Saturday, January 15, 2011

Georgia Deputies Stumble Into Home-Based Meth Lab While Serving Foreclosure Notice; Score Big Bust

In Tift County, Georgia, WFXL-TV Channel 31 reports:
  • The routine serving of a bank foreclosure notice turns into a big drug bust in Tift County. Tift County Sheriff’s Department Information Officer David Hare tells FOX 31 News that sheriff’s deputies were serving a bank foreclosure notice Wednesday afternoon at 1241 WB Parks Road when they saw signs of a possible meth lab operation.

  • Hare says additional law enforcement officials were called to the scene to execute a search warrant of the home. They reported finding chemicals inside the home and on the adjacent property that were being used to manufacture methamphetamine.

  • Hare says officers with the Mid-State Narcotics Task Force arrested the homeowner, 43-year-old Michael Willis and charged him with manufacturing methamphetamine, possession of a firearm by a convicted felon, forgery, and manufacturing fake Georgia driver’s licenses.

For the story, see Deputies serving foreclosure notice cash in on meth lab.

Mortgage Servicer Neglect Adds To Blight In Chicago Neighborhoods As Vacant Homes Left Lingering In Legal Limbo

In Chicago, Illinois, the Chicago Tribune reports:
  • A new type of property is adding to neighborhood blight: the bank walkaway. Research to be released Thursday, the first of its kind locally, identifies 1,896 "red flag" homes in Chicago — most of them are in distressed African-American neighborhoods — that appear to have been abandoned by mortgage servicers during the foreclosure process, the Woodstock Institute found.

  • Abandoned foreclosures are increasing as mortgage investors determine that, at sale, they can't recoup the costs of foreclosing, securing, maintaining and marketing a home, and they sometimes aren't completing foreclosure actions. The property, by then usually vacant, becomes another eyesore in limbo along blocks where faded signs still announce block clubs.

  • "The steward relationship between the servicer and the property is broken, particularly in these hard-hit communities," said Geoff Smith, senior vice president of Woodstock, a Chicago-based research and advocacy group. "The role of the servicer is to be the person in charge of that property's disposition. You're seeing situations where servicers are not living up to that standard."

For more, see More banks walking away from homes, adding to housing crisis (Research shows 1,896 red flag homes in Chicago appear to have been abandoned during foreclosure process).

Nassau DA: Long Island Man Facing Foreclosure Used Phony Raffle Racket In Home-Peddling Scam, Clipping Victims Out Of $100K+

In Mineola, New York, WCBS NewsRadio 880 AM reports:
  • It was too good to be true. A Long Island man is accused of selling more than $100,000 worth of raffle tickets for a million-dollar waterfront home, then reneging on the drawing and pocketing the cash for luxury vacations.

  • The Nassau County District Attorney’s office arrested 32-year-old Scott Cicerone of North Babylon and charged him with scamming thousands of people out of $100,000. Cicerone was facing arraignment Thursday on 21 counts of petit larceny and one count of scheme to defraud. His attorney said Cicerone will plead not guilty.

  • Authorities say Cicerone sold raffle tickets in 2009, promising to give the winner a $1 million lien free home in Massapequa.(1) The tickets were only $50 each. [...] But D.A. Kathleen Rice says the house was really in foreclosure and Cicerone instead used the ill-gotten gains to pay for a Mercedes and take trips to Las Vegas, Atlantic City, and California.

For more, see Long Island Man Charged In House Raffle Scam.

For the Nassau County DA press release, see Suffolk Man Charged With Scamming Victims Out of More Than $100K in 2009 Massapequa House Raffle Scam (Cicerone promised ticket-holders the chance to win million-dollar home; instead used cash for vacations).

(1) Cicerone advertised that the winner would receive the property lien free, never mentioning the $1 million lien on the house from the previously defaulted loan, but did qualify the raffle, however, claiming if they did not sell 30,000 tickets, the ticket buyers’ money would be 95% refunded, according to the Nassau County DA press release.

Rogue Bill Collector Contacted, Harassed Friends & Family In Attempt To Illegally Squeeze Cash From Debtor: Federal Lawsuit

In Sherman, Texas, The Southeast Texas Record reports:
  • An East Texas man is suing a collection agency after one of its agents contacted and harassed his friends and family. Jimmy Cotten filed suit against Nelson, Hirsch & Associates Inc. on Dec. 15 in the Eastern District of Texas, Sherman Division.Cotten states that the defendant contacted his cell phone several times a day, contacted his cousin and called his friends on more than one occasion in an attempt to collect a debt.

  • Cotten argues that these telephone calls were harassing and abusive tactics in violation of the Fair Debt Collection Practices Act and Texas Debt Collection Act. He claims the defendant's actions have caused him to suffer from humiliation, anger, anxiety, emotional distress, fear, frustration and embarrassment. The defendant is also accused of invasion of privacy by intrusion into private affairs and intentional infliction of emotional distress.

For the story, see Debt collector sued for calling debtor's friends, family.

Mass. AG Pinches Landlord For Filing Phony Cerification After Being Nabbed For Failure To Comply w/ Lead Paint Law When Renting To Family w/ Young Kid

From the Office of the Massachusetts Attorney General:
  • A Worcester area property owner has been arraigned for fraudulently claiming his property was in compliance with lead laws and endangering children, announced Attorney General Martha Coakley. Jaroslaw Pianka, age 40, of Charlton, was arraigned on charges of Child Endangerment, Larceny by False Pretenses, and Uttering (2 counts).

  • Authorities allege that Pianka, the owner of two properties located on Dale Court in Leicester, failed to comply with lead laws by submitting fraudulent certificates of lead compliance and representing that his properties had been properly deleaded. [...] A Worcester County Grand Jury returned indictments against Pianka on December 17, 2010.(1)

For the Massachusetts AG press release, see Property Owner Arraigned on Child Endangerment and Other Charges for Allegedly Failing to Comply with Lead Paint Laws.

(1) In one case according to authorities, a family with two children under the age of six rented one of Pianka'a properties under the verbal assertion that the property had been deleaded in February 2007. Massachusetts Law requires owners of properties containing dangerous levels of lead to abate or contain lead whenever a child under six years of age resides in the property. According to authorities, the family subsequently performed a home lead test which revealed lead in the property, and contacted the Leicester Board of Health to request a lead determination in March 2009.

According to the state AG, Further inspection of the property by the Board of Health found several areas that tested positive for lead and the Board of Health issued an order to Pianka to correct the lead in the property in April 2009. Following the order, in April 2009, Pianka reportedly provided the family with a copy of a letter of full deleading compliance and the Massachusetts Tenant Lead Law Notification and Certification Form, which is required by law to be provided by landlords to tenants prior to renting properties built before 1978, and reportedly also provided the letter of full deleading compliance to the Board of Health. According to authorities, a review of the letter conducted by the Massachusetts Department of Public Health’s Child Lead Poisoning Prevention Program determined the documentation to be fraudulent.

In a second case, Pianka was also cited for lead paint compliance at a second property after the Board of Health learned of additional alleged violations, the state AG said.

Massachusetts Landlord's Refusal To Renew Lease After Long-Time Tenant's New Child Triggered Lead Paint Abatement Obligation Leads To State AG Lawsuit

From the Office of the Massachusetts Attorney General:
  • A Boston real estate management company, its agent and property owner have been sued for violating state anti-discrimination law, Attorney General Martha Coakley’s Office announced. The Attorney General’s Office filed a housing discrimination complaint on January 3, 2011, against Mediate Management Company (“Mediate”), its agent Deborah Kooring, and Fenway Buttrick, LLC, in Suffolk Superior Court alleging that the defendants refused to renew the lease of a family because they reside with a young child whose presence required the defendants to comply with state lead paint laws.(1)


  • According to the complaint, the tenants lived for many years in an apartment unit owned by Fenway Butrick, LLC and managed by Mediate. In May 2010, the tenants submitted a lease renewal to the defendants and informed them that the tenants recently had a child who would be living with them in the apartment unit. Concerned for their child’s well-being, the tenants asked the defendants to inspect the apartment unit for lead paint hazards. The complaint alleges that after learning of the change in the tenants’ familial status, Mediate’s agent notified the tenants that their lease would not be renewed.

