Agent Accused Of Pocketing Payoff Proceeds In Alleged $1.1M+ Escrow Swindle; Criminal Charges Under Review

In Forest Lake, Minnesota, the Star Tribune reports:
  • A Forest Lake real estate closer is accused of pocketing more than $1.1 million from dozens of real estate transactions in the Twin Cities area by failing to pay off original mortgages or pay forward numerous transaction-related fees. Two of the properties were being bought by the city of Forest Lake, which lost more than $205,000. Many of the cases involved hundreds or thousands of dollars but the largest, at $594,000, involved a bank that said funds given to the closer, a company owned by Cynthia T. Strand, were not used to pay off the first mortgage on the property.


  • According to the 14 counts of civil charges filed by the Commerce Department, Strand Closing Services in Forest Lake took in money that was meant to pay off mortgages and related fees but failed to pass it along in at least 42 instances. Her title insurance, real-estate closer and notary licenses have been revoked and she may face a civil penalty.(1)

  • Washington County Attorney Doug Johnson said the Commerce Department has referred the case to his office to review for possible criminal charges. "We're in the middle of looking at it," he said, declining to speculate on whether criminal charges would be filed.(2)

For the story, see Forest Lake closing firm accused of pocketing cash (State officials say the fraud scheme involved the company not paying off mortgages).

(1) Strand is also accused of failing to record title changes in several cases, failing to remit title insurance premiums, using fraudulent practices and demonstrating financial irresponsibility, the story states.

(2) Any person who has lost money due to the fraudulent, deceptive or dishonest practicesof, or conversion of trust funds by, a Minnesota-licensed closing agent, real estate broker, or real estate salesperson should contact the Minnesota Department of Commerce's Real Estate Education, Research and Recovery Fund for information on recovery of some or all of the monetary losses suffered.

Sunday, April 11, 2010

Unfair, Deceptive Practices In Connection With Post-Foreclosure Judgment Loan Workout Negotiations Subject To NJ Consumer Fraud Act

A recent ruling by a New Jersey appellate court recently held that unfair or deceptive practices by a lender or loan servicer in connection with the negotiation of an agreement to cure a default in a mortgage following the entry of the judgment of foreclosure(1) is subject to the provisions of the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -106.(2) That court also held that this was the case even though the mortgagor/homeowner did not actually sign the promissory note (and, consequently, not liable for repayment thereof) that was the subject of the foreclosure action.(3) It stated that "[t]here [was] little doubt that, if [homeowner] had been the initial debtor and her attempts to cure default had taken place before entry of the order of foreclosure, the transactions would have been covered by the CFA ..." and "f[ound] no principled reason to distinguish the present structurally identical transactions, albeit by a non-debtor mortgagor, executed after a judgment of default had been entered."

Inasmuch as the New Jersey CFA allows for an award of triple damages and attorneys' fees to a winning homeowner, this ruling may operate to encourage more attorneys to take on cases on behalf of New Jersey homeowners who, when seeking loan modifications from their lender or loan servicer, get jerked around or are otherwise subjected to unfair or deceptive practices.(4)

For the ruling, see Gonzalez v. Wilshire Credit Corp., DOCKET NO. A-2634-08T2, 988 A.2d 567; 2010 N.J. Super. LEXIS 16 (App. Div. 2010).

(1) The court observed that the homeowner who filed suit "... essen[tially] claims that Wilshire committed consumer fraud in calculating the amounts due transforming, as the result of the terms of annually or biannually renegotiated agreements, a default curing obligation into a never-terminating cash cow."

(2) The court points out that the CFA, at N.J.S.A. 56:8-2, provides (bold text is my emphasis, not in the original text):

  • The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice . . . .

The court then went on to explain the meaning of the word "unconscionable" as used in the CFA when referring to commercial practices that are prohibited, and quoted its earlier ruling in Associates Home Eq. Serv's v. Troup, 343 N.J. Super. 254, 278 (App. Div. 2001) in that regard (bold text is my emphasis, not in the original text):

  • The word "unconscionable" must be interpreted liberally so as to effectuate the public purpose of the CFA. Kugler v. Romain, 58 N.J. 522, 543 (1971). It is not intended to "erase the doctrine of freedom of contract, but to make realistic the assumption of the law that the agreement has resulted from real bargaining between parties who had freedom of choice and understanding and ability to negotiate in a meaningful fashion." Id. at 544. The standard of conduct contemplated by the unconscionability clause is "good faith, honesty in fact and observance of fair dealing [,]" and the need for application of that standard "is most acute when the professional seller is seeking the trade of those most subject to exploitation — the uneducated, the inexperienced and the people of low incomes." Ibid. Whether a particular practice is unconscionable must be determined on a case-by-case basis. Id. at 543.

