Saturday, March 12, 2011

Mississippi Mobile Home Park Owner To Cough Up $50K To Settle Race-Based Discrimination Fair Housing Lawsuit

From the U.S. Department of Justice:
  • The Justice Department [] announced that Mississippi property owner Indigo Investments LLC, has agreed to pay $50,000 in monetary damages and civil penalties to settle the government’s Fair Housing Act lawsuit. The government alleged that Indigo and its former employees, Barbara A. Hamilton and Edward L. Hamilton, discriminated against African-American residents and members of interracial households at Homestead Mobile Home Village in Gulfport, Miss., which Indigo formerly owned and the Hamiltons formerly managed.

  • The lawsuit originated as a result of a complaint filed with the Department of Housing and Urban Development (HUD) by an African-American couple who moved to the mobile home park after being displaced by Hurricane Katrina. After investigating the complaint, HUD issued a charge of discrimination, and the case was referred to the Justice Department, which filed the lawsuit in June 2009.


  • "Losing one’s home to any disaster is disruptive enough without facing housing discrimination when trying to find a new home to restart your life," said John Trasviña, Assistant Secretary for Fair Housing and Equal Opportunity. "HUD and the Department of Justice continue our joint enforcement actions to eliminate illegal housing discrimination in all forms."

  • Under the settlement, which was approved by the U.S. District Court for the Southern District of Mississippi, Indigo Investments LLC, will pay $45,000 to 12 individuals and $5,000 to the United States as a civil penalty.

For the DOJ press release, see Justice Department Settles Housing Discrimination Lawsuit Against Mississippi Mobile Home Park Owner and Managers.

Use Of "No Blacks" Selling Point To Cost Alabama Landlord, Two Employees $15K+ To Settle DOJ Fair Housing Discrimination Lawsuit

From the U.S. Department of Justice:
  • The Justice Department [] announced a settlement of its lawsuit alleging that Chandi Biswas, Kenneth R. Scott and Frankie L. Roberson violated the Fair Housing Act by making discriminatory statements against African-American renters at Rolling Oaks Apartments in Clanton, Ala. The settlement, in the form of a consent decree, was approved by a federal district judge in Montgomery, Ala.

  • The case originated based on evidence generated by the Civil Rights Division’s Fair Housing Testing Program, in which individuals pose as renters to gather information about possible discriminatory practices. The testing uncovered evidence that Scott and Roberson, employees at Rolling Oaks Apartments, told white testers that a selling point of the apartment complex was the lack of African-American tenants, and that Rolling Oaks Apartments had adopted rental policies intended to discourage African-American rental applicants. Biswas owns Rolling Oaks Apartments and employed Scott and Roberson.

  • "When housing providers make race a part of their sales pitch, they create an atmosphere of intolerance and they violate the law," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "This settlement will make clear that race is never an appropriate selling point for housing."

  • Under the settlement, the defendants must pay $15,500 to the government as a civil penalty.

For the DOJ press release, see Justice Department Resolves Lawsuit Alleging Discrimination on Basis of Race in Clanton, Alabama.

Tenant, Non-Profit To Split $30K For Settlement Of DOJ Fair Housing Racial Discrimination Suit; Feds Pocket $5K In Penalties

From the U.S. Department of Justice:
  • The Justice Department announced [] that Orland Park, Ill., property owner Terence Flanagan has agreed to pay $35,000 in monetary damages and civil penalties to settle consolidated Fair Housing Act lawsuits against him. The lawsuits alleged that Flanagan discriminated against a family that tried to rent a single-family home from him, and that Flanagan made repeated statements to fair housing testers expressing a preference not to rent the home to African-Americans.

  • [The] settlement, which has been approved by the U.S. District Court for the Northern District of Illinois in Chicago, resolves a lawsuit filed by the department and one filed by Kemal Majied and the South Suburban Housing Center, a private fair housing organization, against Flanagan in late 2009.

  • Mr. Majied, who is African-American, and his family unsuccessfully sought to rent a single-family home that Flanagan had advertised for rent and contacted the South Suburban Housing Center for assistance. Both the Housing Center and the department later sent fair housing testers to the property, where Flanagan stated he would rent the house to a white tester for $100 less than the advertised rate, and further stated “you’re not black, that’s the reason you’re getting that.”

For the DOJ press release, see Justice Department Obtains $35,000 Discrimination Settlement Against Chicago-area Landlord.

W. Pennsylvania Feds Score Guilty Plea From Teen In Cross-Burning Conspiracy; Conduct Constitutes An Illegal Interference w/ Housing Rights Of Another

From the U.S. Department of Justice:
  • Michael Francis Bealonis, of Robinson, Penn., pleaded guilty [to] a charge related to the burning of a cross in the yard of an African-American juvenile in November 2009, the Justice Department announced []. Bealonis, 19, pleaded guilty to conspiracy to interfere with the housing rights of another in federal court in Pittsburgh before Senior U.S. District Judge Maurice B. Cohill.

  • Information presented during the plea hearing established that a cross burning occurred on Nov. 14, 2009, at a residence in Robinson that was home to a family with three minor children, one of whom is African-American and an adopted son of the family.(1)


  • "This teen used an unmistakable symbol of bigotry and hate to threaten a family with violence simply because the race of a child. These incidents have no place in our country, and they are a reminder of the civil rights challenges we still face today," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "We will continue to aggressively prosecute hate crimes of this kind."
For the DOJ press release, see Pennsylvania Teen Pleads Guilty for Cross Burning.

Go here for other posts on cross-burning prosecutions.

(1) According to the DOJ press release, the investigation determined that Bealonis and his co-conspirators agreed to burn a cross in the backyard of the home, and used boards to construct a 6-foot wooden cross with athletic socks attached that had been soaked in accelerant. Bealonis and one of his co-conspirators transported the cross to the garage of another co-conspirator, where they poured gasoline on the cross before Bealonis took it, jumped over a fence and carried it to the back yard of the victim’s house, where he pushed the cross into the ground and lit it. He also used racial slurs and expressed racial animus during the cross burning.

Three Guilty Pleas, One Conviction After Louisiana Federal Court Trial In Cross-Burning Conspiracy

From the U.S. Department of Justice:
  • The Justice Department announced that U.S. District Judge Donald E. Walter accepted the guilty plea of Jeremy Matthew Moro, 33, for conspiring to burn a cross near the home of an interracial couple in Athens, La., in October 2008. [In February], Judge Walter accepted the guilty plea of Joshua James Moro, 25, on the same charge.

  • Another defendant, Sonya Marie Hart, 31, pleaded guilty on Jan. 31, 2011, to misprision of a felony because she withheld information from the FBI regarding the defendants’ attempt to cover up the cross burning. The Moros’ cousin, Daniel Danforth, was previously convicted by a federal jury for organizing, carrying out and attempting to cover up the same cross burning.


  • Cross burning, unfortunately, remains a terrible symbol of hatred and intolerance. Every citizen has a right to feel safe and secure in their homes and neighborhoods. Intimidation of citizens in this district will not be tolerated. This office will continue to prosecute individuals who participate or facilitate crimes which violate the civil rights laws,” said U.S. Attorney for the Western District of Louisiana Stephanie Finley.

For the DOJ press release, see Three Plead Guilty to Civil Rights Conspiracy in Connection with Cross Burning in Athens, Louisiana.

Go here for other posts on cross-burning prosecutions.

