Saturday, October 09, 2010

Pro Se Homeowner "Loses The Farm" In Attempt To Void Sale Leaseback-Type Foreclosure Rescue Deal

A recent ruling by the Idaho Supreme Court dealt defeat to a pro se homeowner-couple facing foreclosure of their farm in their attempt to unwind a foreclosure rescue, sale leaseback-type arrangement. According to the facts in the case, when entering into the arrangement with the operator:
  • "they signed the warranty deed and contract for reconveyance under duress caused by those documents being presented to them about ten minutes before the real property would have been sold at a foreclosure sale."

The case provides an example of what not to do when trying to unwind these type of deals. Regrettably for the homeowners, they failed to raise, among other claims, the equitable mortgage doctrine which, if successful, would have resulted in recharacterizing the deal as a secured loan.(1)

For the ruling, see Bagley v. Thompson, Docket No. 36041-2009, 2010 Opinion No. 107, (Supreme Court of Idaho, Idaho Falls, October 6, 2010).

(1) See Dickens v. Heston, 53 Idaho 91; 21 P.2d 905 (Id. 1933); See also Equitable Mortgage Doctrine In Idaho.

Wells Fargo Agrees To $67M In Loan Modifications For NJ Homeowners Saddled With Wachovia, Golden West, World Savings "Pick-A-Payment" Loans

From the Office of the New Jersey Attorney General:
  • Attorney General Paula T. Dow announced [] that Wells Fargo Home Mortgage has agreed to provide New Jersey consumers with nearly $67 million in loan modifications and pay the state $3.98 million to resolve allegations that companies it acquired – Wachovia Corporation, Golden West and World Savings -- deceptively marketed adjustable rate mortgage loans.(1)

For the NJ AG press release, see Attorney General Announces Settlement with Wells Fargo Home Mortgage; Company Providing $67 Million in Loan Modifications, Paying State $3.98 Million.

Go here for the Settlement Agreement, and here for the Announcement of Restitution Fund.

(1) For announcements of "Pick-a-Payment" settlements in other states, see:

California Appeals Court Fires Warning Shot At R/E Agents Failing To Disclose That Property Is So Greatly Encumbered That Short Sale Is Doomed To Fail

A recent ruling by a California appellate court hammered real estate agents for failing to disclose to a home purchaser that the property was so overencumbered with mortgages that there was little likelihood that a desired short sale transaction would successfully close at the agreed-upon purchase price.

The court "kindly" commences its ruling with the following excerpt, which essentially serves as the shortened, "CliffsNotes" (aka Cliff Notes) version of the situation involved.
  • Particularly in these days of rampant foreclosures and short sales, "[t]he manner in which California's licensed real estate brokers and salesmen conduct business is a matter of public interest and concern. [Citations.]" (Wilson v. Lewis (1980) 106 Cal.App.3d 802, 805-806.)

  • When the real estate professionals involved in the purchase and sale of a residential property do not disclose to the buyer that the property is so greatly overencumbered that it is almost certain clear title cannot be conveyed for the agreed upon price, the transaction is doomed to fail.

  • Not only is the buyer stung, but the marketplace is disrupted and the stream of commerce is impeded. When properties made unsellable by their debt load are listed for sale without appropriate disclosures and sales fall through, purchasers become leery of the marketplace and lenders preparing to extend credit to those purchasers waste valuable time in processing useless loans. In the presently downtrodden economy, it behooves us all for business transactions to come to fruition and for the members of the public to have confidence in real estate agents and brokers.

  • The case before us presents the interesting question of whether the real estate brokers representing a seller of residential real property are under an obligation to the buyers of that property to disclose that it is overencumbered and cannot in fact be sold to them at the agreed upon purchase price unless either the lenders agree to short sales or the seller deposits a whopping $392,000 in cash into escrow to cover the shortfall.

  • Here, the buyers and the seller agreed to the purchase and sale of a residential real property for the price of $749,000. Unbeknownst to the buyers, the property was subject to a first deed of trust in the amount of $695,000, a second deed of trust in the amount of $196,000 and a third deed of trust in the amount of $250,000, for a total debt of $1,141,000, and the lenders had not agreed to accept less than the amounts due under the loans in order to release their deeds of trust.

  • According to the buyers, after they signed the deal with the seller, they sold their existing home in order to enable them to complete the purchase of the seller's property. Only then did they learn that the seller could not convey clear title because the property was overencumbered.

  • In a lawsuit against the seller's brokers, the trial court sustained a demurrer without leave to amend, holding that the brokers owed no duty of disclosure to the buyers. The buyers appeal. We reverse, holding that, under the facts of this case, the brokers were obligated to disclose to the buyers that there was a substantial risk that the seller could not transfer title free and clear of monetary liens and encumbrances.

For the rest of the ruling, see Holmes v. Summer, No. G041906 (Cal. App. 4th Dist., Div. 3, October 6, 2010) (go here for .doc version; when links expire, try here).

Mortgage Investors Suit Claiming Citi Doomed Foreclosure Attempt By Failing To Deliver Note To Go To Trial

Reuters reports:
  • CitiFinancial Mortgage must defend a lawsuit over problems with loan documents, a federal appeals court ruled, in a widening controversy over the quality of legal filings in U.S. foreclosure proceedings.


  • In the case decided by the 7th Circuit U.S. Court of Appeals this week, two investors purchased an Illinois mortgage from CitiFinancial for $140,000 in 2001. But the company never delivered a copy of the underlying note, which doomed the investors' attempt to foreclose on the property, according to the decision. The investors, Patrick Cogswell and Patrick O'Flaherty, then sued CitiFinancial.

  • The 7th Circuit reversed a lower court ruling and said the case could be decided at trial.

For the story, see Citi unit must defend foreclosure suit (Case involves allegations of missing documents).

For the ruling, see Cogswell v. CitiFinancial Mortgage Company, Inc., No. 08-2153 (7th Cir. October 5, 2010).

Republican Sham To Embarrass Democrats???

In Washington, D.C., The Spoof reports:
  • Bank of America announced today, that in what is being described as an "accounting oversight", foreclosure proceedings have been initiated on the White House, which could eventually force the eviction of the Obama family. Some are calling it a significant symbol of the state of the housing market, while others say it is a Republican sham to embarrass Democrats with the mid-term elections looming.

For more, see Foreclosure proceedings initiated on the White House.

In a related story from The Spoof, see President Obama Gets Eviction Notice from China.

Friday, October 08, 2010

BofA Slams Brakes On Foreclosures In All 50 States; PNC To Do Same In 23 States

The Washington Post reports:
  • Bank of America Corp., the nation's largest bank, said Friday it would stop sales of foreclosed homes in all 50 states as it reviews potential flaws in foreclosure documents. A week earlier, the company had said it would only stop such sales in the 23 states where foreclosures must be approved by a judge. The move comes amid evidence that mortgage company employees or their lawyers signed documents in foreclosure cases without verifying the information in them.