(Note: The legal analysis for determining whether a commercial practice is "unconscionable" under the New Jersey CFA appears to differ (and be much looser) from the analysis for determining the unconscionability of a contract under the common law. See, for example, Muhammad v. County Bank of Rehoboth Beach, Delaware, 189 N.J. 1; 912 A.2d 88 (2006), in which the New Jersey Supreme Court cited Sitogum Holdings, Inc. v. Ropes, 352 N.J. Super. 555, 564-66, 800 A.2d 915 (Ch.Div.2002) for the general proposition "that unconscionability traditionally entails discussion of two factors: procedural unconscionability, which "can include a variety of inadequacies, such as age, literacy, lack of sophistication, hidden or unduly complex contract terms, bargaining tactics, and the particular setting existing during the contract formation process," and substantive unconscionability, which generally involves harsh or unfair one-sided terms.")

(3) The court stated the following in giving its ruling (bold text is my emphasis, not in the original text; footnotes in original text omitted):

  • We acknowledge that the transactions at issue in this case did not directly involve the original mortgage loan but, instead, agreements to cure default between a mortgagor who was not a party to that loan and the assignee and servicer of that loan. However, as the Lemelledo Court observed: "the CFA could not possibly enumerate all, or even most, of the areas and practices that it covers without severely retarding its broad remedial power to root out fraud in its myriad, nefarious manifestations." Lemelledo, supra, 150 N.J. at 265 (citing Federal Trade Comm'n v. Sperry & Hutchinson Co., 405 U.S. 233, 240, 92 S. Ct. 898, 903, 31 L. Ed. 2d 170, 177 (1972)). Instead, the applicability of the CFA "hinges on the nature of a transaction, requiring a case by case analysis." Papergraphics, supra, 389 N.J. Super. at 13. While we would hesitate greatly to hold that most "settlements" are subject to the CFA's strictures, we regard these particular agreements to be so closely allied to the cures of default recognized in N.J.S.A. 2A:50-57 as to warrant coverage.

  • There is little doubt that, if Gonzalez had been the initial debtor and her attempts to cure default had taken place before entry of the order of foreclosure, the transactions would have been covered by the CFA under Lemelledo and Troup. We find no principled reason to distinguish the present structurally identical transactions, albeit by a non-debtor mortgagor, executed after a judgment of default had been entered.

  • The CFA offers a remedy to "[a]ny person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any method, act, or practice declared unlawful under this act" and affords legal and equitable relief, treble damages and reasonable attorneys' fees to successful litigants. N.J.S.A. 56:8-19.

  • We find that Gonzalez' status as a signatory to the agreements to cure default entered with Wilshire provides her with standing under the CFA. In the circumstances presented, Wilshire's arguments regarding the lack of privity between Gonzalez and Wilshire arising from the making of the initial loan and the issue of her status as a "consumer" of that loan are irrelevant. A separate contractual relationship between Gonzalez and Wilshire exists that involves the loan, but does not arise directly from it.

  • Further, we find that the monetary damages that Gonzalez claims to exist as the result of Wilshire's allegedly unconscionable practices, if proven, constitute the statutorily-required "ascertainable loss." Weinberg v. Sprint, Corp., 173 N.J. 233, 237 (2002) (holding that to have standing under the CFA, "a private party must plead a claim of ascertainable loss that is capable of surviving a motion for summary judgment.").

  • We disagree with the motion judge's conclusion that Gonzalez could obtain relief in this matter only by a motion to vacate, modify or enforce the "settlement" with Wilshire. Such a motion would not effectively address the unconscionable practices that Gonzalez claims to have occurred here. Moreover, contrary to the conclusion of the motion judge, we do not find the casting of this matter as a CFA claim to signify an improper motive on counsel's part. The remedies of treble damages and an award of attorneys' fees were created to address just such a circumstance as has allegedly arisen here.

  • As the Court stated in Wanetick v. Gateway Mitsubishi, 163 N.J. 484 (2000): "two of the three main purposes of the Act are `to punish the wrongdoer through the award of treble damages, and, by way of the counsel fee provision, to attract competent counsel . . . .'" Id. at 490 (quoting Lettenmaier v. Lube Connection, Inc., 162 N.J. 134, 139 (1999)). See also Cox v. Sears Roebuck & Co., 138 N.J. 2, 24-25 (1994); Sema v. Automall 46 Inc., 384 N.J. Super. 145, 151 (App. Div. 2006).

  • We thus conclude that Gonzalez has offered sufficient factual evidence of unconscionable conduct on the part of Wilshire to withstand a motion for summary judgment Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995), and that the motion judge was mistaken in his determination that the CFA is inapplicable to her claim. Manalapan Realty v. Manalapan Tp. Comm., 140 N.J. 366, 378 (1995).