'Clean & Sober' Group Home Operator Scores $55K From Michigan Municipality In Settlement Of DOJ Fair Housing Lawsuit

From the U.S. Department of Justice:
  • The Justice Department announced [] that Dalton Township, Mich., will pay $62,500 to settle a lawsuit alleging that the township discriminated against a group home for persons recovering from drug and alcohol addiction, in violation of the federal Fair Housing Act and Title II of the Americans with Disabilities Act.(1)


  • "The Fair Housing Act and the Americans with Disabilities Act ensure that persons with disabilities, including those recovering from addiction, can live in a community of their choosing free from discrimination," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "The Justice Department will continue its vigorous enforcement of federal laws to protect the civil rights of persons with disabilities across the country."

  • "Cities and towns have an obligation to make reasonable accommodations to their zoning policies when they are necessary to afford people with disabilities the same housing opportunities that others enjoy," said John Trasviña, Department of Housing and Urban Development (HUD) Assistant Secretary for Fair Housing and Equal Opportunity. "HUD will continue to work with the Justice Department to enforce the Fair Housing Act to ensure equal housing opportunities for people with disabilities."

For the DOJ press release, see Justice Department Settles Housing Discrimination Lawsuit Against Dalton Township, Michigan.

(1) According to the press release, Dalton Township will fork over $55,000 to the owner of the group home, and permit him to operate the group home for up to nine men recovering from alcohol and drug dependency at its current location; and cough up $7,500 to the United States as a civil penalty.

Non-Profit Sponsor Of 'Clean & Sober' Group Homes Scores $105K In Damages From NC Town In Settlement Of Fair Housing Suit

From the U.S. Department of Justice:
  • The Justice Department announced [] that it has settled its suit against the town of Garner, N.C., and the town’s Board of Adjustment alleging that they violated the Fair Housing Act when refused to allow up to eight men recovering from drug and alcohol addictions to live together as a reasonable accommodation.

  • Oxford House Inc., the non-profit organization that chartered the home, sponsors the development of self-governing houses in which recovering addicts support each other’s determination to remain sober. The case began when Garner refused to consider requests by Oxford House to increase the number of residents in the home from six to eight.


  • Under the terms of the settlement, which must still be approved by the U.S. District Court in Raleigh, N.C., the defendants will pay $105,000 in monetary damages to Oxford House and $9,000 to the government as a civil penalty.(1)

For the DOJ press release, see Justice Department Settles Fair Housing Lawsuit Against Town of Garner, North Carolina.

(1) According to the press release, the settlement also requires the town to grant the reasonable accommodation requested by Oxford House, to submit periodic reports to the government, and to train town officials on the requirements of the Fair Housing Act. In December 2010, in connection with the parties’ proposed settlement, the town amended its zoning code to establish a procedure for addressing future requests for reasonable accommodations.

Town Passes 45-Day Moratorium On Unlicensed Group Homes; Now Faces Fair Housing Lawsuit Threat By 'Sober Living' Facilities Operator

In San Rafael, California, the San Rafael Patch reports:
  • City council members unanimously approved a 45-day moratorium on all unlicensed group homes despite threats of a legal challenge from an attorney representing two sober living facilities.

  • Since the beginning of February, residents in the Forbes and Gerstle Park neighborhoods have been concerned about possible parking problems and traffic congestion caused by two sober living facilities on 1 Culloden Park Rd. and 201 Marin St. Both of these facilities provide no treatment for the recovering alcoholics or addicts who would be living there and could house between seven and 15 people, although it is unclear how many people are currently living in these locations.


  • Attorney Matthew Gorman, representing the operators of both sober houses, wrote a letter to the city a few hours before the March 7 city council meeting saying a moratorium would be “highly problematic and would expose the city to legal challenges if the city council proceeds.” Instead, he volunteered his cooperation with the city to find a solution.On top of being vague and rushed, the moratorium violates privacy laws, equal protection rights, uniform housing code, zoning regulations and the Federal Fair Housing Act, Gorman said.

  • Both the Federal Act and the State Act (of the Fair Housing Act) treat persons recovering from drug and alcohol addictions as individuals with a disability,” Gorman said. Discrimination in housing based on this disability is prohibited.


  • Cities all over the state and country are struggling with how to regulate sober living facilities. Garner, N.C., Columbus, Ind. and Dalton Township, Mich. have all been sued by the United States Department of Justice for attempts at regulation, according to [City Attorney Rob] Epstein.(1) Los Angeles is currently revising its zoning to address the problem and West Hollywood was recently involved in a lawsuit involving rent control and clean and sober living homes.

For more, see Moratorium on Group Homes Violates Fair Housing Act, Lawyer Says (City may face "legal challenges" after unanimously approving a moratorium on all group homes).

(1) For the U.S. Department of Justice press releases on these legal actions, see:

Feds Indict One, File Six Civil Suits In Various States In Crack Down On Alleged 1st Time Homebuyer Tax Credit Scams

From the U.S. Department Of Justice:
  • The United States has filed six lawsuits in five states to stop tax return preparers from fraudulently claiming the first-time homebuyer tax credit and the earned-income tax credit, the Justice Department announced [].

  • The filings of those civil injunction complaints coincided with the indictment of a Philadelphia man on criminal charges of fraudulently claiming the first-time homebuyer credit.(1) All of these actions are part of the Justice Department’s continuing efforts to halt tax scams involving false claims for tax credits and to prosecute those who fraudulently file tax returns containing those claims.


For the DOJ press release, see Justice Department Announces Indictment and Six Lawsuits Targeting False Claims for First-time Homebuyer and Earned-income Tax Credits (Actions Highlight Continuing Nationwide Effort to Halt Tax Scams And Prosecute Fraudulent Tax-Return Preparers).

(1) From the press release:

  • According to the indictment, Jonathan Brownlee of Philadelphia was charged with 16 counts of filing false federal income tax returns that contained fraudulent claims for the first-time-homebuyer credit. He allegedly obtained personal information about several individuals through false pretenses and used that information to make false claims for the credit to the Internal Revenue Service (IRS), along with requests that refunds be deposited into bank accounts that he controlled or could access. Brownlee allegedly knew the individuals whose names he used were not entitled to the credit because they had neither purchased a home nor signed a contract to do so. If convicted, he faces a maximum prison sentence of 80 years and a maximum fine of $4 million.

Friday, March 11, 2011

"The Eleventh Judicial Circuit Does Not Have A Rocket Docket!" Says Judge As She Dismisses Foreclosure Action, Cancels Debt Over Sloppy Paperwork

The Palm Beach Post last week obtained a copy of the 57-page transcript of a February 11, 2011 hearing in which Miami-Dade Circuit Court Judge Maxine Cohen Lando rips into attorney Marc A. Ben-Ezra, of the Ft. Lauderdale-based foreclosure mill Ben-Ezra & Katz, P.A. for the crappy paperwork filed in a foreclosure action that was apparently improperly brought.

After placing the world on notice that:
  • ... the Eleventh Judicial Circuit does not have a rocket docket. We take every case seriously. We believe that every case deserves the Court's full attention and we expect the lawyers on those cases to do the same[,]

Judge Lando proceeds to:

  • dismiss the foreclosure action with prejudice,
  • cancel the promissory note and dismiss it with prejudice based on an IRS Form 1099-A, Acquisition or Abandonment of Secured Property, that was apparently filed and sent to the homeowner in this case,
  • invite homeowner's attorney to "go for some other form of judgment" for any other remedy that might be available,
  • announce that an order will be drafted finding both Ben-Ezra and a former associate in contempt of court,
  • announce that she will send the contempt of court order to The Florida Bar for its review and consideration of any disciplinary action,
  • order Ben-Ezra to pay the legal fees and costs incurred by the homeowner for his attorney fees incurred in defending this foreclosure action.