  • Mediate’s purported basis for the non-renewal included maximum occupancy limitations and square footage limitations, both of which bases later were shown to be incorrect. According to the complaint, in late May 2010, the tenants filed a complaint alleging discrimination with the Boston Fair Housing Commission (“BFHC”). The defendants subsequently submitted to a lead paint inspection which revealed high levels of lead paint and required the defendants to abate the lead hazard under Massachusetts lead paint laws.

For the Massachusetts AG press release, see AG Sues Boston Real Estate Management Company, Agent and Property Owner for Housing Discrimination.

(1)Anti-discrimination law prohibits landlords and real estate professionals from refusing to rent to prospective tenants because they have children. It further requires them to comply with lead paint laws designed to protect young children from known health hazards,” AG Coakley said. “Massachusetts is facing critical housing needs and residents must be treated fairly.”

California Attorney Admits Breaking Into Foreclosed Clients' Former Homes On Their Behalf At Least A Half Dozen Times In Squatting Protest

In Southern California, the Los Angeles Times reports:
  • Jim and Danielle Earl had fallen behind on their mortgage payments after a business reversal. But the six-bedroom house that they shared with their brood had already been sold to an investment company, [Ventura County Superior Court] Judge Barbara A. Lane pointed out. The eviction would stand.

  • Incensed, [attorney Michael T.] Pines vowed to hire a locksmith and enter the vacant house illegally. "I'm going back there," Pines declared, gripping the lectern. "And I hope I get arrested." "I certainly hope not," Lane shot back. "That is a blatant disregard of this court's order."

  • With Pines, the threat at the October hearing couldn't be written off as courtroom theatrics. The 58-year-old attorney admits to breaking into homes at least half a dozen times, including one before with the Earls, leaving the clients to squat in their homes while he defends their legal right to possession. His unconventional methods have gotten him fined by a judge in San Diego, arrested in Newport Beach and threatened with contempt — and jail — in Ventura.


  • Pines has yet to wrest a house back. His most high-profile client, baseball legend Lenny Dykstra, took Pines' advice last July to move back into his foreclosed Thousand Oaks mansion against a bankruptcy judge's orders. That move, followed by a victory party at the estate, brought an order barring the former outfielder from the property. Dykstra fired Pines after one month and lost the house in a foreclosure sale in November.

For more, see Lawyer advises foreclosed clients to break back into their homes (Michael Pines, who was baseball legend Lenny Dykstra's attorney, admits to breaking into homes at least half a dozen times, leaving clients to squat while he defends their legal right to possession).

Friday, January 14, 2011

Ventura County DA Charges Four In Alleged Foreclosure Rescue Racket That Targeted Primarily Non-English Speaking Homeowners For Upfront Fee Fleecing

In Ventura County, California , the Ventura County Star reports:
  • Ventura County prosecutors have filed a felony complaint against four people alleging they ran a fraudulent home foreclosure rescue program from an Oxnard office. Prosecutors allege that Maria Victoria Santos, 55, of Ventura, along with Felipe Carlos Segovia Castro, 67, of Moreno Valley; Laura Cecilia Carlson, 64, of Hacienda Heights; and Margie Joanna Vargas, 22, of Orange, targeted predominantly monolingual Spanish-speaking clients facing foreclosure on their homes.

  • The four defendants collected thousands of dollars in upfront fees from their clients after promising to save their homes from foreclosure. However, prosecutors allege their clients received no actual services and lost thousands of dollars in addition to their homes.


  • Santos faces 11 counts of foreclosure consultant fraud and seven counts of grand theft. Castro is charged with one count of foreclosure consultant fraud. Carlson, a licensed real estate saleswoman, and Vargas, a licensed notary public, are both charged with two counts of foreclosure consultant fraud.


  • The charges arise out of what authorities say was a fraudulent home foreclosure rescue business called USA Home Recovery Service, run by Santos out of an office on Fifth Street in Oxnard. Prosecutors said Santos advertised her services on local radio stations broadcasting in Spanish to Spanish-speaking residents in Ventura County.

  • Those who suspect they were victimized in this operation are asked to contact the Ventura County District Attorney’s Office Real Estate Fraud Unit at 662-1750 and file a complaint.

Source: 4 accused of foreclosure rescue fraud.

Go here for the Ventura County DA press release.

Central Florida Foreclosure Mill Required Staff To Work "Off The Clock," Says Ex-Employee In Lawsuit

In Tampa, Florida, The Tampa Tribune reports:
  • A former employee of a major foreclosure law firm in Tampa says she and other employees were forced to work "off the clock" to keep up with a flood of cases over the past three years. Denise Vasquez has filed a lawsuit and is asking for a jury trial in her case against Florida Default Law Group. She also names her supervisor, Timothy Hutton, in the case.

  • Vasquez says employees were regularly allowed five hours per week of overtime but then were routinely required to work extra hours. "Thousands of emails from all over the country would come in every day requiring action in the Florida Courts," the suit says. A lawyer for Florida Default was not available for comment. The suit was originally filed in Hillsborough County but was transferred to federal court at the request of Florida Default.

For more, see Employee: 'Foreclosure mill' forced her to work off clock.

Landlord Gets The Squeeze As Lender Refuses To Renew Short Term Balloon Mortgages; Bank Opts To Foreclose Instead Despite Prompt Payment History

In Springfield, Missouri, KYTV Channel 3 reports:
  • Imagine never being late or missing a payment, but still losing your home to foreclosure. It's happening across the nation to owners of rental properties. An owner of multiple rental properties can't typically get a traditional loan, so he'll get a one-, three- or five-year note that's renewed when it expires. Several property owners in the Ozarks are getting turned down for renewals even though they've never been late or missed a payment. The result is they lose their properties to foreclosure and the income that goes with it.

  • When Don Hosey got into the home rental business nearly a decade ago, he never imagined this is how it would end. "That's how I feel. They don't care," Hosey said about his bank.

  • He owns 10 properties in Springfield. He say he's never been late on a payment. He's never missed a payment. In fact, his properties were making him a profit of about $2,500 a month. So he can't figure out why his bank would refuse to renew his loans. Instead, it sent him a letter demanding that he immediately pay off the loans on all 10 properties. "I have to pay the balances on all properties or they take them back and foreclose on me," he said.

  • In fact, they've already foreclosed on two properties, including a six-plex, his biggest money maker. His bank didn't return a reporter's calls but told him why they wouldn't refinance his loans.


  • Hosey is not alone. The owner of Metro Housing Finders, an organization that places tenants, says he knows of at least a half dozen owners in the same position.

For the story, see Banks foreclose on rental property owners with excellent payment histories.

NC Upfront Fee Loan Modification Racket Gets Clipped For 80K+ In Restitution, Civil Penalties After Pocketing Cash In Exchange For Broken Promises

In Raleigh, North Carolina, the Greensboro News & Record reports:
  • A company that operated in Colfax and Charlotte has been banned from doing foreclosure assistance work in the state. The state Attorney General's office said [] that Reginald Keith Turner, who did business as Hazelton Management and The Carley Group, is prohibited from doing foreclosure assistance, loan modification and debt relief work in the state.

  • The Attorney General’s Office said it first warned Turner to stop violating the law in late 2008. Instead, he reopened his business under a new name, The Carley Group, and continued taking consumers’ money.