  • Also Friday, PNC Financial Services Group Inc. said it is halting most foreclosures and evictions in 23 states for a month so it can review whether documents it submitted to courts complied with state laws.

For more, see BofA halts foreclosure sales in 50 states.

Foreclosure Mill-Owned Title Insurance Agency Refuses To Insure Firm's Own Work

In Deerfield Beach, Florida, The Palm Beach Post reports:
  • The title insurance arm of one of the state's largest foreclosure law firms is refusing to cover properties foreclosed on by its own attorneys citing potential defects in court filings.

  • New House Title, which is owned by the same people who run the Tampa-based Florida Default Law Group, sent notice to a Boca Raton real estate attorney Wednesday that a 2009 foreclosure was off limits.

  • What Attorney Robert Feldman found interesting in New House's denial for the Deerfield Beach condominium is the foreclosure was handled by the Florida Default Law Group. "It is somewhat surprising that now they won't even insure their own work," Feldman said.

For more, see Florida foreclosure firm's title insurer won't insure firm's foreclosure titles.

David J. Stern's Allegedly Bogus Foreclosure Documents? Let The Whistleblowing Begin

The Tampa Tribune reports:
  • [N]ow, in a foreclosure industry bloated by the lingering effects of the housing crisis, a former employee in one of the firms under investigation describes in detail a secret system designed for speed at any cost.

  • Attorneys and staff members forged signatures and changed dates, casually passed around notary stamps, and notarized stacks of blank documents to be filled in later, said the employee, Tammie Lou Kapusta, in an interview with attorney general's staff.

  • At the Law Offices of David J. Stern in Broward County, where Kapusta worked, long "signing tables" were set up across eight floors and employees would process 250 documents per floor each day, she said during the interview.

  • Two or three employees sat around practicing the signature of Chief Financial Officer Cheryl Samons, at Samons' direction, Kapusta said. Company lawyers were overheard saying they worried about breaking the law or getting disbarred, but Kapusta said they worried more about losing their jobs.

  • Toward the end of the interview, which was conducted under oath with Kapusta's attorney present, she also describes romantic relations among people who worked in the office, including Stern.(1)

For more, see Fired worker says home foreclosure firm forged documents.

Go here to read the entire Deposition of Tammie Lou Kapusta taken by the Florida AG's office.

(1) As the "loose thread" that runs through these alleged bogus document-manufacturing foreclosure mill law firms keeps getting pulled, one question that arises is whether the "race to the prosecutor's office" has begun. See United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) for one Federal judge's observation, made in the context of drug conspiracy cases, on the so-called "race to the courthouse/prosecutor's office" (in my view, this observation is equally suited to other types of major, multi-defendant felony cases) (bold text is my emphasis, not in the original text):

  • In practical terms, drug conspiracy cases have become a race to the courthouse. When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed.

South Florida Court Voids $180K+ Mortgage As Foot-Dragging Lender Walks Away From Unwanted Collateral; HOA Makes Off With Free & Clear Condo

In Pompano Beach, Florida, the South Florida Sun Sentinel reports:
  • After winning a lawsuit against Wells Fargo that claimed the bank purposely delayed foreclosure proceedings on a condominium unit for more than a year, a Pompano Beach condo association has been awarded title to the unit without owing a dime on the original $184,400 mortgage.

  • The case, brought by the Palm Aire Gardens Condominium Association, is being seen as a precedent that could pave the way for other condo associations facing similar foreclosure delays.

  • "Banks are delaying foreclosures and abusing the process and our association is struggling financially because of it, that's why we filed our lawsuit.'' said Palm Aire Gardens President Oscar Garcia. "Now we own the property free and clear of the mortgage, which gives us options to sell it or rent it.'' Wells Fargo did not respond to requests for comment.

  • Palm Aire's legal strategy is being dubbed "The Mortgage Terminator'' by the Association Law Group, the South Florida firm that represents the condo complex and hundreds of others across the state. "Many of our association clients are already starting to use it,'' said attorney Ben Solomon, of Association Law Group. "The only criteria is that the association has title to the unit through its own foreclosure process and the mortgage holder has not initiated foreclosure yet.''


  • Solomon said his firm aimed to help the association financially by forcing the lender, Wells Fargo, to either foreclose on the loan and pay its share of unpaid maintenance fees or, instead, agree to release its mortgage and walk away. According to three court judgments already won by Association Law Group, including another issued last week on the behalf of Palm Aire Gardens, the bank cannot later try to collect on the original loan amount from the association.(1)

For the story, see New legal tactic helps associations gain control of abandoned condos.

(1) According to the story, Solomon noted that the bank still has a right to go after the original borrower (who abandoned the property) for the outstanding balance on the loan, but it cannot sue the association for that loan amount.

Recent Foreclosure 'Freeze' Leaves Would-Be Homebuyer Homeless; Gets 90 Minutes Notice Of Deal Cancellation After Wiring $75K To Closing Agent

In Fort Lauderdale, Florida, The Palm Beach Post reports:
  • Sales of bank-owned homes are being called off statewide, leaving buyers with uncertain contracts to purchase properties and, in some cases, scrambling to find places to live. [...] The move by three of the nation's largest lenders to pull back foreclosure operations in light of flawed court documents is causing an unexpected chain reaction of real estate tumult.


  • Norman Lachance is living with a friend after he was told 90 minutes before he was to get the keys for a bank-owned home last week that Fannie Mae was canceling the closing. The JPMorgan Chase-managed property near Fort Lauderdale is now on real estate's equivalent of a do-not-call list.

  • "I gave up my apartment because I was supposed to be in my home Oct. 1," said Lachance, whose belongings are in storage. "I bought insurance, paid for an inspection, had the electricity turned on." Lachance said his $75,000 cash payment already had been wired when the closing was canceled. He said he was told that if he asks for the money back, he will lose his hold on the home. "My lawyer asked how long this situation would take. There was no answer to that," Lachance said.(1)

For more, see Foreclosure sales freeze leaves buyers in the cold.

(1) It may be that Mr Lachance also lost out on a now-expired Federal tax credit that required a closing no later than September 30. For more on the loss of homebuyer income tax credits due to the foreclosure freeze, see 1st Time Homebuyers May Be Out Thousand$ In Tax Credits Due To Stalled Closings Resulting From Recent 'Robo-Signer' Mess.

Another Would-Be Homebuyer Faces Homelessness After Loan Servicers Pull Rug Out From Under Imminent Closings

In Ocala, Florida, The New York Times reports:
  • Amanda Ducksworth was supposed to move in to her new home this week, a three-bedroom steal here in central Florida with a horse farm across the road. Instead, she is camped out with her 7-year-old son at her boss’s house.

  • Like many buyers across the country, Ms. Ducksworth was about to complete the purchase of a foreclosed house when it suddenly went off the market. Fannie Mae, the giant mortgage holding company that buys loans from commercial lenders, is pulling back sales of homes that might have been foreclosed in bad faith.

