Saturday, June 19, 2010

Dozens In Daytona Get Boot Without Prior Notice As Rent Skimming Landlord Pockets Renters' Payments & Stiffs Bank, Losing Properties To Foreclosure

In Daytona Beach, Florida, WESH-TV Channel 2 reports:
  • Dozens of Daytona Beach residents were evicted on Friday, and they said they had no idea it was coming. Residents who live in the homes along Magnolia Avenue in Daytona Beach said they paid their rent, but they claim it was the landlord who didn't pay his.

  • More than a dozen families were displaced, and their belongings were thrown to the curb. Many in the development said they have no money and nowhere to live. Their landlord said he feels guilty, but he said the tenants knew it was coming. "I have no words about what's going on right now," said former resident Joy Soriano. The tearful mother of two was at a loss for words over suddenly losing her home. "We knew nothing about this happening," she said. "They just threw everything out in the street."


  • The bank foreclosed on the two homes six months ago, [the ex-owner/landlord] said, and he continued to pay the electric and cable. He said he told renters earlier this month that they would have to get out.

For more, see Dozens In Daytona Beach Unknowingly Evicted, They Say (Landlord Says He Told Renters Weeks Ago They'd Have To Move).

Foreclosure Purchaser Intimidated Renter's Minor Children, Driving Tenants From Home, Says Suit Seeking $1M+ In Damages On Behalf Of F'closed Landlord

In Rockville, Maryland, Courthouse News Service reports:
  • A couple who lost their rental home to foreclosure claim the buyers sent men to the house the next day to force their way in, demand the keys from the tenants' children, who were home alone, and tell the kids to leave, or they would "break the door and change the locks. We will throw all your stuff out."

  • Alexander Portillo and his wife say David Loring and Jason Greenwald, of Residential Value, intimidated their tenants so badly that the family vacated the property that night, though the defendants "never acquired lawful deed holders status" for the house.(1)


  • When the parents returned home, they took the children and immediately vacated, costing the Portillos 6 months in rent, they say. The Portillos sued Loring, Greenwald and Residential Value for trespassing, interference with contract, conspiracy and loss of consortium. They seek $9,900 in compensatory damages for the first three counts, $50,000 in compensatory damages for loss of consortium, and $250,000 in punitive damages for each count. The Portillos are represented by Jonathan Ai.

For more, see Foreclosure Nightmare Alleged in Maryland.

For the lawsuit, see Portillo v. Loring, et al.

(1) As I read the lawsuit, while the foreclosure purchaser may have been the winning bidder, he never completed the transaction, which would have resulted in a forfeiture of any deposit paid with the winning bid, and would have left the landlord in foreclosure as the continuing title owner of the home until another foreclosure sale could be scheduled and conducted.

Harassment Of Tenants In Foreclosed Homes Continues As Investors Ignore Federal Law

In Bakersfield, California, KGET-TV Channel 17 reports:
  • Amber and Tony Moore say their rental was foreclosed on and sold at auction last year. "On the 15th of September we watched the house get sold," said Moore. The Moores obtained a lawyer who assured them they had the right to live out their lease, but eventually they say the harassment got so bad they just decided to give up.

  • "They were constantly dropping us a three day notice, constantly threatening us with harassing phone calls, emails, even text messages. Stuff like 'get out," said Moore. "If you're protected by the federal law you're allowed to live out the term of your lease,"(1) said attorney Mark Roy with Greater Bakersfield Legal Assistance.(2) Roy says the only exception to that law are people renting from family or paying way below market value rent, or if the new owner intends to live there.

  • But Frank St. Clair with St. Clair Investments, says he buys about a dozen foreclosed properties a month, and he doesn't agree. "It appears that pertains to the banks that are the foreclosing entity. I'm not the foreclosing entity, I'm a third party, so I don't have to honor the lease," said St. Clair. "Well they're 100% wrong," said Treves. "They say that but if they fight us in court they'll lose."

  • In fact a renter is taking St. Clair to court over this issue next month. St. Clair says it's the first time anyone has challenged him, but he is confident he'll win. "We have a fairly conservative legal system around here so I feel pretty comfortable with it going that way in court," said St. Clair.

For the story, see Contact 17 Investigation: Renters' rights.

(1) See the Protecting Tenants at Foreclosure Act of 2009, which provides important federal protections for tenants in foreclosed properties, including the right to receive 90 days' notice before being required to leave the property and, in many cases, the right to remain for the length of the tenant's existing lease term.

See also, National Law Center on Homelessness & Poverty, Staying Home: The Rights of Renters Living in Foreclosed Properties.

(2) Greater Bakersfield Legal Assistance (GBLA) is a 501 (c) (3) non-profit organization that offers free legal services in civil matters to low-income persons residing in its service area within Kern County, California.

Tenants In Homes Facing Foreclosure Continue Feeling Uncertainty, Despite Protections Under Federal Law

In Orange Park, Florida, First Coast News reports:
  • At the Orange Park Parkridge Apartment Complex, residents are just finding out the property is in foreclosure. Pamela Carden lives there and is worried. "I don't know if I have to move; I don't know what our rights are as tenants," said Carden.

  • Carden's lease expires in August, but she's decided to start packing in case she has to leave in a hurry. "We have not been notified by the bank, nor the attorneys." But there are protections for renters living in foreclosed properties, said attorney Erica Shaffor of Three Rivers Legal Services.(1) "There's a new federal law that provides protection," she said.(2)

  • A landlord has to allow a tenant to live on the property at least three months from the time the foreclosure proceedings begin, she said. An attorney for the lender said tenants should have been informed. Even those on a month-to-month lease are still allowed to live on the property 90 days, said Shaffor. "However, (you) still have to stay current with your rent. If you fall behind you will be subject to an eviction," said Shaffor.

  • Carden is pleased that she doesn't have to move out in a hurry, but she said when her lease expires in August, she will have to find a new place to call home. "If you have to move and you have kids or pets, you have to be able to plan and to save," said Carden. This 90-day allowance also applies to anyone living in Section 8 housing.

Source: Orange Park Renter Discovers Apartment in Foreclosure.

(1) Three Rivers Legal Services, Inc. is a local, non-profit corporation which provides free civil legal services to low-income, eligible clients in seventeen counties throughout North Florida.

(2) See the Protecting Tenants at Foreclosure Act of 2009, which provides important federal protections for tenants in foreclosed properties, including the right to receive 90 days' notice before being required to leave the property and, in many cases, the right to remain for the length of the tenant's existing lease term.

See also, National Law Center on Homelessness & Poverty, Staying Home: The Rights of Renters Living in Foreclosed Properties.

Family Who Unwittingly Rented Foreclosed Home Gets Two Weeks Before Getting Boot; Files Theft Complaint With Cops Against Phony Landlord

In Seattle, Washington, KING-TV Channel 5 reports:
  • Phyllis Richmond has to move out of the South Seattle house that she has rented for the past eight months. She's a single mother who shares the four-bedroom house with her three sons. Richmond leased the house from a property management company run by Peter Dodsondance. She signed a year-long lease, paying $1,400 a month to a man who doesn't own the house. "I honestly think he needs to be arrested and go to jail for a long time," said Richmond, who was notified on Friday she must move out.

  • KING 5 News reported on Dodsondance's property management company in April when he rented out another home. He filed a declaration of abandonment, claiming he has the legal right to collect rent on a foreclosed home owned by someone else. The home Richmond is renting was foreclosed on in October 2009 and Aurora Loan Services in Bellevue took ownership. Aurora Loan posted an eviction notice on the property on Friday.