  • The state then filed suit against Turner, alleging that he charged homeowners an advance fee of as much as $2,500 but did little or nothing to help save their homes. Turner shut down his operations and left North Carolina after the state won a temporary court order against his foreclosure rescue work in June 2010.(1)

Source: State bans foreclosure rescue firm that operated in Colfax.

For the NC AG press release, see Phony foreclosure rescue outfit banned from reopening in NC.

(1) Go here for a list of other foreclosure rescue rackets shut down by the NC AG.

Thursday, January 13, 2011

Brooklyn Jurist Continues Slamming Sloppy Lenders, Foreclosure Mills; Charges Law Firm With "Delinquent Conduct"

AOL Daily Finance columnist Abigail Field writes:

  • Now, Judge Arthur M. Schack of Brooklyn has taken things a step further. Since the banks in cases before him have yet to begin complying with the new court rules, he has started throwing out foreclosure cases. But the question isn't whether the banks will now choose to start complying with the rule: The question is: Will they even be able to?

  • The first case Judge Schack tossed was Citibank, N.A. v. Murillo, which he dismissed with prejudice on Jan. 7, as the blog StopForeclosureFraud reported. The attorneys for Citibank in that case were from the Steven Baum law firm, a foreclosure mill that has been sanctioned for its involvement in frivolous cases. If the Baum firm couldn't file a timely affirmation in the Murillo case, how many of its other cases will it be able to file affirmations in?(1)

  • Schack tells me he's thrown out a dozen or so more since Murillo, and he says until the banks and their attorneys start obeying his order to comply with the new affirmation rule, he'll keep tossing cases. A court order is a court order, Schack explains. "They can't just ignore it. In Murillo, they asked for more time, but they didn't give me a reason. It doesn't matter who you are, you have to obey court orders."

  • By dismissing these cases "with prejudice," Schack is forcing the banks to start the whole process over if they wish to foreclose. Given how long foreclosures take to complete, that alone is a significant penalty. Moreover, if the banks do refile any of these cases, they will be reassigned to him. "We don't have judge-shopping in Brooklyn," Schack explains. So the banks will have to get their papers in order before they refile.

For more, see Why a New York Judge Is Throwing Out Foreclosure Cases.

(1) Commenting on the negative effect on the functioning of the court system and the adjudication of claims resulting from attorneys' chronic failure to comply with the rules of proper practice, Justice Schack noted (bold text is my emphasis, not in the original text)):

  • The failure of plaintiff's counsel, Steven J. Baum, P.C., to comply with two court orders, my November 4, 2010 order and Chief Administrative Judge Pfau's October 20, 2010 order, demonstrates delinquent conduct by Steven J. Baum, P.C. This mandates the dismissal with prejudice of the instant action. Failure to comply with court-ordered time frames must be taken seriously. It cannot be ignored. There are consequences for ignoring court orders. Recently, on December 16, 2010, the Court of Appeals, in Gibbs v St. Barnabas Hosp. (___NY3d ___, 2010 NY Slip Op 09198), instructed, at *5:

    As this Court has repeatedly emphasized, our court system is dependent on all parties engaged in litigation abiding by the rules of proper practice (see e.g. Brill v City of New York, 2 NY3d 748 [2004]; Kihl v Pfeffer, 94 NY2d 118 [1999]). The failure to comply with deadlines not only impairs the efficient functioning of the courts and the adjudication of claims, but it places jurists unnecessarily in the position of having to order enforcement remedies to respond to the delinquent conduct of members of the bar, often to the detriment of the litigants they represent. Chronic noncompliance with deadlines breeds disrespect for the dictates of the Civil Practice Law and Rules and a culture in which cases can linger for years without resolution. Furthermore, those lawyers who engage their best efforts to comply with practice rules are also effectively penalized because they must somehow explain to their clients why they cannot secure timely responses from recalcitrant adversaries, which leads to the erosion of their attorney-client relationships as well. For these reasons, it is important to adhere to the position we declared a decade ago that "[i]f the credibility of court orders and the integrity of our judicial system are to be maintained, a litigant cannot ignore court orders with impunity [Emphasis added]." (Kihl, 94 NY2d at 123).

Justice Schack then continued on (alterations, emphasis in the original):

  • "Litigation cannot be conducted efficiently if deadlines are not taken seriously, and we make clear again, as we have several times before, that disregard of deadlines should not and will not be tolerated (see Miceli v State Farm Mut. Auto Ins. Co., 3 NY3d 725 [2004]; Brill v City of New York, 2 NY3d 748 [2004]; Kihl v Pfeffer, 94 NY2d 118 [1999]) [Emphasis added]." (Andrea v Arnone, Hedin, Casker, Kennedy and Drake, Architects and Landscape Architects, P.C., 5 NY3d 514, 521 [2005]). "As we made clear in Brill, and underscore here, statutory time frames —like court-order time frames (see Kihl v Pfeffer, 94 NY2d 118 [1999]) — are not options, they are requirements, to be taken seriously by the parties. Too many pages of the Reports, and hours of the courts, are taken up with deadlines that are simply ignored [Emphasis added]." (Miceli, 3 NY3d at 726-726).

Recent Massachusetts High Court Ibanez Ruling Leaves Question On 3rd Party Bona Fide Purchaser Unanswered (Or Did It?)

One question that the Massachusetts Supreme Judicial Court in the recent Ibanez ruling left unanswered is noted in this excerpt from Justice Robert J. Cordy's concurring opinion, with whom Justice Margot Botsford joined:
  • What is more complicated, and not addressed in this opinion, because the issue was not before us, is the effect of the conduct of banks such as the plaintiffs here, on a bona fide third-party purchaser who may have relied on the foreclosure title of the bank and the confirmative assignment and affidavit of foreclosure recorded by the bank subsequent to that foreclosure but prior to the purchase by the third party, especially where the party whose property was foreclosed was in fact in violation of the mortgage covenants, had notice of the foreclosure, and took no action to contest it.(1)

For the ruling, see U.S. Bank Nat’l Ass’n v. Ibanez, No. SJC-10694 (January 7, 2011).

(1) It typically follows that where a foreclosure sale is found to be "wholly void" (ie. absolutely void, void ab initio, void from inception, a legal nullity, nugatory, ineffectual, of no legal effect, etc. - and as distinguished from a foreclosure sale that is treated as being merely voidable - a sale that, although infected with minor defects, is treated as valid and binding until challenged and annulled by the injured party), a bona fide third party foreclosure purchaser acquires no title at all - in the same way as though it had acquired its interest through a forged deed, thereby leaving it holding the bag (unless he/she obtained a title insurance policy - in which case it may be the title insurer left doing the bag-holding). It can be said that when a foreclosure sale is found to be wholly/absolutely void, "there are lasting consequences to everyone in the subsequent chain of title." See Julian v. Buonassissi, 414 Md. 641; 997 A.2d 104 (Md. 2010), making this observation in the context of a deed being found to be "void ab initio or of no legal effect." (go here for more on the distinction between void and voidable).

Reference is made here to the opinion in chief, wherein Justice Ralph D. Gants, writing for a unanimous court, touched on the issue of a void foreclosure sale in the following excerpts (footnotes from the text of the opinion omitted; bold text is my emphasis, not in the original text):

  • Recognizing the substantial power that the statutory scheme affords to a mortgage holder to foreclose without immediate judicial oversight, we adhere to the familiar rule that "one who sells under a power [of sale] must follow strictly its terms. If he fails to do so there is no valid execution of the power, and the sale is wholly void." Moore v. Dick, 187 Mass. 207, 211 (1905). See Roche v. Farnsworth, 106 Mass. 509, 513 (1871) (power of sale contained in mortgage "must be executed in strict compliance with its terms"). See also McGreevey v. Charlestown Five Cents Sav. Bank, 294 Mass. 480, 484 (1936).