Ben-Ezra makes a valiant but ultimately futile attempt to throw himself on the mercy of the court in order to dodge being found in contempt of court, but Judge Lando refused to yield to his 'pure heart and empty head' defense.(1)

The transcript should serve as required reading for the rubber-stamping, "rocket docket" judges in Ft. Myers, Jacksonville, and anywhere else in Florida who are intent on bulldozing foreclosure cases through the court system based on faulty documents.

For the transcript, see Central Mortgage Company v. Gonzalez Del Real.

Go here for Judge Lando's earlier ruling in this case granting homeowner's motion to vacate the foreclosure judgment.

(1) For an earlier post on this story and more on the "pure heart and empty head defense," see Head Of Florida Foreclosure Mill Ordered Into Court To Explain Dubious Document Filings In Recently-Dismissed Suit.

AARP Sues HUD Over "Middle-Of-The-Game" Changes In Reverse Mortgage Rules

The New York Times reports:
  • Reverse mortgages, which pay older homeowners a regular sum against the equity in their house, are supposed to shield borrowers from economic upheaval. But the popular loans have become tangled up in the real estate collapse.

  • AARP, the seniors’ organization, filed suit Tuesday against the Department of Housing and Urban Development, which regulates reverse mortgages. The suit asserts that policy changes by HUD are pushing older homeowners into foreclosure. The case was filed in Federal District Court for the District of Columbia by the AARP Foundation, the organization’s charitable arm, and the law firm of Mehri & Skalet on behalf of the surviving spouses of three homeowners who had bought reverse mortgages. All three are facing eviction, the suit says.

  • HUD has illegally and without notice changed the rules in the middle of the game at the expense of vulnerable older people,” said Jean Constantine-Davis, a senior lawyer at the AARP Foundation.

  • The lawsuit focuses on reverse mortgages where only one spouse signed the loan document. It argues that HUD shifted course in late 2008, making changes in its procedures so that surviving spouses who are not named on the mortgage must pay the full loan balance to keep the home, even if the property is worth less.

For more, see AARP Sues U.S. Over Effects of Reverse Mortgages.

Foreclosure Mill Shutdown Leaves Mess Behind For Tampa-Area Court System

In Tampa, Florida, the St. Petersburg Times reports:
  • As many as 20,000 foreclosure cases in the Tampa Bay area have been left in limbo by the virtual collapse of the David J. Stern Law Firm, once Florida's most prolific foreclosure "mill.'' The firm's implosion gives many borrowers at least a temporary reprieve from foreclosure and means that thousands of cases could be dismissed unless lenders quickly hire other attorneys.

  • "It's a mess,'' Pinellas-Pasco Chief Judge Thomas McGrady said Tuesday. In a letter dated March 4, Stern notified McGrady and other chief judges that as of March 31 the firm will end its involvement in all 100,000 foreclosure cases statewide in which it is still listed as attorney of record. Bank of America and other Stern clients jettisoned the firm last year because of its allegedly sloppy, fraudulent practices, but in many cases have yet to hire anyone to replace him.


  • Attached to each letter was a list of Stern cases in that particular judicial circuit. In Pinellas-Pasco, the list is 251 pages with a total of about 10,000 cases — a third of all pending foreclosures.

  • McGrady said his staff is working on orders requiring banks to show cause why their foreclosure suits should not be dismissed if they fail to get timely substitute counsel. In some cases, McGrady said, a new attorney has appeared but without proper legal authority. In other cases, more than one law firm has claimed to represent the same bank. "Then what do we do?'' he asked.

  • In Hillsborough County, Stern is still attorney of record in just under 10,000 cases, of a total of 25,000 pending foreclosure suits. Chief Judge Manuel Menendez Jr. said he doubts that Stern's letter frees him from the responsibility of legally withdrawing from the cases. "You can't just walk away,'' Menendez said. "I think he's written the letter in attempt to circumvent the rules of judicial administration.''

For more, see Collapse of David J. Stern law firm throws foreclosure courts into disarray.

Colorado Law Incentivizes Foot Dragging By County Officials When Returning Surplus Sale Proceeds To Foreclosed Homeowners After Public Auctions

In Arapahoe County, Colorado, The Denver Post reports:
  • What [Barry] Gragert didn't know was that a defining traumatic event for him — the loss of his Aurora home to foreclosure not long after the death of his wife two years ago — actually had a bittersweet outcome. Arapahoe County officials had quietly been holding more than $50,000 for him — funds left over from the foreclosure sale of the house where he had lived and raised a family for 19 years. Trouble is, no one had told him about it.


  • State law requires counties to hand over any proceeds from foreclosure sales after all the debtors on a property have been paid. Usually there's little or nothing left. But when money is owed, counties put almost no effort into locating former homeowners. They're only required to send a notice to the homeowner's last-known address at the time the foreclosure began — usually the very house the homeowner was forced to leave — and to publish an ad in a local newspaper, often one the homeowner has never heard of.

  • In a search of just three Front Range counties — Denver, Arapahoe and Adams — The Denver Post found that dozens of former homeowners were owed more than $653,300 since 2008.(1) Kenneth Aragon, who lost his Aurora home to foreclosure in 2009 and is owed money, was dumbstruck when told by The Post he had money coming. "They sent it to my old address?" said Aragon, who lives in Aurora. "How dumb is that?"


  • In July 2008, the law changed, allowing counties to keep funds unclaimed after five years from the date of foreclosure. Previously the money was held in perpetuity. The three counties say their search efforts are minimal because of limited resources and small staffs.

For more, see Money owed to victims of foreclosure rarely gets to them.

(1) Here's a list of people in three metro-area counties due at least $10,000 from the county treasurer for property sold at foreclosure:

  • Adams County: Efrain Ruiz ($14,203), Mike L. Zamora ($48,325), Richard A. Wasilkow ($37,026), Anthony J. Peters ($11,625), Arthur Schilling ($32,653), Rosa E. Martinez ($15,895), Barbara L. Brinkley ($11,792);
  • Arapahoe County: Clarita Fritz ($10,536), Shirley Shellenbaum ($12,995), Patricia Rasmussen ($19,037), Thomas Allman ($42,156), Bernard and Margaret Krueger ($14,158), Barry Gragert ($50,641), Kenneth and Beatrice Aragon ($27,456), Clinton and Christine Rivard ($15,426), David and Jami Childress ($12,717), Laura Van Norden ($45,875);
  • Denver County: Jesse and Theresia Morrison ($18,572), Marie Duran and Olan Gulley ($21,658), LeRoy Green ($31,730), Ruth Dewey ($39,412), Fayetta Curry and Sharon Davis ($33,212).

Mortgage Servicer Took Loan Modification Payments, Then Foreclosed On Her Anyway & Now Admits Screw-Up, Says Tucson Homeowner

In Tucson, Arizona, KOLD-TV Channel 13 reports:
  • So many Tucson area homeowners are behind in their mortgage payments, and risking foreclosure, but an Oro Valley woman says her foreclosure was a shock. Up until the day her home was foreclosed on and sold, she thought everything was fine, and says she was even assured it would not happen. When it did, Tracy Wood says, "I felt like I was going to vomit and pass out."


  • Wood says she was paying nearly 3,000 dollars a month on her Oro Valley home, never missing a payment as her mortgage company told her it was modifying her loan, and she would not be foreclosed on. Woods, says, less than two weeks after her Texas-based mortgage company, Saxon Mortgage assured her everything was fine, she got a phone call from an investor, telling her he was going to buy her foreclosed home that very day. And he did.

  • "I thought he was joking. I go, well, that's not...I just talked to my mortgage company. There's no way that's going to happen," Woods says. "It was unexpected and hit me completely out of nowhere," She says.

For more, see Oro Valley woman says mortgage co. admits foreclosure was mistake.

Thursday, March 10, 2011

Laid Off Robosigner Blows Whistle On Foreclosure Mill; Describes Boiler Room Operation Allegedly Set Up To Crank Out Docs w/ Falsified Signatures

In Baltimore, Maryland, The Baltimore Sun reports:
  • Prosecutors have launched an investigation into a complaint that more than 1,000 deeds for homes foreclosed upon in Maryland were improperly executed — the latest development suggesting widespread problems in the way foreclosures have been handled in the state.

  • The complaint, filed last week by a paralegal formerly employed by the Shapiro & Burson law firm, lays out allegations that attorneys who were supposed to be signing deeds and key foreclosure paperwork for Maryland properties instead instructed others to falsify their signatures on the documents.

  • "We're looking at this case very closely," said Ramon V. Korionoff, chief of staff to the Prince George's County state's attorney, whose office is investigating. "It's very troubling."


  • State regulators said this week that they also have received complaints about alleged foreclosure-documentation problems at the Baltimore law firm of Friedman & MacFadyen. Four notaries employed there resigned their commissions earlier this year after inquiries from the Maryland secretary of state's office, according to the agency.


  • Charlene Perry, who specializes in foreclosure title work as vice president of Preferred Title Group Inc. in Baltimore, calls a deed with a false signature "a huge problem" that could come back to haunt a later homeowner if it is challenged. Most homebuyers purchase title insurance, so it would be up to the insurer to pay for their legal defense, she said.

  • "I don't think the consumer at the end of the day is going to lose. But they're going to lose sleep," said Perry, who has worked in the title industry for more than 25 years. "They're going to be on pins and needles: 'Do I own my home?' "


  • The complaint against Shapiro & Burson was filed by Fairfax resident Jose Portillo, 42, a notary who worked for the firm as a paralegal for nearly three years. He said he decided to file a complaint against his former employer after he and about 10 co-workers were laid off in February. He met with Civil Justice to offer information he thought would be helpful in the group's foreclosure litigation work and then prepared the affidavit last week.


  • He described a boiler-room atmosphere, much like that at mortgage companies during the housing bubble, in which employees were overwhelmed with work. He said his shift regularly stretched into 12- and 13-hour days. Employees in another department handling foreclosure sales sometimes stayed until 4 a.m., he said.

  • Portillo said he knows he is putting his Virginia-issued notary commission at risk by acknowledging that he improperly notarized documents. He said he decided to complain because it upset him that the firm laid off employees who followed instructions, while those who gave those instructions are still on staff. He said he hopes regulators see mitigating reasons to excuse his own notary violations.

  • "It was implied that my job was at stake," said Portillo, who had already gone through a five-month stretch of unemployment in 2007 after settlement work dried up. "I know what I saw, and I have no qualms testifying and reaffirming my affidavit."

For more, see More foreclosure irregularities alleged in Maryland (Former law firm employee says over 1,000 deeds were recorded with false signatures).

State Lawmaker To Push Legislation Requiring Banks To Record Chain Of Title Before Filing Connecticut Mortgage Foreclosure Actions

From the Office of Connecticut State Senator Anthony Musto:
  • Amidst national reports of shoddy paperwork processing that led to suspended foreclosure proceedings at many major lenders, state Senator Anthony Musto (D-Trumbull) is pushing legislation that would require banks to perfect their legal right to property before they can file a foreclosure action.

  • Under current state law, banks and other lenders are exempt from recording their mortgage assignments, and thus securing their rights to the mortgage, before foreclosing on property—in contrast to individuals, who must properly record such things as deeds, liens and easements in public land records to make them effective.

  • Our law treats banks, mortgage holders and other lending institutions different from everyone else,” said Senator Musto, who testified in support of the bill before the General Assembly’s Judiciary Committee this past Friday. “With recent fraudulent document scandals involving some of the countries biggest mortgage lenders, and with a foreclosure crisis planted at the root of our continuing economic troubles, it makes no sense to allow banks to skip a step required by everyone else to secure an interest in the land. This bill will remove an unreasonable exemption and provide an additional layer of security for homeowners. Banks simply need to play by the same set of rules everyone else uses.”

For the press release, see Musto Seeks to Change Title Rules in Foreclosure Cases (Proposal would level playing field between banks and homeowners).

Demands Continue For MERS To Cough Up The Cash For Unpaid Recording Fees

In New York City, WNBC-TV Channel 4 reports on some of the calls demanding that Mortgage Electronic Registration System begin coughing up the cash for the millions it may owe for fees it has avoided by failing to record assignments of mortgages when loans are sold between its members:
  • [Southern Essex, Massachusetts Register of Deeds John] O’Brien has officially requested that Massachusetts Attorney General Martha Coakley file suit against MERS, seeking $22 million in unpaid recording fees associated with home loans that were bought, sold, and securitized since 1998. “I have challenged them to open their books and show me how many times they have moved people’s mortgages around,” O’Brien said.

  • In [New York State's] Suffolk County, former county clerk Ed Romaine is making a similar request. Now serving as a county legislator, Romaine has asked the Suffolk County attorney explore a lawsuit against MERS that he says would claw back more than $100 million for taxpayers. Romaine unsuccessfully tried to block MERS from doing business in Suffolk County back in 2001. “I saw a problem because we would not know who would be the owner of these mortgage notes because they would be sold in a private system and not recorded in a public system,” Romaine said.

  • The prediction wasn’t far off. Mortgage industry insiders say a major reason many of the nation’s foreclosures are stalled or progressing at a slow pace is the inability of MERS to identify what parties actually hold title to distressed mortgage loans. The problem has led housing advocates to begin demanding foreclosure agents show proof of which investors actually hold legal claim on properties.

For the story, see Counties Seek Millions From Mortgage Giant (MERS under fire for unpaid fees).

Utah Federal Judge Grants TRO, Trial Request Stalling Foreclosure For Pro Se Homeowner

In Salt Lake City, Utah, the Deseret News reports:
  • A Pleasant View man is taking one of the biggest banks in the world to federal court over a failed loan modification that resulted in a foreclosure on his home. And he's doing it without an attorney.

  • I went to several attorneys and every attorney told me the same thing: ‘You are never going to go anywhere. Banks have bottomless pockets, and you are not going to win,’” recalled Michael Waters, who repairs computers by trade.

  • In what is shaping up to be a "David vs. Goliath" legal fight, Waters appears to be putting up a decent battle. He has already won a restraining order preventing the foreclosure of his home while the case is in court. And U.S. District Judge Bruce Jenkins appears to be sympathetic to Waters’ plight and has granted him a trial.

  • Waters’ legal troubles began last year after he lost his job and called Bank of America to see what he could do to keep up with his mortgage payments. The bank offered a forbearance that drastically reduced Waters’ mortgage payment and told Waters he was eligible for a trial loan modification. "I thought, 'This is like a blessing. This is wonderful,'” Waters said.

  • But before Waters had the chance to make his first payment, Bank of America sent a letter canceling the forbearance. The bank told him it was because his payment was late, but the letter was sent before the payment was due. When Waters contacted the bank, he was told a different story. The bank said it could not offer a forbearance because they did not have the note to the loan.

  • Well I said, 'Who does own the note? Maybe we could work something out' and they said, 'We can't give you that information,'” Waters said. Bank of America told Waters his February mortgage payment was due immediately and he had seven days before the March payment was due. Waters said he did not have the money because Bank of America advised him to use his savings to pay off all debt to qualify for the forbearance. The bank foreclosed three months later.

  • Instead of giving up, Waters started doing research online to see if he could find any options that may give him a fighting chance. "It probably took me 64 hours of legal research," he said. "I just went to the Internet and found copies of lawsuits that were filed, and I just typed in something similar."

  • Waters stumbled across two Supreme Court rulings (Haines v. Kerer and Platsky v. CIA) that have aided him in court. “(The rulings) said that if somebody is in court pro se, which is me — no attorney — that their case can't be rejected or thrown out on technical groundsand the judge has to help, explained Waters.(1)

For more, see Pleasant View man takes banking Goliath to court sans attorney.

For the transcript of the hearing granting the homeowner a trial in this case, see Waters v. Bank of America.

(1) For a couple of the many Federal court rulings mandating that trial judges cut pro se homeowners a considerable amount of slack when hearing their cases, see:

Haines v. Kerner, 404 U.S. 519 (1972), in which the U.S. Supreme Court reversed the rulings of two lower courts, the court stated:

  • The only issue now before us is petitioner's contention that the District Court erred in dismissing his pro se complaint without allowing him to present evidence on his claims.

    Whatever may be the limits on the scope of inquiry of courts into the internal administration of prisons, allegations such as those asserted by petitioner, however inartfully pleaded, are sufficient to call for the opportunity to offer supporting evidence. We cannot say with assurance that under the allegations of the pro se complaint, which we hold to less stringent standards than formal pleadings drafted by lawyers, it appears 'beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' Conley v. Gibson, 355 U.S. 41, 45—46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). See Dioguardi v. Durning, 139 F.2d 774 (CA2 1944).

    Accordingly, although we intimate no view whatever on the merits of petitioner's allegations, we conclude that he is entitled to an opportunity to offer proof. The judgment is reversed and the case is remanded for further proceedings consistent herewith.

Platsky v. Central Intelligence Agency, 953 F.2d 26 (2d Cir. 1991), in which a Federal Appeals Court ruled:

  • Pro se plaintiffs are often unfamiliar with the formalities of pleading requirements. Recognizing this, the Supreme Court has instructed the district courts to construe pro se complaints liberally and to apply a more flexible standard in determining the sufficiency of a pro se complaint than they would in reviewing a pleading submitted by counsel. See e.g., Hughes v. Rowe, 449 U.S. 5, 9-10, 101 S.Ct. 173, 175-76, 66 L.Ed.2d 163 (1980) (per curiam); Haines v. Kerner, 404 U.S. 519, 520-21, 92 S.Ct. 594, 595-96, 30 L.Ed.2d 652 (1972) (per curiam); see also Elliott v. Bronson, 872 F.2d 20, 21 (2d Cir.1989) (per curiam). In order to justify the dismissal of a pro se complaint, it must be " 'beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' " Haines v. Kerner, 404 U.S. at 521, 92 S.Ct. at 594 (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957)).

    In light of these principles, we think that the district court should not have dismissed Platsky's complaints without affording him leave to replead.


  • The district court also dismissed the complaints for their failure to plead facts that were sufficiently specific. The district judge held that Platsky failed to allege the concrete and particularized injury required to establish standing and to state a claim upon which relief could be granted.


  • We think that Platsky should have a chance to state his claim more clearly. It is not "'beyond doubt that the plaintiff can prove no set of facts in support of his claim[s],' " Haines v. Kerner, 404 U.S. at 521, 92 S.Ct. at 595, and therefore we hold that the better course would have been for the district court, in dismissing Platsky's pro se complaints, to grant him leave to file amended pleadings. See Elliott v. Bronson, 872 F.2d at 22. We have instructed Platsky that his complaint must set out, with particularity and specificity, the actual harms he suffered as a result of the defendants' clearly defined acts.

    Accordingly, we vacate the judgment and order below, and remand the case to the district court with instructions to allow the plaintiff to replead.

See also Estelle v. Gamble, 429 U.S. 97 (1976), which supports the mandate that trial judges cut pro se homeowners slack when bringing their cases:

  • The handwritten pro se document is to be liberally construed. As the Court unanimously held in Haines v. Kerner, 404 U.S. 519 (1972), a pro se complaint, "however inartfully pleaded," must be held to "less stringent standards than formal pleadings drafted by lawyers" and can only be dismissed for failure to state a claim if it appears "`beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Id., at 520-521, quoting Conley v. Gibson, 355 U.S. 41, 45 -46 (1957). [429 U.S. 97, 107]

10th Circuit To Hear Appeals Of Lower Court Dismissals Of Utah Wrongful Foreclosure Cases Brought By Homeowners

In Salt Lake City, Utah, The Salt Lake Tribune reports:
  • The Utah Legislature appears poised to stifle any legislation that might help thousands of Utah homeowners facing foreclosure, punting decisions on those issues back to the courts.

  • But federal courts in Utah, where most foreclosure lawsuits end up, have been downright cold toward homeowners seeking relief from what they claim are illegal actions on behalf of banks and others. In case after case, federal judges have sided with banks and foreclosure trustees in lawsuits that raise legal questions about their ability to take property when loans become delinquent.

  • State courts, according to homeowner attorneys, have been more open to foreclosure lawsuits. Given that, banks and others seeking to foreclose are automatically moving cases filed into federal court. Homeowners have never even be allowed to gather evidence from the foreclosure entities because their cases are quickly dismissed.


  • Now, at least three of cases from Utah have been appealed to the 10th Circuit Court of Appeals in Denver, whose rulings could clarify whether the legal issues are serious and need more judicial consideration.

For more, see Shoulders cold when foreclosure cases hit the courts.

Wednesday, March 09, 2011

Feds Accuse South Florida Outfit Of Peddling Bogus Loan Modification Services

The Federal Trade Commission recently announced:
  • As part of the Federal Trade Commission’s continuing crackdown on scams that target homeowners behind in their mortgage payments or facing foreclosure, the FTC has charged a national operation with marketing bogus loan modification services.(1) The FTC seeks to stop the illegal practices and make the defendants pay refunds to consumers.

  • According to the FTC’s complaint, the defendants target financially distressed consumers using direct mail, the Internet, and telemarketing, and falsely promise they will get loan modifications to make consumers’ mortgages much more affordable, or fully refund their money if they fail. They make these promises even to homeowners whose lenders have denied them modifications or who have been sent foreclosure notices. The defendants charge up to $2,600 for their supposed services and typically ask for half of the fee up-front, claiming a success rate of up to 100 percent.

  • As alleged in the complaint, the defendants claim expertise that enables them to prevent foreclosure, and often mislead consumers to believe they are affiliated with, or approved by, consumers’ lenders. They tell consumers not to contact their lenders and to stop making mortgage payments, claiming that falling behind on payments will demonstrate the consumers’ hardship to lenders.

For the FTC press release, see FTC Charges Mortgage Relief Operation with Deceiving Distressed Homeowners.

For the lawsuit and related court orders, see:

  • Complaint for Permanent Injunctive and Other Equitable Relief,
  • Order Granting in Part and Denying in Part Motion for Preliminary Injunction and Asset Freeze,
  • Amended Ex Parte Temporary Restraining Order with Asset Freeze, Appointment of Receiver, Expedited Discovery, and Other Equitable Relief and Order to Show Cause Why a Preliminary Injunction Should Not Issue.

(1) The named defendants in the FTC lawsuit are: U.S. Mortgage Funding Inc., Debt Remedy Partners Inc., Lower My LLC, David Mahler, Jamen Lachs, and John Incandela, Jr., also known as Jonathan Incandela, Jr.

Cops: Fake R/E Agent Conned Elderly Couple Facing F'closure Into Signing Over Deed, Then Pockets $45K Deposit From Would-Be Buyer In Failed Sale

In Orlando, Florida, WESH-TV Channel 2 reports:
  • One man was arrested Friday and accused of real estate fraud. Authorities with the Orange County Sheriff's Office said they believe there could be more victims. Investigators said Dave Howell, 31, had a real estate office and was taking the clients' money, but he doesn't have a real estate license.

  • Deputies said Howell contacted an elderly couple who was in foreclosure and promised he could sell their home in a short sale. Investigators said Howell had the couple sign what ended up being fake documents and also signed over the title over their house to him.

  • Authorities said Howell then contacted a buyer and said he could sell the house for $85,000, but first the buyer paid what she thought was a $45,000 escrow deposit. "The transaction never closed," Orange County Sheriff's Office spokesman William Cruz said.

  • "The bank account where the suspect deposited this escrow of $45,000 was completely depleted, misappropriated, ultimately stolen." Investigators said Howell had an office off of South Hiawassee Road called Nationwide Consultants LLC and has being doing business for about one year. He has been charged with practicing real estate without a license and grand theft.

Source: 1 Arrested In Real Estate Fraud Case (Howell Accused Of Grand Theft, Practicing Real Estate Without License).

Hidden Cost Of Buying 'Cheap' Foreclosed Home Becomes Selling Point For Builders Peddling Their Inventory

The Associated Press reports:
  • Homebuilders trying to fight off customers' attraction to cheap foreclosures are doing more to show buyers that the good deals can come with pitfalls. [...] Many national builders are using some form of marketing to try to make that point and beat back the quiet competition from lower-priced foreclosures and short sales.


  • Lennar Corp.'s website is fighting back with a "Buying a New Home vs. a Foreclosed Home" page that lays out the benefits of new construction — like home warranties, energy efficiency, and customization options — while highlighting the potential risks of buying a foreclosed home.

  • PulteGroup Inc. uses similar tactics in its advertising, as does Shea Homes and Phoenix-area builder Fulton Homes. Fulton and Shea both promote new homes with a "foreclosure cost calculator" on their websites that lets customers calculate potential costs.


  • Home builders say they're hopeful that as more customers turn to them instead of the overloaded foreclosure market, they'll be able to show the value in new construction.

For more, see Homebuilder Ads Highlight Pitfalls of Foreclosures (Homebuilders try to draw in buyers by pointing out pitfalls and risks of buying foreclosures).

Tuesday, March 08, 2011

South Florida Foreclosure Mill Throws In Towel; Will Shut Down At End Of Month

In Plantation, Florida, Reuters reports:
  • A prominent Florida lawyer accused of mishandling many foreclosure cases in that state is shutting down his foreclosure law practice at the end of the month, a regulatory filing shows.

  • The decision by the lawyer, David Stern, was announced by DJSP Enterprises Inc, a company he once ran and which calls itself the main customer of the Law Offices of David J. Stern PA. DJSP said it expects to receive no further referrals from Stern. The company, whose businesses have included processing, servicing and title operations, has already laid off much of its workforce.

  • A lawyer for Stern did not immediately respond to a request for a comment on Monday. DJSP shares traded down 7 cents, or 29.2 percent, at 17 cents in morning trading on the Nasdaq, after falling as low as 15.5 cents. They traded as high as $13.65 last April.

  • Stern's firm is among several being investigated by the office of Florida Attorney General Pam Bondi over whether documents they submitted in foreclosure cases were defective. Major mortgage companies, including Fannie Mae and Freddie Mac, stopped doing business with Stern.

  • Florida media last month said Stern was trying to sell some luxury assets, including homes and a yacht, worth millions of dollars. He resigned as chief executive of Plantation, Florida-based DJSP in November.

Source: Florida lawyer David Stern ends foreclosure law practice.

See aslo, The Palm Beach Post: Stern law firm ends foreclosure operations:

  • On Friday, Stern sent a letter to Florida judges saying his firm still needed to withdraw from 100,000 cases statewide, nearly a third of the state's court backlog of 350,615 foreclosure cases.

  • "We have been forced to drastically reduce our attorney and paralegal staff to the point where we no longer have the financial or personnel resources to continue to file Motions to Withdraw in tens of thousands of cases that we still remain as counsel of record," Stern wrote. "Therefore, it is with great regret that we will be ceasing the servicing of clients with respect to all pending foreclosure matters in the State of Florida as of March 31, 2011."

Defendants In Mortgage Payment Hijacking Scam Face New Charges Of Running Fraudulent Upfront Fee Loan Modification Ripoffs

In Las Vegas, Nevada, the Las Vegas Sun reports:
  • Two men were arrested Friday in connection with an alleged scheme designed to steal mortgage payments from Southern Nevada homeowners, Nevada Attorney General Catherine Cortez Masto said.

  • Joseph Yorkus, who was out on bail from a February arrest in connection with a similar scheme, and James Bartczak, who was still in custody, were booked on new charges in connection with an investigation by the attorney general's Mortgage Fraud Task Force.

  • Both men had been arrested in February for setting up the business “Great Western Business Services,” which is alleged to have embezzled homeowners’ mortgage payments by sending letters to homeowners falsely stating that their loans had been transferred from Bank of America to Great Western. The letters instructed the homeowners to make their mortgage payments to Great Western rather than to Bank of America, which actually owned the loan.

  • Numerous victims missed mortgage payments that could potentially result in foreclosure, despite the fact they had actually made their payments -- albeit to the alleged scammers instead of their true loan servicer.

  • The latest arrest is based on new allegations that, in addition to fraudulently operating Great Western Business Services, Yorkus and Bartczak also ran three other fraudulent companies, BAC Collections, Fresh Start Consultants and Learn Your Rights, for the purpose of convincing homeowners to pay their mortgage through those businesses.

  • Yorkus and Bartczak allegedly misrepresented that the companies would assist homeowners in obtaining credit repair and loan modifications, as well as principal reductions. Instead of obtaining the loan modifications, the homeowners' payments were allegedly diverted by Yorkus and Bartczak for their own personal use.

  • One of the alleged victims is a senior citizen who lost more than $10,000, officials said.

Source: 2 men arrested in alleged mortgage payment scam.

Securitizations Hit Tax Lien Industry

The Center for Public Integrity reports:
  • When Florida retiree Gladys Walker fell behind in paying taxes on her modest Pompano Beach home, she had no idea one of America’s biggest banks and a major Wall Street hedge fund engaged in frenzied bidding for the right to collect her debt—all $768.25 of it. “I just couldn’t come up with the money,” said Walker, 67, a former hotel worker who makes do on a monthly Social Security check.

  • Barely more than a year after a taxpayer bailout of major financial institutions, Bank of America and the hedge fund, Fortress Investment Group, spotted a fresh money-making opportunity – collecting the tax debts of tens of thousands of people like Walker. The bank and hedge fund can add interest charges and fees, and they bundled the debts as securities for investors.

For more, see Wall Street Quietly Creates a New Way to Profit From Homeowner Distress (Large Bank, Hedge Fund Bundle Small Tax Debts Into Private Investments).

Monday, March 07, 2011

MERS Gets Hammered In Recent Oregon Federal Court Rulings As 100s Of F'closures Stall; Resulting Crappy Titles Will Be Uninsurable, Warns Underwriter

The Oregonian reports:
  • Sales of hundreds of foreclosed homes in Oregon have been halted or withdrawn in recent weeks after federal judges repeatedly questioned their legality, according to a number of real estate attorneys in the state. Lenders have withdrawn more than 300 foreclosure sales since February in Deschutes County alone, one of the Oregon area's hardest hit by the housing collapse. About 130 of those notices were filed in the past week, attorneys say.


  • And, in a potential deal breaker for other foreclosure cases, one of the nation's largest title-insurance companies is warning lenders that it might not guarantee title in some cases.


  • The legal concerns revolve around Mortgage Electronic Registration Systems Inc., a Reston, Va., corporation set up in the mid-1990s by the mortgage banking industry to rapidly record the ownership of mortgages so they could be packaged and sold as securities.


  • Since October, federal judges in five separate Oregon cases have halted foreclosures involving MERS, saying its participation caused lenders to violate the state's recording law.(1) Three of those decisions came last month, the key one in U.S. Bankruptcy Court in Eugene.


  • In response to that ruling, First American Financial Corp., one of the nation's largest title insurers, began warning lenders and buyers in title documents that it wouldn't insure titles with a cloudy public record in Oregon, company attorney Alan Brickley said. "It's simply saying we have a concern, and you should have a concern," said Brickley, who's based in Portland.

Fotr more, see Hundreds of Oregon foreclosure sales stopped after judges' rulings.

(1) For these Oregon federal court decisions, which raise questions about the legality of hundreds of foreclosures in the state, see

The Stench Left By MERS After Swallowing Your Loan

Mortgage Electronic Registration Systems, also known as MERS, "whose private mortgage registry has all but replaced the nation’s public land ownership records," takes a heavy hammering in a recent article in The New York Times for the central role it's played in creating the quagmire in the foreclosure process as it and lenders (real and purported) attempt to enforce delinquent promissory notes secured by mortgages on people's homes.

For the story, see MERS? It May Have Swallowed Your Loan.

Two Ongoing Florida Cases Show HSBC's Purported Foreclosure Moratorium May Be BS; Inquiries To Lenders' Attorneys Yield No Explanations

AOL's Daily Finance reports:
  • In HSBC's 2010 annual report, the bank asserted that it had stopped "processing foreclosures" and that it "suspended foreclosures" in December, even though the information wasn't made public until Feb. 28, when HSBC filed the report with the SEC.

  • But based on at least two cases still working their way through Florida's courts, that delay in disclosure apparently also meant that HSBC didn't tell attorneys bringing foreclosure actions in the bank's name to put their cases on hold. Indeed, if HSBC had systematically put its many pending foreclosure cases on hold in December, the news surely would have come out before now. So it's appropriate to ask: What does the moratorium announcement really mean?


  • In two active Florida cases, Wells Fargo is trying to foreclose as the loan servicer for HSBC, which is the plaintiff and will, if the foreclosures are successful, get the properties. The case names reflect HSBC's role: HSBC v. Harley, and HSBC v. Shinneman. Both are set for trial later this month, and as of March 3, had not been not affected by HSBC's foreclosure moratorium.

  • Jacksonville Legal Aid attorney April Charney represents Harley, while attorney Todd Allen represents Shinneman. Both reached out to their opposing counsels repeatedly after the HSBC moratorium became public. Both opposing counsels told them on Thursday that the cases were going forward. (When I contacted the attorney for HSBC in the Shinneman case, Travis Harvey, his response was "no comment." HSBC's attorney in Harley, Michael Winston, didn't reply to my email.)

For more, see What Do HSBC's Foreclosure Moratorium and Robo-Signing Claims Really Mean?

Sunday, March 06, 2011

Sacramento Feds Score Another Guilty Plea As 5th Defendant Goes Down In Foreclosure Sale Bid Rigging Conspiracy

In Sacramento, California, the San Jose Mercury News reports:
  • Federal prosecutors say a Northern California man has pleaded guilty to conspiring to rig bids at foreclosure auctions in a county among the hardest hit by the real estate bust. The U.S. Attorney's Office for the Eastern District of California says 38-year-old Yama Marifat of Pleasanton pleaded guilty Friday to the conspiracy.

  • Prosecutors say Marifat and a group of real estate speculators agreed not to bid against each other at San Joaquin County public foreclosure auctions to keep prices down. The group would then hold a private auction where the property went to the conspirator willing to pay the most above the public price. The speculators would split the difference between the prices at public and private auction as a payoff among themselves.

  • Marifat faces up to 10 years in prison for bid rigging and 30 years for mail fraud, plus fines up to at least $2 million. The U.S. Attorney's Office says Marifat is the fifth person to plead guilty in connection with the conspiracy, which was uncovered as part of an ongoing federal investigation into fraud and bid-rigging in real estate auctions in San Joaquin County.(1)

Source: Calif man pleads guilty to foreclosure bid rigging.

For the U.S. Attorney press release, see Real Estate Investor Pleads Guilty to Bid Rigging at Public Foreclosure Auctions.

Go here for other posts & links on bid rigging at foreclosure and other real estate-related auctions.

(1) Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660, visit, the United States Attorney’s Office for the Eastern District of California at 916-554-2700 or the FBI’s Sacramento Division at 916-481-9110.

Attorney, Two Law Partners Admit To Bid-Rigging MD Real Estate Tax Lien Sales; Dodge Criminal Charges By Winning "Race To the Prosecutor's Office"

The Center for Public Integrity reports:
  • A key witness in a federal probe of corruption in Maryland property tax-lien sales has stated under oath that he rigged bids for years while representing a Florida bank and other firms that bought liens at annual sales auctions, newly unsealed court records show.

  • Baltimore real estate attorney John Reiff said he and two law partners helped fix bids for the purchase of “large numbers” of property tax debts, called tax liens, sold by tax assessors at auctions in Baltimore and several other Maryland counties between 2003 and 2007, according to court filings made public for the first time last month.


  • An investigation published in December by the Center for Public Integrity showed how lien buyers can tack on double-digit interest rates, legal fees and other costs that can add thousands of dollars to a homeowner’s bill. In some states, lien holders can seize homes from those who fail to pay. The bid rigging cost the city of Baltimore and surrounding counties money by artificially holding down bids, local officials say, although they could not determine how much.


  • Though the tax-lien industry has long been controversial, the Baltimore lawyer’s sworn declaration appears to be the first to mention a bank, or a tax-lien portfolio manager, in connection with allegations of criminal conduct in the bidding process.