  • But today, Aurora Loan gave Richmond a two-week reprieve. She can stay in the home until the end of the month. "I'm grateful. I'm very grateful," said Richmond. Richmond has filed a theft complaint against Dodsondance with the King County Sheriff's Office.

Source: Man scams renters by offering foreclosed homes.

Dozens Of Renters Get Immediate Boot Without Advanced Notice From F'closed Rooming House After Local Authorities Declare Premises Unfit For Habitation

In Edwardsville, Pennsylvania, The Times Leader reports:
  • Twenty to 30 residents of an Edwardsville rooming house have been evicted after authorities declared the property unfit for habitation Thursday. The property, a series of three buildings [...], was foreclosed upon by a bank in Florida, Edwardsville Code Enforcement Officer David Saraka said. Saraka and Edwardsville Fire Inspector Ray King said the property was rife with electrical, structural and health hazards, including improperly wired electrical junction boxes, a disconnected fire alarm, broken stairs and railings, and standing water in the basements of two of the three structures.

For more, see Edwardsville rooming house shuttered (The buildings along Main Street have numerous code violations, authorities say).

See also, Citizens Voice: Building violations force dozens out of apartments.

Friday, June 18, 2010

Illinois AG Files Civil Suit Against Pair For Allegedly Running Sale Leaseback Foreclosure Rescue Racket That Targeted Senior Citizens

In Chicago, Illinois, Courthouse News Service reports:
  • Two con artists promised to save distressed homeowners' houses from foreclosure, then tricked them into signing away their deeds, the Illinois attorney general says in Cook County Court. The state claims Warren Jackson and Yolanda King, and their companies W2X, PTU I, Y2X, and Goldburg Bail-Out, selected their victims "by reviewing Illinois foreclosure filings." Attorney General Lisa Madigan said the lawsuit came in response to eight complaints to her office.


  • Jackson and King promised to help homeowners refinance mortgage loans and stop foreclosure proceedings, then would "take the title from the homeowner's property and strip almost all of the homeowner's equity," Madigan claims in the lawsuit.(1) The "equity stripping scheme" targeted senior citizens with little understanding of the residential mortgage loan industry, according to the complaint.


  • Most victims were unable to buy back their homes, due largely to the lost equity and the exorbitant fees that King and Jackson took without their victims' knowledge, and for consulting work they never performed, according to the complaint. The complaint does not estimate the total damages done. Madigan demands restitution for the victims and civil penalties of $50,000 per violation of the [Illinois] Mortgage Rescue Fraud Act.

For more, see AG Alleges Heartless Mortgage Frauds.

For the Illinois AG press release, see Attorney General Madigan Joins U.S. Attorney General Holder To Announce National Sweep Against Mortgage-Related Fraud (Madigan Files Two Lawsuits as Part of Operation Stolen Dreams Initiative).

For the lawsuit, see People v. Jackson, et al.

(1) According to the Illinois AG lawsuit (paragraphs 21-24):

  • In return for the loans, defendants require the homeowners to sign over their houses to defendants or someone affiliated with defendants. In some cases, however, the homeowners do not realize that they are giving up their homes. Instead, they believe that defendants Jackson and King, through defendants W2X, Y 2 X and PTU I, have merely refinanced their mortgage. They think they are making their 'mortgage' payments to defendants, but in reality, they are just paying rent to defendants. Under the guise of signing loan documents, defendants give these homeowners warranty deeds or similar instruments that transfer title to their homes. Some homeowners are told by Defendants that they are signing over title to their properties for a one to two year period. During this period, Defendants tell the homeowners that they can stay in their properties by paying rent.

According to the complaint, individual homeowners lost from $60,000 to $149,000 of equity in their homes as a result of W2X’s fraudulent schemes.

Feds Begin Announcing Mortgage Fraud Takedowns Around The Country

The Feds have begun announcing their major mortgage fraud takedowns around the country. The operation, dubbed "Operation Stolen Dreams", has involved 1,215 criminal defendants nationwide in the sweep that began in March responsible for more than $2.3 billion in losses to banks and mortgage companies, according to published reports. For a sampling, see:

Massachusetts Couple Facing F'closure To Keep Home After Settling Lawsuit; Sought Loan Modification & Claimed WAMU Failed To Bargain In Good Faith

In Boston, Massachusetts, the Lowell Sun reports:
  • A Westford couple's lawsuit against the nation's largest mortgage company -- one of many filed against Washington Mutual -- has been settled more than two years after the firm failed to respond to the couple's attempts to save their home from foreclosure. Lori and Mark Pestana originally filed a $5 million lawsuit in October 2008 alleging that Washington Mutual and its attorney, Boston-based Harmon Law Offices, which collected foreclosure fees and costs, violated state law that requires them to bargain in good faith. They settled the lawsuit last month, with the couple being able to stay in their home.

  • The Pestanas did not return a call seeking comment, but attorney Kevin Costello, who represents the couple, described his clients as the "poster children" for the gap between a lender's professed and public statements to stop foreclosures and the reality of the borrower's experience. "Although I cannot disclose the precise terms of the settlement, I can say that we expect the Pestanas to be able to remain in their home,'' Costello said. "This was an individual settlement that was deeply affected by WaMu's collapse and seizure by the FDIC. That action made the legal issues in the case vastly more complicated."


  • The Pestanas' lawsuit sought class-action status on behalf of thousands of Washington Mutual's former borrowers in Massachusetts. In the lawsuit, attorney Gary Klein, who also represents the Pestanas, wrote that the company's process for managing delinquent accounts creates "a nightmare for homeowners who deeply care about saving their homes."

For the story, see Couple settles foreclose lawsuit.

NYC Woman Victimized In Foreclosure Rescue Scam Temporarily Dodges The Boot As Neighbors Jam City Agency Phone Lines In Effort To Call Off Eviction

In St. Albans, Queens, the New York Daily News reports:
  • FRANCIS BLACKMAN knew the day was coming when city marshals would show up and evict her from the St. Albans home that had been in her family for more than 15 years. But when they knocked on her door last week, she had a backup plan.

  • Blackman enlisted the help of neighbors, who flooded the city's 311 line, the police and several city agencies with calls protesting the eviction. They argued that she was entitled to a temporary stay, since she'd filed for bankruptcy just days before. And it worked.

  • "They got me some time," said Blackman, 55, who is being ousted after her home went into foreclosure in what she believes is a case of deed theft - a scam that has become all too common in southeastern Queens.(1) Blackman is one 10 homeowners in the area who have banded together after becoming victims of the mortgage crisis. Some are in the midst of foreclosure proceedings and others are fighting evictions that have already happened.(2)

For more, see Foreclosure scam victim staying put for now.

(1) According to the story, Blackman said she was duped by a woman city property records identify as Orit Tuil, who came to her door in 2006 claiming to be a foreclosure specialist after she and her stepmother missed payments on the $180,000 mortgage. "She said that I would have to sign over the deed to her," Blackman reportedly said of the woman. "I was ignorant to what goes on after that." The $180,000 mortgage was paid back, then Tuil took out two mortgages totaling $405,000, according to property records. "This was a common scheme back then when money was being lent so easily," said Lynn Armentrout, a lawyer at the City Bar Justice Center, the pro bono affiliate of the New York City Bar. "What they usually do is refinance, strip all the equity out of the house, then disappear."