  • I gave up my rental thinking I would have a house,” said Ms. Ducksworth, a 28-year-old catering assistant. “Now I’m sharing a room with my son. What the hell is up with that?

For more, see Flawed Foreclosure Documents Thwart Home Sales.

Ohio AG Tags Ally/GMAC With Civil Suit; Cite 'Stephan' Testimony As Trigger For Probe Into Allegedly Bogus Affidavits Filed In State F'closure Actions

From the Office of the Ohio Attorney General:
  • In a lawsuit filed [] against GMAC Mortgage, LLC and its parent, Ally Financial Inc., Ohio Attorney General Richard Cordray accuses the loan servicer and its agents of filing fraudulent affidavits to mislead courts in hundreds of Ohio foreclosures.


  • Through the lawsuit, Cordray is asking the court to grant a preliminary and permanent injunction preventing GMAC/Ally from proceeding to foreclose in any pending Ohio case or allowing the property to be sold. Cordray is also asking for civil penalties of up to $25,000 for every violation of Ohio’s Consumer Sales Practices Act and for consumer restitution.

  • As a result of similar reports regarding depositions taken by a JPMorgan Chase and Bank of America employees, Cordray [] also requested that JPMorgan Chase and Bank of America suspend moving toward a judgment, sale, eviction or property transfer involving any foreclosure case with affidavits signed by those employees. Cordray also sent letters to Wells Fargo and Citibank, requesting that the banks meet with his office to discuss foreclosure affidavit procedures.

For the Ohio AG press release, see Attorney General Cordray Files Lawsuit Against GMAC Mortgage.

For the lawsuit and exhibits, see State of Ohio v. GMAC Mortgage, LLC, et al.

Lender Abandons Foreclosure Action, Leaving Unwitting Property Owner Holding The Bag On Code Enforcement Violations & Facing Criminal Charges

In Atlanta, Georgia, WGCL-TV reports:
  • Marcus Kyzer could receive thousands of dollars in fines or even jail time for failing to maintain two rental properties in Southwest Atlanta. "I have no options at this point," said Kyzer. "The mortgage companies have written the debt off, but they don't want the properties on their books so they've written the debt off and left the titles in my name."
  • Kyzer said he filed for bankruptcy a year ago and was under the impression that the homes on Baker Drive would go into foreclosure. However, when the homes didn't go into foreclosure, code enforcement slapped Kyzer with three arrest warrants for not keeping the properties maintained.
  • "Why didn't you maintain the properties until foreclosure went through?" asked CBS Atlanta reporter Adam Murphy. "Because I didn't realize the properties hadn't been foreclosed on. I believed that had happened right after I got the discharge from my bankruptcy," said Kyzer.
  • It's a common problem throughout the city. Fulton County Code Enforcement Director Tony Phillips said Kyzer's case happens to about one-third of all property owners trying to get rid of properties in unincorporated Fulton County. "Simply because you've received a letter or had conversations about a foreclosure, it doesn't actually mean the property has actually transferred ownership, and until it does you're still legally responsible for property maintenance and other code violations that could occur on that property," said Phillips. Kyzer will have to explain his case to a judge next week.
Source: Property Owner Faces Possible Jail Time (Marcus Kyzer Received Arrest Warrants For Properties He Thought Were Bank Owned).

Cops Accept "The Bank Sent Me!" Defense In Home Break-In Probe Targeting "Trash-Out" Agent; Say No Crime Was 'Intended' - "It's A Civil Matter!"

Sarasota Herald Tribune columnist Tom Lyons writes:
  • The oldest trick in the book when cops want to avoid investigating a complaint is to simply insist it is a civil matter. Sometimes I can’t blame police for saying that. [...] Sometimes that phrase probably does save all involved a lot of useless trouble.

  • But the sheriff’s offices in Sarasota and Charlotte counties use that dodge when a bank sends property preservation contractors — that is, hired burglars -- to break into a house and change the locks while the resident owner or tenant is not there. That's outrageous. And it doesn't matter that there is probably a foreclosure lawsuit under way on that house.


  • But the old "that's a civil matter" dodge is exactly what was used when, for instance, tenants at a house in Punta Gorda found that men had broken in by jimmying a sliding glass door. The renters also reported some valuable items stolen, and said a beer that had been in the fridge was found half consumed on a table.

  • The sheriff's investigators did go to the trouble, at least, to get the denials of any theft from the men who broke in. And the investigators accepted those assurances, even though one of those men's fingerprints was on the beer bottle.

  • That beer issue aside, the men were excused because they worked for a company that is paid by banks to break into homes, and there was a work order to prove it. No charges were filed against the professional housebreakers or the bank officers who sent them.

  • In Sarasota, sheriff's investigator Jeff Bell explains that there has to be criminal intent to charge a crime, and there isn't any bad intent when a bank is just sending someone to secure houses that may have been abandoned during a drawn-out foreclosure lawsuit.(1)

  • Sorry, but that's weak. When a house is clearly abandoned and power is off and mold is growing, that's one thing. But when a house is obviously lived in, insisting that a housebreaking there isn't a crime is just bizarre.

For more, see Break-in? Not if bank is calling the shots.

(1) As reasonable as it may sound that "there has to be criminal intent to charge a crime," a victim of this type of violation must be ready to follow up and ask the cop making such a statement whether there is such a thing as criminal negligence. In other words, is it possible that a crime can be committed by someone who, despite a complete lack of intent to commit the crime, acted in such a negligent manner that the conduct rises to the level so as to constitute criminal negligence? (After asking the question, just be quiet and carefully listen to see whether the cop tries to tap dance his/her way around the question, or sincerely accepts the legitimacy of the question and decides to take a second look at the case (Since a cop is arguably less likely to try and BS an attorney asking a question like this, a victimized homeowner or renter may want to secure the services of counsel to ask the questions).

In Florida, the recording of a notice of pendency (ie. lis pendens - typically filed at the commencement of a foreclosure action) in the public records operates as notice to the world of litigation pending involving the property against which the lis pendens is recorded, and serves as constructive notice of the proceeding, the claims made therein, and the documents forming the causes of action (that can be found in the court file associated with the particular action at the local courthouse) against the property in the proceeding (F.S. 48.23 and the case law thereunder).

The issue here is whether the foreclosing lender's trash-out contractor has a legal obligation to:

  • ask the lender to provide him/her with a copy of a writ of possession (obtained after a foreclosure sale when the home's occupants are officially booted out by the local sheriff's office) evidencing that the lender is now in legal possession of the premises, or

  • familiarize him/herself with the court file associated with the foreclosure action (which, under F.S. 48.23, he/she is deemed to have constructive notice of) to determine whether a writ of possession stripping legal possession from the homeowner and turning it over to the lender was issued (or evidence that the writ was actually executed by police),

  • visit the Civil Division of the local Sheriff's Office (the department that handles evictions) and inquire as to whether a writ of possession was executed for the premises, or

  • take any other action (checking for active utility meters outside the premises, inquiring of neighbors, etc. to determine whether anyone is living in the home or whether they witnessed the last occupants moving out) that leads to solid, objective evidence that the premises has been abandoned (particularly applicable when the foreclosure action is not yet completed)?

