Saturday, February 05, 2011

Bank Rejects Full Price Short Sale Offer, Prefers To F'close Instead; Fannie, Loan Servicer Mum, Despite Homeowner-Signed Waiver Allowing Comment

In Vancouver, Washington, KATU-TV Channel 2 reports:
  • Stacy Baker fought for two years to sell her father’s house and to keep it from being auctioned off, but lost the fight even after her real estate agent said an offer was made to the bank that met its own conditions.


  • Baker’s real estate agent, Aaron Signor, first tried to sell the house for about what was owed, but at $179,000 it didn’t sell. Over the following months, they lowered the price and got an offer at $134,000. But Flagstar Bank, which services the mortgage on the house, rejected the offer, saying the house was worth $150,000.


  • But then just days before the Baker house was set to be auctioned off, Signore said he brought Flagstar a viable $150,000 non-FHA offer, which is just what Flagstar asked for. “Even the processor at the lender – Flagstar Bank – she thought, ‘Hey, you got an offer full price, we’ll get the foreclosure stopped; we’ll make it go away; we’ll have a sale.’ She calls me back and says, ‘sorry.’”

  • Signor was so confused, he began digging deeper and found the loan on the Baker house was held not by Flagstar but by Fannie Mae, which is another government-sponsored organization. It buys loans from banks with the goal of adding “stability to the housing and mortgage markets.” It’s that quasi-governmental enterprise that, along with Flagstar Bank, said, “No,” to allowing Stacy Baker to sell her father’s house. “Why would they foreclose on a home when they have exactly what they just said, “Yes,” to in their hand and opt to foreclose instead?” Signor asked.

  • Baker signed a waiver so Fannie Mae could speak to a reporter, but the organization still declined to do so, leaving the taxpayer wondering what is going on; instead, Amy Bonitatibus, spokeswoman for Fannie Mae, said in a statement: “Fannie Mae’s top priority is to keep borrowers in their homes. … Unfortunately, foreclosure is the only option when all other foreclosure alternatives have been considered and exhausted.”

  • Fannie Mae told a reporter to speak to Flagstar. The bank’s senior manager, John Matthews, said, “We as a bank would have no comment on a specific file with you. I appreciate your investigative efforts, but this matter would not be for public discussion.”

For the story, see Realtor, home seller baffled when bank rejects its own offer.

City Steps In, Coughs Up $250K To Rebuild Seven Backyards Gobbled Up By 'Rogue' Canal As Evacuated Townhouse Residents Get Green Light To Return Home

In Sunrise, Florida, WFOR-TV Channel 4 reports:
  • A handful of residents in a Sunrise community are rejoicing tonight. Nearly 8 weeks after being evacuated from their homes when part of their backyards collapsed into a canal, repairs are completed at Spring Tree Cove West and residents are able to return home.


  • A total of seven townhouses were evacuated and declared unsafe. For weeks, residents didn’t know if the homes sustained significant damage and when or if they’d be able to return home.


  • There is debate over who owns the land — Broward County or the Spring Tree Cove West homeowner’s association. While that is sorted out, the city of Sunrise spent $250,000 to repair the canal bank with rock, sand, dirt and soil. The city plans to put up fencing in the backyard. Each home had to be certified as safe by a structural engineer before the city would allow residents to move back in.


  • I’m ecstatic that the city responded in such a forceful way,” said Mayor Mike Ryan. “Our entire effort is getting in touch with the residents and celebrating getting them back in their homes. It proves that government can do things right occasionally.”

For the story, see Evacuated Sunrise Residents Allowed Back Home.

Indiana Man Dies During Foreclosure Eviction; Six Hour Police Standoff Begins With Gunshots, Ends In Flames

In Winchester, Indiana, The Star Press reports:
  • Authorities have identified the man who died in a police standoff Monday night that ended in fire. The man was William T. Stein, 54, 2251 N. Randolph County Road 350-E, according to Randolph County Coroner Duane Petry. Authorities, however, aren’t yet certain exactly how Stein died and are awaiting an autopsy report from forensic pathologist Paul Mellen at Ball Memorial Hospital.

  • Sheriff’s deputies were called to Stein’s home Monday afternoon to stand by while a bank representative changed the locks on the house, which was in foreclosure proceedings. When deputies knocked on the front door, two gunshots were fired through the door from the inside, missing the deputies.

  • The resulting standoff lasted six hours, until police heard two more gunshots from inside the house; the house then caught fire. Police believe Stein started the fire.

Source: Fatal Randolph County standoff suspect ID'd.

Novice Online Foreclosure Auction Buyer Wins Bid, Gets Soaked On Underwater Home Subject To Existing $220K Mortgage Lien

In Orange County, Florida, the Orlando Sentinel reports:
  • OK, maybe it was too easy. With just a few clicks of the mouse, Orlando accountant John Dey bought a Lake Nona-area house that was auctioned off during one of Orange County's new, online foreclosure auctions. And get this: In the kind of deal espoused by get-rich-quick authors, he paid just $20,000 for a house worth close to $200,000.

  • But as more than two dozen Florida counties have opened their foreclosure auctions in the past year to bidders from around the world via the Internet, inexperienced auction bidders such as Dey are learning the hard way that these troubled properties can be, well, troubled.

  • The houses may be embroiled in property-line disputes, riddled with ownership complications or saddled with outstanding debt. For Dey, it was a lesson that cost him $20,000 for a house he'll never really own.

  • The website, which Dey used to pursue the 6-year-old house, included warnings about the risks associated with foreclosure-auction properties. He noticed that only one other bidder was competing against him. But he and his wife, a real-estate agent, had researched the house and carefully read the legal documents that would grant them ownership should they win the auction.

  • "I said, 'This is great deal,' " said Dey, emphasizing that he is a certified public accountant. "They make it nice and easy to put a deposit down. They have the foreclosure judgment. I said, 'This is better than being at the courthouse steps, because you've got everything at your fingertips.' "

  • And, as he said, there was Clerk of the Court Lydia Gardner's smiling face planted on the auction website, in a way that seemed to sanction the online-bidding process. Still, Dey became increasingly nervous about the deal during the bidding. He weighed his lack of experience and decided to back out of the bidding as soon as the price hit $20,000. But by then it was too late. The other bidder opted out.

  • Immediately after the purchase, he went to the courthouse and plowed through the foreclosure case file for his new acquisition — only to learn that the house came with a $220,000 mortgage lien from Wells Fargo.

  • It was actually the North Shore at Lake Hart Homeowners Association that had foreclosed on the property, for more than $7,000 in legal and delinquency fees.


  • Dey said it was nice that the court system wanted to speed up and expand access to the auction process by moving it from a room inside the Orange County Courthouse to the Internet, but the site should be more bold about warning of the problems online investors may encounter.(1)

For the story, see Online foreclosure auctions: Proceed with care.

(1) While I'm all for protecting consumers in consumer transactions, there's a limit to how much protection you can smother people with. The incident described in this story illustrates, in my view, where the line of protection should be drawn. Buying a house at a foreclosure sale auction is not a consumer transaction. It's not even an investment transaction. It's a business transaction, and if one doesn't know anything about the business of buying property at a foreclosure sale auction, one should do himself/herself a favor and either pay the price and get an education on this business, or simply stay away. The title problem reported in this story with the existence of a prior lien is merely one of the myriad of nasty surprises that might await. If a screwed-over novice in this type of deal is searching for someone at whom the finger of blame can be pointed, looking into the nearest mirror will promptly conclude that search.

Illegal "Overthrow" Of "Hawaiian Kingdom" At Center Of Foreclosure Rescue 'Program' Peddled To State Homeowners; 300 'Believers' Take The Bait

In Honolulu, Hawaii, KITV-TV Channel 4 reports:
  • A legal argument based on the overthrow of the Hawaiian Kingdom, used unsuccessfully to fight foreclosures in the 1990s, is now being used once again, even though the man who promoted the theory 15 years ago was convicted of a felony.

  • David Keanu Sai is back in the public eye 11 years after being put on probation after telling people that they could walk away from mortgages because of the way the Kingdom of Hawaii was overthrown. Hundreds of people fighting foreclosure have invested in that claim again -- partly because Sai now has a University of Hawaii doctoral degree to back his argument.

  • Kale Gumapac, founder of Laulima LLC and Hawaiian Alliance LLC, advertises on Craigslist that he has a way to stop the foreclosure process. “It doesn't put the banks in trouble and it doesn't put the borrower in trouble,” Gumapac said. “And it's worked. That's what I am trying to tell the Legislature.”