(2) Among those helping in the effort was one woman who was evicted from her home in 2005 and is still trying to prove that her mother was a victim of an identity theft scam that resulted in a stranger taking over their home.

Calgary Cops Seek Suspect Wanted For Targeting Elderly Couple In Alleged Home Equity Ripoff; Accused Of Setting Criminal Interest Rate On Loan

In Calgary, Alberta, The Calgary Herald reports:
  • Police are looking for a man who allegedly scammed an elderly couple into unknowingly signing away their home to the suspect, officials said. Police say they are looking for Richard William Hoffman, 38, after Hoffman allegedly offered a loan to the victims. The suspect allegedly told the elderly couple in 2006 they could use their southeast Calgary home as collateral.

  • The couple then signed an agreement in June 2007, police say. The couple thought the agreement was a reverse mortgage. In reality, police say, the document pledged the home to the suspect and did not give any rights for the elderly couple to remain in their home. Hoffman has since started to foreclose on the house, police say.

  • Police say the couple was loaned $84,000 and owed $150,000, putting the interest rate at 65 per cent. Since it is illegal under Alberta law to have a loan interest rate exceed 60 per cent, police have charged Hoffman with unfair trading practices.

Source: Police looking for man who allegedly scammed elderly couple out of their home (Richard William Hoffman being sought after 65% loan).

For follow-up stories, see

  • CBC News: Accused in seniors' loan scam surrenders: Richard William Hoffman, 38, is charged with unfair practices under Alberta's Fair Trading Act, and with setting a criminal interest rate under the Criminal Code. Hoffman surrendered the day after police released a picture of him to the media. [...] The couple is still living in the home and involved in a legal battle to retain ownership.

Thursday, June 17, 2010

USDOJ Announces Results Of Nationwide Mortgage Scam Takedown

From the U.S. Department of Justice:
  • Attorney General Eric Holder, FBI Director Robert Mueller, Housing and Urban Development Inspector General (HUD-OIG) Kenneth M. Donohue, and other members of the Financial Fraud Enforcement Task Force today announced the results of a nationwide takedown, Operation Stolen Dreams, which targeted mortgage fraudsters throughout the country and is the largest collective enforcement effort ever brought to bear in confronting mortgage fraud.


  • Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement, recovering money for victims and increasing cooperation with state and local partners. The operation was conducted in conjunction with the Department of Justice – including the FBI, U.S. Attorneys Offices, the U.S. Trustee Program and other components – as well as the Department of Housing and Urban Development, the Department of the Treasury, the Federal Trade Commission, the Internal Revenue Service, the U.S. Postal Inspection Service, the U.S. Secret Service, the National Association of Attorneys General and the National District Attorneys Association.

For the entire press release, see Financial Fraud Enforcement Task Force Announces Results of Broadest Mortgage Fraud Sweep in History.

FTC Announces Enforcement Actions Against 16 Peddlers Of Foreclosure Rescue, Loan Modification Services

The Federal Trade Commission announced:
  • As part of the agency’s continuing crackdown on scams that prey on financially distressed homeowners, the Federal Trade Commission announced legal actions against more than a dozen marketers accused of pitching bogus mortgage modification or foreclosure relief services.

  • FTC settlement orders ban 16 marketers from the mortgage modification or foreclosure relief business. The promoter of a similar scam has been ordered to pay $11.4 million for flouting a previous court order. And, in a new action, the FTC has charged another online marketing operation with masquerading as a government mortgage assistance program.

For the entire press release, and links to the relevant court documents, see FTC Settlement Orders Ban More Than A Dozen Marketers from Selling Mortgage Relief Services; Repeat Offender Ordered to Pay $11.4 Million for Contempt.

NJ AG Announces Charges Against Woman In Alleged Short Sale "Flopping" Scam; Used Phony IDs & Documents, Straw Buyers Say Authorities

From the Office of the New Jersey Attorney General:
  • Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor [] announced charges against a Kearny woman who allegedly orchestrated a scheme to steal millions of dollars by obtaining mortgage loans using false identities and counterfeit documents. According to Director Taylor, Genilza R. Nunes, 36, of Kearny, was arrested on March 9 by detectives of the Division of Criminal Justice Major Crimes Bureau as a result of an ongoing investigation into the conspiracy. [...] Because the investigation by the Division of Criminal Justice is ongoing, the charges were not announced until [Wednesday]. Nunes was charged [] with other defendants in a federal investigation into related activities announced by the U.S. Attorney’s Office and FBI in Newark.


  • Nunes and her co-conspirators allegedly defrauded numerous lending institutions of millions of dollars through what is known as a “short sale mortgage loan property flip scheme.” [...] In this case, individuals involved in the scheme were purchasing the properties as straw buyers, using false identities supported by counterfeit driver’s licenses, false financial records, and fictitious credit histories.

  • Through a series of fraudulent transactions, the short sale properties were then sold or “flipped” at inflated values derived from fraudulent appraiser reports. A second straw buyer applied for a mortgage loan on the inflated property and obtained the loan under a false identity. The short sale property was then purchased with the loan proceeds, and, by design, the straw buyer made no payments on the loan, causing a loan default. [...] Typically Nunes and her co-conspirators obtained $100,000 to $300,000 per transaction.

For the entire press release, see Kearny Woman Charged in Multi-Million Dollar Scheme to Obtain Mortgage Loans Using False Identities & Counterfeit Documents.

4 Lawyers Among Five To Go To Trial In Alleged Sale Leaseback F'closure Rescue Scam; 3 Others Cop Guilty Pleas; Civil Suits To Reclaim Losses Ongoing

In White Plains, New York, The Journal News reports:
  • Five suspects in an alleged mortgage scheme — including four lawyers — will go to trial in August,(1) fighting charges that they cost four Westchester County families their homes and swindled two mortgage lenders out of $1.4 million.

  • Meanwhile, three other defendants have pleaded guilty to roles in the scheme and will be sentenced this summer.(2) Prosecutors say the eight suspects swindled vulnerable people in Croton-on-Hudson, Yorktown, Cortlandt and Mount Vernon who were about to lose their homes. The suspects promised to help save their homes, but instead left the homeowners with nothing.(3) [...] The Westchester County District Attorney's Office and the state Banking Department investigated the case.

For the story, see Trial date set in Westchester mortgage-fraud case.

(1) Lawyers David Reback of Rye Brook, Eileen Potash of Queens, Mildred Didio of Manhattan and Frank Corigliano of Newtown, Conn., appeared in court with Amerigo DiPietro of Brewster, who owned Interstate Monetary Concepts in Briarcliff Manor. Jury selection for their trial will begin Aug. 9. They face up to 15 years in state prison on the top count of the indictment against them.

(2) Doreen Swenson and Hubert "Phil" Hall a married couple from Tarrytown, reportedly already pleaded guilty to second-degree grand larceny and first-degree scheme to defraud, both felonies, for helping to set up the phony mortgages. They agreed to serve 2 to 6 years in state prison and will be sentenced Aug. 5, the story states. Wilma Shkreli of Westwood, N.J., also known as Wilma Gecay, also reportedly pleaded guilty to second-degree grand larceny and is expected to be sentenced on July 20 to five years probation. Prosecutors reportedly said she posed an an investor.