In Florida and elsewhere, "A person has no right to shut his eyes or ears to avoid information, and then say that he has no notice; that it will not suffice the law to remain willfully ignorant of a thing readily ascertainable by whatever party puts him on inquiry, when the means of knowledge is at hand." Sapp v. Warner, 105 Fla. 245, 141 So. 124; aff'd on rehearing 143 So. 648 144 So. 481 (Fla. 1932), among scores of other cases throughout the country to the same effect.

The question for police and prosecutors, in my view, is whether the foreclosing lender's trash-out contractor exercised prudent, reasonable diligence in determining that the bank legitimately had the right of possession to the premises, or whether the contractor negligently or willfully closed his/her eyes to readily obtainable facts, and simply indulged in possibilities or probabilities before deciding to break into the premises.

If it's the latter, the question for law enforcement then is whether such careless or reckless conduct rises to the level of criminal negligence. ( It seems to me that the standard of diligence to which a trash-out contractor should be held before committing a home break-in should, at a bare minimum, be the same as that legally required of a process server serving a lawsuit.)

Until the cops get up to speed in this area of law enforcement, the victimized homeowner's (or tenant's) recourse in these situations is limited to hiring a lawyer and suing the perpetrators. As noted in earlier posts, media reports reveal that at least one Massachusetts law firm is apparently going around the country taking on these illegal lockout cases on behalf of screwed-over homeowners. See:

For those homeowners (and tenants) who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

JPMorgan Chase Behind Recent 'Break-In' Of Orlando-Area Home Owned, Occupied By Delinquent Borrower

In Orange County, Florida, The Raw Story reports:
  • In yet another sign that the foreclosure crisis in the US may be getting out of hand, a Florida woman has gone to the press about having her home broken into -- by an agent of her mortgage bank.

  • Nancy Jacobini of Orange County, Florida, says she was three months behind on her mortgage payments, but not in foreclosure, when she heard an intruder breaking into her home. Panicked, she called 911 and spent 10 nervous minutes on the phone with a dispatcher only to discover that the intruder was an agent of her mortgage company, JPMorganChase, who had come to change the locks on her home.


  • According to WFTV, the bank claims Jacobini never established a mortgage payment plan, and the house was assumed to be vacant as there were no utilities at the address. But the news crew found electricity and running water in the house.

  • A JPMorganChase representative told the news crew that the company had made a "mistake" in attempting to change the locks, and that the company has no right to change the locks on a home that hasn't been foreclosed and which is occupied.(1)

For more, see JP Morgan ‘thug’ breaks into home not in foreclosure: report.

Go here for the WFTV-TV Channel 9 video.

(1) Until the cops get up to speed in this area of law enforcement and start bringing criminal charges against the perpetrators, the victimized homeowner's (or tenant's) recourse in these situations is limited to hiring a lawyer and suing the perpetrators.

As noted in earlier posts, illegal lockout lawsuits on behalf of screwed-over homeowners are beginning to gain some steam. See:

For those homeowners (or tenants) who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

Thursday, October 07, 2010

Obama To Nix Notary Bill

The Washington Post reports:
  • Amid growing furor over the legitimacy of foreclosure proceedings, White House officials said Thursday that President Obama will not sign a two-page bill passed by lawmakers without public debate after critics said the legislation could loosen standards for foreclosure documents.

  • The bill, named the Interstate Recognition of Notarizations Act, would require courts to accept document notarizations made out of state. Its sponsors intended the effort to promote interstate commerce. But homeowner advocates warn the new law could allow lenders to cut even more corners as they seek to evict homeowners.

For more, see Obama won't sign bill that would affect foreclosure proceedings.

Obama Administration Aware Of Mortgage Industry Attempt To Sneak Through Proposed Law Affecting Document Notarizations

The Huffington Post reports:
  • White House is taking a careful look at legislation recently passed by Congress with little notice that would require courts to recognize notarizations from out-of-state, which some consumer advocates say would make it more difficult to fight bogus foreclosures by banks.

  • "There were a series of meeting on that this morning here," said White House spokesman Robert Gibbs, who added the White House would have a more definitive statement later on Thursday. "It is something that, as you said, there has been a lot of news on, the processing of documentation, the resulting impact on foreclosures, and that is being evaluated....In general, there is concern, ultimately, about the situation."

  • Max Gardner, a foreclosure defense attorney, said the timing of the bill was suspicious, considering fraudulent notarization of bogus foreclosure affidavits is at the heart of a scandal that has prompted the nation's largest banks to pause foreclosures in 23 states.

  • "The timing is just a little curious to me that all of a sudden you can't get anything through the Senate at all and then all a sudden on a voice vote," Gardner said. "This was first introduced in the House in 2007."

  • The legislation, titled the "Interstate Recognition of Notarizations Act," would "require any Federal or State court to recognize any notarization made by a notary public licensed by a State other than the State where the court is located when such notarization occurs in or affects interstate commerce." The bill would also require courts to recognize electronic notarizations.

  • "The thing that concerns me about the bill is that the provisions in it that allow for digital notarization by electronic means," said Gardner, "which implies that anyone with the appropriate software could notarize a digital document or image of a document, which would allow someone to notarize a document without seeing someone execute the document or doing the things a notary is supposed to do. In my mind that would lead a broad exception for more fraudulent practices."

For more, see White House Has 'Concerns' About Notarization Bill Seen As Foreclosure Cover.

DeKalb Cops, Feds Raid Suspected Loan Modification Scam Operation; Walk Off With Four Car Loads Of Records, Dozens Of Computers

In DeKalb County, Georgia, WGCL-TV reports:
  • DeKalb police executed a search warrant at Matrix Capital Resources Tuesday. They are sorting out the details of the sale pitch that lured in hundreds of unsuspecting mortgage clients. Police hope the evidence will seal their case against Fred Lee, who they said is the mastermind behind Matrix Capital.


  • [P]olice filled four car loads with records from the company. Police are investigating allegations of fraud and theft. One of those boxes may hold the key that could land Lee behind bars. “We are out here conducting a search warrant on Matrix Capital Resources, looking for documents and uncovering other victims that we may not know about at this time,” said Sgt. John Germano of the DeKalb County Police Fraud Unit.

  • The DeKalb police and Secret Service agents confiscated dozens of computers. Each of the computers they believe holds the stories of victims who have lost their homes. “We are looking at any related documents that would reveal any loan modifications either successful or unsuccessful,” Germano said.

  • The files confiscated in this search warrant will likely detail how the ploy worked, police said. Police say Lee travels from state to state, community to community, and church to church selling hundreds of people on the hope of a lowering their mortgages. The cost was $1,500 up front. Police said Lee told clients that while the loan is in the modification process, they don’t have to make payments.

For the story and video, see Search Warrant Executed At Loan Modification Company.