    One of the terms of the power of sale that must be strictly adhered to is the restriction on who is entitled to foreclose. The "statutory power of sale" can be exercised by "the mortgagee or his executors, administrators, successors or assigns." G.L. c. 183, § 21. Under G.L. c. 244, § 14, "[t]he mortgagee or person having his estate in the land mortgaged, or a person authorized by the power of sale, or the attorney duly authorized by a writing under seal, or the legal guardian or conservator of such mortgagee or person acting in the name of such mortgagee or person" is empowered to exercise the statutory power of sale. Any effort to foreclose by a party lacking "jurisdiction and authority" to carry out a foreclosure under these statutes is void. Chace v. Morse, 189 Mass. 559, 561 (1905), citing Moore v. Dick, supra. See Davenport v. HSBC Bank USA, 275 Mich. App. 344, 347-348 (2007) (attempt to foreclose by party that had not yet been assigned mortgage results in "structural defect that goes to the very heart of defendant's ability to foreclose by advertisement," and renders foreclosure sale void).

    A related statutory requirement that must be strictly adhered to in a foreclosure by power of sale is the notice requirement articulated in G.L. c. 244, § 14. That statute provides that "no sale under such power shall be effectual to foreclose a mortgage, unless, previous to such sale," advance notice of the foreclosure sale has been provided to the mortgagee, to other interested parties, and by publication in a newspaper published in the town where the mortgaged land lies or of general circulation in that town. Id. "The manner in which the notice of the proposed sale shall be given is one of the important terms of the power, and a strict compliance with it is essential to the valid exercise of the power." Moore v. Dick, supra at 212. See Chace v. Morse, supra ("where a certain notice is prescribed, a sale without any notice, or upon a notice lacking the essential requirements of the written power, would be void as a proceeding for foreclosure"). See also McGreevey v. Charlestown Five Cents Sav. Bank, supra. Because only a present holder of the mortgage is authorized to foreclose on the mortgaged property, and because the mortgagor is entitled to know who is foreclosing and selling the property, the failure to identify the holder of the mortgage in the notice of sale may render the notice defective and the foreclosure sale void. See Roche v. Farnsworth, supra (mortgage sale void where notice of sale identified original mortgagee but not mortgage holder at time of notice and sale). See also Bottomly v. Kabachnick, 13 Mass. App. Ct. 480, 483-484 (1982) (foreclosure void where holder of mortgage not identified in notice of sale).


  • We now turn briefly to three other arguments raised by the plaintiffs on appeal. First, the plaintiffs initially contended that the assignments in blank executed by Option One, identifying the assignor but not the assignee, not only "evidence[ ] and confirm[ ] the assignments that occurred by virtue of the securitization agreements," but "are effective assignments in their own right." But in their reply briefs they conceded that the assignments in blank did not constitute a lawful assignment of the mortgages. Their concession is appropriate. We have long held that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title in land to the bearer of the assignment. See Flavin v. Morrissey, 327 Mass. 217, 219 (1951); Macurda v. Fuller, 225 Mass. 341, 344 (1916). See also G.L. c. 183, § 3.

On a related note, a September 28, 2010 ruling from the Washington State Court of Appeals, in Albice v. Premier Mortgage Services Of Washington, Inc. (if link expires, TRY HERE), 157 Wn. App. 912; 239 P.3d 1148; 2010 Wash. App. LEXIS 2199 (Wn. Ct. of App., Div. II, September 28, 2010) appears to have addressed an issue under Washington law closely resembling the unanswered 3rd party bona fide purchaser question in Ibanez.

The Washington appeals court in Albice found that a technical defect in following the applicable statute rendered a foreclosure sale wholly void, despite any claim of bona fide purchaser status made by a 3rd party foreclosure sale buyer who purchased the foreclosed real estate. The court went further to hold that, given the specific facts of the case, the 3rd party foreclosure sale buyer either knew or should have known of the technical defects that were fatal to the foreclosure sale and, consequently, did not qualify as a bona fide purchaser anyway, thereby allowing the foreclosure to be undone, regardless of whether the sale was void, or merely voidable.

It should be noted that, like Massachusetts, Washington is a non-judicial foreclosure state. The foreclosure sale in Albice, like in Ibanez, was carried out pursuant to a power of sale contained in the security agreement. One distinction between the two cases is that in Albice, the security agreement foreclosed was a deed of trust, whereas in Ibanez, the security agreement was a mortgage (possibly a distinction without a material difference).

For the briefs filed in Albice, see:

Florida AG's Office To State Lawmakers: Foreclosure Process In "Total Disarray" - A "Virtual Morass" Of Fake Documents, Faulty Assignments

The South Florida Sun Sentinel reports:
  • Florida’s foreclosure process has become a “virtual morass” of fake documents and faulty practices by “mill” law firms spewing out unverified paperwork, Associate Florida Attorney General Patricia Conners told the Florida Senate Committee on Banking and Insurance Tuesday.


  • Conners’ comments echoed an Attorney General office report issued last week that indicates the problems include instances of false paperwork, fake signatures and improper certification by notaries. The report showed that investigators have documented cases of foreclosure processors swearing to the truth of thousands of documents that they have not verified and homes being foreclosed upon by a bank that did not hold the mortgage note.


  • Conners described the Florida foreclosure process as "total disarray" in her update on the investigation. Florida’s foreclosure problems have gained national attention because, as Conners indicated, Florida’s foreclosures represent half of all the pending cases in the 23 states that use a judicial process to resolve foreclosures.

For more, see: Foreclosure: AG's office says process in 'total disarray'.

Oneidas Dodge Potentially Adverse Supreme Court Ruling In R/E Tax-Dodging Case; 11th Hour Waiver Of Lawsuit Immunity Moots High Court's Role In Case

The Associated Press reports:
  • The U.S. Supreme Court has dismissed a case involving two New York counties that are trying to foreclose on land owned by the Oneida Indian Nation to settle a property tax dispute. The court agreed in October to hear the case. It centers on the issue of whether tribal immunity from lawsuits prevents Madison and Oneida counties from foreclosing on tribal land.

  • The justices said in an unsigned opinion Monday that the Oneidas have agreed since to waive their immunity. They said that eliminates the high court's role in the case. The court instructed the 2nd U.S. Circuit Court of Appeals to consider other issues raised in the dispute. The case involves about 17,000 acres. The federal government has agreed to put most of the land into trust.

Source: High court dismisses Oneida foreclosure case.

See also The Utica Observer Dispatch: Supreme Court sends Oneidas foreclosure case back to lower court:

  • The U.S. Supreme Court kicked the longstanding foreclosure lawsuit involving the Oneida Indian Nation back to a lower court Monday. In doing so, it decided not to rule on whether Indian tribes can block foreclosure cases using sovereign immunity.The court’s decision came after the Nation voluntarily waved its immunity. The counties have been seeking to foreclose on Oneida property for years, saying they hope the effort induces payment of property taxes from the 1990s.

  • What the Supreme Court did do, however, was vacate a previous judgment barring Oneida and Madison counties from foreclosing on Oneida land.That means the 2nd U.S. District Court of Appeals will hear the case once again – but without the argument of sovereign immunity.(2)

For an earlier post on this story, see Federal Appeals Court Gives Indian Tribes The "Go-Ahead" To Buy Real Estate, Stiff Counties On Lawfully-Owed Property Taxes & Get Away With It.

(1) According to the Supreme Court (bold text is my emphasis, not in the original text):

  • We granted certiorari, 562 U. S.___(2010), on the questions "whether tribal sovereign immunity from suit, to the extent it should continue to be recognized, bars taxing authorities from foreclosing to collect lawfully imposed property taxes" and "whether the ancient Oneida reservation in New York was disestablished or diminished." Pet. for Cert. i. Counsel for respondent Oneida Indian Nation advised the Court through a letter on November 30, 2010, that the Nation had, on November 29, 2010, passed a tribal declaration and ordinance waiving "its sovereign immunity to enforcement of real property taxation through foreclosure by state, county and local governments within and throughout the United States." Oneida Indian Nation, Ordinance No. O-10–1 (2010). Petitioners Madison and Oneida Counties responded in a December 1, 2010 letter, questioning the validity, scope, and permanence of that waiver; the Nation addressed those concerns in a December 2, 2010 letter.