(3) According to the story, prosecutors described the three-year scam like this:

  • The group found their victims through notices of public auction or foreclosure. They reached out to them and gained their trust, saying they could transfer their deed to an investor, who would hold the title for 12 to 24 months so they could save money and reclaim their home.
  • But once the "investor" took title, phony checks were presented to the lenders for much higher amounts than what the straw buyer paid for the home. Those checks allowed the group's members to get inflated mortgages, which they used to pay off the original mortgage and keep the remainder for themselves.
  • With the homes stripped of their equity, the former owners were left with nothing. They have filed civil lawsuits to try to reclaim what they lost, prosecutors said.

C. Fla. Feds Charge Investment Group Operator In Alleged Mortgage Scam; Accused Of Controlling Both Sides Of Sale Transactions While Fleecing Lenders

In Tampa, Florida, The Tampa Tribune reports:
  • Joseph F. Daniele, the man behind a peculiar real estate investment group that enabled his companies to collect large sums of money on at least 400 deals, was arrested Monday and accused of mortgage fraud. The arrest follows a two-year state and federal investigation into a pattern of property transactions first outlined in a Tampa Tribune investigative report in 2007.


  • The Tribune's story detailed homes that were purchased by 65 buyers, many of whom complained to police that they bought the properties at inflated values and borrowed tens of thousands more than the sales price. The buyers said they were pitched to join an investment group they thought could help them get rich quick from Florida's housing boom. The plan was to buy distressed property in low-income neighborhoods, fix up the homes, rent them and sell them later for a profit.

  • The best part of the pitch: zero down to purchase. Buyers bought homes dozens at a time, sometimes the same day. Most of the homes were in South St. Petersburg, and more than 75 percent of them ended up in foreclosure, the Tribune reported last year.


  • The government complaint says Daniele's companies were controlling both transaction parties, the buyers and the sellers, even though lenders didn't know this. Deals were often made between individuals in the investment group. Buyers also told the Tribune they routinely signed blank documents, sometimes late at night in empty parking lots.

For more, see Investor accused of wire fraud in St. Pete deals.

Forced Sale Of Free & Clear Home Over Unpaid $800 HOA Fees While Texas Homeowner Away On Military Duty Gets National Media Coverage

ABC News reports:
  • It should have been a happy summer for Michael Clauer. The Texas Army National Guard captain was winding down his time in Iraq, preparing for a new unit to arrive and replace him and the 130 service members under his command. But a phone call in June 2009 left him so shaken that a colleague suggested he seek psychiatric help: his wife, her voice choked with tears, told him that their homeowners association had foreclosed on and sold their Frisco, Texas house -- which the Clauers say is valued at more than $300,000 -- for $3,200, according to county land records.


  • Now, Clauer and his wife May are suing the homeowners association, the investors who bought the home at foreclosure and sold it, and the home's current owner. The Clauers, who reached an agreement with the current owner to continue to live in the home with their two young daughters until their lawsuit is resolved, either want to get their house back or be paid damages by the people they're suing. They'd prefer, of course, the former.


  • As the case progresses -- a jury trial is set for January of 2011 -- Clauer said he hopes his story will help force a change in how homeowners associations in Texas are allowed to initiate foreclosures. Few other states, he said, allow associations as much power as Texas does.

For more, see Soldier, Back From Iraq, Finds Homeowners Association Sold His House (National Guard Capt. Michael Clauer Says Law Should Have Stopped Foreclosure; Association Says It Didn't Know Clauer Was on Duty).

Wednesday, June 16, 2010

Squatters Stake Claim To Vacant F'closed 8,000 Sq. Foot Mansion Currently On Market For $3.3M; Unexpected Move-In Leaves Listing Agent Scratching Head

In Kirkland, Washington, The Seattle Times reports:
  • The 8,000-square-foot mansion was dark and in foreclosure for years. So last weekend when the for-sale signs came down and the lights lit up, neighbors were relieved. "We were like — 'finally, somebody's going to make that place a home,' " says one. But then some new signs went up.

  • "No trespassing," the signs say. "Privately owned property. Not for sale." That's odd, neighbors thought. The West of Market neighborhood in Kirkland is friendly, easygoing. So one of them called the real-estate agent to ask what was up. What he said floored them. The house is still for sale for $3.3 million. Whoever is living there had broken in. They're squatters.(1)


  • The house's history is like a recap of the economic meltdown. A modest house was torn down to make way for this behemoth, but the builder defaulted on it in 2008 and the mansion went into foreclosure. It ended up in the hands of Venture Bank, in Lacey, Thurston County. Then that bank failed — too many defaulted loans — and was seized by the feds. So the house went to another bank, called First Citizens, which, according to legal documents on file at King County, now owns it. Or so they think they own it.

  • A form posted on the door of the house by its new "tenants" says "all rights, interest and title in said property" has been transferred to something called the "Priority Rose Children's Outreach" in Bothell. That's a charity that was incorporated only two weeks ago, according to the state Secretary of State's Office. Its purpose is listed as "spiritual training for adults and children in a religious safe environment for the development of all mankind."

  • That sounds nice. But the phone number for the charity is also the number for a Bothell company called NW Note Elimination that specializes in "eliminating mortgages." It does this by finding flaws with loans or titles and exploiting them to stake outright claims to property.

  • One of its strategies, according to a primer it posted on Craigslist, is to create a land trust and claim title to a piece of property, then try to challenge the existing mortgages as flawed in hopes the banks eventually will just go away.

For the story, see Squatters cozy up in mansion.

For story update, see:

  • The Seattle Times: Police squelch squatters' brazen move into mansion: Tuesday the rent came due for the mansion squatters, a woman and man who last week just moved in and tried to stake claim to a 8,000-square-foot, foreclosed house in Kirkland that is for sale for $3.3 million,

(1) Reportedly, the real-estate agent had $80,000 worth of staging furniture inside, but last week he managed to get in and cart it away.

Judge Allows F'closure Rescue Scammer To Buy Down 5-Year Prison Term To Three Years In Exchange For Immediately Coughing Up $25K In Victim Restitution

In Atlanta, Georgia, My Fox Atlanta Channel 5 reports:
  • A man running a scam foreclosure company exposed by the FOX 5 I-Team pleads guilty. It was more than three years ago that the I-Team captured the company on hidden camera and the victims are finally getting some relief. All but one family lost their home to foreclosure after dealing with Dwayne Green of Maximus Investments. They told the judge often times they scraped together their last $500 handing it over to him because Green said he could save their house. The judge handed the head of Maximus Investments a maximum sentence.

According to the My Fox Atlanta Channel 5 video report, the judge slammed Green with five years in jail and ordered to pay his victims $50,000 in restitution. The judge then offered him an option to buy down the five year sentence to three years if he coughs up half the restitution upfront before being hauled away to prison. Shortly thereafter, Green reportedly exercised the option and presented the court with $25,000 in money orders.

For more, see I-Team: Maximus Guilty Plea.

Las Vegas Scammer Gets 12-30 Months For Ripping Off Financially Strapped Homeowners Of Upfront Fees For Foreclosure Rescue Services Never Performed

In Clark County, Nevada, the Las Vegas Sun reports:
  • A 50-year-old Henderson man who preyed on Las Vegas area homeowners facing foreclosures in 2007 and 2008 is going to prison. Jeffery Tye Brown, who operated DB Financial Services, a Henderson foreclosure rescue business, has been sentenced to serve from 12 to 30 months for felony mortgage fraud by Clark Country District Court Judge Kenneth E. Cory.