Fla. F'closure Mill Wins Round 1 In State AG's Dubious Document Probe; Is Appeal Next, Or Will AG Give Up & Throw In The Towel? (Everyone's Watching!)

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Florida's attorney general has no authority to investigate or discipline one of the state's large foreclosure law firms, a Palm Beach County judge ruled Monday.

  • The five-page ruling from Circuit Judge Jack S. Cox was in response to a request from the Shapiro & Fishman law firm to quash an attorney general's subpoena for information. The attorney general's office announced in August it was investigating Shapiro & Fishman, which has offices in Boca Raton and Tampa, as well as two other large firms that represent lenders in foreclosure hearings.

  • Cox said the Florida Bar, not the attorney general's office, is responsible for investigating allegations of misconduct, including complaints that foreclosure paperwork was doctored in order to rush cases through the courts.(1)

For more, see Judge rules in favor of so-called foreclosure mill.

(1) A notation on the Florida AG's website indicates that its probe "relates to a civil -- not a criminal -- investigation." The AG's office was not probing possible criminal conduct, but possible civil violations of the Florida Deceptive and Unfair Trade Practices Act (F.S. 501.201 et seq.).

I may be wrong on this, but on the surface, this court's ruling supports the seemingly ridiculous proposition that Florida attorneys and law firms are immune from civil lawsuits (at least those brought by the state attorney general) for violations of the Florida Deceptive and Unfair Trade Practices Act. An appeal should be forthcoming, in my view.

Maybe the state AG's office would be better off conducting a (or "recruiting" the local county prosecutor's office and/or U.S. Attorney's office for participation in a joint) criminal investigation, which clearly is not within the purview of The Florida Bar ("A guardian for the integrity of the legal profession" in Florida, according to its website).

Wells Fargo Stands Pat On Mass-Produced Foreclosure Document Scandal; Insist Robosigned Affidavits Are Accurate

Bloomberg News reports:
  • Wells Fargo & Co. is standing by the accuracy of foreclosure filings and won’t follow competitors in delaying seizures, after an employee testified he signed documents for proceedings without personally reviewing records. The bank said yesterday it doesn’t plan to halt repossessions because its “procedures and daily auditing demonstrate that our foreclosure affidavits are accurate.”

For more, see Wells Fargo Foreclosures Proceed After Data Queried.

See also the San Francisco Chronicle's The Bottom Line blog: Wells Fargo on foreclosure checks: "We don't need no stinkin' audits."

Ohio Secretary Of State Warns Against Mortgage Industry Gambit To Minimize Problems With Bogus Notarizations

In a recent interview with American Public Media, Ohio Secretary of State Jennifer Brunner made this observation on an apparent mortgage industry response to the recent brouhaha involving bogus notarizations(1) and foreclosure robosigners:
  • And what's very interesting is that on Sept. 27, Congress very quickly passed House Resolution 3808 (PDF) and it requires that state and federal courts honor notarizations from another state as long as they were lawful in that state.

  • It seemed innocuous at first, but when you really look into it, and you look into what's happening out there with technology and mortgages, and see that there are states with very lax laws and allow for electronic notarization without even presenting in front of a notary.

  • It seems very clear that there an attempt of the banking industry to flank what's being discovered by consumers with a lot of indignation.

For the transcript of the entire interview, see Faulty foreclosure papers notarized.

(1) See Ohio Secretary Of State Asks Feds To Open Criminal Probe Into 'Robo-Notary' Abuses Involving Mass-Produced Foreclosure Docs; Lists 5 Violations Of Law for recent action taken by Secretary of State Brunner in connection with dubious notarizations on foreclosure documents.

Wednesday, October 06, 2010

Stall Foreclosures As Long As Possible, Say Junior Mortgage Bond Investors As Loan Servicers Keep Coughing Up The Cash, Absorbing Up The Pain

A recent story in The Wall Street Journal noted the effect the foreclosure suspensions in connection with the recent robosigner brouhaha may have on cash flow for the holders of junior mortgage bonds:
  • While it is unclear whether the delays will have a deep impact on the market for bonds, the changes are already creating some unexpected outcomes, say investors.

  • When houses that have been packaged into a mortgage bond are liquidated at a foreclosure sale—the very end of the foreclosure process—the holders of the junior, or riskiest debt, would be the first investors to take losses.

  • But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream.

  • The latest events thus set up an odd circumstance where junior bondholders—typically at the bottom of the credit structure—could actually end up better off than they expected. Senior bondholders, typically at the top, could end up worse off.

  • Not surprisingly, senior debt holders want banks to foreclose faster to reduce expenses. Junior bondholders are generally happy to stretch things out. What is more, it isn't entirely clear how the costs of re-processing tens of thousands of mortgages will be allocated. Those costs could be "significant" said Andrew Sandler, a Washington, D.C., attorney who represents mortgage companies.

  • "This is sort of an extraordinary situation," said Debashish Chatterjee, a vice president for Moody's Investors Service who covers structured finance. By delaying foreclosures, "it means the subordinate bondholders don't get written down for a much longer period of time, and they keep getting payments."

For the story, see Mortgage Investors Are Set for More Pain.

LI Judge "Extends Invite" To RoboSigning Duo To Appear At F'closure Settlement Meeting While Hammering Lender's Lawyer In Failed 'Bamboozle' Attempt

In Riverhead, New York, a recent ruling in a foreclosure action presided over by Suffolk County Supreme Court Justice Peter H. Mayer merits a quick note here.

In his ruling denying, without prejudice, a motion for an Order of Reference,(1) Justice Mayer sounds like someone who believes he may have just nabbed a couple of multiple corporate hat-wearing robosigners, along with the attorney representing the foreclosing lender, attempting to bamboozle him with the various documents that they submitted in court in their effort to force a sale of the home securing the loan purportedly owned by the plaintiff.(2)

Those interested in the facts should read the ruling; it suffices to say here the lender's attorney took a bit of a hammering, and that robosigners Sherry Hall (possibly also known as "Sherri D. Hall") and Nikole Shelton have been ordered to appear at the Foreclosure Settlement Conference scheduled in this case for November 17, 2010.(3)

For the ruling, see Deutsche Bank Trust Ams. v McCoy, 2010 NY Slip Op 51664(U) (NY Sup. Ct. Suffolk County, September 21, 2010).

(1) Justice Mayer set forth the following legal basis under New York law for denying the lender's request to move forward with the foreclosure:
  • Only where the plaintiff is the assignee of the mortgage and the underlying note at the time the foreclosure action was commenced does the plaintiff have standing to maintain the action (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]; Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, 755 NYS2d 730 [2d Dept 2003]; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]; First Trust Natl. Assn. v Meisels, 234 AD2d 414, 651 NYS2d 121 [2d Dept 1996]).

  • An assignment executed after the commencement of an action, which states that it is effective as of a date preceding the commencement date, is valid where the defaulting defendant appears but fails to interpose an answer or file a timely pre-answer motion that asserts the defense of standing, thereby waiving such defense pursuant to CPLR 3211[e] (see, HSBC Bank, USA v Dammond, 59 AD3d 679, 875 NYS2d 490 1445 [2d Dept 2009]).