(4) All states and the District of Columbia have some form of consumer protection law (regrettably, many are less effective and consumer-friendly than others) that may be applicable in situations similar to this one. For more on this point, see the National Consumer Law Center report: CONSUMER PROTECTION IN THE STATES: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

State Lawmakers Pass 11th Hour Bill Allowing Many Californians To Dodge State Income Tax On Debt Forgiveness On Short Sales, Foreclosures, Loan Mods

In Sacramento, California, The Sacramento Bee reports:
  • Tax relief is on the way for thousands of fearful California mortgage borrowers. Most no longer face a double whammy of losing their homes – and then paying a big state tax bill on the forgiven debt. State lawmakers Thursday passed SB 401, a bill by Sen. Lois Wolk, D-Davis, to exempt borrowers who lost homes to foreclosure or short sales in 2009 from state taxes that can run into thousands of dollars. The same is true for certain types of loan modifications. State tax officials say 100,000 people statewide will be spared paying tax they otherwise would owe.(1) A spokesman for Gov. Arnold Schwarzenegger said he will sign the bill.

For more, see California won't tax forgiven home debt.

See also: Governor Gets What He Wants on Short Sale Tax.

(1) According to the story, the California Franchise Tax Board says the tax forgiveness measure mostly applies to people who refinanced their homes to get better interest rates or extract equity, and then had a short sale or foreclosure where debt was forgiven. But the tax board also warned that refinanced dollars taken out as cash and spent on items other than home improvements may be taxable.

Now-Disbarred Lawyer Cops Plea To $4.5M Swindle Of Elderly Clients' Trust Funds; 97-Year Old Victim Out $1M, Left Unable To Pay Ass't Living Expenses

From the Office of the U.S. Attorney (Atlanta, Georgia):
  • M. DEWEY BAIN, 59, of Cumming, Georgia, pleaded guilty [] in federal district court to defrauding his clients of over $4.5 million in trust funds that he had misrepresented were in investments earning good returns. United States Attorney Sally Quillian Yates said of the case, “This defendant, an attorney formerly licensed in Georgia and Texas, entered into trust agreements with elderly victims, told them that he was placing their money in safe investments, and then lost it all after diverting it to his own personal and business use. His egregious abuse of trust defrauded clients out of more than $4.5 million in retirement savings and inheritance money.”


  • Under one of the trust agreements, BAIN originally invested the money of a 97-year-old client in certificates of deposit and paid her personal expenses out of the trust. He later liquidated the certificates based on false pretenses and moved the money to a bank account in his name. He then used the money in his business, even though she had specifically refused to permit such an investment because it was too risky. He also wrote checks off of her credit card account without her authorization. As a result of BAIN’s fraud, this victim lost nearly $1 million and was no longer able to pay for her assisted living residence. BAIN was disbarred in Georgia in October 2009.(1)

For the U.S. Attorney press release, see Disbarred Attorney Pleads Guilty To Defrauding Elderly Clients (Defendant Diverted Over $4.5 Million of Clients’ Trust Money For His Own Use).

(1) If a Georgia 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 State Bar of Georgia Clients' Security Fund 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.

Texas Consumer Reaches Confidential Settlement With Zombie Debt Buyer After Scoring $8.1M Jury Verdict In Suit Alleging Hostile Phone Manners

In Dallas, Texas, Workbench reports:
  • At courthouses across the United States, it has become increasingly common during the economic downturn for lawsuits to be filed against consumers to collect old debts. Lawyers who specialize in the practice are filing thousands of suits on behalf of large firms that have acquired debts from other companies. Although most people don't fight the suits and lose them by default, a Dallas woman bucked the trend last October.

  • Chrystal A. Snow challenged the validity of a $9,000 debt in a Dallas County Court-at-Law and countersued the debt collector for making improper phone calls, her attorney Ross Teter said. In a case that has received no media attention, Snow won her suit against Midland Funding LLC(1) and the jury hearing the case awarded her $8.1 million -- $250 for actual damages, $100,000 for mental anguish and $8 million in punitive damages, he said.

  • "The jury made a finding she did not owe the debt," Teter said in a phone interview. "We argued that they violated the Texas Fair Debt Collection Act by making harassing phone calls and the jury agreed." [...] Snow, who did not return requests for comment, has [subsequently] reached a confidential settlement with Midland, her attorney Teter said.
For more, see Woman Sues Debt Collector, Wins $8.1 Million.

(1) According to the story, Midland Funding is a subsidiary of Encore Capital Group, a company whose primary business is the acquisition and collection of "charged-off consumer receivable portfolios," according to its 2009 annual report filed with the Securites and Exchange Commission. "We acquire receivable portfolios at deep discounts from their face values," the annual report states. "[W]e have invested approximately $1.4 billion to acquire 28.8 million consumer accounts with a face value of approximately $43.8 billion."