  • The task force found that between December 2007 and February 2008, Brown contacted victims whose homes were going into foreclosure and obtained advance payments up to $999 for foreclosure rescue services that he never performed. [...] Shortly after the mortgage fraud task force executed a search warrant in 2008 on the DB Financial offices, Brown fled the country. In February he was extradited back to the U.S. from the Philippines, where he was in hiding to evade authorities.

For more, see Henderson man sentenced in mortgage fraud scam.

NY Appellate Court Stalls Foreclosure Action; Says Summary Judgment Premature Where Home's Purported Co-Owner Claimed To Be Victim Of Forged POA

A recent ruling by a New York intermediate appellate court reversed a lower court decision granting summary judgment in favor of a mortgage lender in a foreclosure action where a woman claiming to be a co-owner of the home alleged that her signature was forged on a power of attorney that purported to authorize her husband, the other co-owner, to engage in real estate and banking transactions on her behalf. She claimed that the allegedly forged power of attorney was then used to take her ownership interest in the home out of her name. The home was then allegedly pledged as collateral for a loan that ultimately ended up in default and subject to the foreclosure action at issue.

Because the appeals court found that several irregularities sufficient to "put a reasonable person on notice that something was amiss" were apparent on the face of the power of attorney, it found that the wife established, without contradiction in the record, that she may have an ownership interest in a property currently subject to foreclosure proceedings under a deed and mortgage that may be invalid. Accordingly, it ruled that summary judgment in favor of the foreclosing lender was premature, as the wife's allegations raised triable issues of fact.

In addition, the appellate court reversed the lower court's denial of the woman's motion to intervene in the action (since she wasn't an owner of record when the the mortgage loan was granted or when the foreclosure action was initiated, and since she didn't sign the mortgage or promissory note, she was not named as a defendant by the foreclosing lender). The appeals court found that the woman had "made a sufficient showing of a real and substantial interest in the outcome of the foreclosure action warranting her intervention" (Greenpoint Sav. Bank v McMann Enters., 214 AD2d 647, 648 [1995]), and that "As a person who "may be affected adversely by the judgment" in this action involving title to property, Sklar is entitled to intervene as of right (see CPLR 1012 [a] [3])."

The facts of the case are a little convoluted, but for those involved in unwinding or undoing a deed/title theft scam involving the use of a forged power of attorney, there may be something in this case that may be of interest.

For the ruling, see US Bank Natl. Assn. v Gestetner, 2010 NY Slip Op 04907 (App. Div. 3rd Dept. June 10, 2010).

Short Sellers, Foreclosed Borrowers May Be In For Big Surprise As Collection Firms Scramble To Buy Up Unpaid Loan Deficiencies

In Palm Beach County, Florida, The Palm Beach Post reports:
  • Joshua Rand is the muscle. Not in a busting-skulls, Tony Soprano kind of way. But he does seek to collect, and sometimes even buys, the debt left by delinquent homeowners who walk away from their mortgages - the same borrowers who often assume that a foreclosure or short sale wipes out their loan balance, ending their liability.

  • A principal in the New York-based Deficiency Judgment Recovery Network, Rand said he has "hundreds, maybe thousands" of home loans gone sour in Florida that his company, formed in late 2009, is working to collect balances from. Rand either is hired by lenders to collect the deficiencies for them or his company buys the debt in pools for pennies on the dollar, profiting on the back end by making a borrower pay up.

  • "People are under the assumption that the banks are so busy modifying home loans that they don't have the bandwidth or stomach to go after those who are walking away. That's a bad assumption," said Rand, whose company motto is "We turn shortfalls into windfalls."

  • A deficiency judgment, or claim, is basically the remainder owed on a home loan when a borrower goes into foreclosure or completes a short sale. [...] "These lawyer firms are salivating. They can't wait because they see huge opportunities to collect money," said Mark Greene, owner and president of Short Sale Operations LLC in North Palm Beach. "It's going to be a blood bath."


  • In Florida, a claim must be filed within five years, but the lender has up to 20 years to collect. So even if a borrower has no money today, he or she may rebound within the collection time frame. "People are broke right now, but they won't be broke forever," Greene said.

For the story, see Borrowers beware: Firms profit off defaults.

Tuesday, June 15, 2010

Judge Kiboshes Foreclosure Action; Says He Was BS'd By Dubious Paperwork Filed By Loan Servicer, Foreclosure Mill Law Firm

In Northeast Florida, The Florida Times Union reports:
  • Changing stories about who owns a mortgage and seemingly fresh evidence from a long-closed bank led a judge to throw out a foreclosure lawsuit in St. Johns County. It’s the second time in as many months that Circuit Judge J. Michael Traynor has dismissed with prejudice a foreclosure case where homeowners disputed who owns the mortgage.

  • Lawyers representing New York-based M&T Bank gave three separate accounts of the ownership, with documentation that kept changing, before Traynor tossed the case Friday . “The court has been misled by the plaintiff from the beginning,” the judge wrote in his order. He added that documents filed by M&T’s lawyers seemed to contradict each other and “have changed as needed to benefit the plaintiff.”

  • The latest account was that another bank, Wells Fargo, owned the note, and M&T was a servicer, a company paid to handle payments and other responsibilities tied to a mortgage. To believe that, the judge wrote, the “plaintiff is asking the court to ignore the documents filed in the first two complaints.” He added that Wells Fargo can still sue on its own, if it has evidence that it owns the mortgage.

  • Traynor has scheduled a hearing in August for lawyers from the Law Offices of Marshall C. Watson, a Fort Lauderdale-based firm, to explain the evidence they presented before deciding whether he should impose sanctions on either them or the bank. Attorneys at the Watson firm referred questions [to] a supervising attorney who didn’t respond to messages left by phone and email. Traynor wrote he would have questions about a document that was presented unfinished in court last year, then shown again this year carrying the stamp of the First National Bank of Nevada, which the federal government closed two years ago.

  • More and more foreclosure cases are being argued on shaky evidence, said James Kowalski, a Jacksonville attorney who represented homeowners Lisa and Larry Smith in the fight over their oceanfront home on Anastasia Island. “I think it’s very representative of what the banks and their lawyers are currently doing in court,” Kowalski said. He said lawyers bringing the lawsuits are often pressed by their clients to close the cases quickly. But it’s up to lawyers to present solid evidence and arguments. “We are supposed to be better than that,” Kowalski said. “We are supposed to be officers of the court. ...We are supposed to be protectors of justice, not simply aiding and abetting a servicer who is trying to hurry something through.”

Source: Judge dismisses St. Johns foreclosure suit (Documents provided by M&T Bank contradicted each other, he said.).

In a related post, see Schmaper/Paper -- It's Just A Foreclosure, Your Honor.

Court-Appointed Trustees' Search For Faulty Mortgage Loan Documentation Threatens To Leave Lenders Holding The Bag In Consumer Bankruptcy Cases

Buried at the end of a recent story in The Arizona Republic is this excerpt on the aggressiveness of court-appointed trustees in their attempt to void the mortgages on homes owned by individuals filing for Federal bankruptcy protection:
  • Faulty deeds that open doors to trustees. As some debtors and creditors are learning, court-appointed trustees, especially in Chapter 7 cases, can be quite aggressive in trying to collect money. Some even look for defects in mortgage paperwork that could allow them to push their claim ahead of a lender's.

  • Suppose a person buys a home, stays current on the payments but files for bankruptcy protection. "The trustee can look at all the purchase documentation for problems," [Tucson attorney Daniel J.] Rylander said, citing issues like an insufficient number of witnesses or errors in notarized signatures.