  • It remains settled, however, that foreclosure of a mortgage may not be brought by one who has no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]; Kluge v Fugazy, 145 AD2d 537, 536 NYS2d 92 [2d Dept 1988]).

  • Indeed, a plaintiff has no foundation in law or fact to foreclose upon a mortgage in which the plaintiff has no legal or equitable interest (Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]; Katz v East-Ville Realty Co., 249 AD2d 243, 672 NYS2d 308 [1st Dept 1998]).

  • Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]).

  • Although the February 28, 2008 assignment states it is "effective January 19, 2008," such attempt at retroactivity is ineffectual. If an assignment is in writing, the execution date is generally controlling and a written assignment claiming an earlier effective date is deficient, unless it is accompanied by proof that the physical delivery of the note and mortgage was, in fact, previously effectuated (see, Bankers Trust Co. v Hoovis, 263 AD2d 937, 938, 694 NYS2d 245 [1999]).

  • A retroactive assignment cannot be used to confer standing upon the assignee in a foreclosure action commenced prior to the execution of the assignment (Countrywide Home Loans, Inc. v Gress, 68 AD3d 709, 888 NYS2d 914 [2d Dept 2009]; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]). Plaintiff's failure to submit proper proof, including an affidavit from one with personal knowledge, that the plaintiff was the holder of the note and mortgage at the time the action was commenced, requires denial of the plaintiff's application for an order of reference.

(2) A similar paperwork gambit used in another New York case (Deutsche Bank Natl. Trust Co. v Maraj, 18 Misc 3d 1123, 2008 NY Slip Op 50176; January 31, 2008, Schack, J.) left one Brooklyn trial judge scratching his head wondering if he was the target of a "corporate 'Kansas City Shuffle' - a complex confidence game" (a reference to the 2006 film, Lucky Number Slevin, in which the term is explained by a hitman played by Bruce Willis). See also Brooklyn Judge Presides Over A Corporate "Kansas City Shuffle" In Foreclosure Action?

(3) Justice Mayer expresses some of his "dismay" towards the foreclosing lender's attorney in this unaltered excerpt:

  • Counsel also submits an Affirmation of Compliance with CPLR 3408, which states that "[w]e have determined that this loan is not subprime," and that the defendants "are not entitled to a court conference" (emphasis in original).

  • Despite counsel's assertions, the plaintiff's own affidavit of merit states that "[w]e have determined that this loan is subprime" and that "the defendants are entitled to court conference" (emphasis added).

  • The direct contradiction between counsel's "belief" and the assessment of one whose affidavit states, as in this case, that she has "first-hand knowledge of the facts and circumstances surrounding this action," validates this Court's approach in refusing to accept counsel's assertions as fact in any given foreclosure action.

  • The mistaken "belief" of an attorney who has no personal knowledge of the facts, yet opines in court documents that a homeowner-defendant is not entitled to a statutorily required court conference, may prejudice the homeowner's rights while subjecting the attorney to otherwise avoidable court sanctions.

Jurist, Media Reporter Give Their Views On Foreclosure Robo-Signers

Democracy Now! recently did an on-camera interview with Kings County (Brooklyn), New York Supreme Court Justice Arthur Schack and Mother Jones magazine reporter Andy Kroll for their views on the recent foreclosure brouhaha getting major coverage from media outlets around the country.

For the interview (approximately 15 minutes), see Lenders Forced to Suspend Thousands of Foreclosures.

Citigroup, Ally/GMAC, MERS Face Civil Racketeering Class Action Filed On Behalf Of Kentucky Homeowners Facing Foreclosure

Bloomberg News reports:
  • Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans. The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

For more, see Citigroup, Ally Sued for Racketeering Over Database.

Tuesday, October 05, 2010

Florida Judge Sticks Standing-Lacking Lender With $30K Tab For Homeowner's Legal Bill After Booting Case

In Loxahatchee, Florida, The Wall Street Journal reports:
  • Israel Machado's foreclosure started out as a routine affair. In the summer of 2008, as the economy began to soften, Mr. Machado's pool-cleaning business suffered and like millions of other Americans, he fell behind on his $400,000 mortgage.
  • But Mr. Machado's response was unlike most other Americans'. Instead of handing his home over to the lender, IndyMac Bank FSB, he hired Ice Legal LP in nearby Royal Palm Beach to fight the foreclosure. The law firm researched the history of Mr. Machado's loan and found two interesting facts.
  • First, the affidavits IndyMac used to file the foreclosure were signed by a so-called robo-signer named Erica A. Johnson-Seck, who routinely signed 6,000 documents a week related to foreclosures and bankruptcy. That volume, the court decided, meant Ms. Johnson-Seck couldn't possibly have thoroughly reviewed the facts of Mr. Machado's case, as required by law.
  • Secondly, IndyMac (now called OneWest Bank) no longer owned the loan—a group of investors in a securitized trust managed by Deutsche Bank did. Determining that IndyMac didn't really have standing to foreclose, a judge threw out the case and ordered IndyMac to pay Mr. Machado's $30,000 legal bill.(1)


  • Mr. Ice, who started Ice Legal four years ago, portrays his firm's work as defending the integrity of the legal process surrounding foreclosures. Banks can't repossess houses if they're using sloppy, and in some cases fraudulent paperwork, or if they can't prove that they own the loan. He says his firm has between 300 and 500 similar cases pending.

For more, see Foreclosure? Not So Fast.

(1) Florida foreclosure defense attorneys have got their motions ready for attorneys fees requests as courts have begun dismissing foreclosures based on these bogus documents. In Florida, where an agreement allows for an attorney fee award to one of the contracting parties (mortgage loan agreements typically allow a foreclosing lender to tack on its attorney fee to the amount owed on a loan when suing a homeowner to enforce the mortgage terms), state statute mandates an award of prevailing party attorney's fees to the other party under the reciprocity provisions of section 57.105(7), Florida Statutes; Landry v. Countrywide Home Loans, Inc., 731 So. 2d 137 (Fla. 1st DCA 1999).

Not only might the lender and servicer be court-ordered to cough up fees to the homeowners' attorneys, it's possible that the foreclosure mill law firms representing the lenders/servicers (at least in Florida) may also be ordered to foot part of the tab as well by reason of
section 57.105(1), Florida Statutes (bold text is my emphasis, not in the original text):

  • Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee, including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and the losing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:

    (a) Was not supported by the material facts necessary to establish the claim or defense; or

    (b) Would not be supported by the application of then-existing law to those material facts.

(For an old (July/August, 2000) article in The Florida Bar Journal that may be of some value in providing guidance to lawyers in requesting court-ordered, prevailing party attorneys fees from losing defendants (ie. lenders, servicers, etc.), see Pleading Requirements for a Claim for Attorneys' Fees.)