West Virginia Couple Files Suit Against Lender For Oppressive, Abusive Collection Practices

In Berkeley County, West Virginia, The West Virginia Record reports:
  • An Upshur County couple is suing American General Home Equity after they claim the company engaged in a pattern of abusive debt collection practices. Ricky Miller and Sue Ellen Siler obtained a credit line loan secured by a home Miller owned, according to a complaint filed March 5 in Berkeley Circuit Court.


  • Miller and Siler claim they fell behind on their loan payments to American General, despite using all of their savings money and borrowing from family members. They claim after they fell behind in payments, American General engaged in a pattern of oppressive and abusive collection practices. The plaintiffs claim Oravec repeatedly and on numerous occasions used profanity and obscene language.

  • Oravec informed Siler that "he believed when he made the loan that the Millers would be unable to make the loan payments," according to the suit. The plaintiffs claim that making a loan with the intent that the loan will not be repaid and that the lender will obtain titled [sic] to the property through foreclosure is in violation of West Virginia Code. Miller and Siler are seeking damages as allowed under the Truth in Lending Act, the West Virginia Consumer Credit & Protection Act and other West Virginia law.

Source: Upshur couple sues over collection efforts.

Mortgage Lender's Alleged Sleazy Collection Practices Leads To Civil Suit Charging Violations Of WV Consumer Credit & Protection Act

In Jackson County, West Virginia, The West Virginia Record reports:
  • A Jackson County couple allege their mortgage lender crossed the line in attempting to collect on their delinquent account. Charles E. and Tammy J. Hatcher of Ravenswood filed suit on March 31 against Vanderbilt Mortgage and Finance. In their complaint filed in Jackson Circuit Court, the Hatchers allege the Maryville, Tenn.-based company employed inappropriate techniques, including threats of arrest, and relaying message through third-parties, in an attempt to get the Hatchers current on their mortgage payments.(1)


  • In their suit, the Hatchers accuse Vanderbilt of unlawful debt collection, unreasonable publication and misrepresenting the status of their account. As a result of Vanderbilt's actions, the Hatchers allege they "suffered fear of loss of home, and annoyance and inconvenience associated with the abusive and unconscionable servicing of their contract." The Hatchers seek damages in the amount of $4,300 in civil penalties for each violation of the state Consumer Credit and Protection Act, attorney fees and court costs. They are represented by Sara Bird with Mountain State Justice of Charleston.(2)

For the story, see Jackson couple sues Tenn. mortgage company over collection tactics.

(1) According to the story:

  • the Hatchers allege representatives from Vanderbilt began calling "two to three times a day, Monday through Saturday."
  • they singled out one representative who "threatened that the police would kick them out and padlock the door so that [they] would not be able to remove their belongings."
  • other representatives threatened seizure of the Hatcher's personal belongings, and suggested they find "a better place to live so their kids would not be homeless."
  • on more that one occasion, Tammy alleges a Vanderbilt representative called her a "liar" when she said a payment would be forthcoming from the portion of student loans she intended to use as living expenses.
  • on at least two occasions, the Hatchers allege Vanderbilt informed their friends they were behind on their mortgage. The Hatchers say both the mother of one of their son's youth football teammates, and an in-law told them relayed to them a message from Vanderbilt about the need to make a payment.
  • on a date not specified, Vanderbilt sent the Hatchers a letter saying they were willing to work out a plan to get them current on the mortgage. The agreement called for the Hatchers to make lump sum payments once their student loans were disbursed. Despite making three lump-sum payments of $1,830 as called for, the Hatchers allege Vanderbilt continued to inform third-parties about the delinquency in their mortgage, including a neighbor, and Tammy's mother and step-father after the January payment was made.

(2) According to their website, Mountain State Justice is a non-profit public interest law office dedicated to pursuing impact and significant litigation on behalf of low-income West Virginians, whose work currently focuses primarily on combating predatory lending and abusive debt collection techniques through individual and class action lawsuits, and who provide free legal services in their areas of practice to qualifying individuals.

Insurer Stiffed HOA On $5M In Connection With Fire Insurance Claim Over Blaze That Left 30 People Homeless: Lawsuit

In Galveston, Texas, The Southeast Texas Record reports:
  • Alleging it was paid only half of its stated limits on its insurance policy in following a huge fire last year, a local condominium owners' association has filed suit against its insurer, recent court documents say. The Maravilla Homeowners Association accuses Westchester Surplus Lines Insurance Co. of "failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement" after the plaintiff filed a claim for the four-alarm fire within the Maravilla Resort Condominiums on Galveston's West End on June 3, 2009. [...] The homeowners association asserts the stated limits were $10 million, but Westchester tendered only $5 million. [...] The Southeast Texas Record reported in October that the homeowners association filed suit against two businesses over alleged misconduct and overall negligence in relation to the blaze, which left more than 30 homeless.

Source: Galveston condo owners sue insurer over $5M in fire proceeds.