  • "Keep in mind the mortgage industry had been insanely busy (during the boom)," he said, so plenty of title companies probably made paperwork errors. In fact, the lender, who would seek permission from a judge to complete a trustee sale, might not even be able to find the original paperwork, perhaps because the note has been sold several times, Nussbaum said.

  • "If the lender can't prove its claim, the trustee has an interest in a home that might not have a lien against it," he said. Homeowners usually aren't aware of this and might wind up living free in the property for a while. But they also could see the dwelling sold out from under them if they file for bankruptcy protection.

  • "If there's no valid loan, the trustee could just sell the home," [Scottsdale attorney Randy] Nussbaum said. Needless to say, all this can cause quite a surprise. "This is a very scary topic," Rylander said, adding that it also could apply to car loans with faulty paperwork.(1)

For the story, see Attorneys finding vexing issues in bankruptcy cases.

(1) I wonder how this plays out in states like Florida and Texas, where an invalidation of a mortgage that leaves the bank with an unsecured loan, coupled with homeowners' protections under each state's homestead exemption laws that are unlimited as to dollar value, could ostensibly leave a homeowner emerging from bankruptcy with a house unencumbered by a mortgage and an unsecured home loan that gets discharged through the bankruptcy court proceedings.

S. Fla. Feds Bag Attorney For Looting $1M+ Out Of R/E Escrow Acct.; Cash Intended To Pay Off Existing Lien Holders; Title Insurer Left Holding The Bag

From the Office of the U.S. Attorney (Ft. Lauderdale, Florida):
  • [A]ttorney Peter N. Price, 49, of Hollywood, pled guilty [] to a criminal information charging him making false statements to HUD, [...]. In addition, Price agreed to make restitution to Stewart Title Guaranty, the victim of his fraud, in the amount of $1,608,246.57.


  • According to the criminal information and statements made during [a] plea hearing, Price, a title attorney, operated Intracostal Title Services, Inc., a title company in Hollywood, Florida. According to statements made in court, Price embezzled more than $1,000,000 in loan proceeds that had been sent to Intracostal’s escrow bank account by clients to pay off prior mortgage loans. Instead of using the money as directed, Price prepared and sent a false HUD1 Real Estate Settlement Form, falsely reflecting the old loans had been paid.

For the U.S. Attorney press release, see Broward Title Lawyer Charged In Connection With Mortgage Scheme.

NY AG Slams Debt Collector, Affiliated Attorney In Seperate Suits; Alleges Repeated Threatening & Obscene Phone Calls, Lawyer-Renting Racket

From the Office of the New York Attorney General:
  • Attorney General Andrew M. Cuomo [] announced a lawsuit against several Western New York debt collection companies that violated the law by harassing consumers through repeated threatening and obscene phone calls as well as making illegal calls to the consumers’ employers and families. Attorney General Cuomo’s lawsuit claims Frank Santiago, of [...] Hamburg, who is the owner and operator of Northern Asset Management, LLC and Eastern Asset Management, LLC, had employees use abusive measures and lies in the debt collection operation.(1) The suit seeks to shut down the companies, bar Santiago from the collection business and require him to pay significant penalties, costs and fees to the state.


  • Earlier this month, in a related case, Cuomo sued Williamsville-based attorney John P. Nicolia after an investigation determined that he collected $141,000 in fees for allowing Santiago’s companies to threaten consumers across the country using Nicolia’s name. In reality, Nicolia never provided any actual legal services for the debt collection companies.

  • Santiago’s collectors, after invoking Nicolia’s name, often falsely stated that the consumers had lawsuits filed against them, would have their driver’s licenses suspended, would be charged with a crime and/or would be imprisoned or lose their property if they didn’t pay.(2)

For the New York AG press release, see Attorney General Cuomo Sues Wny Debt Collection Companies That Harassed And Threatened Consumers Nationwide.

(1) According to the press release, the Attorney General’s investigation determined that Santiago tried to avoid detection from authorities by changing the name of his companies after consumer complaints mounted. Santiago operated a company called Ethical Asset Management from late 2006 through mid 2007. After complaints, Santiago closed Ethical Asset and opened Eastern Asset. After being sued dozens of times, Santiago shut down Eastern Asset in December 2009 and immediately began operating Northern Asset, which is still active.

(2) The press release adds the following information:

  • The collectors also repeatedly harassed consumers and their relatives often at unconscionable times. One consumer claimed that he received calls as early as 6:50 in the morning from various phone numbers. Others claimed the company called 10-15 times a day to their home, cell phone, work and even to family members over an extended period of time. One consumer complained that the collectors called “constantly every 2 minutes, then when he couldn’t talk to me he called my 85-year-old neighbor and told her that this is a matter I can’t ignore and if I don’t contact them that they will be sending the police to my house.”

    Additionally, Santiago’s company regularly and illegally contacted consumers’ employers over the alleged debts. In one case, a collector continued to call and harass a consumer at work, leading to the consumer to lose a day’s pay because they were not allowed to take personal calls at work. Another collector called the employer of a consumer - on medical leave due to a high-risk pregnancy - and threatened to subpoena the employer at the workplace.

Monday, June 14, 2010

PA Couple Current On House Payments Found Themselves Facing Foreclosure Anyway; Media Intervention Needed To Straighten Out Lender's Attorney Screw-Up

In Chester County, Pennsylvania, CBS 3 reports:
  • Living in the woods of Chester County, Judi and Ed Worrall are used to peace and quiet. But a piece of mail that landed in their mailbox this winter changed all that.It told them their house was in foreclosure and would be put up for sheriff's sale. The only problem: the Worralls aren't behind on their mortgage payments. It's their neighbor who has a problem. But nonetheless, the legal notice listed their address under their neighbor's name.


  • [Judi] was told numerous times the problem would be addressed. "Our office is already aware of the situation," an attorney for the [Phelan, Hallinan and Schmieg law] firm wrote her on March 1. On April 23: "The issue has been addressed," the attorney wrote.

  • Yet by May, the Worralls' address was still listed, and the sheriff's sale was scheduled that month. [...] The sale was postponed and again, she was promised a correction. But the June listings showed their address again. That's when Judi called Eyewitness News.

  • We called Phelan, Hallinan and Schmieg four times without a call back. So we went there. We were turned away; told all the partners were out. But an e-mail we sent apparently finally got their attention. After a week, a representative told us the sale is cancelled. The incorrect paperwork has been recalled from the sheriff, and the law firm called Judi Worrall to apologize. He could not tell us, however, why it took so long.


  • After three months of trying, and numerous phone calls and e-mails, Judi Worrall still can't believe it took the involvement of Eyewitness News to clear their address.

For the story, see Chester Co. Couple Endures Foreclosure Nightmare.

Three More Bagged In Alleged Bait & Switch Refi Scam; Suspects Acccused Of Replacing Key Pages In Loan Docs After Being Signed By Unwitting Homeowners

From the Office of the California Attorney General:
  • In a continuing probe into a defunct Southern California mortgage brokerage, Attorney General Edmund G. Brown Jr. [] announced the arrests of president and co-owner Sean McConville and two associates who used "deceptive promises and forged documents" to steal almost $1 million from homeowners falsely guaranteed attractive home loan refinancing packages.(1) "These criminals employed a classic bait-and-switch in their refinance scheme," Brown said.


  • When homeowners were presented with closing documents, they bore the terms promised, but which the lenders never approved. After homeowners signed the closing documents, key pages were removed and replaced with pages bearing the terms that the lender had actually agreed to. The homeowners' signatures were then forged on the replacement pages, and ALG forwarded the forged documents to the escrow company.

  • Homeowners only discovered they had been defrauded when they received the final loan documents with the true terms and their signatures forged on closing cost disclosures, Truth-in-Lending disclosures, loan applications and other documents. Additionally, ALG collected almost $1 million in undisclosed fees, charging homeowners up to $57,000 in broker fees.

  • In total, dozens of homeowners were locked into almost $30 million in loans with terms they did not agree to. As a result of this scheme, many homeowners were forced to sell their homes, come out of retirement, or tap retirement savings. Others paid significant prepayment penalties, including over $21,000 in one case. Borrowers also rarely received the large cash-outs they were promised as part of the refinance.

For the entire California AG press release, see Three More Suspects Nabbed in Million-Dollar Bait-and-Switch Home Refinance Scam.

(1) In addition to Sean McConville, 30, of Austin, Texas, president and co-owner of the now-defunct ALG Capital, Inc., others arrested in the AG's most recent bust are: Matthew Bourgo, 27, of Thousand Oaks, and Joseph Nguyen, 37, of Woodland Hills. The suspects are each being held on $29.5 million bail. In September 2009, Brown's office arrested three others involved in the bait-and-switch scam, including Michael McConville, 32, of Simi Valley, Sean's brother and co-owner of the brokerage, Alan Ruiz, 29, of Huntington Beach, and Garrett Holdridge, 24, of Palmdale, who was convicted of seven felonies in March for his involvement in the scam.

Favorable Trial Court Ruling Allowing Florida Couple To Score "Free" House From Foreclosing Mortgagee Snatched Away By Appellate Court Reversal

The following facts are adapted from a recent ruling of Florida's 4th District Court of Appeal, reversing a lower court ruling in favor of a homeowner/couple facing foreclosure:
  1. Homeowners borrowed $200,000 from John Haner to purchase property in 2003, and executed a mortgage and a promissory note in favor of Haner to evidence and secure the loan.
  2. Subsequently, Haner died, and his estate assigned his interest in the note and mortgage, which was already in default, to one, Lizio.
  3. Lizio subsequently filed a foreclosure action against Homeowners, claiming they failed to make required payments on the mortgage.
  4. The trial court denied Lizio's motion for summary judgment, and this case proceeded to trial.
  5. At trial, the personal representative for Haner's estate, Jeffrey Selzer, testified that the original note and mortgage were executed by Homeowners in 2003.
  6. Personal rep Selzer stated that he executed an assignment of the mortgage to Lizio in October 2007; the assignment was recorded a few days later.
  7. Personal rep Selzer also testified that he received the original note and mortgage from Haner prior to his death, and the mortgage presented at trial was identical to the mortgage the now-deceased Haner gave Selzer.
  8. Finally, personal rep Selzer concluded from reviewing Haner's documents that Homeowner's defaulted on the note in January 2006.
  9. Lizio did not testify on his own behalf. Prior to resting, Lizio offered into evidence original copies of the assignment, note, and mortgage.
  10. Homeowners moved to involuntarily dismiss the case.
  11. Broward County Circuit Court Judge Richard D. Eade granted Homeowners' motion, finding that the assignment of the mortgage and note to Lizio did not constitute prima facie evidence that Lizio is the current owner and holder of the mortgage and note.
  12. Judge Eade dismissed Lizio's foreclosure action with prejudice, and ordered a cancellation of the lis pendens and a discharge/cancellation of the mortgage (go here, pp. 3-4 for court order).

In reversing Eade's ruling against the foreclosing mortgage holder, the appellate court applied this relatively basic rule of law to the facts in this relatively simple case (bold text is my emphasis, not in the original text):

  • Where the defendant denies that the party seeking foreclosure has an ownership interest in the mortgage, the issue of ownership becomes an issue the plaintiff must prove. Carapezza v. Pate, 143 So. 2d 346, 347 (Fla. 3d DCA 1962).

  • In the present case, appellant possessed the original note, mortgage, and assignment executed by the personal representative of Haner's estate. The note was payable to the late John Haner, and the assignment granted Haner's rights under the note and mortgage to appellant. Thus, appellant "held" the note, which granted him standing to seek foreclosure of the mortgage. Mortgage Elec. Registration Sys., Inc. v. Revoredo, 955 So. 2d 33, 34 n.2 (Fla. 3d DCA 2007).

  • Appellees argued that the testimony of the personal representative demonstrated only that the note and mortgage was assigned by the estate of Haner but that Selzer's testimony did not foreclose the possibility that appellant, who did not testify, may have executed a subsequent assignment of that same note and mortgage.

  • Although appellees raise a point that the trial court may consider as part of appellees' defense, we find, nonetheless, that the trial court erred in granting appellees' motion for involuntary dismissal at that particular juncture. Appellant met his burden of providing a "prima facie case"; therefore we reverse and remand for further proceedings.(1)

For the ruling, see Lizio v. McCullom, No. 4D09-1149 (Fla. 4th DCA June 9, 2010).

(1) This case provides evidence that, while the ridiculous rulings of some trial judges in foreclosure actions typically seem to favor the foreclosing lenders, every once in a blue moon, a crazy ruling will sometimes improperly favor the homeowner. What Judge Eade was thinking in ruling in favor of the homeowners in this case is beyond me. Maybe Judge Eade is a good judge who simply had a bad day when making his ruling. It could also be that he slept through the trial, missing the live, in-person testimony of the personal representative (a Florida attorney) for the original, subsequently-deceased mortgage holder, who actually saw and physically handled the originals of the loan documents at issue and who personally executed the assignment of mortgage. I also suppose it's possible that Judge Eade was up for re-election, and saw a cheap opportunity to garner support from financially strapped homeowners by ruling in favor of the delinquent borrowers in this case, at a somewhat minimal risk of having his ruling appealed (keep in mind, the foreclosing lender here was not some giant, institutional lender or loan servicer using "manufactured" assignments and affidavits executed by multiple corporate hat-wearing vice presidents in far away places to make their case, and who have the wherewithal to appeal a dopey ruling like this one; the foreclosing lender here, albeit by assignment, was a private individual (possibly a real estate investor) who apparently saw an opportunity to potentially profit by purchasing a mortgage - presumably at a discount - that was already in default, from the estate of the original lender, who also was a private individual).

Rulings like this one serve only to give the apologists for the institutional mortgage lending and loan servicing industries, as well as the assembly line foreclosure mill law firms, support for claims that some judges are unfairly favoring delinquent homeowners in foreclosure actions. Trial judges should not lose sight of their sworn duty to simply apply the law and let the chips fall where they may. Based on some of the rulings that are coming down, however, that is apparently a lot easier said than done for some of our esteemed jurists.

Sunday, June 13, 2010

NY AG Slams Manhattan Developer With Suit Alleging He Screwed Buyers By Looting $7.4M From Battery Park City Condo Reserve Fund

From the Office of the New York Attorney General:
  • Attorney General Andrew M. Cuomo [] filed a lawsuit charging the developers of the Rector Square Condominium in Battery Park City with defrauding purchasers out of approximately $7.4 million by raiding a reserve fund meant to ensure the health and safety of residents and instead using the money for personal and unrelated business purposes.

  • The Attorney General’s investigation revealed that while developers YL Rector Street, LLC and its principal, Yair Levy, had promised tenants and owners that the reserve fund would be set aside for making repairs, improvements and replacements necessary for their health and safety, they instead depleted the fund leaving residents with a mere $70. A review of the Condominium’s financial records uncovered that Levy misused millions of dollars of the residents’ money for personal and general business expenses, including making credit card payments and writing checks to himself and relatives.

For the entire New York AG press release, see Attorney General Cuomo Sues NYC Developer For Illegally Raiding Condominium's Reserve Fund (Lawsuit Seeks $7.4 Million in Restitution and to Bar Developer from Future Sales).

D.C. High Court Boots Lawyer From Bar For Criminal Convictions Involving Ripoffs Of Landlords, Tenants

In Washington, D.C., Washington City Paper reports:
  • After introducing us to foreclosure scammers, the District of Columbia Court of Appeals gifted us with another tale of malfeasance []. This time: the case of Kim E. Hallmark, a crooked lawyer, permanently disbarred for an “offense involving moral turpitude.”(1)

  • Over a period of two years in the early 1990s, Hallmark swindled a series of landlords and tenants out of a total $40,000, racking up eight misdemeanor charges for theft, fraud, and contempt of court. In one “typical” case from 2000, Hallmark leased an apartment on New Jersey Avenue, first tried to pay rent with a faulty check, and then paid for two months rent while occupying the place for ten months. In the mean time, while the owners tried to evict her, she sublet the apartment for two months—her subletters left upon realizing she wasn’t the landlord.

For more, see Crooked Lawyer Finally Disbarred After Swindling Landlords, Tenants out of $40K.

(1) For the ruling of the D.C. Court of Appeals formally (and finally) giving her the boot from the D.C. Bar, see In re Hallmark, No. 03-BG-762 (D.C. June 10, 2010).

Vacant Home Hijackings Growing Throughout South Florida; 200 Adverse Possession Claims Filed In Recent Months In Broward, Palm Beach Counties

In South Florida, the Sun Sentinel reports:
  • Imagine going to a house or condo you own and finding a stranger living there who claims the property no longer belongs to you. It's happening across Florida and other parts of the country through what authorities say is abuse of a centuries-old concept known as adverse possession.(1)

  • Dating back to Renaissance England, adverse possession allowed people to take over abandoned cottages and farmland, provided they were willing to live there and pay the taxes. These days, officials say, the legal doctrine is being misused by squatters, trespassers and swindlers to claim ownership of vacant or foreclosed homes.

  • In Broward and Palm Beach counties alone, adverse possession claims have been filed on some 200 homes in recent months. Three of the four people behind the claims have been arrested, and police are investigating the fourth man, who along with his father, a convicted mobster, tried to take over properties in Hollywood.


  • [In one case] The occupant, Fitzroy Ellis, told [the owner of the vacant home] he was entitled to take over the home because it was abandoned. Police disagreed, and Ellis, 64, is now in the Broward County Jail charged with six counts of grand theft. Ellis tried to claim a total of 48 properties in Broward, including a $1 million house in Coral Springs, through a company he formed called Helping Hands Properties Inc., county official records show. He told a Plantation police detective he planned to rent out the houses and condos and could offer tenants a good price "since he didn't have to pay anything for the homes,'' according to a police report. Ellis, who is representing himself, wrote in court documents that the allegations against him are "false and an abuse of power.''

  • Another South Florida man, Mark Guerette of Wellington, filed notice in official county records that he was taking possession of 100 homes in Broward and three in the Palm Beach community of Lake Worth through Saving Florida Homes Inc. and two other companies. On one day last November, he filed takeover notices on 10 condos in the same North Lauderdale complex [...], records show. Police say Guerette, 46, rented out six of the properties and collected more than $20,000 from tenants before he was arrested in April. He has pleaded not guilty to a charge of organized scheme to defraud.

  • His lawyer, Robert Shearin, said Guerette is nothing more than a good Samaritan, rescuing blighted homes. "The banks are letting these properties go down the tubes,'' Shearin said. "Here's a guy trying to help out, and he ends up in jail.''

For more, see Squatters take over S. Fla. homes in what police call latest fraud in housing crisis.

Go here for a list & map of homes snatched through claims of adverse possession in Broward and Palm Beach Counties.

(1) Florida law requires a series of steps that must be taken before a non-owner can take ownership of a property. The state adverse possession law can be found in the Florida statutes at:

Chicago Homeowner In 3-Unit Condo Depletes Savings After Footing Bill To Carry Entire Building As Others Lose Title To Foreclosure, Deed Forfeiture

In Chicago, Illinois, the Chicago Tribune reports:
  • It is hard to tell whether Traci Hargrove is moving on or staying put. On one day she tends the garden at her Rogers Park three-flat, preparing to plant impatiens. But the next day she removes the drapes in her den and takes down her ceiling fans, because she fears losing her home.

  • Hargrove is caught in the middle. Below her is a foreclosed property and above her is a unit whose owner has stopped paying assessments. Like a lot of condo owners in Rogers Park, she has paid her mortgage and assessments on time, but has been forced to foot the heat, water and other maintenance bills for the building. "If it were my fault, I could handle it. But my livelihood and happiness is dependent on other owners in the building," she said. "I pay what I have, but it's not enough."


  • "I had no clue what I was getting into," said Traci Hargrove, a part-time driver for Pace, who now acts as the building's handyman and manager. "I pay the utilities, take care of the lawn, electrician work and extermination. I don't want this job. I'm not a landlord. Those aren't my tenants."

  • The unit upstairs is owned by the federal government as part of a deed forfeiture. The former owner no longer lives there, and Hargrove is trying to evict the tenant to gain possession of the condo. If she succeeds, she will be able to rent the unit for up to 13 months and collect unpaid assessments.

  • Hargrove would use that money, in part, to pay off the $8,122.82 Peoples Gas bill. She has kept the gas company from cutting off service by paying the association's bill out of her personal checking account. "We have depleted our entire savings to hold on to our house," Hargrove, 47, said. "If I leave my home, I want to leave because I'm ready to go, not because someone is forcing me or intimidating me into leaving."

For the story, see The hidden housing crisis (Rogers Park hit hard by condo foreclosures).

NYS High Court Chief Continues Pounding The Pavement With Upstate Tour In Ongoing Push To Ensure Adequate Legal Help For Poor In Civil Cases

In Rochester, New York, the Democrat and Chronicle reports:
  • New York's top judge stumped Thursday in Rochester on behalf of an effort to ensure adequate legal representation for the poor in civil proceedings. Chief Judge Jonathan Lippman of the state Court of Appeals, who appointed a task force Wednesday to find a reliable way to pay for civil legal services, said the recession has forced hundreds of thousands of poor people to appear in court without lawyers for such matters as foreclosure, eviction, child custody and physical abuse.

  • Although civil legal services for the poor have been paid for years through a fund paid by interest earned on escrow accounts set aside by lawyers on their clients' behalf, lower interest rates have caused the fund to shrink from $31 million to $8 million, he said in an interview with the editorial board of the Democrat and Chronicle. As a result, agencies that provide legal services to the poor have had to turn away eight potential clients for every client they've served, Lippman said.

  • He said the task force's mission will be to find a permanent, comprehensive funding mechanism that isn't affected by interest rates and could involve money provided through the state budget's general fund. The present diminished fund could be part of the new mechanism, he said.

For the story, see Cause brings state's top judge to Rochester.