    We vacate the judgment and remand the case to the United States Court of Appeals for the Second Circuit. That court should address, in the first instance, whether to revisit its ruling on sovereign immunity in light of this new factual development, and — if necessary — proceed to address other questions in the case consistent with its sovereign immunity ruling. See Kiyemba v. Obama, 559 U. S. ___ (2010) (per curiam).

    Petitioners are awarded costs in this Court pursuant to this Court’s Rule 43.2.

For the Federal appeals court ruling that was the subject of this appeal, see Oneida Indian Nation of N.Y. v. Madison County, 605 F.3d 149 (2d Cir. 2010).

(2) More from the Utica Observer Dispatch:

  • Oneida County Executive Anthony Picente Jr. said his reaction to the situation is “mixed” because the county was hoping the Supreme Court would resolve the issue. Now there is no clear indication of how long it will take. “Legally, the decision’s a victory for us,” he said. “But practically it doesn’t feel like a victory because we expected to win the entire argument at Supreme Court.”

    Officials had speculated a Supreme Court ruling could have implications for Indian tribes across the country. In opposing letters to the Supreme Court, attorneys from both sides engaged in a sharp back-and-forth about the waiver.

    David Schraver, an attorney for the counties, said he is “unaware of any other case in which a party has aggressively litigated an issue for fully 10 years – including up to this court and back once more – and then attempted to moot the issue through purely unilateral action. …

    But attorney Seth Waxman, who works for the Oneidas, said there is “no basis” for Schraver’s suggestion that the waiver was an attempt by the Nation to shield itself from an unfavorable ruling.

Wednesday, January 12, 2011

Recent Massachusetts High Court Ruling Triggers Resumption Of Statewide Class Action Alleging Faulty Foreclosures, 'Fair Debt' Violations

In Boston, Massachusetts, Bloomberg reports:
  • A statewide class action in which Massachusetts homeowners accuse U.S. Bancorp and Ally Financial Inc. of faulty foreclosures will resume now that the state’s high court ruled in a similar case last week.(1),

  • The litigation was on hold while the Supreme Judicial Court decided whether state law required foreclosures to be conducted by the mortgage owner. The high court ruled Jan. 7 in U.S. Bank v. Ibanez that an industry practice allowing post-foreclosure assignments violated state law. “This is a statewide class action and it’s going to bring relief to all of the people who are dispossessed homeowners in many instances,” Kevin Costello, a lawyer for the borrowers, said in a telephone interview today. Costello [] filed a motion to restart evidence gathering in the case. [...] In July, U.S. District Judge Richard G. Stearns in Boston granted the defendants’ request to halt the class action until the high court ruled in Ibanez.

  • Banks and law firms had been conducting foreclosures in the state before mortgages were transferred to them under a 1995 “title standard” by the Real Estate Bar Association for Massachusetts, a group of closing attorneys, that condoned the practice.

  • It was basically created by the real-estate bar without adequate foundation,” said Costello of Roddy Klein & Ryan in Boston. “It became an enabler for people who wanted to do business the way they wanted to do business.”

  • The homeowners in the class-action, or group, lawsuit said their foreclosures were also brought by the wrong party, often because of the process of securitization -- bundling mortgages into trusts that issue bonds. The Ibanez ruling “pretty clearly establishes that our theory of the case is correct,” Costello said. “The securitization machinery didn’t allow for individualized treatment of these kinds of loans and so the sort of standard industry practice was foreclose first and assign later.”

  • The case has two classes of borrowers, he said: those whose foreclosures were started though not completed and those with completed foreclosures. The homeowners sued Ally unit GMAC Mortgage and U.S. Bancorp unit U.S. Bank. Other defendants include EMC Mortgage, now owned by JPMorgan Chase & Co., and two foreclosure law firms, Harmon Law Offices PC in Newton and Ablitt Scofield PC in Woburn.

For the story, see Massachusetts Foreclosure Class Action to Resume.

For the Massachusetts class action lawsuit, see Manson v. GMAC Mortgage LLC.

(1) According to the Amended Consolidated Complaint (paragraphs 6-7), the Plaintiffs seek relief for the Defendants’ wrongful foreclosure practices. Plaintiffs seek declaratory and injunctive relief concerning the validity of foreclosures conducted by entities who do not hold a power of sale at the time of the sale, injunction of eviction actions pending procedures to verify the validity of the underlying sales, injunction of upcoming sales where there is no proof of assignment, cancellation of fees and costs for invalid sale processes, and damages.

In addition , the lawsuit also seeks recovery for alleged violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. and Massachusetts General Law c. 93A., the state's consumer protection statute.

Sticky-Fingered Closing Agent Gets 12 Yrs, Agrees To Indemnify Title Insurer Left Holding Bag In $3.8M+ Escrow Account Ripoff Affecting 11 Home Buyers

From the Office of the New Jersey Attorney General:
  • Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor announced that the owner of a title company in Red Bank was sentenced to prison [last week] for stealing $3.8 million in loan proceeds intended for payment of mortgage balances and other closing costs.

  • According to Director Taylor, Ronald P. Mas Jr., 35, of Red Bank, a mortgage broker, settlement agent and owner of Olde Gotham Title and Settlement Services LLC in Red Bank, was sentenced to 12 years in state prison. [...] He executed a consent judgment to pay full restitution of $3,841,616 to the title company that insured the mortgages. [...] Mas pleaded guilty on Aug. 26, 2010 to an accusation charging him with second-degree money laundering and second-degree theft by failure to make required disposition of property received.(1)

  • He admitted that between April 2009 and February 2010, he stole $3,841,616 that he received from various mortgage lenders for real estate closings on behalf of 11 home buyers across New Jersey.


  • The state investigation revealed that Mas diverted loan proceeds into his Ameritrade account. Instead of paying off the client’s old mortgage, Mas would make monthly mortgage payments and invest the balance of the loan proceeds into the Ameritrade account. Mas made monthly payments on some mortgages using funds from new loans provided for clients. At the end of February 2010, Mas had a total loss of over $3.4 million in his Ameritrade account. As a result, 11 mortgages were not paid.

For the NJ AG press release, see Red Bank Title Company Owner Sentenced to State Prison for Stealing $3.8 Million in Closing Funds to Play Stock Market.

(1)Home buyers, lenders and title insurers must be able to rely on title agents, who are routinely entrusted with hundreds of thousands of dollars in closing funds,” said Attorney General Dow. “When such agents violate their fiduciary duty and steal from clients, as this defendant did, they should face a stiff sentence.”

Closing Attorney Gets 18 Months For Pocketing $500K+ In Clients' Refinancing Proceeds Intended To Pay Off Existing Mortgages

From the Office of the U.S. Attorney (Buffalo, New York):
  • U.S. Attorney William J. Hochul, Jr. announced [] that Robert R. Goods, 49, of Snyder, N.Y., who was convicted of bank fraud, was sentenced to 18 months in prison and ordered to pay $521,800 restitution by Chief U.S. District Court William P. Skretny.

  • Assistant U.S. Attorney Trini E. Ross, who handled the case, stated that Goods, a mortgage settlement attorney, misused money wired into his business account to pay off mortgages on properties which had been refinanced at SunTrust Bank.

  • For example, in February 2010, SunTrust Bank wired $423,531 into the defendant's business account to pay off a preexisting mortgage, however, Goods instead used that money for other matters.