  • Gumapac said he has about 300 paying customers he is helping attack the title of their properties. “They can only foreclose if the title is clear,” he said. The title attack is based on research by Windward Community College lecturer David Keanu Sai. He argues that the overthrow of Queen Liliuokalani and the violation of executive agreements between the Queen and the U.S. government mean that all land title issued in Hawaii since 1893 are illegal and mortgages null and void.

For more, see Foreclosures Face Sovereignty Claim (Company Using Title Challenge To Stop Foreclosures).

76-Year Old Woman Slams Sheriff's Office With $500K Claim After Botched Foreclosure Eviction Targeted Wrong Home

In Hillside, New Jersey, reports:
  • A 76-year-old Hillside woman has filed a claim for damages against Union County, alleging that officers of the county sheriff’s department illegally entered her home and removed the entire contents because they had the wrong address of a foreclosure.

  • In the document, obtained by Tina Renna of The County Watchers, Ozzie Leak claims that Union County Sheriff Ralph Froelich’s officers entered her home on Nov. 3, 2010 and removed the household contents. Leak is seeking $500,000. She charges that the sheriff’s officers destroyed property, including items of sentimental value, caused emotional distress and mental anguish and left her unable to provide housing for family.

For more, see Sheriff’s Officers Accused Of Emptying Wrong Home In Botched Foreclosure.

Group Cops Guilty Pleas In Debt Collection Racket; Used Phony Law Enforcement Claims To Strong-Arm $6.7M+ From 1000+ Victims Around The Country

From the Office of the U.S. Attorney (Buffalo, New York):
  • U.S. Attorney William J. Hochul, Jr. announced [] that Timothy E. Arent, 38, of Buffalo, New York, pleaded guilty [...] to mail fraud and tax evasion charges. The charges carry a maximum penalty 25 years in prison and a $500,000 fine.

  • Assistant U.S. Attorney MaryEllen Kresse, who is handling the case, stated that from October 2006 through October 2009, Arent and his partner, Neil G. Wieczkowski, engaged in a fraudulent debt collection scheme. The two illegally purchased debtor information from two former employees of Capital Management Services, a Buffalo debt collection business, and thereafter used the information to coerce the victims into paying fictitious debt.

  • These former employees, Thomas Rice and Andrew Jon Pytlewski, have pleaded guilty to stealing the debtor information and are awaiting sentencing in February 2011. Neil Wieczkowski, meanwhile, pleaded guilty to mail fraud and tax evasion on January 7, 2011 and will be sentenced in April 2011.

  • Regarding defendant Arent, the Government’s evidence revealed that Arent claimed to be a law enforcement officer with the ability to arrest the victims if they did not immediately make a substantial payment on the alleged debt owed.

  • During a three year period, Arent and Wieczkowski received approximately $6.8 million in checks written by over 1,000 victims from across the country. The scheme netted Arent almost $5.7 million which he used to pay the mortgage and remodeling costs on a $500,000 West Ferry mansion, pay the salaries of co-defendant Wieczkowski, a full time handy man, and a full time housekeeper, and to purchase such luxury items as antiques, furniture, jewelry, furs, artwork, high end vehicles, vacations and an in-ground pool.

For the U.S Attorney press release, see Fourth Person Convicted In Illegal Debt Collection Scheme.

For an earlier press release on this racket, see Debt Collector Pleads Guilty To Mail Fraud And Tax Evasion.

Sovereign Citizen Movement & "Paper Terrorism"

In Talledega County, Alabama, a recent story in The Daily Home contained this excerpt describing how those who subscribe to the Sovereign Citizen movement have been known to engage in "paper terrorism" and create chaos in the real estate title recording system:
  • According to Southern Poverty Law Center spokesman Mark Potok, sovereign citizens organizations [...] began proliferating in the 1990s. They are closely related to the common law courts movement, Potok said.

  • These people believe that the government controls them through the way they write their names and things along those lines,” he said. “They often practice what is referred to as ‘paper terrorism’ by filing liens on their enemies’ property, bizarre tax documents and Uniform Commercial Code forms that don’t really mean anything. The beliefs of the different sovereign groups vary, but a lot of them buy into the ‘redemption scam.’ They believe that if you file the correct documents, in the right order, with the right words you can redeem your ‘government account,’ which could be worth anywhere from $60,000 to $20 million. They believe government is inherently wicked, and that they have been enslaved, but if they spell their names with colons and dashes and file the right paperwork they can be set free. Of course, all of that is nonsense. Their beliefs have no foundation in any law at all, let alone the laws of the United States.”

  • In addition to harassing their enemies with bogus liens and fake court documents, some sovereign citizens also have been involved in stealing houses by filing pseudo-legal documents on foreclosed houses. Copies of these fake documents are frequently pasted onto the windows of these houses, Potok said.

For the story, see 2 arrested on felony warrants from South Carolina.

Go here for other posts on rackets involving so-called sovereign claims.

Low Income Tenants Find Themselves Stuck In Legal Cracks Of Mess Left By Private Equity Slumlords; Clueless Investors Wash Their Hands Of Bad Bets

In The Bronx, New York, The Huffington Post reports:
  • First, a heating pipe broke in the adjacent apartment, sending a powerful blast of steam into his home along with an unrelenting stench. Then, chunks of the ceiling started falling into his bathroom, and black mold began creeping up the walls. Cockroaches thrived in the suddenly tropical apartment. In December, mice popped up from the gaps between the walls and the baseboards.

  • But each time Sergio Cuevas sought the attention of the landlord, hoping to arrest the deterioration of his apartment in the Bronx, he got nowhere. It was like the management company had ceased to exist.

  • This was not the result of another derelict slumlord, but rather an example of a lesser-explored aspect of the national foreclosure epidemic: Cuevas and some 400 other tenants living in ten apartment buildings in a working poor stretch of the Bronx have found themselves stuck in the legal cracks of the American real estate reckoning, their homes claimed by no one. When trouble arises, there is effectively no landlord to call.

  • The investors who bought their buildings at the height of the real estate bubble, hoping to flip them for quick profit or jack up stabilized rents, have washed their hands of a bad bet.

  • The bank that has initiated foreclosure says it does not yet have legal title, meaning it lacks responsibility. The court-appointed receiver who controls the property says he doesn't have enough money to attend to the burgeoning problems.

  • The scene here in the Bronx is emblematic of a growing national problem. In apartment buildings scattered in low-income neighborhoods from New York to Phoenix to San Francisco, families with scant resources and uncertain legal rights are literally watching their ceilings crumble and their floors collapse as they wait and hope for a resolution.

For more, see The Latest Victims Of The Foreclosure Crisis: Low-Income Apartment Renters.

Friday, February 04, 2011

BofA Backpeddles On Post-Foreclosure Eviction Threat After Being Hit By Local Media Spotlight

In Stone Mountain, Georgia, WXIA-TV Channel 11 reports:
  • [Homeowner Paulette] Davenport says she got a call from Bank of America saying that the foreclosure was a mistake -- then just a few days another call saying it wasn't an error and the bank had already foreclosed. It wasn't long before the Sheriff showed up. She tried to get some answers.

  • "I have called and spoken to many different people at Bank of America. They all tell me it's too late, 'Call me back in two weeks.' I would spend hours on the phone. They keep transferring me to different places, different numbers, continuously. No help, nothing," Davenport said.

  • What was Paulette Davenport to do? Her 16-year-old son, Travis Davenport, took over and sent the 11Alive Help Desk an e-mail. [...] After 11Alive's Bill Liss contacted Bank of America, the bank withdrew the eviction order. They said that Davenport and her family will stay in the house as the bank sorts through months of paperwork. "I just want to keep my home for me and my family," she said.

  • That's the next goal for 11Alive's Help Desk on behalf of Davenport -- getting Bank of America to rescind the foreclosure once and for all, and modify the loan.(1)

For the story, see Getting an Eviction Lifted for an Army Vet in Foreclosure.

(1) What we apparently have here is the operation of what columnist Joe Nocera referred to in a recent New York Times' story (see Shamed Into Altering a Mortgage) as the Heisenberg Journalism Principle: the process of reporting a story can sometimes affect the behavior of those being reported on (a 'parallel' of the Heisenberg Uncertainty Principle in physics).

State Regulator Seeks $50K Fine Against Suspected Las Vegas Loan Modification Racket For Allegedly Playing Fast & Loose With Clients' Trust Funds

In Las Vegas, Nevada, the Las Vegas Sun reports:
  • The state is seeking to levy a $50,000 fine against a Las Vegas couple in the foreclosure and loan modification business, accusing them of mishandling their clients’ money. The state Division of Mortgage Lending has filed a complaint to revoke the license of Jeff and Gail Strum, operators of US Loan Modification Services, [...].