Two Canadian Tourists Find Themselves Illegally Locked Out Of Rented Home By Foreclosing Lender After Returning From Day At Beach

In Punta Gorda, Florida, the Sarasota Herald Tribune reports:
  • Two Canadian tourists returning to their rental home from a day at the beach found evidence burglars had struck -- or so it seemed. Their laptop computer and MP3 player were missing, as were six bottles of wine. A half-empty beer opened by the intruders was still cold and sitting on the kitchen counter.

  • But why, then, had the locks on the front door been changed? It turns out that a Sarasota company working for a lender trying to retake the property through foreclosure sent two men to the Punta Gorda home to break in and change the locks, even though the home was obviously occupied.

  • It is illegal for any bank representative to enter a property if they have not yet retaken it at a foreclosure sale, especially if there is any sign the home is occupied, foreclosure experts say. The process of banks hiring people to break into homes, even when occupied, is just the latest oddity of the messy foreclosure crisis in Florida. Some property owners are reporting the break-ins to law enforcement as burglaries. Yet investigators consider the disputes a civil matter because the contractors do not display criminal intent. That essentially leaves the property owners without recourse.(1)


  • In North Port, one family returned home from a weekend vacation and called their attorney in a panic: The front door lock was changed, the alarm system dismantled and family gerbil gone.

  • Landlord Brenda Perron of Sarasota has been in a three-year battle with Bank of America, which has sent people to change the locks on Perron's rented condo three times because the bank mistakenly believed her condo was in foreclosure.


  • Another man went to check on the North Port property his father owned to find his keys no longer worked, magazines moved from where they were in the home, cabinets opened and some tools missing.

For more, see Bank changes locks on occupied, foreclosed homes.

(1) Other than to file a civil lawsuit against the bank and the trash-out contractor. Other media reports reveal that at least one Massachusetts law firm is apparently going around the country taking on these illegal lockout cases on behalf of screwed-over homeowners. See:

For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

Maryland Man Cops Plea In Sale Leaseback, Equity Stripping Ripoff That Targeted High-Equity Homeowners With Unaffordable House Payments

From the Office of the U.S. Attorney (Baltimore, Maryland):
  • James William Fox II, age 40, of Crofton, Maryland, pleaded guilty [] to conspiracy to commit wire fraud in connection with a mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes, but left them with no equity and no longer holding the title to their properties.


  • According to Fox’s plea agreement, he met James Hooper Dan, age 45, of Annapolis, Maryland, when both were loan officers at a mortgage brokerage in Annapolis. Beginning in 2006, Fox began to identify prospective borrowers who owned and had equity in their homes, but who could not afford their mortgage payments and were at risk of losing their homes because they were either in foreclosure, bankruptcy or financial distress.

  • Fox, and sometimes Fox and Dan, told potential victims that they could "rescue" them and save their houses. The promises involved transferring the home to Fox or Dan, who would obtain a new mortgage loan. Fox and Dan promised to make the payments on the new mortgage loan for six months or a year, during which time the individual would "repair" their credit, refinance the property and reacquire it. During this six month or one-year period, the individual was to continue living in the house.

For the entire U.S. Attorney press release, see Crofton Loan Officer Pleads Guilty to Mortgage Fraud Scheme.

Minn. Sale Leaseback, Equity Stripping Victim Wins Back Free & Clear Home With Help From Non-Profit Law Firm As Judge Voids Sale & Subsequent Mortgage

In St. Paul, Minnesota, the Housing Preservation Project announces:
  • The Foreclosure Relief Law Project(1) won a major victory [...] in a prolonged equity stripping lawsuit. After a two day trial, the Court ordered that the homeowner now owns her home free and clear of a mortgage.

  • Almost two years ago, Ms. Sandra Gustafson approached the Foreclosure Relief Law Project because she was facing eviction from the home she has owned for almost 20 years. Ms. Gustafson was the victim of an elaborate equity stripping scheme orchestrated by a now-defunct company called Midwest Equity Consultants. Midwest Equity linked homeowners in foreclosure with “investors.”

  • An “investor” purchased Ms. Gustafson’s house and immediately sold it back to her on a contract for deed. Per the terms of the contract for deed, Ms. Gustafson was to refinance her home after 15 months. As is true with most equity stripping transactions, Ms. Gustafson was in no position to refinance her property, leaving her on the brink of eviction, as well as the loss of her $125,000 in equity to the “investors.”


  • In previous hearings before the Court, the Plaintiff successfully argued that Midwest Equity and the “investors” violated various provisions of Minnesota’s equity stripping laws. The Court also agreed with the Plaintiff that the mortgage that financed the transaction was void, because it violated state law and public policy.(2)

  • At trial, the bank that financed the transaction asked the Court to force Ms. Gustafson to repay the bank for its loss. The Court held that there was no legal basis to do so and denied the bank’s request.

For the entire press release, see Major Victory For Coon Rapids Homeowner In Equity Stripping Case.

(1) The Foreclosure Relief Law Project is a program of the Housing Preservation Project (“HPP”). HPP is a non-profit law firm based in St. Paul, Minnesota. Ms. Gustafson was represented by Jane Bowman and Mark Ireland.

(2) I suspect that the court found that the mortgage lender (presumably unwittingly) financing the sale leaseback ripoff was not entitled to bona fide purchaser status and, accordingly, was not entitled to the protection of the state recording statutes, thereby leading to its security interest in the premises being voided in favor of the superior, albeit unrecorded, rights and equities of the defrauded homeowner.

When dealing in real estate under Minnesota law (and under the law of most, if not all, other states as well), it is not enough for a purchaser or mortgage lender to merely examine defects in the record chain of title, but also, to discover anyone who is in open possession of land. If a person other than the seller/mortgage borrower is found to be in open possession of the premises, the purchaser/mortgage lender has a duty to inquire directly of the person in possession as to what the nature of that possession is.

A purchase/mortgage loan against the premises without first inquiring into the facts underlying that possession has generally been regarded as the strongest evidence of bad faith on the part of the purchaser/lender, and accordingly, said purchaser/lender acquires its interest in the premises subject to any unrecorded rights and equities that the possessor can establish. Such a failure to make inquiry, a negligent or willful closing of the eyes to visible pertinent facts, has been regarded as an intentional avoidance of the truth which it would have disclosed.

Such a purchaser/mortgage lender is generally considered to be on notice of such outstanding unrecorded rights and equities and, accordingly, is not a bona fide purchaser entitled to the protection of the state recording statutes.

For a survey on some of the Minnesota case law in this regard, see Minnesota Bona Fide Purchaser, Possession, Duty Of Inquiry.

For other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Monday, October 04, 2010

Maine Residents File Class Action Suit In Effort To Hold Lender Accountable For Allegedly "Routinely & Systematically" Using False F'closure Documents

In Biddleford, Maine, the Molleur Law Office announces:
  • Five Maine residents filed a complaint(1) today [Oct 1, 2010] against GMAC Mortgage, LLC ("GMAC") on behalf of themselves and a class of Maine homeowners alleging that the company routinely and systematically files false certifications that it has a right to foreclose on Maine homeowners, and false affidavits when asking courts to enter foreclosure judgments.


For more, see Molleur Law Files Class Action Complaint Against GMAC.

See also Lexology: Archibald v. GMAC Mortgage, LLC may be start of new class action wave over allegedly defective affidavits (requires subscription; if no subscription, GO HERE, then click appropriate link for the story).

(1) For the GMAC Maine Class Action Lawsuit and related documents, see:

(2) Mr. Cox, an attorney who reportedly has retired from the practice of law but apparently has yet to leave the "playing field" (see Retired Maine Attorney Joins Fight Against Foreclosures; Volunteers Services With Local Legal Aid Program), successfully represented a homeowner facing foreclosure as co-counsel in a case decided by the Maine Supreme Court in August. Based on the facts in that case, the Maine high court found that MERS was not a "mortgagee" within the meaning of the state's foreclosure statute, 14 M.R.S. §§ 6321-6325, and therefore had no standing to institute foreclosure proceedings. See Mortgage Electronic Registration Systems, Inc. v. Saunders, et al., 2010 ME 79 (August 12, 2010).

Central Florida's "Hang 'Em High, Harry" Ready To Wield Heavy Gavel To Hammer Sloppy Foreclosure Mills Unable To Follow Simple Court Rules

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • Criminal defense attorneys used to call Judge Harry Rapkin "Hang 'Em High Harry" for his tough prison sentences, and his latest crackdown in foreclosure court might have home lenders trying to come up with a similar nickname.

  • Rapkin unleashed a new order last week, aimed at attorneys for lenders who are still making the kind of simple errors that would be considered ridiculous in any courtroom. A lot is at stake; Rapkin sees hundreds of cases where the lender is minutes away from taking someone's property. Rapkin's new order completely dismisses foreclosure cases when they do not follow the simplest of rules.


  • "This isn't brain surgery," said Sarasota attorney Michael Belle, who reviews foreclosure filings for the judges as part of a court-sponsored program. On Sept. 24, the day Rapkin debuted the order, a quarter of the 250 cases seeking his permission to retake property made one of the errors, 61 in all.

  • Rapkin's checkboxes [listing the most common mistakes he sees in foreclosures] give him a quick way to make rulings on the cases. But it also has a twinge of ridicule: as in, can you believe professional attorneys can get things this wrong? Belle said it is a sad commentary about how a judge feels he must hold the hand of these attorneys just to meet elementary standards. "Judge Rapkin is now finally saying I can't trust these guys anymore, so here's what I'm going to do," Belle said.

For more, see Sarasota judge simplifies foreclosure cases (COURTROOM: A checklist of filing errors can bring a case to a halt).

Fort Lauderdale-Area Court System Not Immune To 'Kangaroo-Itis' In Foreclosure Actions As Local Chief Judge Takes "See No Evil, Hear No Evil" Posture

In Fort Lauderdale, Florida, WFOR-TV Channel 4 ran a story that made the following reference to the goings-on at the local county courthouse in connection with foreclosure actions that, to some, may appear to be a rubber-stamping kangaroo court system, and where the local chief judge is seemingly taking his cues from Mizaru, Kikazaru, and Iwazaru, better known as the proverbial "Three Wise Monkeys":
  • If there's any question about how bad the mortgage foreclosure crisis is, all you need to do is sit in on special courts like the one in Broward County. They do nothing but handle mortgage foreclosure cases using retired judges paid by the state of Florida. The special foreclosure courts were set up by the state in July with $9.6 million in seed money to try to reduce the backlog of some 67,000 foreclosure cases statewide.

  • In Broward County, the I-Team found the line of lawyers handling these cases stretching out the door and some cases before a judge lasting mere minutes to close. "We're under a mandate from the legislature to track the cases," said the Honorable Victor Tobin. Judge Tobin heads Broward County's special foreclosure court and oversees its operations. "We're under the gun to move 62% of those cases (off the docket) in one year," said Judge Tobin.

  • Though the retired judges preside over as many as 600 to 700 cases a week, Judge Tobin disagrees with those who charge that the cases are rushed through. "There is no pressure on that judge in the contested docket to move the cases in any particular fashion," said Judge Tobin. "You take your time, give everybody a hearing, be sure they're heard, listen to the arguments and (then) rule (in the case on the merits.)"

  • But critics, such as [local foreclosure defense attorney Roy] Oppenheim, say that pressure to clear the calendar and move the cases has resulted in rushed judgments, sloppy judicial decisions and even cases of judges overlooking forged or unverified documents such as unverified bank notes and mortgages.

  • "The banks effectively, in my opinion, hijacked the judicial system where the judicial system to a large extent became a private collection agency for the banking industry," said Oppenheim. Oppenheim calls these special foreclosure courts "rocket dockets" And he says homeowners get burned when judges more often than not side with banks at times without even seeing or reading evidence presented by the homeowner.

  • "These (unverified) affidavits these judges have known have had problems for well over a year and allowed these to steam roll through," said Oppenheim. "And not fulfill, in my opinion, their constitutional oath of office as judges. In terms of protecting and upholding both the United States Constitution and the Florida Constitution in terms of protecting the Constitutional rights, the property rights of homeowners and citizens of this state."

  • Judge Tobin disagrees."They (the judges) are under no edict to side with the bank as opposed to the homeowner," said Judge Tobin. Judge Tobin admits mistakes get made but he defends the system of specialized foreclosure courts. "You can't look at 50,000 cases…and not have a problem in individual cases," said Judge Tobin. "I haven't really seen it here in the 17th (Judicial Circuit.) I know they've had (problems or) issues have been raised in other jurisdictions. I know the (Florida) Attorney General is looking at the issue. We haven't really had it. But that doesn't mean that it's not there."

  • In fact, the problem of fraudulent court documents is so bad Florida's Attorney General has now opened a criminal investigation.

Source: I-Team: Mortgage Help Not Helping.

In a related column, see Naked Capitalism: Florida’s Kangaroo Foreclosure Courts: Judges Denying Due Process on Behalf of Banks.

DOCX Foreclosure "Document Fabrication" Price Sheet? has an interesting post on the DOCX’s GetNet™ Document Recovery solution, which DOCX describes in its promotional literature as:
  • "[a] national network of runners that is engaged to provide document recovery, expedited recordation services, title searches, and insurance submissions.

DOCX claims in its promotional literature that:

  • "The service is unique in that our clients can request that DOCX obtain any missing recordable documents through this web site through our online GetNet™ Work Order Form. Status of existing projects can also be obtained through our Online Services."

For more on this document retrieval service, including the DOCX price sheet (in downloadable form, ready for easy distribution to foreclosure defense attorneys, government investigators, journalists, members of Congress, consumer advocates, homeowners, and any other interested persons), see Psst. Hey you, yea, you. I got just what you need. Lender Processing Services’ DOCX Document Fabrication Price Sheet.