  • In another instance, in March 2010, SunTrust Bank wired $128,000 into the defendant's business account to pay off the pre-existing mortgage, but once again, he used the money for other things. As a result of the defendant's actions, SunTrust Bank suffered a loss of $521, 872. 84.

For the U.S. Attorney press release, see Ex-Attorney Sentenced In Mortgage Fraud Scheme.

Thanks to Bill Collins of Frontier Abstract, Rochester, NY for the heads-up on this story.

Judge Says Deportation Constitutes 'Good Cause' For F'closure Rescue Scammer's Failure To Appear At Sentencing 'Buydown' Hearing; Grants 2-Month Delay

In Santa Maria, California, the Santa Maria Times reports:
  • A Superior Court judge has postponed a ruling on whether the former manager of a Los Angeles-based foreclosure consultation business with an office in Santa Maria will have her felony convictions reduced to misdemeanors for committing prohibited foreclosure practices.

  • Irma Gonzalez Diaz, 42, was set to be sentenced Thursday by Judge Edward Bullard in Santa Maria on the three felony counts, which he had indicated he would consider reducing to misdemeanors if she followed his terms, including paying restitution to the victims.

  • She was not in court for the hearing, however, because she has been deported due to her illegal immigration status, and she has not made any restitution. [...] The sentencing hearing was postponed to March 17.


  • Investigators said Diaz took part in a scam whereby victims whose homes were in or nearing default paid her money to refinance their homes, but she didn’t complete the process. Diaz has been deported to Mexico, according to her attorney, Catherine Swysen. “I do find good cause for her not appearing today,” Bullard replied to that information.

For the story, see Sentencing postponed in mortgage scam case.

Tuesday, January 11, 2011

Fla. Continues "Burying Its Head In Its Sandy Beaches" In F'closure Mess Despite Recent Actions In Other States; Critics Attack 'Delusional Behavior'

The Palm Beach Post reports:
  • Fed up with the foreclosure chaos, the New Jersey courts demanded that banks prove the integrity of their home repossession systems or face shutdown. To demonstrate the need for the Dec. 20 order, New Jersey cited flaws in six Florida foreclosure cases, including three in Palm Beach County, as examples.(1)

  • In Nevada and Arizona, attorneys general last month sued Bank of America for a dual-track foreclosure system that offers homeowners hope with a loan modification, while at the same time taking away the home in court.(2) Called deceptive and labeled consumer fraud in the lawsuits, the practice is also prevalent in the Sunshine State.

  • And on Friday, the Massachusetts Supreme [Judicial] Court issued a bombshell ruling against banks' ability to foreclose on homes - a decision could reverberate nationwide.(3)

  • The moves by other states to address the foreclosure morass has Florida homeowner advocates and defense attorneys asking why more isn't being done here. [...] But as hundreds of homes continue to sell at auction each day and the variations of alleged malpractice mount, critics charge that Florida is burying its head in its sandy beaches, waiting for an ocean breeze to blow the whole thing over.

For more, see State guilty of 'delusional behavior' in slow response to foreclosure chaos, critics say.

(1) See Legal Services of New Jersey Report and Recommendations to the New Jersey Supreme Court Concerning False Statements and Swearing in Foreclosure Proceedings, November 4th, 2010.

(2) For the lawsuits, see:

(3) See Mass. High Court Ruling "A Train Wreck For F'closure Industry" As Banks Slammed In Bay State Beat Down; 'Clouds' Over Title To Homes Darken Statewide.

Municipal Group Of Pension Funds Tell Major Mortgage Servicers To Clean Up Flawed Foreclosure Process

Bloomberg reports:
  • A group of seven public-sector pension fund systems called on the boards of the four largest U.S. banks, including Bank of America Corp., to review foreclosure practices, saying there’s a “fundamental” flaw in the companies’ methods. The lenders, which also include Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc., should report their findings on annual proxy statements to shareholders in coming months, the pension group said.

  • The group represents more than $430 billion in pension fund investments, including $5.7 billion invested in the four banks, according to a statement from New York City Comptroller John C. Liu. “The banks’ boards cannot continue to pretend the foreclosure mess is the result of technical glitches and paperwork errors,” Liu said. “There is a fundamental problem in their procedures that endangers not just homeowners, but shareholders, and local economies.”

  • The group includes the New York City Pension Funds, the Connecticut Retirement Plans and Trust Funds, the Illinois State Board of Investments, the Illinois State Universities Retirement System, the New York State Common Retirement Fund, the North Carolina Retirement Systems, and the Oregon Public Employees’ Retirement Fund.

For more, see Pension Funds Ask Banks to Review Mortgage Practices.

Bond Insurer: 'Goldman Tricked Us Into Buying $30M In Worthless CDOs!' Firm Seeks To Recover Investment & Impose $90M In Punishment

The Wall Street Journal reports:
  • ACA Financial Guaranty Corp. said it is suing Goldman Sachs Group Inc. for "fraud and unjust enrichment" in connection with a soured mortgage-backed investment that led the bank to pay $550 million to settle government charges last year.

  • The monoline bond insurer alleged in its lawsuit that Goldman designed the investment, named Abacus, to fail so that a hedge-fund client, Paulson & Co., could take big profits by shorting the portfolio and so that Goldman could take in fat investment banking fees. ACA bought millions of dollars in Abacus notes and insured the super-senior parts of the underlying portfolio for $909 million, it said in its lawsuit.

  • ACA said in a statement Thursday that the Abacus 2007-AC1 collateralized debt obligation "was worthless" at the time Goldman marketed it to ACA.

For more, see ACA Financial Sues Goldman For Alleged Abacus-Related Fraud (requires subscription; if no subscription, TRY HERE, then click appropriate link for the story).

For the lawsuit, see ACA Financial Guaranty Corp. v. Goldman Sachs & Co.

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

"My Dream Is Done Now" Laments Steel City Man After Losing Recently Repaired Home To Demolition, Despite Removal From City's 'Tear Down' List

In Pittsburgh, Pennsylvania, the Pittsburgh Tribune Review reports:
  • When Andre Hall bought a house in the West End, he thought he "finally had a piece of Pittsburgh." On Monday, Hall, 40, returned to do repair work on the house at 3224 Motor St. to find workers demolishing it.

  • "I don't come for a week over the holiday, and as soon as I come back, I see a backhoe on top of the house," he said. "Why did they demolish the house? They could see I had put in new windows and had slabs of drywall."

  • John Jennings, acting chief of Pittsburgh's Bureau of Building Inspection, said his department notified contractors P.J. Deller Inc. on Nov. 3 that the house no longer was slated for demolition. "A couple things went awry," Jennings said. "The house next door was to be demolished, and the contractor, in error, took this house down as well."


  • Hall, who works in home repairs, said he was about three weeks away from being able to move into the home. He planned to live there with his girlfriend, Shawna Jones, and his five children. The couple lives in a one-bedroom apartment in East Liberty. "My dream is done now," he said. "Someone needs to man up and take responsibility for this."

For the story, see West End demolition leaves property, owner empty.

Monday, January 10, 2011

Stiffed Upstate NY Tax Collectors, Indian Nations Continue Lower Court Litigation Over Unpaid Real Estate Taxes, Despite Pending Supreme Court Ruling

In Rochester, New York, The Syracuse Post Standard reports:
  • The Cayuga Indian Nation has asked a federal court in Rochester to stop Seneca County from foreclosing on five nation properties for unpaid back taxes, a lawyer for the Cayugas said [last week].(1)

  • The nation [last week] requested a temporary restraining order and preliminary injunction to halt the county’s foreclosure attempt, attorney Daniel French said. A date for arguments had yet to be scheduled. “This is all litigation folly, a waste of taxpayers’ money,’’ French said.


  • The Cayugas claim they have sovereign nation rights to not have to pay taxes on any of the 1,100-plus acres they own in both counties. The counties disagree and the two sides have clashed over the tax issue in court many times.