  • Under a 2009 law, [foreclosure] consultants are allowed to collect their fees up front and install them in a trust account. They were authorized to take the money out as they performed the service. An examination of the business found the money the Strums collected wasn't placed in a trust fund in a licensed bank or credit union as required by law. They also failed to keep records for each homeowner. The couple is accused of co-mingling these funds and using the money for their personal affairs without an explanation of how it was spent.(1)

For the story, see State seeks $50,000 fine against Las Vegas couple in loan business.

(1) If the allegations are true, this duo should consider themselves lucky that criminal prosecutors aren't breathing down their necks, charging them with the crime of misapplication of entrusted funds/theft by misapplication (or some similar-sounding charge), which happens to be a felony in many places. See, e.g., Former Laywer is Sentenced for Forgery, Contempt of Court and Misapplication of Entrusted Funds, where, among other things, two settlement checks ($24,998.17; $7,500.00) belonging to clients of a now-disbarred New Jersey attorney (who practiced law for 30+ years) somehow found their way into the latter's personal bank account, as opposed to his trust account (in violation of New Jersey Supreme Court Rules) which resulted in the exposure of those funds to a substantial risk of loss.

Buffalo Feds: Rogue Housing Counselor For Local Non-Profit Agency Ripped Off $200K From Dozens Needing Help Fighting Foreclosure

In Buffalo, New York, The Buffalo News reports:
  • A woman hired to help struggling Western New Yorkers save their homes from foreclosure has been accused of lying and stealing their money so she could gamble at local casinos. Lori J. Macakanja, 35, of Dunkirk, was fired last year as a housing counselor for HomeFront Inc., a not-for-profit agency on Delaware Avenue in Buffalo.

  • The U.S. Attorney's Office claims Macakanja stole about $200,000 from about 100 clients who went to the agency for help in fighting foreclosures. She was charged Friday with felony counts of mail fraud and falsifying documents.


  • Officials at HomeFront dismissed Macakanja and cooperated with the investigation after learning of the crimes, and none of the agency's other employees have been accused of wrongdoing, authorities said. Brian M. Cacciotti, CEO of HomeFront, told The Buffalo News on Friday that Macakanja's actions were totally out of step with the agency's procedures and its mission. "These were the willful acts of a rogue employee," Cacciotti said. "Our mission is to help people."

For more, see Fired housing counselor charged in scam (Accused of diverting funds meant for averting foreclosure to own uses, including gambling).

Defaults On Reverse Mortgages Spike As Elderly Fail to Keep Up With Property Tax, Homeowner's Insurance Payments

The Orlando Sentinel reports:
  • Thousands of older homeowners in Florida who tapped the equity in their paid-off homes to boost their income now face the possibility of foreclosure as the number of defaults on such "reverse mortgages" skyrockets.

  • More than 30,000 U.S. homeowners are in "technical default" on their reverse mortgages and could lose their homes because they have failed to pay their property taxes or property-insurance premiums, according to a new research report based on the latest government data.

For more, see Seniors find dark side to reverse mortgages (Growing reverse-mortgage defaults put homeowners at risk of foreclosure).

Thursday, February 03, 2011

Use Of Voluntary Dismissal To Dodge Scrutiny After Failed Attempt To Dupe Court By Producing, Filing Dubious Docs At Issue In Recent Foreclosure Suit

In West Palm Beach, Florida, the South Florida Sun Sentinel reports:
  • A South Florida homeowner who is fighting a mortgage foreclosure could end up reshaping state law. An appeals court on Wednesday asked the Florida Supreme Court to consider Roman Pino's case as a matter of "great public importance," a move legal experts say could result in reforms in foreclosure cases where there is evidence of fraud in the way documents were handled by lenders, mortgage servicers and law firms.(1)


  • If the case is taken up by the Supreme Court and results in a decision in favor of the homeowner, legal experts who specialize in foreclosure law say the case has the potential to affect thousands of foreclosures across the state where there are allegations of document fraud.


  • Pino hired Royal Palm Beach attorney Thomas Ice, whose law firm has been at the forefront of uncovering forged and fraudulent foreclosure documents. The bank alleged in its foreclosure complaint that it was the owner of the mortgage note through an assignment from another lender, but didn't include the assignment as part of the foreclosure complaint, according to the appellate decision. Ice's attorneys moved to dismiss the complaint, arguing that the bank needed the assignment in order to foreclose.

  • Then the bank's attorney, from the law offices of David J. Stern in Plantation, filed an amended complaint and attached an assignment that had not been recorded in land records and "which happened to be dated just before the original pleading was filed," the appeals court wrote.

  • Ice wanted to try to prove Pino was the victim of fraud, but the judge would not allow him to go forward because the bank voluntarily dropped the foreclosure action. The appeals court agreed with the judge, but because of the importance of the issue, sent the case to the state's highest court in Tallahassee. One appellate judge, Gary Farmer, disagreed, saying he thought the trial judge could have kept the case open so Ice could pursue his claim of fraud.(2)

  • Ice said Wednesday that the bank dismissed the foreclosure just as his attorneys were set to take depositions of Stern employees to discover how the assignment was created. Stern's firm is one of four foreclosure law firms in the state under investigation by the Florida Attorney General's Office for document fabrication.

  • The case illustrates a problem that is playing out in cases around the state, where problematic documents are discovered, and the foreclosure is dismissed only to be later refiled with different documents, Ice said.

  • That is what happened to Pino. The bank refiled the foreclosure in August 2009, and that case is now going forward. "This seems to be a prevalent problem in foreclosures," Ice said. "That is why [the appellate judges] want the Florida Supreme Court to rule on it. This is going to be significant to thousands of cases across the state."

For the story, see Case involving alleged foreclosure fraud headed to Florida Supreme Court.

For the Florida appeals court ruling, see Pino v. The Bank of New York Mellon, 4D10-378 (Fla. App. 4th DCA, February 2, 2011) (en banc).

(1) Although the 12-member appeals court, in a 9-1 ruling (with one recusal and one retirement (Judge Farmer) subsequent to the hearing and prior to the issuance of the ruling) affirmed a lower court ruling in favor of the foreclosure mill, it obviously felt that it should be the state Supreme Court that should take a long, hard look at this issue and make the ultimate decision as to how to proceed when dealing with the dubious practices engaged in by foreclosure mills. In this regard, the court majority observed:

  • We conclude that this is a question of great public importance, as many, many mortgage foreclosures appear tainted with suspect documents. The defendant has requested a denial of the equitable right to foreclose the mortgage at all. If this is an available remedy as a sanction after a voluntary dismissal, it may dramatically affect the mortgage foreclosure crisis in this State.

(2) In support of the homeowner's position in this case, the following excerpt gives a taste of the vigorous, six-page dissent originally authored by the since-retired Judge Gary Farmer (concurred with and formally filed by Judge Mark E. Polen) (bold text is my emphasis):

  • This issue is one of unusual prominence and importance. Recently, the Supreme Court promulgated changes to a rule of procedure made necessary by the current wave of mortgage foreclosure litigation. See In re Amendments to Rules of Civil Procedure, 44 So. 3d 555 (Fla. 2010). In approving one amendment, the court pointedly explained:

    [R]ule 1.110(b) is amended to require verification of mortgage foreclosure complaints involving residential real property. The primary purposes of this amendment are (1) to provide incentive for the plaintiff to appropriately investigate and verify its ownership of the note or right to enforce the note and ensure that the allegations in the complaint are accurate; (2) to conserve judicial resources that are currently being wasted on inappropriately pleaded ‘lost note’ counts and inconsistent allegations; (3) to prevent the wasting of judicial resources and harm to defendants resulting from suits brought by plaintiffs not entitled to enforce the note; and (4) to give trial courts greater authority to sanction plaintiffs who make false allegations.” [e.s.]

    44 So. 3d at 556. I think this rule change adds significant authority for the court system to take appropriate action when there has been, as here, a colorable showing of false or fraudulent evidence. We read this rule change as an important refutation of BNY Mellon’s lack of jurisdiction argument to avoid dealing with the issue founded on inapt procedural arcana.

    Decision-making in our courts depends on genuine, reliable evidence. The system cannot tolerate even an attempted use of fraudulent documents and false evidence in our courts. The judicial branch long ago recognized its responsibility to deal with, and punish, the attempted use of false and fraudulent evidence. When such an attempt has been colorably raised by a party, courts must be most vigilant to address the issue and pursue it to a resolution.

I suspect that this dissent may be the now-retired Judge Farmer's 'going-away' present to the citizens of Florida (usually, it's the guy going away who gets, not gives, the 'going-away' presents); it was his way to prod the state Supreme Court into hearing this case and help kick-start their analysis of the issues. If the Florida Supreme Court takes this case and ultimately reverses, don't be surprised if this Judge Farmer-authored, Judge Polen-filed dissent is incorporated, either in whole or in part, into the state high court's analysis. (Kudos to Judge Polen for going on the record and acknowledging the fine work of his now-retired colleague when filing the dissent).