  • Reiff stated that a firm formed with his law partners acted to “suppress competition for tax liens by refraining from full competitive bidding.” [...] U.S. District Judge J. Frederick Motz in Baltimore unsealed Reiff’s declaration and some other records at the request of the Huffington Post Investigative Fund, now part of the Center for Public Integrity.


  • Reiff and his partners, Anthony DeLaurentis and Richard Turer, were one of three investment groups that participated in the five-year scheme to dominate the tax lien auctions, according to prosecutors.

  • Three other participants have pleaded guilty to bid rigging in the case. In May, Baltimore County attorney Harvey M. Nusbaum, 73, was sentenced to a year-and-a-day in prison and an $800,000 fine. His partner, Jack W. Stollof, 75, was sentenced to 12 months of house arrest and an $800,000 fine. A third man, Steven L. Berman , 53, received two years probation and a $750,000 fine.

  • Bid rigging is typically a clandestine effort made to line the pockets of unscrupulous businessmen at the expense of unsuspecting consumers — in this case, at the expense of homeowners and county and city governments,” Justice Department prosecutors wrote in a sentencing memorandum about Nusbaum.

  • In principle, bid rigging is no different from any other common theft of money or property. It is criminal fraud, pure and simple.”

  • The unsealed records describe in detail how the well-financed investment groups illegally dominated the process in Maryland through collusion — and how they made millions of dollars off homeowners as a result. The three groups, according to Reiff, decided in advance which liens each would bid on.


  • Reiff has been a key witness in the federal probe that has resulted in three convictions. He and his two partners cooperated with the government and were not charged.(1)

  • In many cases, homeowners who owed only a few hundred dollars in taxes or municipal bills saw their debt soar into thousands because of the fees and interest. A Baltimore woman lost the home her family had owned for nearly three decades over what began as an unpaid water bill of $362, for instance.

For more, see Witness Says He Rigged Bids in Property Tax Lien Auctions in Maryland.

Go here for the recently-unsealed court filings referred to in this story.

Go here for other posts & links on bid rigging at foreclosure and other real estate-related auctions.

(1) This is another example of how scammers in criminal conspiracies can buy their way out of jail time (and, in this case, can avoid prosecution altogether) by winning the "race to the prosecutor's office" (possibly better described as the "rat-race to the prosecutor's office"), where once they learn they are the subject of a probe, they can run to the prosecutor's office (with the best criminal defense attorney they can afford in tow) and start ratting out their friends and colleagues in exchange for the best deal available. See United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) for one Federal judge's observation, made in the context of drug conspiracy cases, involving the so-called "race to the courthouse/prosecutor's office" which seems equally suited to other types of major, multi-defendant felony cases:

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

Sale Of Tax Liens To Speculators & Proliferation Of Vacant, Rundown Real Estate

In Fulton County, Georgia, a recent story in The Atlanta Journal Constitution on the proliferation of vacant and rundown properties highlights the role that the sale of tax liens plays in the physical deterioration of some neighborhoods:
  • A contributing factor, [community development groups and tax officials] say, is the sale of tax liens. It burdens such properties with debt that exceeds their value and puts them in the hands of speculators who may sit on property as it deteriorates. As a result, many municipalities have stopped selling liens.

  • Fulton County, however, still relies on the sale of tax liens as its primary method of collecting delinquent county and Atlanta city taxes, despite concerns over sometimes outrageous costs for property owners, questions about whether the practice saves the county money and negative effects on community revitalization. To a much lesser extent, Gwinnett County also sells tax liens.

  • Fulton County Tax Commissioner Arthur Ferdinand continues to decline to discuss the county’s sales of tax liens or release property tax data that would support analysis of the practice. The Atlanta Journal-Constitution has sought his input since late last year. He has not returned phone calls.

  • Fulton sold a lien for 2005 taxes on 55 Chester Ave. and, since 2006, taxes totaling $2,767 have not been paid. Tax liens and overdue taxes are not the only reason Chester Avenue and similar properties remain vacant and decrepit. But community development experts say liens in private hands discourage development by adding costs and legal complications to clearing land for construction.

  • In Georgia, unless a property owner receives notice of a lien sale and settles the debt sooner, the legal process after a lien is sold drags out a year or more. Private companies may hold liens longer because they accumulate fees and interest, and once a property is sold, they can wait for a development project that needs the land. In the interim, the companies often don’t pay taxes on vacant properties or maintain them.

For the story, see In tax-lien limbo.

In a related Atlanta Journal Constitution story, see Senate bill tackles sales of tax liens:

  • Legislation introduced in the [Georgia] Senate on Friday is meant to curb abuses of the sale of property tax liens, but broad language in the bill would obstruct tax collection by counties that do not sell liens, according to tax experts.

  • Senate Majority Leader Chip Rogers, R-Woodstock, who introduced the bill, said the language will be changed to affect only the practice of selling tax liens to private companies and not the collection of taxes by the counties.


  • A series of stories by The Atlanta Journal-Constitution over the past two months(1) detailed how the sale of tax liens can
create outrageous costs for property owners and stall community revitalization efforts. The stories also raised questions about whether selling tax liens saves the county money as Fulton County Tax Commissioner Arthur Ferdinand has said.

(1) See:

Florida Court Sets 2,700 Foreclosure Cases Set Dismissal After Lying Dormant For A Year

AOL's Daily Finance reports:
  • If you sue someone in Florida but then stop pursuing your case for a year, the court can clear its case load by dismissing your suit for "failure to prosecute." Across Florida, courts are starting to clear their overwhelmed dockets by dismissing foreclosure cases the banks have failed to prosecute. In one division of one of Florida's 20 judicial districts, perhaps as many as 2,700 cases have been set for dismissal in one week.

  • When Allison Albert of the Jacksonville Area Legal Aid went to foreclosure court in Duval County, part of the Fourth Judicial Circuit, on Tuesday, hundreds of "failure to prosecute" cases were on the docket. While waiting for her client's case to be called, she heard the court's staff talking about how the court had sent out notices, scheduling hearings for about 2,700 foreclosure actions -- and noting that if the bank didn't take action within 60 days of the notice, the case could be dismissed at the hearing for failure to prosecute. All of the cases were scheduled to be heard over the next eight court days.

For more, see Are Banks Abandoning Foreclosures in Florida?

Judge Slams F'closure Defense Lawyer w/ $12K Fine After Refusing To Recuse Himself In Case Involving Bank From Whom He Received Three Loan Mods

In Detroit, Michigan, The Michigan Citizen reports:
  • Third District Court Judge Robert J. Colombo recently received three home loan modifications from Charter One Bank. Colombo ruled, however, he did not need to recuse himself from a mortgage foreclosure case involving the same bank. Nor did it stop him from levying a $12,000 fine on the attorney and client fighting the bank’s foreclosure when the attorney attempted to link the foreclosure case to a discrimination lawsuit now pending against Charter One.

  • Attorney Vanessa Fluker has devoted her legal career to defending victims of foreclosure and predatory lending in Detroit. On March 1, Fluker’s colleague, Jerry Goldberg, defended her against a court sanction handed down by Colombo. Colombo’s decision included the $12,000 judgment against Fluker and foreclosure victim Asha Tyson.


  • During opening statements, Goldberg emphasized the effects of unfairly sanctioning one of the few attorneys who defend homeowners victimized by predatory lending and subsequent evictions. “To put a damper on attorneys to even raise these issues has a negative impact on society,” Goldberg said.

For more, see Judge fines anti-foreclosure lawyer (Court sanctions attorney for linking foreclosure to Charter One discrimination case).