  • French said he does not understand why the counties are taking the foreclosure action now since the U.S. Supreme Court is expected to rule this summer on a similar case involving Madison County’s attempt to foreclose on Oneida Indian Nation properties that are in tax arrears. “This is all rather silly since the Supreme Court is going to decide on this in a couple months,’’ French said.(2)

For more, see Cayuga, Seneca counties start foreclosure action against Cayuga Nation; tribe seeks injunction.

See also The Oneida Daily Dispatch: Madison County, Oneida County, Oneida Indian Nation prepare for Supreme Court land foreclosure case.

(1) According to the story, the Cayugas owe $5,506.70 for unpaid 2008 taxes on the five properties, three of which are in the town of Seneca Falls and two in the town of Varick, county attorney Frank Fisher said. In addition, neighboring Cayuga County has started foreclosing on five nation properties where the nation owes $124,131.08 in back taxes on three properties in the village of Union Springs and two in the town of Springport, county attorney Fred Westphal said.

(2) The ruling currently on appeal to the U.S. Supreme Court is Oneida Indian Nation of N.Y. v. Madison County, 605 F.3d 149 (2d Cir. 2010). Noteworthy in the 2nd Circuit ruling are the words of Circuit Judge Jose A. Cabranes who, in a concurring opinion with whom Circuit Judge Peter W. Hall joined, stated (bold text is my emphasis, not in the original text):

  • The holding in this case comes down to this: an Indian tribe can purchase land (including land that was never part of a reservation); refuse to pay lawfully-owed taxes; and suffer no consequences because the taxing authority cannot sue to collect the taxes owed.

    This rule of decision defies common sense. But absent action by our highest Court, or by Congress, it is the law. In the last twenty years, the Supreme Court has twice held that, although states may have a right to demand compliance with state laws by Indian tribes, they lack the legal means to enforce that right. See Kiowa Tribe of Okla. v. Mfg. Tech., Inc., 523 U.S. 751, 755 (1998) (“There is a difference between the right to demand compliance with state laws and the means available to enforce them.”); Okla. Tax Comm’n v. Citizen Band Potawatomi Indian Tribe of Okla., 498 U.S. 505, 514 (1991) (holding that states have a right to collect taxes on certain cigarette sales on an Indian reservation, but the tribe is immune from suit seeking to enforce that right). In light of this unambiguous guidance from the Supreme Court, I am bound to concur with the conclusion that, although the Counties may tax the property at issue here, see City of Sherrill, N.Y. v. Oneida Indian Nation of N.Y., 544 U.S. 197 (2005), they may not foreclose on those properties because the tribe is immune from suit.

    This result, however, is so anomalous that it calls out for the Supreme Court to revisit Kiowa and Potawatomi. I wish that we were empowered to revisit those decisions, but, alas, that is not a privilege extended to intermediate appellate courts. If law and logic are to be reunited in this area of the law, it will have to be done by our highest Court, or by Congress. Accordingly, I concur in the judgment of the Court and in the careful and comprehensive opinion of Judge Sack.

Ostensibly Time-Barred 'Fair Debt' Violations In Sewer Service Suit May Remain Viable Where 'Equitable Tolling' Suspends Running Of 1-Year Statute

In denying a motion to dismiss a lawsuit alleging, among other things, violations of the Federal Fair Debt Collection Practices Act ("FDCPA"), a Federal court in Brooklyn, New York ruled that consumer/plaintiffs may have viable claims under the ("FDCPA") against the defendants despite the expiration of the 1-year statute of limitations set forth in that statute, where the limitations period was 'equitably tolled' (where the existence of "extraordinary circumstances" require that the running of the statute of limitations be suspended; such a suspension will be made only in "rare and exceptional" circumstances(1)).

The FDCPA statute of limitations issue was one of several issues raised in the lawsuit, which involves allegations of a massive sewer service racket in connection with the obtaining of default judgments by the defendant, a nationwide 'zombie debt' buyer, and which also named a law firm, a process serving outfit, and others as defendants.

In making his ruling, United States Circuit Judge Denny Chin, sitting by designation in the U.S. District Court, addressed the issue of the statute of limitations in the following excerpt (at pages 10-13, court footnotes omitted; bold text is my emphasis, not in the original text):
  • Defendants argue that some or all of the FDCPA claims are time-barred. To be timely, an FDCPA claim must be brought "within one year from the date on which the violation occurs." 15 U.S.C. 5 1692k(d). Plaintiffs counter that the equitable tolling doctrine preserves their claims.

  • The first FDCPA violations allegedly occurred when the Leucadia and Mel Harris defendants filed the state debt collection actions. Defendants plausibly violated the FDCPA again when they subsequently applied for default judgments against plaintiffs. Even using the default judgment application dates, the claims of Sykes, Graham, and Perez would be time-barred because those dates were more than a year before December 28, 2009, when the class action allegations were asserted. Thus, it appears that absent equitable tolling, their claims would be untimely.

  • The Complaint plausibly alleges that equitable tolling applies, as to most of the plaintiffs' FDCPA claims. A statute of limitations may be tolled in extraordinary circumstances, if a plaintiff establishes that: (1) the defendant concealed from him the existence of his cause of action; (2) he remained in ignorance of that cause of action until some length of time within the statutory period before commencement of his action; and (3) his continuing ignorance was not attributable to lack of diligence on his part. State of N.Y. v. Hendrickson Bros., Inc., 840 F.2d 1065, 1083 (2d Cir. 1988); see also Bailey v. Glover, 88 U.S. (21 Wall.) 342, 349-50 (1874). FDCPA claims are subject to equitable tolling. Somin v. Total Cmty. Mgmt. Corp., 494 F. Supp. 2d 153, 158 (E.D.N.Y. 2007) (citing Johnson v. Nyack Hosp., 86 F.3d 8, 12 (2d Cir. 1996)).

  • Sykes and Perez have sufficiently alleged that defendants fraudulently deprived them of notice of their debt collection action. Because sewer service purposefully ensures that a party is never served, it is plausible that defendants' acts were "of such character as to conceal [themselves]" to warrant equitable tolling. Bailey, 88 U.S. at 349-50. The present class action commenced on December 28, 2009. Because Sykes and Perez allege that they discovered the default judgments entered against them after December 28, 2008, their claims would be timely under equitable tolling. The Complaint alleges, however, that Graham did receive a copy of the summons and complaint by mail from Mel Harris, LLC sometime before a default judgment was entered against her, and thus it fails to allege exercise of due diligence on her part. Thus, this prong of defendants' motion is granted with respect to Graham, but denied as to all other plaintiffs.

For the entire ruling (37 pages), see Sykes v. Mel Harris and Associates LLC.

(1) See Somin v. Total Cmty. Mgmt. Corp., 494 F. Supp. 2d 153, 158 (E.D.N.Y. 2007):

  • As with any a statute of limitations, the FDCPA is subject to equitable tolling in appropriate circumstances. The doctrine of equitable tolling applies only in "rare and exceptional" circumstances. Bertin v. United States, 478 F.3d 489, 494 n. 3 (2d Cir.2007); Smith v. McGinnis, 208 F.3d 13, 17 (2d Cir.2000) (per curiam). To invoke this doctrine, a plaintiff must allege that extraordinary circumstances prevented him from acting in a timely manner. See Johnson v. Nyack Hosp., 86 F.3d 8, 12 (2d Cir.1996). Generally, equitable tolling applies only where defendant has engaged in conduct to conceal wrongdoing and, as a result, plaintiff fails to discover facts giving rise to the claim, despite the exercise of reasonable diligence. Coveal v. Consumer Home Mtge., Inc., 2005 WL 704835 *4 (E.D.N.Y.2005); see Chapman v. ChoiceCare Long Island Term Disability Plan, 288 F.3d 506, 512 (2d Cir.2002).