Illinois Appeals Court Disregards Real Estate Deal Structured As Sale Leaseback w/ Repurchase Option; Says Arrangement Constitutes Equitable Mortgage

An Illinois appeals court recently upheld a Cook County trial court ruling that, given the facts of the case, a sale of a home, coupled with a contemporaneous leaseback and option to repurchase was not to be treated as an absolute sale, but rather, the transactions taken together were recharacterized by the court as an equitable mortgage.(1)

In addition to the 'standard' characteristics of these types of deals where a homeowner gets screwed over, one notable point was that the lack of a formal written leaseback agreement or option to repurchase was not fatal to the court's finding that the deal constituted an equitable mortgage under Illinois law. The homeowner gave uncontradicted testimony that the leaseback and repurchase option concepts were discussed by the two operators structuring the deal, and that it was proposed that one of them would draw up papers for those purposes, but no document was executed at closing for those purposes.

In determining that an equitable mortgage existed, the court made reference to the existing case law that it applied in the following excerpt:

  • In determining whether a constructive, or equitable mortgage exists our courts consider several factors, including:

    ‘ the existence of an indebtedness, the close relationship of the parties, prior unsuccessful attempts for loans, the circumstances surrounding the transaction, the disparity of the situations of the parties, the lack of legal assistance, the unusual type of sale, the inadequacy of consideration, the way the consideration was paid, the retention of written evidence of the debt, the belief that the debt remains unpaid, an agreement to repurchase, and the continued exercise of ownership privileges and responsibilities by the seller [Citations.]’

    Robinson v. Builders Supply & Lumber Co., 223 Ill. App. 3d 1007, 1014 (1991), quoting McGill v. Biggs, 105 Ill. App. 3d 706, 708 (1982).

    The parties’ intentions are the key consideration and proof of these factors “must be clear, satisfactory and convincing” if they are to overcome a written instrument. Robinson v. Builders Supply & Lumber Co., 223 Ill. App. 3d at 1014. However, “it is not necessary that there be no conflict in the evidence presented.” Silas v. Robinson, 131 Ill. App. 3d 1058, 1062 (1985).

Among the factors that swayed the court in finding that the deal constituted an equitable mortgage was the disparity between the sale price and the value of the property. The deal, as structured, provided for a sale by the homeowner to the first purchaser for a price of $90,000 with a contemporaneous leaseback. Shortly therafter, the first purchaser sold the premises, subject to the homeowner's continued occupancy, to a subsequent purchaser for a contract price of $170,000.

As a result of the court's ruling, the deed to the first purchaser was deemed to be an equitable mortgage. Further, the deed by the first purchaser conveying title to the subsequent purchaser (the home remained occupied by the screwed-over homeowner throughout the entire relevant period - and who was still in occupancy as of the date of this ruling), and the mortgage obtained by the subsequent purchaser were both voided by reason of the fact that the subsequent purchaser was not entitled to bona fide purchaser protection.(2)

For the ruling, see Gandy v. Kimbrough, No. 1-10-0424 (Ill. Ct. App. 1st Dist. 3d Div., December 22, 2010) (when link expires, TRY HERE).

Representing the screwed-over homeowner was attorney Gilbert Liss, Chicago, IL.

Thanks to Linda Spak for the heads-up on this court ruling.

(1) See generally:

(2) According to the ruling, the subsequent purchaser simply made a brief conclusory argument that she conducted a diligent inquiry and was a bona fide purchaser, which the court found insufficient and constituted a waiver of this argument, and which it briefly addressed in this excerpt:

  • As noted above, Kimbrough has failed to provide adequate citation to the record or analysis of case law to provide any cogent argument with respect to her claim that she was a bona fide purchaser. “ ‘[A] reviewing court is entitled to have the issues on appeal clearly defined with pertinent authority cited and a cohesive legal argument presented. The appellate court is not a depository in which the appellant may dump the burden of argument and research.’ ” In re Marriage of Auriemma, 271 Ill. App. 3d 68, 72 (1995), quoting Thrall Manufacturing Co. v. Lindquist, 145 Ill. App. 3d 712, 719 (1986). Supreme Court Rule 341(h)(7) requires a clear statement of contentions with supporting citation of authorities and pages of the record relied on. 210 Ill. 2d R. 341(h)(7). Ill-defined and insufficiently presented issues that do not satisfy the rule are considered waived. Express Valet, Inc. v. City of Chicago, 373 Ill. App. 3d 838, 855 (2007). We will not sift through the record or complete legal research to find support for this issue.

(The foregoing should serve as a reminder that it's not enough to go into court and simply raise issues without the appropriate support, leaving it to the judge to figure out.)

It should be noted that, even though the court threw out the bona fide purchaser claim/defense on the grounds that issue was deemed waived by the subsequent purchaser, the weight of authority in Illinois case law appears to support the proposition that the open and visible possession of the home by the homeowner in this case places the subsequent purchaser, as well as any lender financing the purchase, on notice of any rights or equities she (the homeowner) may be able to establish, and upon said establishment, those rights or equities would have priority over any subsequently-acquired interests of others. See:

Life Savings & Loan Association v. Bryant, 125 Ill. App. 3d 1012, 467 N.E.2d 277 (1st Dist. 1984) [bold text is my emphasis; not in original text]:

  • Illinois courts have uniformly held that the actual occupation of land is equivalent to the recording of the instrument under which the occupant claims interest in the property. (Bullard v. Turner (1934), 357 Ill. 279, 192 N.E. 223; Beals v. Cryer (1981), 99 Ill. App. 3d 842, 426 N.E.2d 253). The open and visible possession of land by the equitable owner is sufficient to charge a mortgagee with notice of the rights of such owner, and the mortgagee will take subject to the rights of the person in possession. Williams v. Spitzer (1903), 203 Ill. 505, 68 N.E. 49.

Fidelity Trust & Savings Bank v. Williams (1936), 285 Ill. App. 131, 1 N.E.2d 739 (addressing the issue of whether the retention of possession by the grantor of property after it is conveyed constitutes notice of the grantor of his or her interest in the property, and to those claiming under the grantee, under Illinois law) [bold text is my emphasis; not in original text]:

  • The rule of law which seems to control in a like situation is that the retention of possession by the grantor of the property conveyed is notice of his or her interest in the property, and to those claiming under the grantee, and such rule is laid down in the case of Ford v. Marcall, 107 Ill. 136, wherein the court said: "The law is, as this court has declared in White v. White, 89 Ill. 460, that when the grantor of real estate remains in possession, all persons acquiring title from the grantee are chargeable with notice of all the claims of the grantor."

    This rule was followed and approved in the case of Ronan v. Bluhm, 173 Ill. 277, where the court said: "It is proper we should remark, in answer to the discussion upon the point, that as it is conceded by all parties that the said Thomas Ronan did not deliver possession of the premises in question to the grantee, Carbine, but remained in the open and exclusive occupancy thereof, appellee, Bluhm, is deemed, as matter of law, to have taken the conveyance from Carbine with full notice of all the rights and equities of said Ronan in the premises. Illinois Central Railroad Co. v. McCullough, 59 Ill. 166; White v. White, 89 id. 460; Ford v. Marcall, 107 id. 136." It is to be noted from what the court said in this opinion that Bluhm was deemed as a matter of law to have taken the conveyance from Carbine, the grantee of Ronan, with full notice as to all the rights and equities of Ronan in the premises.

    This rule has been passed upon by the courts of this State, and the law is again discussed and approved in the case of Rock Island & Peoria Ry. Co. v. Dimick, 144 Ill. 628. The court in this opinion said: "The law is well settled in this State, as generally elsewhere, when not changed by the recording acts, that open and exclusive possession of lands, under an apparent claim of ownership, is notice to those subsequently dealing with the title of whatever interest the possessor has in the premises, whether the interest be legal or equitable in its nature. Wade on Notice, sec. 273; Davis v. Hopkins, 15 Ill. 519; Truesdale v. Ford, 37 Ill. 210; Smith v. Jackson's Heirs, 76 Ill. 254; Partridge v. Chapman, 81 Ill. 137. It has been held also in this State, that if the grantor remains in possession after conveyance, purchasers from the grantee are affected with notice of the grantor's rights in the land. White v. White, 89 Ill. 460; Ford v. Marcall, 107 id. 136."

    In the case of Porter v. Clark, 23 Ill. App. 567, this rule was also approved, and in discussing the subject matter of the litigation, the court there stated what we regard as pertinent in its application to the instant case. This statement is: "If Porter, knowing as he did that Clark was in possession, had gone to him and inquired as to his rights, he would undoubtedly have been told that the purchase money had not been paid, and that he, Clark, claimed a vendor's lien on the land."

For more on the applicability of the bona fide purchaser doctrine in Illinois in similar situations, see:

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

Fed Reverses Course On Proposal That Would Have Pulled Rug Out From Under Homeowners Invoking TILA To Undo Bad Mortgage Loans

Reuters reports:
  • The Federal Reserve said on Tuesday it is backing away from a final rule impacting home foreclosures after consumer advocates said the reform would remove incentives to modify troubled loans. The Fed said it will instead leave the issue for the new Consumer Financial Protection Bureau.

  • The Fed proposal would have made changes to the process where a borrower can seek to cancel a mortgage that violates disclosure requirements under a truth-in-lending law [Federal Truth in Lending Act, or "TILA"]. Under the current system, a borrower has up to three years to take a lender to court seeking to cancel a loan, through a process known as rescission, by showing that required disclosures about the terms of a loan were not provided when it was signed.

  • Once the loan is canceled, a borrower then has to pay off the principal, but can deduct from the total the amount that would have been paid in interest and other fees.

  • Lawmakers and consumer advocates charge the Fed proposal would make a key timing change requiring the borrower to pay off the loan before it is canceled.

  • In practice, groups opposing the rule change argue, struggling homeowners would lose leverage to renegotiate their loans because they would have to pay off the principal before a lender relinquishes their interest in the property.

For the story, see Fed leaves truth-in-lending rule to consumer agency.

NJ Appeals Court Boots Rubber Stamped Foreclosure Judgment; Says Bank "Failed To Meet Burden To Establish Bona Fides Of Alleged Assignment"

The following facts are taken from a recent ruling by the New Jersey intermediate appeals court (footnote 1 below is a footnote appearing in the court ruling):
  1. Bank filed a foreclosure action against homeowners.
  2. Homeowners filed a response, which was accepted as an answer and challenged, among other things, the bona fides of a later assignment of the mortgage.
  3. In response, Bank filed a motion for summary judgment, but the judge denied relief pending further information regarding the assignment.
  4. Thereafter, Bank filed a supplemental affidavit, executed by Janine Timmons, a manager of Washington Mutual Bank, attesting to the accuracy of facts "based on our computerized business records maintained in the ordinary course."
  5. She claimed that the note and mortgage had been executed by homeowner on December 14, 2006, and the note and mortgage had been sold to Bank on January 16, 2007; moreover, an assignment of mortgage was executed on October 31, 2007, two weeks after the filing of the foreclosure complaint on October 18, 2007.(1)
  6. After receiving the supplemental affidavit, the motion judge struck homeowners' answer and permitted the foreclosure matter to proceed by default.
  7. Thereafter, a judgment was entered, and this appeal followed.

In reversing the ruling of the motion judge and booting the case back to the trial court for further proceedings, the New Jersey appellate court expressed these concerns (bold text is my emphasis):

  • The affidavit makes reference to unidentified computerized business records supporting the verification of the facts attested to, but nothing more is set forth regarding the records other than that conclusory statement.

    Recently, the Supreme Court reiterated the relevant factors that must be established by a proponent of documents pursuant to N.J.R.E. 803(c)(6). In New Jersey Div. of Youth and Fam. Servs. v. M.C. III, 201 N.J. 328 (2010), Justice Wallace, speaking for the Court, observed:

    Under the business records exception to the hearsay rule, a party seeking to admit a hearsay statement pursuant to this rule must demonstrate that "the writing [was] made in the regular course of business," the writing was "prepared within a short time of the act, condition or event being described," and "the source of the information and the method and circumstances of the preparation of the writing must justify allowing it into evidence." State v. Matulewicz, 101 N.J. 27, 29 (1985) (citation omitted). [(Id. at 347).]

    The affidavit submitted by Timmons falls far short of meeting this threshold showing. Nothing in her affidavit indicates any of the elements identified in either the rule or M.C.

    Additional considerations are cause for concern. N.J.R.E. 1002 mandates that, "To prove the content of a writing or photograph, the original writing or photograph is required except as otherwise provided in these rules or by statute." Here, reference is made to computerized records, yet the record before the trial court or on appeal is devoid of any copies of such records to support the attestations of Timmons. See N.J.R.E. 1001(c) and Fed. Ev. Rule 1001(c) (requiring "original" computer data in the form of printouts or other readable output). Most important, no discovery was permitted to defendants. In such instance, plaintiff should not be allowed to "cut corners" to avoid meeting its burden.

    We are satisfied that plaintiff failed to meet its burden to establish the bona fides of the alleged assignment to permit plaintiff to proceed on its foreclosure complaint. We take particular note of the fact that plaintiff has not responded to the appeal so that we are unable to have the benefit of its position on the issues raised by defendants.

For the ruling, see Deutsche Bank National Trust Co. v. Wilson, Docket No. A-1384-09T1 (App. Div., January 19, 2011).

Thanks to Robert Napolitano for the heads-up on this ruling.

(1) The assignment was executed by an individual identified as Laura Hescott who signed the assignment as an assistant vice-president of Washington Mutual Bank. Ms. Hescott has been identified as an employee of Lender Processing Services, Inc. ("LPS"), a servicer of default mortgages. The bona fides of the practices of this service provider have been the subject of increased judicial scrutiny. See, e.g., In re Taylor, 407 B.R. 618, 623 (Bankr. E.D. Pa. 2009).

The Supreme Court has recognized that "[s]erious questions have surfaced about the accuracy of documents submitted to courts by lenders and service-providers in support of foreclosure requests." Administrative order 01-2010, 202 N.J.L.J. 1110 (December 27, 2010). The practice of signing and filing documents without any personal knowledge of the information, also known as "robo-signing," implicates the "overriding concern about the integrity of the judicial process." Id. at 1111. The order provides that "lenders and service providers who have filed more than 200 residential foreclosure actions in 2010 are required, within 45 days, to demonstrate the reliability and accuracy of documents and other submissions to the court in foreclosure proceedings." Ibid. On remand, to the extent the order is applicable to plaintiff, plaintiff shall comply with its terms.

Alleged Failure To Come Clean On Defects In Recording Mortgages Leads To Another Proposed Class Action Lawsuit Targeting BofA

In New York City, Reuters reports:
  • Bank of America Corp was hit with a lawsuit on Wednesday claiming the lending giant hid foreclosure problems that eventually led to a decline in its share price. The suit, a proposed class action, says Bank of America concealed defects in the recording of mortgages, which harmed investors when the company had to temporarily discontinue foreclosures last fall. [...] The lawsuit in U.S. District Court, Southern District of New York is Pipefitters Local No. 636 Defined Benefit Plan v. Bank of America Corp et al., 11-cv-733.

For more, see Proposed class action targets BofA on foreclosures.

Wednesday, February 02, 2011

Chase Faces Asset Seizure For Stiffing Homeowner's Attorney Out Of Legal Fee Award After Carrying Out Wrongful Foreclosure While TRO Was In Effect

In El Paso, Texas, Bloomberg reports:
  • A JPMorgan Chase & Co. branch in El Paso, Texas, may have furniture and computers seized by the sheriff unless the bank complies with a judge’s order to pay the legal bills of a single mother whose eviction case he dismissed.

  • The manager of the Chase branch was served on Jan. 26 with court papers that instructed the New York-based company to pay attorney Richard A. Roman’s $5,000 in fees, according to Detective Hector Lara, an El Paso County sheriff’s officer. The manager, Jose Gomez, told Lara that the branch’s gear is protected by the Federal Deposit Insurance Corp. and that he would contact the bank’s security staff and the Federal Bureau of Investigation, Lara said [] in a telephone interview. Lara said he’s waiting for an opinion from the county attorney on whether the bank’s property can be seized.

  • They don’t have a problem putting my client out in the street,” Roman said. “But when somebody prevails against a bank, they pull every string in the book to avoid paying.”

  • Roman, a former judge, is representing borrower Judith French, whose home was sold in a foreclosure auction on Sept. 7 even though the lawyer had obtained a temporary restraining order the same day. Roman said he’s seeking the legal fees from JPMorgan because he believes the bank was French’s mortgage servicer. Judge Bruce King dismissed French’s eviction case in county justice court on Dec. 15, saying the restraining [order] was in effect at the time of the foreclosure sale.

  • Greg Hassell, a JPMorgan spokesman, said the company was unaware of King’s judgment because it wasn’t named as the plaintiff. “Now that we are aware, we are taking steps to pay,” Hassell said.

  • Roman’s strategy of going after the bank’s property is unusual, according to April Charney, a senior attorney with Jacksonville Area Legal Aid in Jacksonville, Florida, who said she has instructed thousands of lawyers on representing consumers in foreclosure and bankruptcy cases.

  • If it was me I wouldn’t go for a desk or chair, I would execute on their business license,” Charney said. “When you go into court and a judge orders you to do something and you don’t do it, that’s the last step before lawlessness.”

  • Lara said he’s never faced a situation like this. “Right now our concern is whether we can go ahead and seize any equipment in a bank,” Lara said.

Source: JPMorgan Faces Texas Sheriff in Showdown Over Eviction Case Fees.

Maryland Foreclosure Rescue Operator Gets 27 Months In Sale Leaseback Equity Stripping Ripoff; Feds Estimate Losses At Between $1M To $2.5M

From the Office of the U.S. Attorney (Baltimore, Maryland):
  • U.S. District Judge J. Frederick Motz sentenced James William Fox II, age 40, of Crofton, Maryland [last week] to 27 months in prison, followed by three years of supervised release, for conspiracy to commit wire fraud in connection with a mortgage fraud scheme which he promised to help homeowners facing foreclosure keep their homes, but left them with no equity and no longer holding the title to their properties.

  • At [last week]’s sentencing hearing Judge Motz also ordered that Fox pay restitution in the full amount of the loss, which the government contends is between $1 million and $2.5 million.

For the U.S. Attorney press release, see Crofton Loan Officer Sentenced to 27 Months in Prison in Mortgage Fraud Scheme.

See Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals for other incidents that led to criminal prosecutions in sale leaseback ripoffs.

Requiring Borrower To Escrow Deed In Lieu Of Foreclosure As Precondition To Getting Mortgage Loan An Illegal Title Clogging, Says Maryland High Court

In a recent court ruling, the Maryland Court of Appeals, the state's highest court, concluded that:
  • A deed in lieu of foreclosure executed as a precondition to originating a loan, before any default on the loan occurs, is not valid under Maryland law, because it clogs a borrower’s equity of redemption.(1)

In reaching this conclusion, the Maryland high court vacated an earlier decision from a Montgomery County Circuit Court judge who, despite the fact that this type of scam has been found to be illegal going back centuries, didn't seem to think there was anything wrong with this ripoff.

For the 28-page ruling (which may provide some insight to those attorneys using civil lawsuits to fight equity stripping, foreclosure rescue rackets), see C. Phillip Johnson Full Gospel Ministries, Inc. v. Investors Financial Services, LLC, No. 115, ___ Md. ___ (January 28, 2011).

(1) The court, in footnote 8 of the ruling, provides a handy description and background on the anti-clogging/clogging of the equities doctrine, which begins as follows (bold text is my emphasis, not in the original text):

  • The term “clogging” is widely used to describe various schemes to strip a mortgagor’s right to redeem her equity in the event of a foreclosure. The doctrine against “clogging” the so-called equity of redemption arose in the English Courts of Chancery, as an attempt to ameliorate the harsh result that obtained in the law courts in medieval England, before the concept of a mortgage had evolved. Before the adoption of the “anti-clogging” doctrine, a landowner wishing to borrow while pledging his land as security would deed the land outright to his creditor, in exchange for a stated sum of money, subject to the condition that if the landowner (borrower) repaid the creditor on a future specified day (called “law day”), title would revert to the borrower. If for any reason (even if he could not find the creditor) the borrower failed to pay on “law day,” he forfeited his title, regardless of whether the debt owed bore any reasonable relation to the value of the land.

(Editor's Note: While this case did not involve a sale leaseback, equity stripping foreclosure rescue ripoff, attorneys using civil lawsuits to fight these rackets on behalf of victimized homeowners may be well-advised to at least consider asserting a claim that this type of scam is void in that it is nothing more than a prohibited scheme/clog employed to circumvent the centuries-old "anti-clogging" rule.)

For a discussion on the clogging of the equities doctrine, see John C. Murray:

No Rescue For Philly Couple After Dealings With Local Foreclosure Rescue, Sale Leaseback Peddler End In $180K Home Equity Fleecing

In Philadelphia, Pennsylvania, The Philadelphia Inquirer recently ran a story of the plight of a local couple who, finding themselves in a financial pinch, made the ill-advised decision to turn to local foreclosure rescue operator Anthony J. DeMarco III and his outfit, DeMarco REI, to refinance their home through what allegedly ended up being a sale leaseback ripoff that took the couple for $180,000. DeMarco's alleged racket is described in this excerpt:
  • [T]he U.S. attorney in Philadelphia alleged in an indictment last month, DeMarco kept that money [$180K], as well as proceeds from the sales of at least 113 additional houses in a foreclosure-rescue scheme that netted him $11 million.

  • The scheme operated from mid-2006 into 2009, but most of the $31 million in new, fraudulent mortgages from 19 banks, including three that were subsequently closed by the Federal Deposit Insurance Corp. (FDIC), were obtained in 2007 and 2008, when banks were in the jaws of a fierce financial crisis sparked by sloppy mortgage lending.

  • The U.S. Attorney's Office, as part of its civil lawsuit against DeMarco REI, plans to set up a mediation program between the original homeowners and the new lenders to help as many of DeMarco's victims as possible regain ownership, though some may have lost their houses anyway. A federal court hearing on the matter is scheduled for Wednesday in Philadelphia.

For the story, see Rescue scheme called a fraud (U.S.: DeMarco REI took $11 million from homeowners).

For the U.S. Attorney (Philadelphia) press release announcing their actions against DeMarco and others, see Charges & Civil Complaint Filed In Foreclosure Rescue Scheme (Civil Complaint Seeks Help For Scam Victims Facing Foreclosure).

For the charges brought in this criminal/civil, 'dual' prosecution, see:

See Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals for other incidents that led to criminal prosecutions in sale leaseback deals.

Tuesday, February 01, 2011

Foreclosure Mills Resist Franklin County Court Orders To Personally Certify Authenticity, Accuracy Of Filed Documents

In Franklin County, Ohio, The Columbus Dispatch reports:
  • In response to a national outcry over fraudulent foreclosure filings, three Franklin County judges are requiring lawyers to verify that all of the documents in residential-foreclosure actions are valid.

  • Six of the lawyers affected by the order are fighting back. They have asked the Ohio Supreme Court to prohibit the judges from requiring them to sign "certifications" on behalf of their clients. The dispute could slow the processing of some foreclosure cases.


  • [County Pleas Judge Guy] Reece said there are alternatives for lawyers who don't want to sign the certification. "They have the option of showing up in court, having a hearing and producing the evidence," he said.


  • The controversy was driven in part by the revelation that some law firms and major lenders were using so-called "robo-signers" to complete affidavits on foreclosures without reading the documents or verifying ownership of the mortgages' notes.


  • In October, The Dispatch examined the files of more than 130 people whose houses were slated for auction and identified at least 55 whose foreclosure cases contained mistakes, omissions of crucial evidence or questionable affidavits.


  • The judges told the lawyers that they must "personally certify the authenticity and accuracy of all documents" in support of a residential-foreclosure filing. If a lawyer doesn't comply, the judge will not grant a motion for default or summary judgment, but will instead schedule the case for trial. That could delay a case for as long as a year.

For more, see Local judges get tough on foreclosure documents.

Rogue Federal Judge Reverses State Court Ruling & Allows Nevada Foreclosures To Go Forward; Ruling Issued W/out Prior Court Hearing

In Las Vegas, Nevada, the Las Vegas Sun reports:
  • A Bank of America subsidiary can resume work on thousands of foreclosures in Nevada after a federal judge on Monday dissolved a restraining order against the foreclosures statewide issued by a Nye County District Court judge. The Nye County order was overturned Monday by Chief U.S. District Judge for Nevada Roger Hunt.


  • "The ever-expanding body of case law within this district (of Nevada) holds that the Nevada law governing nonjudicial foreclosure does not require a lender to produce the original note nor does it require that ReconTrust be substituted as trustee under the deed of trust as prerequisites to non-judicial foreclosure proceedings," Hunt ruled.

  • He also ruled that [Nye County Judge Robert] Lane's restraining order was invalid since Lane did not require North to post a bond -- a bond that would have satisfied damages to Bank of America from the issuance of the restraining order, should Bank of America prevail in the litigation. "The state court did not require plaintiff to post a bond, which under Nevada law renders the temporary restraining order void," Hunt wrote in his ruling.

  • Hunt's ruling appeared to come without a hearing and without attorneys for North filing paperwork opposing Bank of America's motion that the restraining order be dissolved.(1)

  • John Christian Barlow, North's attorney in St. George, Utah, said he was studying Hunt's ruling. Barlow confirmed the judge issued the ruling without a hearing. The ruling came before Barlow made an appearance in the case and before Barlow filed any briefs opposing Bank of America's motion that the Nye County restraining order be dissolved.

For the story, see Judge overturns order, allows 8,900 Nevada foreclosures to resume.

(1) Aside from the issue of the possible failure to conduct a hearing, 'leagle eagles' may want to ponder whether the Federal judge's ruling in this case violated the Rooker-Feldman doctrine, which, for purposes of this blog, is satisfactorily described in Wikipedia as follows:

  • The Rooker-Feldman doctrine is a rule of civil procedure enunciated by the United States Supreme Court in two cases, Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983). The doctrine holds that lower United States federal courts other than the Supreme Court should not sit in direct review of state court decisions unless Congress has specifically authorized such relief. In short, a federal court must not become a court of appeals for a state court decision.

'Leagle eagles' who don't find Wikipedia a satisfactory resource on this point and who have some time on their hands can check out Duke Law Journal: Allison B. Jones, The Rooker-Feldman Doctrine: What Does It Mean To Be Inextricably Intertwined?, 56 Duke L. J. 643 (2006).

See also Martin J. Bishop, Eleventh Circuit: Rooker-Feldman Doctrine Bars Post-Foreclosure TILA Recission Claim.

Florida Bar Directs Attorneys To Notify Judges About Any Evidence Of Potential Foreclosure Fraud, Even If Case Is Closed & Home Has Been Auctioned Off

The Palm Beach Post reports:
  • In an opinion that could have unfathomable consequences in countless foreclosure cases, The Florida Bar says attorneys must notify a judge about potential fraud — including robo-signed affidavits and forged notary stampseven if a foreclosure case is closed and the home has been sold at auction.


  • [T]he biggest and most troublesome problem is what to do with cases that ended years ago. Can judges undo these foreclosures, and what happens in cases in which the home was sold to new owners without a clear title? As for discipline, the judges must decide what to do with fraud brought to their attention. Should they refer the cases to the Bar for further investigation or to legal authorities for prosecution?

  • "It's going to create a huge mess. There's no other way to describe it," [St. Lucie Circuit Judge Burton] Conner said. "We just don't know how bad it really is. I guess you could say we're just waiting for the shoe to drop."

For more, see Florida Bar says foreclosure lawyers must report fraud to court.

(1) See The Florida Bar News: Free Bar foreclosure CLE ready for download:

  • [Bar Ethics Counsel Elizabeth] Tarbert said the Professional Ethics Committee has opined that an attorney has an affirmative obligation, under Rule 4-3.3 of the Rules Regulating The Florida Bar, to notify the court of a potential fraud when the attorney knows that a client has deliberately lied at a deposition. That also applies if the attorney receives information that clearly establishes that the client has perpetrated a fraud on the court by filing a false affidavit, such as when a false statement has been made in the affidavit or the affidavit has been improperly verified or notarized. Then the attorney’s duty to the court supersedes the attorney’s duty to the client, and the attorney must reveal the fraud to the court.

Florida Bar Creates Course On Court Requirements, Rules & Ethics For Attorneys Representing Foreclosing Lenders

The Palm Beach Post reports:
  • Florida attorneys representing banks in foreclosure cases may now take a free class from the Florida Bar on the court requirements, rules and ethics of repossessing homes. The free four-hour program, which is available online, was created after the so called "robo-signing" debacle in the fall that shut down foreclosure cases temporarily while banks reviewed and revamped their procedures. It is some of the first direction given by The Bar on how to handle the allegedly false affidavits that have been filed in foreclosure cases.


  • A Palm Beach Post investigation found that many of the foreclosure firms hired young attorneys, who likely had little experience prosecuting foreclosures.

For the story, see Florida Bar creates class in wake of robo-signing mess.

Monday, January 31, 2011

Failure To Properly Authenticate Paperwork Sinks Bank In Attempt To Establish Standing To Sue In NJ Foreclosure Action

A recent ruling by the New Jersey intermediate appellate court concluded that Wells Fargo Bank failed to properly authenticate paperwork submitted in an attempt to carry out a home foreclosure and accordingly, said that it failed to establish standing to maintain a foreclosure action.

The court found that the paperwork produced by the bank were enough to indicate that it could have standing, if properly authenticated, and then went on to say:
  • However, the documents that Wells Fargo relied upon in support of its motion for summary judgment to establish its status as a holder were not properly authenticated.(1) A certification will support the grant of summary judgment only if the material facts alleged therein are based, as required by Rule 1:6-6, on "personal knowledge." See Claypotch v. Heller, Inc., 360 N.J. Super. 472, 489 (App. Div. 2003). Baxley's certification does not allege that he has personal knowledge that Wells Fargo is the holder and owner of the note. In fact, the certification does not give any indication how Baxley obtained this alleged knowledge. The certification also does not indicate the source of Baxley's alleged knowledge that the attached mortgage and note are "true copies."

    Furthermore, the purported assignment of the mortgage, which an assignee must produce to maintain a foreclosure action, see N.J.S.A. 46:9-9, was not authenticated in any manner; it was simply attached to a reply brief. The trial court should not have considered this document unless it was authenticated by an affidavit or certification based on personal knowledge. See Celino v. Gen. Accident Ins., 211 N.J. Super. 538, 544 (App. Div. 1986).

    For these reasons, the summary judgment granted to Wells Fargo must be reversed and the case remanded to the trial court because Wells Fargo did not establish its standing to pursue this foreclosure action by competent evidence. On the remand, defendant may conduct appropriate discovery, including taking the deposition of Baxley and the person who purported to assign the mortgage and note to Wells Fargo on behalf of Argent

For the ruling, see Wells Fargo Bank, N.A. v. Ford, ___N.J. Super.___ (App. Div. January 28, 2011) (approved for publication) (when link expires, GO HERE).

Representing the homeowner in this case were Margaret Lambe Jurow (arguing) and Rebecca Schore (on brief) for Legal Services of New Jersey, Inc.(2)

For a discussion of a number of relevant issues to be addressed in this case, see New Jersey Appeals Court Shoots Down Foreclosure Over Bad Documents.

Thanks to Robert Napolitano for the heads-up on this ruling.

(1) The appeals court described the documents submitted to the court in this excerpt:

  • This motion was supported by a certification of Josh Baxley, who identified himself as "Supervisor of Fidelity National as an attorney in fact for HomEq Servicing Corporation as attorney in fact for [Wells Fargo]." Baxley's certification stated: "I have knowledge of the amount due Plaintiff for principal, interest and/or other charges pursuant to the mortgage due upon the mortgage made by Sandra A. Ford dated March 6, 2005, given to Argent Mortgage Company, LLC, to secure the sum of $403,750.00." Baxley did not indicate the source of this purported knowledge. Baxley's certification also alleged that Wells Fargo is "the holder and owner of the said Note/Bond and Mortgage" executed by defendant and that the exhibits attached to his certification, which appear to be a mortgage and note signed by defendant, were "true copies." Again, the source of this purported knowledge was not indicated. The exhibits attached to the Baxley certification did not include the purported assignment of the mortgage.

(2) Legal Services of New Jersey, Inc. is an independent, non-profit organization that coordinates the statewide Legal Services system that provides free legal assistance to low-income people in civil matters in New Jersey.

Suspect Pinched In Home Hijacking Rental Racket Invokes 'Adverse Possession' Defense, Posts Bail, Then Continues Operating Business As Usual

In Hemet, California, KABC-TV Channel 7 reports:
  • A man has been arrested on suspicion of carrying out a rental scam in the Hemet area. For the resident who only wanted to give his first name, Lee, it all started about a month ago, when he saw a "for rent" sign in front of a Hemet home. Lee wanted to move in, so he called the man who he said he was the owner, 57-year-old Antonio Simon.

  • "Everything seemed to be fine, let him know that I'd like to get in the house, he came up, wrote me a legal rental agreement," said Lee. Lee says that's when he paid Antonio Simon $3,000, first and last month's rent. But a few weeks later, he got a knock on the door from law enforcement. "And he said, no, this house isn't supposed to be occupied, it would be owned by the bank, going up for auction," said Lee.

  • Police say Simon offered to rent out a home he didn't even own. And detectives say he's done it many times in the area, finding empty or foreclosed homes and renting them out, even though he's not the owner.

  • "We set up an operation where an undercover officer met with the suspect, requested to rent a house and signed a contract, and we then took the suspect into custody," said Riverside County Sheriff's Deputy Melissa Nieburger.

  • Simon is out on bail, and the district attorney continues to review the case. In the meantime, Simon operates business as usual. In a rental guide, he has another home for rent, this one in San Jacinto.

  • During a phone call Friday, Simon told Eyewitness News he doesn't think he's doing anything illegal, citing a part of law known as "adverse possession." Scott Altman, a vice dean at USC Law School, clarified adverse possession: "If you occupy property without the owner's consent for five years, and pay real estate taxes, adverse possession lets you become the owner. But up until those five years have passed, you're trespassing."

  • That applies not only to Antonio Simon, but Lee as well. "I don't know, he's either crazy and going to lose everything, or he has a loophole like nobody knows and they're going to close that up when it's done," said Lee. For now, Lee is staying put.

  • As for Simon, he's accused of burglary, grand theft and trespassing. He's free on bail. He has not been formally charged.

Source: Hemet man duped in foreclosure rental scam.

Dept. Of Justice Opens Probes Into Recent Servicemember Screwings By Banks In Violation Of SCRA

The Wall Street Journal reports:
  • The U.S. Attorney General has "several" ongoing investigations into violations of a law meant to protect active-duty members of the military from high interest rates and foreclosures. A spokeswoman for the Department of Justice said in an emailed statement that the investigations are looking into lenders who overcharged and foreclosed against the homes of servicemembers without court orders. The spokeswoman declined to identify which lenders were under investigation or how long the investigations had been ongoing.


  • The Servicemembers Civil Relief Act caps interest rates for loans to active-duty military members at a 6% annual rate and shields them from foreclosure. The law applies to "any debt incurred" by a servicemember, including credit cards and car loans, which typically carry much higher rates; the law makes some exceptions to its rules.

  • The law defines active-duty as "full-time" service, including tours and training, and says those who knowingly break the act face prison and fines.

For more, see DOJ Investigating Violations Of Military Lending Protections (requires paid subscription; if no subscription, TRY HERE, then click appropriate link for the story).

Concerns Over Deutsche's Dubious Documents, Foreclosure Process Spur U.S. Trustee Probe In Connecticut Homeowner's Bankruptcy Case

Reuters reports:
  • A branch of the U.S. Department of Justice is investigating whether Deutsche Bank filed false documents and attempted to mislead a bankruptcy judge in a foreclosure action. Although the investigation involves the case of only one homeowner in Connecticut, a court document filed on January 26 by the United States Trustee's Office said it wants to elicit information about Deutsche Bank's practices in general in foreclosure cases.(1)


  • In recent months, the office has stepped up efforts around the United States to block banks and law firms from using false or fabricated documents in home foreclosure actions. The effort follows disclosures in October 2010 of large-scale "robo-signing", the mass signing of foreclosure affidavits containing "facts" that had never been checked, and wide production of false mortgage assignments.

  • The January 26 court motion stated that "The United States Trustee has reviewed the documents filed by Deutsche in this case and has concerns about the integrity of those documents and the process utilized by Deutsche in" filing to foreclose.(2)

For more, see U.S. investigates Deutsche Bank in foreclosure case.

(1) According to Reuters, the inquiry involves Deutsche Bank National Trust Co, the Deutsche Bank unit that acts as trustee for thousands of trusts that invested in mortgage-backed securities. The U.S. Trustees' Office is a division of the Department of Justice responsible for overseeing administration of bankruptcy cases.

(2) The U.S. Trustee cited evidence that Deutsche had filed a false mortgage assignment in the case in an attempt to persuade the bankruptcy court that it owns the mortgage, the story states.

Dated June 11, 2010, the assignment was by Sand Canyon Corp. to Deutsche. Sand Canyon purportedly had acted as an intermediary between the loan originator, MAC, and Deutsche. But the motion noted that Sand Canyon had completely exited the mortgage business in 2008, and so in 2010 had no mortgages that it could assign, the story states.

Sunday, January 30, 2011

Bank F'closes After Double-Cross Dupes Homeowner Into Abandoning Bkptcy Filing; Court Nixes Voiding Sale, But Says Estoppel, Fraud Claims Can Proceed

The following facts, as alleged in a lawsuit by a foreclosed homeowner, are taken from a recent court ruling from a California Appeals Court:
  • Homeowner, a married woman, obtained an adjustable rate loan from a bank to purchase real property secured by a deed of trust on her residence.

  • About two years into the loan, she could not afford the monthly payments and filed for bankruptcy under chapter 7 of the Bankruptcy Code.

  • She intended to convert the chapter 7 proceeding to a chapter 13 proceeding and to enlist the financial assistance of her husband to reinstate the loan, pay the arrearages, and resume the regular loan payments.

  • Homeowner contacted the bank, which promised to work with her on a loan reinstatement and modification if she would forgo further bankruptcy proceedings. She alleged that she was told that, once her loan was out of bankruptcy, the bank "would work with her on a mortgage reinstatement and loan modification." She was asked to submit documents to U.S. Bank for its consideration.

  • In reliance on that promise, homeowner did not convert her bankruptcy case to a chapter 13 proceeding or oppose the bank's motion to lift the bankruptcy stay.

  • While the bank was promising to work with homeowner, it was simultaneously complying with the notice requirements to conduct a sale under the power of sale in the deed of trust, commonly referred to as a nonjudicial foreclosure or foreclosure.

  • The bankruptcy court lifted the stay. But the bank did not work with homeowner in an attempt to reinstate and modify the loan. Rather, it completed the foreclosure.

  • The bank then served the homeowner with a three-day notice to vacate the premises and, a month later, filed an unlawful detainer action against her and her husband. Apparently, Aceves and her husband vacated the premises during the eviction proceedings.

  • Homeowner subsequently filed a lawsuit against the bank, alleging a cause of action for promissory estoppel, as well as causes of action for quiet title, slander of title, fraud, and declaratory relief.

  • It also sought to set aside the trustee's sale and to void the trustee's deed upon the sale of the home.

  • She argued the bank's promise to work with her in reinstating and modifying the loan was enforceable, she had relied on the promise by forgoing bankruptcy protection under chapter 13, and the bank subsequently breached its promise by foreclosing.

  • The lower court dismissed the case.

On appeal, the California appeals court reinstated the homeowner's lawsuit with regard to the claims of promissory estoppel(1) and fraud.(2) However, it affirmed the trial court's dismissal with regard to the claims of quiet title, slander of title, and declaratory relief, and refused to set aside the foreclosure sale or void the trustee's deed.(3)

For the ruling, see Aceves v. U.S. Bank, (2011) ___Cal.App.4th____ (Cal. App. 2nd Dist., Div 1, January 27, 2011) (Certified for Publication) (when link expires, TRY HERE or TRY HERE).

See also, San Francisco Chronicle: Bank legally bound by loan-modification promise.

See Court: "Promissory Estoppel" Could Make Lender’s Verbal Agreement To Halt F'closure Sale Enforceable, Even Absent Consideration For Promise To Stall for an earlier post on the application of this doctrine when a loan servicer dupes a desperate homeowner into doing something she/he wouldn't have otherwise done by making phony loan modification promises.

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

(1) With regard to the promissory estoppel claim, the court stated:

  • We conclude (1) plaintiff could have reasonably relied on the bank's promise to work on a loan reinstatement and modification if she did not seek relief under chapter 13, (2) the promise was sufficiently concrete to be enforceable, and (3) plaintiff's decision to forgo chapter 13 relief was detrimental because it allowed the bank to foreclose on the property. Contrary to the bank's contention that plaintiff's use of the Bankruptcy Code was ipso facto bad faith, chapter 13 is "`uniquely tailored to protect homeowners' primary residences [from foreclosure].'" (In re Willette (Bankr. D.Vt. 2008) 395 B.R. 308, 322.)

(2) With regard to the fraud claim, the court stated:

  • The elements of fraud are similar to the elements of promissory estoppel, with the additional requirements that a false promise be made and that the promisor know of the falsity when making the promise. (See McClain v. Octagon Plaza, LLC (2008) 159 Cal.App.4th 784, 792-794 [discussing elements of fraud].) Aceves has adequately alleged those facts.

(3) With regard to the the balance of the claims, the court stated ([alterations] added; bold text is my emphasis, not in the original text):

  • [A] promissory estoppel claim generally entitles a plaintiff to the damages available on a breach of contract claim. (See Toscano v. Greene Music (2004) 124 Cal.App.4th 685, 692-693.) Because this is not a case where the homeowner paid the funds needed to reinstate the loan before the foreclosure, promissory estoppel does not provide a basis for voiding the deed of sale or otherwise invalidating the foreclosure. (See Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at p. 1047, distinguishing Bank of America v. La Jolla Group II (2005) 129 Cal.App.4th 706, 711-714.)


  • Aceves's other claims and requests for relief lack merit as a matter of law. All of them are based on alleged irregularities in the foreclosure process. We see no irregularities that would justify relief. [...]