Federal Court: Servicer's Conduct Stiffing Homeowner Seeking Loan Modification May Be Unfair, Deceptive Practice; Allows Lawsuit To Continue

In San Francisco, California, Courthouse News Service reports:
  • Homeowners who say Wells Fargo Bank duped them into loan-modification programs to stave off foreclosure survived a legal challenge to their case in San Francisco federal court.

  • U.S. District Judge Joseph Spero pared the class's suit [last week], rejecting claims for breach of contract but upholding allegations that the bank's debt-collection practices were unfair, deceptive and fraudulent. He also permitted the plaintiffs to seek restitution for an installment payment they made in March 2010, since the bank had already foreclosed upon them by that point.

  • Lead plaintiffs Gustavo Reyes and Maria Teresa Guerrero claimed that, after they defaulted on their mortgage payments, Wells Fargo offered to freeze foreclosure proceedings against them if they signed a modified loan agreement. But after they signed the loan and made payments over four consecutive months, the bank still foreclosed on their home.


  • Spero [] found that the homeowners may be entitled to damages under California's Rosenthal Act, which protects consumers from improper debt-collection practices.(1)

For more, see Wells Fargo Loses Bid to Dismiss Fraud Claims.

For Judge Spero's ruling, see Reyes v. Wells Fargo Bank, N.A.

(1) In denying Wells Fargo's motion to dismiss the homeowner's claims that the bank used unfair and deceptive practices to dupe them into an allegedly phony loan modification arrangement, Judge Spero made this observation:

  • The court cannot say, as a matter of law, that the statements made in the offer letter would not have been misleading to the least sophisticated buyer in light of: the words 'good news' at the beginning of the letter; the language in the letter indicating that the agreement was being offered based on a review of the recipient's financial information; the statement that foreclosure counsel would be instructed to delay foreclosure proceedings as long as the recipients made timely payments under the agreement; and the use of the words 'trial period' to describe the agreement.

Judge Spero also found that the homeowner had standing to bring an unfair competition claim under Cal. Bus. & Prof. Code §§17200 et seq., according to the ruling.

HAMP Suits Targeting BofA Roll On As SW Ohio Non-Profit Law Firm Files Action On Behalf Of Local Homeowner

In Cincinnati, Ohio, The Enquirer reports:
  • A West Price Hill man on Wednesday filed a federal lawsuit against Bank of America and the U.S. Department of Housing and Urban Development alleging that his home was unlawfully forced into foreclosure.

  • The Legal Aid Society of Southwest Ohio(1) filed the suit in U.S. District Court for the Southern District of Ohio on behalf of John Sinclair, who purchase his home in the 4000 block of Fawnhill Lane in 2000 using a Federal Housing Administration loan.

  • In 2008, Sinclair fell behind on his mortgage, but attempted to work out a plan with BofA to avoid foreclosure, according to court papers. The suit claims that Bank of America ignored his request - a direct violation of federal law considering the FHA program requires lenders to take steps to avoid unnecessary foreclosures.

For more, see BofA, FHA sued over W. Price Hill foreclosure.

For the lawsuit, see Sinclair v. Donovan, et al.

(1) Legal Aid Society of Southwest Ohio provides legal representation, information, advice and referral for lower-income residents of Brown, Butler, Clermont, Clinton, Hamilton, Highland, and Warren Counties. It is affiliated with the Legal Aid Society of Greater Cincinnati and also coordinates services with the Volunteer Lawyers Project (VLP).

Sunday, January 09, 2011

Mass. High Court Ruling "A Train Wreck For F'closure Industry" As Banks Slammed In Bay State Beat Down; 'Clouds' Over Title To Homes Darken Statewide

In Boston Massachusetts, The Boston Globe reports:
  • The state’s highest court [Friday] upheld a controversial Land Court ruling that calls into question the ownership of hundreds, possibly thousands, of foreclosed properties in Massachusetts and could affect how foreclosures nationwide are conducted.

  • In a 6-to-0 decision, the Massachusetts Supreme Judicial Court rebuffed the way lenders in recent years have conducted foreclosures — without having all the documentation in place at the time a property is seized. The justices affirmed a 2009 ruling that invalidated foreclosure proceedings involving two Springfield houses because the lenders did not hold clear titles to the properties.(1)

  • We agree with the [Land Court] judge that the plaintiffs . . . failed to make the required showing that they were the holders of the mortgages at the time of foreclosure,’’ Justice Ralph Gants wrote in the decision.

  • Housing attorneys and state officials said the SJC’s ruling will increase pressure on major US lenders to prove they own mortgages before foreclosing, give homeowners seeking to fight foreclosures additional fodder for legal action, and further stall foreclosures in other states where similar litigation is pending. In cases where there is doubt about whether property was improperly taken, banks might even have to return homes to former owners.


  • Boston lawyer Gary Klein, who represents many clients dealing with home foreclosure, called the ruling “a train wreck for the foreclosure industry.’’ [...] The court said yesterday that its ruling applies to all foreclosures in Massachusetts — no matter when they took place — because laws governing proper foreclosure procedures have remained constant over time. “All that has changed is the plaintiffs’ apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities,’’ Gants wrote in the decision.(2)


  • Officials from the Real Estate Bar Association for Massachusetts said that by not placing a time limit on its ruling, the court has guaranteed a legal traffic jam. “There is a mess of titles out there,’’ said Edward Bloom, president of the association. “There will be a lot more litigation which could have been avoided.’’

For the story, see SJC upends rules on foreclosed properties (Ruling against lenders may have US impact).

See also:

For the ruling of the Massachusetts Supreme Judicial Court, see U.S. Bank Nat’l Ass’n v. Ibanez, No. SJC-10694 (January 7, 2011).

(1) For the 2009 rulings of Massachusetts Land Court Judge Keith C. Long in this matter, see:

(2) Justice Gants' full statement on the retroactive application of this ruling follows:

  • Finally, we reject the plaintiffs' request that our ruling be prospective in its application. A prospective ruling is only appropriate, in limited circumstances, when we make a significant change in the common law. See Papadopoulos v. Target Corp., 457 Mass. 368, 384 (2010) (noting "normal rule of retroactivity"); Payton v. Abbott Labs, 386 Mass. 540, 565 (1982). We have not done so here. The legal principles and requirements we set forth are well established in our case law and our statutes. All that has changed is the plaintiffs' apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities.

Banks Want Court To Scrap Proposal To Halt NJ Foreclosures; Ask Judge To Believe Screw-Ups In Process Can Be Fixed Without Stalling Court Proceedings

In Trenton, New Jersey, Bloomberg reports:
  • Bank of America Corp., JPMorgan Chase & Co. and other U.S. banks told a New Jersey court that defects in their processes for seizing homes in the state can be remedied without halting foreclosures.

  • The banks have taken steps to improve their procedures, making a suspension unnecessary, they said in documents filed [last week] in state court in Trenton, New Jersey, and made public [Thursday].(1) The filings came in response to a proposal to freeze foreclosures in the state by six U.S. banks while their procedures are reviewed. The banks’ practices came under scrutiny after bank employees signed court documents in foreclosure cases without verifying their accuracy, according to court papers.


  • Judge Mary Jacobson scheduled a Jan. 19 hearing to consider suspending uncontested foreclosure cases and staying foreclosure sales by the banks: Ally Financial Inc., Bank of America, JPMorgan, Wells Fargo & Co., Citigroup Inc. and OneWest Bank, according to a Dec. 20 order. The move “is necessary to protect the integrity of the judicial foreclosure process in New Jersey and to assure the public that the process going forward will be reliable,” Jacobson said in the order.

For more, see JPMorgan, GMAC Urge New Jersey Court Not to Suspend Home Foreclosures.

(1) For the documents, see: