Saturday, April 30, 2011

Suit: Broker, Agent, Seller Unloaded Home Onto 1st Time Buyer w/o Disclosing Presence Of Contaminated Federal 'Superfund' Site Less Than 100 Feet Away

In Gainsville, Florida, The Gainsville Sun reports:
  • In 2004, Carla Melgarejo bought her first property, an 1,100-square-foot home at 444 NW 30th Ave. advertised as a "GREAT INVESTMENT" for a first-time buyer. For five years, her attorneys say, she and her daughter lived there without knowing that less than 100 feet to the east was the northwestern boundary of a federal Superfund site, a designation reserved for some of the most contaminated spots in the country.
  • On Tuesday, Melgarejo filed a lawsuit against Bosshardt Realty Services, the real estate agent who worked on the sale and the couple who sold the property, alleging they did not disclose any information about the property's proximity to the Cabot-Koppers Superfund site.(1)


  • In comments at local meetings in recent years, residents have made accusations of "unscrupulous" real estate agents selling properties in the Stephen Foster neighborhood without disclosing the proximity to the Superfund site, which they say has crippled property values. But Springfield said she thought Melgarejo's suit was the first of its kind to be filed.

For more, see Homebuyer near Koppers sues real estate agency, ex-homeowners.

(1) In addition to Bosshardt Realty, one of its agents, David Ferro, and the previous owners of the property, Robert and Robin Evans, were named in the suit, the story states.

Out-Of-Town Investor Gets Rude Surprise After Getting 'Good Deal' On Tax-Foreclosed Vacant House Purchase

In Syracuse, New York, The Post Standard reports:
  • Toronto real estate investor David Ayanoglou thought he found a good deal in Syracuse: a vacant two-family house at 209 Columbus Ave. Ayanoglou visited the boarded-up structure, in a low-income area on the East Side. It needed work, but he decided it had a lot of potential.
  • The house was available because the previous owner had not paid the taxes, giving the city of Syracuse the right to foreclose. The city sold that right in 2006 — along with tax liens on hundreds of other properties — to American Tax Funding LLC, a private company in Florida. American Tax Funding foreclosed in 2007 and sold the property in 2008 to Ayanoglou and a partner.
  • A few months after Ayanoglou paid $13,000 for the house, his property manager called from Syracuse with bad news. The house had been demolished by the city.

For more, see Tax liens cause disputes for Syracuse, a Florida firm and long-distance homeowners.

Owner Of Vacant House Under Renovation Needs Assist From Local Cops To Extract Brazen Squatter From Premises In Failed Attempt To Hijack Home

In Portland, Oregon, The Oregonian reports:
  • When Tyler Combs and a plumber showed up at Combs' Southeast Portland house that's under remodel, they were surprised to find the lockbox on the front door gone and metal shavings on the porch. The plumber jiggled the knob. Suddenly a strange man opened the front door and stuck his head out.
  • "Who are you?" Combs asked. "I live here," the stranger replied. "My jaw dropped, and I said, 'No you don't. This is my house.'" The stranger replied, "I live here now. I own this house."
  • Thus began a frightening but eye-opening ordeal for Combs, who had bought the foreclosed house in July 2009. He had it under renovation and planned to put it back on the market. But now a stranger had moved in, changed the locks and had even persuaded PGE to put the electricity account in his name.


  • Combs, 29, expected the man to pack up his belongings and move on, once caught. But the man didn't budge. [...] Combs called the police. When officers arrived, the stranger continued to block the door. After checking with detectives, East Precinct officers arrested Alexis Marie Logsdon that day, April 13. On Friday, Logsdon, 39, pleaded not guilty to second-degree burglary and criminal mischief. During his arraignment, he continued to argue the house was his.


  • "He took possession of my account for that address, and PGE never notified me," Combs said. "In his mind, he had actually commandeered the house." [...] "He truly believed he had figured out a way to beat the system and literally take this house from me. I just felt so exposed," Combs said. "His confidence is what rattled me."

For the story, see A homeowner startled to find squatter living in the Portland house he bought out of foreclosure.

(1) Reportedly, a local group called Reclaim! Portland Real Estate Listings has a website that details how to illegally occupy a building, with tips to make the place look as "homey" as possible before police arrive, even suggesting the squatter make brownies for the neighbors. There are other websites that do the same, such as, which suggests squatters "dare the cops to intervene," the story states.

According to the story, various websites instruct squatters to change utility bills to their names, all a strategy to garner what is legally called adverse possession and has its roots in English common law. Under Oregon law, a squatter must show he has maintained open, exclusive and continuous use of the property for at least 10 years, and to have honestly believed he owned the property, and can't be conferred to people who know they are trespassing or, as in Logsdon's case, breaking and entering, the story states.

1000+ Tenants In 10 Dilapidated Bronx Bldgs Get New Hope As City Squeezes Bank To Sell Sour Loans To Responsible Landlord; Deal To Affect 548 Units

In The Bronx, New York, the New York Daily News reports:
  • Mayor Bloomberg's administration pressured banks holding mortgages on foreclosed properties to sell them to responsible landlords, and not let them rot into slums. The Bloomberg administration is finally stepping in to protect New Yorkers in foreclosed apartment buildings that are turning into slums.
  • The city pressured the bank that held a $35 million mortgage on 10 Bronx buildings to sell them to a responsible landlord, even if it meant losing money. That new landlord, Steven Finkelstein, stood alongside Mayor Bloomberg and City Council Speaker Christine Quinn Tuesday at one of the buildings getting repairs - as residents cheered wildly.
  • "In six to eight weeks, we will have 80% of the violations corrected," said Finkelstein, new windows his crews have already installed clearly visible. "Once I get them up to par, I'm going to be able to provide affordable housing to people and, you know, keep things going in a very positive manner."
  • Finkelstein's firm paid $27.75 million for the buildings and expects to spend another $7 million to fix 548 apartments. The buildings seem to have been falling apart after California-based Milbank Real Estate bought them in 2007 at the height of the housing bubble, then lost them when the market crashed.
  • Tenants' lives have been hell since LNR Partners of Florida, which ended up with the mortgage, stopped taking care of the properties. The city has written more than 4,000 housing code violations as more than 1,000 people suffered through leaky roofs, backed-up sewers, winters without heat or hot water and prostitutes and drug dealers roaming their halls.
  • "It was a state of hopelessness," said Malikah Rasheed, president of the tenants association at one of the rotting buildings. "We had mushrooms growing in people's apartments. That's how bad it was."
  • City officials hope to bring the new aggressiveness to thousands more apartments endangered by landlords caught up in the housing crunch - and the banks that hold the mortgages.
  • "If you are a bank who held a mortgage and the building is in foreclosure, wake up - you own the building now," Quinn said. "You will be held accountable. That is the message today."

Source: City pressures bank holding mortgage on Bronx buildings to sell to responsible landlord.

See also, The Wall Street Journal: NYC: Deal will fix buildings ailing in foreclosure (More than 1,000 tenants who lived in declining conditions as their buildings fell victim to the foreclosure crisis now have a new landlord who is promising to make millions of dollars in repairs, city officials announced Tuesday).

Pressure On Sour-Loan-Holding Lenders To Cough Up Repair Cash Continues As Code Violations In Multi-Unit Apartment Buildings In Foreclosure Stack Up

In New York City, The Wall Street Journal reports:
  • Housing advocacy groups and the Bloomberg administration are asking bank regulators for help in fixing up deteriorating apartment buildings. Advocates say that hundreds of buildings in New York City are falling into disrepair because their owners took on too much debt to buy them in the boom years leading up to the recession.
  • With many of these properties now in foreclosure proceedings and building-code violations stacking up, banks and other debtholders will help decide their future.
  • Housing advocates, who used to target landlords and opportunistic buyers to fix up aging buildings, have been pressuring lenders in recent months to sell troubled mortgages at discounts so the new owners will be able to afford repairs. They've also been pressuring lenders to fix up properties themselves.

For more, see Tenants Turn to Lenders to Repair Buildings.

Water Shutoffs Major Problem For Miami Renters w/ Landlords In F'closure; County To Vote On Rule Change Allowing Tenants' Payments To Restore Service

In Miami, Florida, The Miami Herald reports:
  • Whenever Michel Joseph wants to shower, cook or use the bathroom, he has to leave his Little Haiti apartment and drop in on a neighbor who has running water. Water has not run in Joseph’s derelict apartment since his landlord abandoned the four-unit building to foreclosure, and skipped town in November.
  • The landlord’s absence led to a water shutoff, and for the past four months, Joseph has not been able to turn it back on because of a long-standing rule at the Miami-Dade Water & Sewer Department.
  • That rule — which restricts renters from re-opening a closed account — has come under increased scrutiny as more landlords have fallen prey to the foreclosure crisis, some leaving tenants without basic utilities.(1)
  • The tenants have become the hidden victims of the foreclosure crisis,” said Purvi Shah, a Florida Legal Services(2) attorney who defends tenants of foreclosed properties. “There are hundreds of tenants in Miami-Dade County living in really serious conditions.”


  • For Shah’s team at Florida Legal Services, getting to this point has been a long, difficult battle. Her team defends tenants going through foreclosure, and has litigated issues like water and electricity shutoffs, illegal evictions, tenant intimidation and landlord abandonment. Of the various issues that tenants face during foreclosure, water shutoff has been the most problematic, Shah said.


  • Water service was discontinued at Hilda Bustos’ North Miami-Dade rental last year before Legal Aid lawyers filed suit in order to force the landlord to pay the bill. However, after the property went into foreclosure, the bank repossessed it and shut off the water, sparking another lawsuit from Legal Aid. The water was eventually turned back on, but tenant advocates do not have the resources to litigate against every landlord that abandons a property, Shah said.
  • In the past three years, more than 400 multi-family properties have had water service discontinued because a landlord defaulted on payments, county statistics show. Most of these properties have less than 15 units.

For the story, see Collateral damage: Tenants of foreclosed properties (Tenants of properties in foreclosure have to deal with water shutoffs, landlord disappearances and sudden evictions, all side effects of South Florida’s mortgage crisis).

(1) According to the story, the Miami-Dade County Infrastructure and Land Use Committee voted to create a bridge account program that would allow tenants to open a temporary Water & Sewer account earlier this month. The full county commission is set to vote on the bridge account next month. Tenants in the property would have to pay a deposit equal to 2.5 times the average water bill to set up the account and can only keep it open for six months. Broward County does not have a tenant payment program.

(2) Florida Legal Services (FLS) is a nonprofit organization founded in 1973 to provide civil legal assistance to indigent persons who would not otherwise have the means to obtain a lawyer. A statewide support center, FLS fulfills its mission primarily by working with local legal aid and legal service programs to improve their ability to provide legal assistance to those in need in their communities.

Tenant Suffers Service Shutoff As Landlord In F'closure Pockets Rent, Stiffs City On Water Bill; Lack Of Running H2O May Lead To Health Dept. Boot

In West Jordan, Utah, the Deseret News reports:
  • If you rent your home and your landlord stops paying the mortgage and the water bill, you just might get a rude surprise, rather than a fair warning. That's the predicament facing renter Annette Bell. "With no funds available, what do I do?" she said.
  • The West Jordan woman is discovering the mortgage crisis not only affects homeowners, it also creates crises for renters who may be victims of the cascading financial problems of their landlords.
  • She discovered her landlord is headed toward foreclosure. Her water was shut off two weeks ago, and she's scrambling to figure out her rights. "I'm not the homeowner, and the water has already been shut off," she said Friday. "So, they won't make payment arrangements with me."
  • A neighbor lets Annette Bell fill water containers so she can manually flush toilets and wash. "As far as moving, that's not an option right now because I don't have the funds to do so," she said.


  • When the city shut off the water early this month, she found out that her landlord, who lives out of state, had not paid the water bill in nearly a year. [...] West Jordan officials said they only contract with the owners, not renters, on residential water bills.


  • The health department could also force Bell out of the house any day, because it has no running water, and the department considers that an unsanitary, unlivable situation.

For the story, see West Jordan renter without water and options after landlord stopped paying bill.

Cops: Fla. Man Hijacked Possession Of F'closed Home & Used It As Rooming House; Pocketed Rent From At Least 5 People, Stole Water, Electrical Service

In Palm Springs, Florida, The Palm Beach Post reports:
  • A 47-year-old Air Force veteran faced a judge [...], after being arrested for allegedly stealing utilities and for "acting as the proprietor" of a foreclosed home in the Village of Palm Springs.
  • Glenn Garlington Dewey, whose last known address was in Palm Springs, was taken into custody after a Palm Springs Public Safety investigator determined Dewey had been collecting $600 in rent from at least five people, who were living in the spare rooms of 2903 Appalachee Road, according to the arrest report.
  • That house, however, was determined to have been foreclosed on in 2010. The investigator also discovered that the last owner of the house, who now lives in Texas, was Cobb Scott - not Dewey, the report stated.
  • The investigator noted in the report that Dewey had also replaced the house's water and electrical meters with that of a neighboring home in foreclosure.

For the story, see Palm Springs man charged with bilking renters with foreclosed home.

Early Morning Bronx Fire In Illegally Converted Rooming House Leaves 3 Dead, 8 Injured; Firetrap Lingered In Foreclosure Since 2008

In The Bronx, New York, the Daily News reports:
  • A fast-moving fire ripped through an apartment in the Bronx on Monday, killing a mother, father and their 12-year-old son who neighbors say were squatting in the building. While the cause of the blaze was under investigation, residents and city records paint a disturbing picture of conditions that may have contributed to three deaths and eight injuries.

  • Residents said the floors of the three-story building had been illegally carved into single-room apartments. Con Ed shut the power off on April 14, prompting some residents to stretch extension cords from another power source.

  • Buildings Department records confirm numerous complaints dating to 2009 about jury-rigged electrical wiring, illegal subdivisions and a lack of secondary exits from apartments at the Prospect Ave. building. The records show inspectors tried to gain access to the building many times but were unable to get inside.

  • About 3:30 a.m. Monday, the building was a virtual firetrap. "It's all rooms," said Eduardo Sanchez, 25, whose second-story apartment was destroyed. "There's like four rooms to a floor - all separate doors."

  • A police source identified the victims as construction worker Juan Lopez, 36; his wife, Christina, 43, and their son Christian Garcia. The parents had two other children who survived the fire after their uncles, who live in the building, pulled them to safety. One of the uncles tried to run back into the building but was repelled by the flames. He then ran to the roof of a neighboring building and tried calling out to his trapped brother but got no response. "He never answered; he never came out," said witness Delsa Martinez. "It happened so fast. They were good people. I can't believe they died in seconds like that."

  • Neighbors said the family moved into the apartment just over a year ago. Some described the family as squatters who shouldn't have been in the building.

  • The two-story blaze quickly spread from the second floor to the third, where the family lived. It took more than 100 firefighters about an hour to stop the flames.

  • Property records show the Belmont building had slipped into foreclosure in [2008] and that ownership had passed through several banks since then. Neighbors said squatters soon began taking over.

  • "It's been like that for a year. The place went into foreclosure, and people kept going in there," said neighbor Mike Lopez. "There's been 10 different families that moved in and out of there, easily."

  • The last owner of record, Domingo Cedano - who runs a used-car dealership on Park Ave. in the Bronx - said he had spoken to fire officials, but he insisted he had nothing to do with the building. "I feel bad, but I am not the owner anymore," he said. "I don't want to give any information because the building is under investigation."
Source: Early morning Bronx fire leaves 3 dead, including child; Building had history of complaints. subdivided
See also, The New York Times: Bronx House Fire Kills Boy, 12, and His Parents:
  • Gayla Marsh, 58, a nurse who owns the home next door, said squatters had moved in and even started charging others rent. [...] Neighbors said they had seen residents use a generator and hastily rigged-up wiring to power the building.
For follow-up stories, see:

Friday, April 29, 2011

Appeals Court Kiboshes Fla. AG's Civil Probe Into F'closure Mill Over Deceptive Trade Practices; Says Criminal Investigation May Have Been Appropriate

The Palm Beach Post reports:
  • Florida's attorney general has no authority to investigate a Boca Raton-based foreclosure law firm under a civil unfair trade practices statute, an appeals court ruled Wednesday.(1) In siding with the Shapiro & Fishman law firm, the 4th District Court of Appeal likely ended the state's pursuit of subpoenas against other so-called "foreclosure mills," including the Law Offices of David J. Stern in Plantation.
  • Judge Spencer D. Levine wrote in Wednesday's ruling that the state's subpoena was not connected to "trade or commerce," a requirement when using Florida's Deceptive and Unfair Trade Practices Act to investigate. Spencer wrote that the attorney general could have proceeded with "a criminal investigative subpoena if other relevant criteria were satisfied."

For more, see Appeals court rules for 'foreclosure mill' firm.

(1) State of Florida, Office of the Attorney General v. Shapiro & Fishman, LLP, No. 4D10-4526 (4th DCA, April 27, 2011).

Recognizing that the court's ruling may not appear to yield a fair, reasonable result, Judge Levine implied that the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), as written, may have left the court's hands tied, giving it no choice but to rule in the way it did. Writing for the 3-judge appellate panel, Judge Levine concluded the ruling with this observation:

  • We are compelled to require that the subpoena issued pursuant to a specific statute be connected to that particular statute. As Justice Cardozo once wrote: “We do not pause to consider whether a statute differently conceived and framed would yield results more consonant with fairness and reason. We take the statute as we find it.” Anderson v. Wilson, 289 U.S. 20, 27 (1933). Similarly, we take FDUTPA as we find it, and we affirm the trial court’s order to quash the subpoena.

Orlando-Area Court Clerk Begins Crackdown On F'closure Auction Buyer Doc Stamp Overpayment Scam Designed To Artificially Inflate Recorded Sale Prices

In Orlando, Florida, the Orlando Sentinel reports:
  • The Orange County Clerk of Courts office took a definitive step Tuesday in preventing investors buying up foreclosure properties from overpaying documentary stamp taxes on their new properties and artificially inflating the sale prices of the real estate.
  • The inflation of foreclosure auction purchase prices appeared to be a common practice among a small group of investors. But the short-term fix seems simple enough: Clerk of Courts Lydia Gardner's office started writing the winning bid amounts on property title certificates Tuesday.
  • That action came after the Orlando Sentinel identified dozens of cases in which the clerk's office listed one foreclosure sale price while the Orange County Property Appraiser's Office listed a higher price – often tens of thousands of dollars more than the high bidders actually paid.

For more, see Clerk's Office aims to stop bogus foreclosure sale prices.

County Bar Association Scores TRO In Illinois Lawsuit Accusing 'Land Patent' Foreclosure Rescue Peddler Of Practicing Law Without A License

In Kane County, Illinois, the Daily Herald reports:
  • The Kane County Bar Association has succeeded in getting a temporary restraining order against a Carpentersville man who the bar association has accused of practicing law without a license. Judge Robert Mueller issued the order against Robert Sperlazzo in response to a lawsuit filed by the bar association.
  • Sperlazzo is accused of acting as an attorney last December while advising two men going through foreclosures while they were at the Recorder’s Office.
  • According to the bar association’s complaint, Sperlazzo was advising two men on Dec. 1 about a “land patent processon how to keep their property even if they were in foreclosure.
  • The complaint states that Sperlazzo took payment in cash and told the men to avoid the court system and not to talk to other attorneys because it would ruin the process. Sperlazzo has not returned phone calls from the Daily Herald. He was due in court last week but was a no-show.

For the story, see Carpentersville man a no-show in attorney case.

Kentucky High Court Nixes Attorney Lawsuits Alleging Defamation, Slander Against Those Making Unfounded Claims About Them In Official Bar Complaints

The Associated Press reports:
  • Statements made in official complaints about attorneys cannot be used as the basis for a civil suit alleging defamation or slander, a split Kentucky Supreme Court ruled Thursday. The court, in a 4-3 vote, ruled that anything said in an official complaint to the bar association is protected speech and the person filing the complaint cannot be sued for the comments.
  • Justice Bill Cunningham, writing for the majority, said protecting such comments creates an atmosphere where people do not have to worry about being sued or attacked for making a complaint.
  • It is the threat and potential for retaliatory litigation — of any kind — that serves as a disincentive to filing a bar complaint,” Cunningham wrote. “We must encourage persons with complaints against attorneys to submit such information to the KBA for proper investigation and examination.”


  • The case arose out of a bar complaint filed by GMAC Mortgage Corp., against attorney Noel Mark Botts. The complaint concerned Botts’ handling of a foreclosure. The opinion doesn’t give details of the complaint. A trial commissioner dismissed the complaint after determining the Kentucky Bar Association failed to prove any misdeeds.
  • Botts sued GMAC and the law firm of Morgan & Pottinger, alleging wrongful use of civil proceedings, defamation and slander, abuse of process, fraud and outrageous conduct.
  • Cunningham noted that at least 28 states have rules banning civil suits based on the contents of a bar association complaint. The concept is to allow bar associations to be “self-regulating” by protecting complaintants from civil liability, Cunningham wrote.
  • A lesser grant of immunity would have a chilling effect on the reporting of attorney misconduct,” Cunningham wrote.
  • The majority sent the case back to Mercer Circuit Court so the judge can determine if any of Botts’ complaints are based on statements made outside the bar complaint process.

For the story, see Lawyers may not sue complaining clients.

For the ruling, see GMAC Mortgage Corporation v. Botts, ___ S.W .3d ___ (Ky. April 21, 2011).

Now-Disbarred Bay State Attorney Charged In Alleged $900K Ripoff Of Elderly, Dead Clients' Cash

From the Office of the Massachusetts Attorney General:
  • A now-disbarred attorney has been indicted in connection with allegedly stealing a total of nearly $900,000 dollars from an estate she represented, a beneficiary of that estate whose funds were in a trust she managed, and an elderly client, Attorney General Martha Coakley’s Office announced [].
  • Maureen F. Pomeroy, age 44, of Bedford, has been indicted by a Middlesex Grand Jury on the charges of Larceny over $250 from a Person 60 or Older (2 counts), Larceny over $250 and Embezzlement by Fiduciary.


  • After receiving a complaint from Pomeroy’s elderly client,(1) the Massachusetts Office of Bar Counsel began an investigation into Pomeroy’s alleged activities. Following Bar Counsel’s investigation, a justice of the Supreme Judicial Court ordered Pomeroy’s temporary suspension from practice in October 2009. Pomeroy later resigned, and was disbarred in February 2010.
  • A Middlesex Grand Jury returned indictments against Pomeroy on March 31, 2011. She will be arraigned in Middlesex Superior Court at a later date.(2)

For the Massachusetts AG press release, see Disbarred Attorney Indicted in Connection with Stealing Nearly $900,000 From Elderly Client, Estate, and Trust.

(1) According to the press release, one of her clients was an 85 year-old man who had retained Pomeroy’s services in order to prepare a will and other estate planning documents for him, and to assist him in obtaining funds from several online bank accounts a relative had set up for him. Authorities allege that Pomeroy stole over $810,000 from this client by securing these funds, but concealing from the client the amount she had received from the accounts, and keeping a portion for herself instead of paying all of the funds to the client.

It is also alleged that she used some of the elderly client’s funds to repay two clients from whom she had earlier misappropriated money. During the investigation, authorities allegedly discovered that Pomeroy had defrauded the estate of a Waltham man and the man’s son.

(2) The Massachusetts Clients' Security Board Of The Supreme Judicial Court was established to manage and distribute the monies in the Fund to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the bar acting as an attorney or a fiduciary.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

More Spotlight For Iowa Couple Who Used State Homestead Loophole To Scored 'Free House'

In Des Moines, Iowa, ABC News reports:
  • The Iowa Attorney General's office is reviewing the case of a couple who paid virtually nothing for their home because of a century-old Iowa law.
  • The $320,000 mortgage of Matthew and Jamie Danielson was voided on their home in a suburb of Des Moines because of the "Spousal Homestead" statute, as first reported by the Des Moines Register. That statute, which dates back to the 1880s, requires that both spouses sign a mortgage agreement.(1)

For more, see Iowa Attorney General Reviewing Case of Couple who Got Free Home.

(1) See also:

Thursday, April 28, 2011

IRS Jumps Into F'closure Fraud Fray; Paperwork Transfer Screw-Ups May Doom Favorable Tax Treatment For Securitized Mortgage Interest Trusts

Reuters reports:
  • The Internal Revenue Service has launched a review of the tax-exempt status of a widely-held form of mortgage-backed securities called REMICs. The IRS confirmed to Reuters that the review comes in response to mounting evidence that banks violated tax requirements by mishandling the transfer of mortgages to REMICs, short for Real Estate Mortgage Conduits.
  • Should the IRS find reason to take tough action, the financial impact could be enormous. REMIC investments are held by pension funds, in individual retirement plans such as 401(k)s and by state and local government entities. As of the end of 2010, investments in REMICs totaled more than $3 trillion, according to data supplied by the Securities Industry and Financial Markets Association.


  • The review, however, is a sign that the widespread bank misdeeds in home foreclosure cases are spilling over to threaten the interests of investors in mortgage-backed securities. The banks originated the mortgages and packaged them into securities.
  • These banks' transgressions, confirmed in court decisions and through recent action by federal bank regulators, include the failure to formally transfer ownership of mortgages to the trusts that invested in them and the subsequent creation of fraudulent mortgage assignments and other false documents.


  • For the IRS, one of the main issues will be whether REMICs actually owned the mortgages from which they received income. If not, for tax purposes they wouldn't qualify as REMICs, and the income would become taxable.

For more, see IRS weighs tax penalties on mortgage securities.

BofA Succeeding In 'Divde & Conquer' Approach in Dealing With 50 State AG Foreclosure Fraud Probe?

Bloomberg reports:
  • Bank of America Corp. (BAC) was accused by a top official at the Iowa attorney general’s office of engaging in a divide-and-conquer strategy by undermining support for the settlement of a nationwide probe into foreclosure practices, a person familiar with the matter said.
  • The bank tried to get attorneys general to break away from those supporting the proposed accord, Iowa Assistant Attorney General Patrick Madigan said during a recent conference call, according to the person. A second person familiar with the settlement talks said the bank sought to sow dissent among the states, eight of which have publicly criticized the proposal’s terms.

For more, see Bank of America Said to Target Individual States to Block Foreclosure Deal.

Baltimore Finally Gets Green Light To Continue Against Alleged "Ghetto Loans" Peddler In Reverse Redlining Suit; Ruling May Help Similar Memphis Case

In Memphis, Tennessee, The Memphis Daily News reports:
  • The city of Baltimore’s mortgage discrimination lawsuit it filed three years ago against San Francisco-based Wells Fargo can go forward now that it has survived Wells’ motion to dismiss the case. The federal judge presiding over the case published an opinion Friday that gave the green light to Baltimore’s fourth iteration of its suit.(1)
  • The suit claims Wells pushed black borrowers into high-cost subprime loans and targeted homeowners for burdensome refinance and home equity loans.
  • The same day that opinion was published, meanwhile, lawyers representing Memphis and Shelby County government filed a copy of it in federal court in Memphis to make U.S. District Judge S. Thomas Anderson aware of the news.
  • They believe the Baltimore decision bolsters the same thing they’re trying to prove here. On substance, there’s barely any daylight between the two lawsuits. Both allege similar claims against Wells and frame their arguments in nearly identical ways.(2)
  • The lawsuit on behalf of Memphis and Shelby County governments even relies on lawyers from the same Washington-based firm of Relman, Dane & Colfax PLLC.

For more, see Baltimore Wells Fargo Ruling Helps Local Cause.

(1) Baltimore's earlier complaints included testimony from two former high-ranking Wells Fargo employees stating that Wells Fargo intentionally made bad loans to African-Americans. The employees, who worked out of Virginia and Maryland but knowledgeable about the company's national lending practices, according to the complaints, said Wells Fargo marketed subprime loans to predominantly African-American ZIP codes and churches, used software to "translate" marketing materials into African-American vernacular, and that company officials referred to the loans in minority communities as "ghetto loans" and to borrowers as "mud people." See The Daily Record: Ex-workers allege race-based loan approach at Wells Fargo.

(2) Go here to read more about the Baltimore case, and here to read more about the Memphis case, and here for earlier posts on the "ghetto loans" allegations made against Wells Fargo.

Bank Apologizes Profusely After Changing Locks On Foreclosed Home In Violation Of Court Order

In Milwaukee, Wisconsin, the Milwaukee Journal Sentinel reports:
  • Keon Williams' fight to keep his house has taken another strange twist: The Milwaukee man arrived home Monday night to find that the locks had been changed on one of his doors on orders from Harris Bank, even though a court order says he can stay in the house for now.
  • "They admitted they had sent somebody to change the locks," Williams' lawyer, Geoffrey Gnadt, said after an emergency court hearing Tuesday. "They did apologize profusely - but there are costs."


  • Completion of [the foreclosure] sale was stayed by a Milwaukee County Circuit Court judge until May 12 after Williams explained the situation in court. Yet when he got home early Monday evening, he was stunned to find new locks and a note from a property management company on the side door of the house. The front door was inexplicably left unlocked.


  • Harris Bank's lawyer told Milwaukee County Circuit Judge William Brash at Tuesday's hearing that the locks had been changed in error, Gnadt said. Harris' lawyer apologized for the snafu and agreed to cover the cost for Williams to have a new lock installed. The bank will also pay Williams' attorney fees and any other costs incurred because of the mistake, according to Gnadt and court records.

For the story, see Harris Bank mistake results in replaced locks (Man fighting to keep house after Central States' collapse left him with 2 mortgages).

Recent 60 Minutes' Story Having An Impact On Spreading Word On Foreclosure Fraud

In Charleston, West Virginia, a recent op-ed piece in The Charleston Gazette that, in urging homeowners facing foreclosure throughout West Virginia to examine their court papers carefully, makes reference to the recent 60 Minutes' story describing the forgeries and other fraudulent conduct in the robosigning scandal engaged in by the mortgage industry and its confederates when illegally booting people out of their homes and onto the streets.

From the column:
  • Amid the orgy of home foreclosures, banks made an embarrassing discovery: Bundlers who packaged the derivatives often failed to prepare records switching the mortgages into the worthless bundles. "60 Minutes" explained:

    "Wall Street cut corners when it created those mortgage-backed investments that triggered the financial collapse. Now that banks want to evict people, they're unwinding these exotic investments to find that, often, the legal documents behind the mortgages aren't there. Caught in a jam of their own making, some companies appear to be resorting to forgery and phony paperwork to throw people -- down on their luck -- out of their homes."
  • Various foreclosures stalled when banks couldn't find records showing that they actually owned the mortgages. However, after months of delay, the banks miraculously "found" the missing documents.
  • But they made a fatal mistake when they tried to seize the home of Lynn Szymoniak, a lawyer who specializes in forgeries.

For the rest of the editorial, see Forgeries by banks are outrageous.

Fed. Court Grants TRO After Homeowner Alleges Violation Of Loan Mod Agreement; Goal Is To Slam Brakes On All Nonjudicial Hawaiian F'closures: Attorney

In Maui, Hawaii, The Maui News reports:
  • Amid the many foreclosure actions and auctions on Maui, one has come to a halt, after a federal judge in Honolulu granted a temporary restraining order. The order itself does not address the borrower's big argument - which is that the bank pursuing her cannot prove it has any real ownership interest in her Kihei home(1) - but the restraining order was temporary. Since it expired a week ago, the lenders have not yet made any effort to resume the process of taking Watoshina Lynn Compton's house.
  • Compton's lawyer, James Fosbinder, said Thursday that the significance of the case is not about Compton herself, but that "there is a very similar fact pattern" with the experience of many other borrowers in trouble. Fosbinder said he has about 300 clients with mortgage troubles, "and about 70 percent" are in the same boat as Compton.


  • On April 4, U.S. District Judge Susan Oki Mollway granted a temporary injunction against U.S. Bank, the supposed trustee of her mortgage after it was engrossed in a mortgage-backed security; and BAC Home Loans Servicing. [...] Mollway found that a scheduled sale of Compton's property would breach the [loan] modification agreement "and cause Compton irreparable harm."
  • "The big question," said Fosbinder, is whether a similar strategy would work in the hundreds of other cases he is prepared to file.
  • He said he believes that once the court hears the evidence, "it would support stopping all nonjudicial foreclosures in Hawaii, and that is our ultimate goal."

For more, see Judge halts foreclosure; others vulnerable? (Loss of woman’s home prevented — for now — in modification struggle).

(1) The main gist of the homeowner's lawsuit yet to be addressed by the court, according to the story, is that the original loan, made by Countrywide, was purportedly transferred into a trust for the purpose of bundling it with other mortgage loans and selling bonds based on those assets. U.S. Bank is supposed to be the receiving bank for the asset. Fosbinder, through discovery, learned that the mortgage documents were never physically transferred, as he believes the law requires, but - as related by a Countrywide representative - were kept with the servicer: Countrywide/BofA, not U.S. Bank, the story states. Furthermore, he said, Hawaii trust law requires that assets in a trust be put there before a closing date, which, he alleges, was missed by years. Therefore, he said, there is a question of whether U.S. Bank has the legal authority to foreclose.

A third argument implicates the involvement of Mortgage Electronic Registration System, the alleged racket by which the big banks assign mortgages without recording them at the Bureau of Conveyances in the usual way.

Guardian Ad Litem Appointments In Foreclosure Actions An Outdated System Ripe For Conflicts Of Interests, Overburden Lawyers

In Tampa, Florida, The Tampa Tribune reports:
  • When a lender fails to find a homeowner to notify them of a foreclosure lawsuit, a judge often appoints a guardian ad litem. That attorney is supposed to represent the property owner's interests.
  • But guess who typically picks the guardian? The lender's attorney. Foreclosure is the only court proceeding in Florida where the plaintiff routinely chooses the attorney ad litem to represent the defendant, according to court records and interviews. Foreclosure firms typically recommend a small pool of lawyers, and the foreclosing lender pays the defendant's attorney bill.(1)


  • Law experts say it's an out-dated system that has become problematic. Now that courts are flooded with foreclosures, there is more opportunity for conflict of interest and overburdened lawyers, said Henry P. Trawick Jr., a Sarasota lawyer and author of Florida's Practice and Procedure, a textbook used by lawyers.
  • "The ad litem is supposed to defend the person he's appointed to represent," Trawick said. "He's supposed to work as hard as he would if that person was paying for his services, not the bank."


  • Michael Olenick, of LegalPrise, which does legal research for lawyers, searched court records across the state and said he found 10 high-volume ad litem attorneys in foreclosure cases. "Many lawyers do these cases from time to time, but some do quite a bit of work for the same firms," he said.
  • Those lawyers, Olenick said, carry a load of more than 100 cases at a time. And just as large foreclosure firms handle cases around the state, so do ad litem attorneys, Olenick said. "Foreclosure defense is litigation, and you may actually have to get in the courtroom," Olenick said. "Why would Palm Beach County appoint a Hillsborough attorney as guardian ad litem?"
  • Trawick, the author of the law reference book, said that doesn't make sense. "Judges should appoint someone they know and trust," he said. "I think they're going to have to start having a list of the persons they know who will do that sort of thing."

For the story, see In foreclosure? If absent, the bank may choose your lawyer.

(1) According to the story, the ad litem procedure came to light recently after the Tribune reported about United States Coast Guardsman Keith Johnson (see Military Man Gets 11th Hour Stay Of Foreclosure Sale As Court-Appointed Attorney Gets Slammed For Failure To Notify Client Of Legal Action). While he was deployed overseas, a court-appointed attorney represented him in a foreclosure lawsuit he says he knew nothing about. That guardian ad litem failed to notify him of the suit, waived his rights to fight the case and allowed the foreclosure to move forward. Johnson returned to find out all of this the day before his Clearwater house was to be auctioned. When it came time to appoint the ad litem for Johnson, the lender's attorney suggested the same Tampa lawyer the bank often uses in such cases, and the judge agreed.

Wednesday, April 27, 2011

Ohio Couple Clips Loan Servicer For Actual, Punitive Damages In Suit Alleging Unnecessary Real Estate Tax Escrow 'Squeeze' Pushed Them Into F'closure

In Warren, Ohio, the Tribune Chronicle reports:
  • In the midst of a soaring caseload that amounts to about 1,500 foreclosure cases a year in Trumbull County alone, it was the little guy who scored a recent victory over a mortgage holder, who even got hit with punitive damages on a counter claim.


  • Trumbull County Magistrate Jason Earnhart found in favor of Eric and Tami Freeman of Fowler Street, Cortland, against Equity One Inc., awarding the local couple $2,000 in compensatory damages, $500 for nominal damages, $2,500 for attorney fees and $10,000 in punitive damages.


  • According to his decision based on facts that came out in a trial last month, the Freemans borrowed $57,600 from Equity One in May of 1999. The Freemans paid monthly installments faithfully until July 2007, when their payment was returned.
  • Equity One demanded $724 instead of $596, which was the normal payment. Since 2003, the couple had been paying their real estate tax on a tax installment plan with the Trumbull County treasurer because they had fallen behind, but they also informed Equity One that the payment plan was set up. By July of 2007, the Freemans were nearly done with the repayment installment plan, but Equity One continued to insist on the higher payments.
  • Payments sent by the Freemans were returned. ''Instead of working with the Freemans, Equity One initiated the suit in February of 2008,'' Earnhart wrote. The Freemans filed a counter claim.

For more, see Owner wins mortgage case.

Loan Servicer: Return Of Home Title May Be In The Cards For Queens Widow Victimized By Scammers Using Forged Docs To Steal Home Out From Under Her

In Jamaica, Queens, the New York Post reports:
  • An elderly Queens widow whose house was stolen by scam artists may have finally won her three-year David-and-Goliath struggle against the bank that tried to seize her home. Dorothy Thomas' nightmare began in November 2007, when she went to pay her annual property taxes on the Jamaica home she's lived in since 1979.
  • She was stunned to learn that her home had been "sold" to a straw buyer by a man impersonating her husband, Eugene, who died in 1986 at age 55. The "buyer" was a mystery man who had pilfered the identity of another innocent woman -- an émigré from Togo who was living in Irvington, NJ. The man, posing as the New Jersey woman, hoodwinked Wells Fargo into giving him a $533,850 mortgage in her name -- and promptly skipped town.
  • A probe by the Queens DA's Office found that Thomas was the victim of a scam, and eight people -- including two crooked lawyers and a CPA -- pleaded guilty in the case.
  • But that still didn't help. Wells Fargo filed a foreclosure order on Thomas' home. So Thomas went to court. But in August, Queens Civil Court Judge Allan Weiss affirmed Wells Fargo's right to try to seize the property. The judge ruled that even though Thomas' long-dead husband "clearly" couldn't have sold the home, someone obviously did.
  • But after multiple inquiries, Wells Fargo spokesman Jim Hynes told The Post, "We have decided not to pursue any legal action against . . . Ms. Thomas despite the rulings of the lower court. We are moving forward with dismissal of the foreclosure action."
  • Thomas' lawyer, Naved Amed, said nobody told that to him, but he hopes it's true. "We've been asking them to stop their action for three years and their answer has always been 'no,'" he said.

For the story, see Widow's ID-theft nightmare nears end.

ACLU Attorneys Issue Reminder On Lee County Judges' Blatant Disregard For Court Rules In Implementing 'Rocket Docket'

In Lee County, Florida, a recent op-ed piece in the News-Press by Howard Simon and Larry Schwartztol, respectively, are the Executive Director of the ACLU of Florida and a staff attorney with the ACLU Racial Justice Program in New York City serves as a reminder of the insidious nature of "rocket dockets' used by local judges in their efforts to improperly bulldoze foreclosure cases out of the court system. From the column:
  • The rules that ordinarily govern judicial procedures are designed to stop the sloppiness and fraud at the courthouse door.
  • But many of those rules are being ignored in Lee County foreclosure cases. The court is pushing foreclosure cases forward without giving homeowners enough time to obtain and examine the banks' evidence.
  • It issues rulings in favor of the banks without requiring them to attach the documents that supposedly support their claims. Perhaps most disturbingly, judges have stated from the bench that some of the basic ground rules don't apply to foreclosure cases.
  • Why short-circuit the normal rules? Because the court is racing to clear foreclosure cases from the docket at a startlingly high speed.
  • In an email obtained by the ACLU a court administrator stated the court's explicit monthly numerical goal: the number of cases filed each month "plus 1,040 additional cases."
  • This means judges hear a couple hundred cases per day, usually devoting only a few minutes to each. But accelerating the judicial process comes at a price: accuracy and fairness.
  • That's why the ACLU has filed a petition on [homeowner Georgi] Merrigan's behalf in the appellate court that oversees the Lee County courts. The ACLU's petition seeks an order that would make sure that Merrigan's case proceeds under the normal rules.(1).
  • These rules aren't mere formalities. They ensure that both sides have the opportunity to make their best arguments so that the court can reach the right decision.
  • Anything less violates the constitutional right to due process. Those rights represent a fundamental American idea: the government can't take away your most cherished property - your home - without giving you a fair hearing.
  • There's no question that foreclosures are devastating Lee County. But no one benefits if people like Merrigan are forced out of their homes based on shoddy foreclosure practices and a failure by the courts to guard against them. The court system can do better, for Merrigan and for the people of Lee County.

For the op-ed piece, see Howard Simon and Larry Schwartztol: Court system denies homeowners fair chance.

For an opposing view from Lee County, Florida Clerk of Court Charlie Green, see Judges act lawfully, professionally, but not hastily, in foreclosure cases.

(1) For more from the American Civil Liberties Union on the filing of their recent petition with a Florida appeals court, see:

MI County Officials Gain Attention From FBI, State AG, Other Law Enforcement Agencies After 60 Minutes Story On Forged, Robosigned F'closure Documents

The Michigan Messenger reports:
  • Curtis Hertel Jr., Register of Deeds for Ingham County, says that a discovery he made involving alleged fraudulent mortgage documents is now being investigated by both the Ingham County Sheriff’s Department and the FBI.


  • As Register of Deeds, Hertel is responsible for overseeing all the documentation of property sales in the county, including mortgage assignments. Mortgage assignments are documents that transfer ownership of a mortgage from one lending company to another. Hertel says he was tipped off to the alleged fraud when he saw a report on CBS’ 60 Minutes.


  • Hertel tells Michigan Messenger that he has spoken with registers of deeds from at least half of the state’s 83 counties. Each register told Hertel they found allegedly fraudulent documents. In Hertel’s case, he has already identified 60 such cases in Ingham county and he has barely begun to dig through the thousands of documents being held in his office.
  • In addition to the investigations by the Ingham County Sheriff’s Department and the FBI, the story has also gotten the attention of Michigan State Sen. Steve Bieda. He serves on the Senate Judiciary Committee. “I will be requesting that the Senate Judiciary Committee conduct an investigation on this,” Bieda tells Michigan Messenger.

For the story, see FBI investigating possible mortgage fraud in Ingham County.

In related stories, see:

Benzinga: Michigan AG Schuette Probing Questionable Mortgage Documents:

  • Michigan Attorney General Bill Schuette announced [] that he is working with Oakland County Register of Deeds Bill Bullard, and other local and federal authorities, to look into questionable mortgage documentation filed with Michigan's Register of Deeds offices during the current foreclosure crisis.

Housing Wire: Michigan AG to probe DocX signatures.

Long Island Lawmaker To Restart Battle Against MERS Over Fee-Dodging Related To Unrecorded Mortgage Assignments

The New York Post reports:
  • The $2 billion battle has begun. When the Suffolk County Legislature meets again next week, the county's share of an estimated $2 billion in fees big banks saved with their electronic record-keeping system -- bypassing paper mortgage records in county clerks' offices -- will top the agenda for legislator Ed Romaine.
  • In his previous job as county clerk, Romaine fought in court against the Mortgage Electronic Recording System, or MERS, for several years in early 2000s and lost. But he’s taking another run at it now as the firm’s shaky legal foundation is cracking and so many ordinary homeowners are suffering from questionable foreclosure actions involving MERS. Created by big banks in the mid-1990s, MERS let them skip the expense of filing paper records. MERS has since filed thousands of foreclosure actions for lenders.
  • "We lost revenues, and they've acted wrongly," said Romaine, who estimates MERS has drained more than $100 million that rightfully belongs to his cash-strapped county. "Filing paper assignments prevented some of the abuses."
  • Romaine's move is part of a growing wave of serious legal challenges to MERS -- moves that ordinary homeowners [...] are praying might help them in loan modification negotations when other options have failed.

For more, see Asking for MERS-y (Homeowners, counties battle bank loan system).

Tuesday, April 26, 2011

Virginia F'closure Defense Advocates Take Issue With Bogus F'closure Docs As Dubious 'App'ts of Substitute Trustee' Begin Popping Up Throughout State

In Richmond, Virginia, Public News Service reports:
  • The tale of bogus Virginia bank documents used to kick people out of their homes after foreclosure reads like a mystery novel, with a very unhappy ending. The document in question in Virginia is called an Appointment of Substitute Trustee.
  • Tom Domonoske with the Virginia-based Legal Aid Justice Center(1) says documents are surfacing that have clearly been "robo-signed" at a document mill that churned out thousands of bogus signatures. These helped "foreclosure mill" attorneys process the paper in assembly-line fashion, without asking a lot of questions.
  • "It means that their home was never foreclosed on, and the person who bought at the foreclosure auction didn't actually buy anything."
  • A video investigation of the document fraud by "60 Minutes" is [available here].


  • In some cases, Domonoske adds, the people signing these documents as "bank vice presidents" were working for a signature mill at $10 an hour, signing hundreds a day.

For more, see How Many VA Foreclosures...are Frauds?

(1) The Legal Aid Justice Center provides legal representation for low-income individuals throughout Virginia. Legal Aid Justice Center's staff of 40 work from offices in Charlottesville, Falls Church, Petersburg and Richmond.

Alleged Robosigner/Process Server Says Signature Was Forged On F'closure Docs, Employer "Screamed" At Her For Slow Service; Outfit Probed By State AG

In West Palm Beach, Florida, The Palm Beach Post reports:
  • West Palm Beach resident Liz Mills learned she was a robo-signer when a friend suggested she search her own name online. On foreclosure blogs and in at least one newspaper article, the 51-year-old process server was singled out for the numerous and varying styles of her signatures on summons paperwork used to prove her efforts in locating home­owners in foreclosure.
  • Now Mills is coming forward in affidavits filed in three foreclosure cases, saying she didn't sign the paperwork and never signed in front of a notary despite notary stamps affixed to the documents.
  • In one case, Mills allegedly signed a return of non-service, meaning the homeowner could not be found, for a foreclosure in Lehigh Acres near Florida's west coast - a town where Mills said she has never been.


  • Service of process is sometimes the first notice a homeowner has that the bank has filed for foreclosure. Sloppy service or "sewer service," as some defense attorneys call bad service of process, can leave a homeowner in the dark and defenseless until after the final judgment and a notice of sale is sent out.


  • With the crush of foreclosures statewide, process service has become big business. Once entrusted only to sheriff's deputies, summonses may now be handled by special process servers certified by the court. The servers often work for larger companies that dole out the legwork. Mills worked for several process service companies, including Miami­-based Gissen & Zawyer Process Service Inc.
  • The Florida Attorney General's Office is investigating the company after allegations of backdating returns of service, improper billing practices and filing questionable affidavits with the courts.
  • Mills said she believes her signatures were forged on documents because she has a short name that's easy to sign.


  • The typical charge for process service is $45, about $10 of which goes to pay Mills, who may have to make several visits to a home. When Gissen & Zawyer didn't think she was working fast enough, she said, she was called to Miami for a conference. "They stood there and screamed at me that I was not serving their work fast enough," said Mills, who worked for the company about 10 months.

For more, see Local 'robo-signer' alleges her signatures were forged.

Rogue Refinancing Lender Leaves Homeowner Facing Foreclosure By Diverting Loan Payoff Proceeds Away From Existing Mortgage Lienholder

In Milwaukee, Wisconsin, the Milwaukee Journal Sentinel reports:
  • Keon Williams is on the verge of being thrown out of his house - a startling turn of events, considering that for nearly three years since refinancing in 2008, he faithfully paid his monthly mortgage and his property taxes.


  • Williams, an ex-Marine and single father of three teenagers, finds himself caught up in the continuing fallout from America's mortgage meltdown. His right to continue living in the home he bought, the home he has been paying for, is in jeopardy in the aftermath of the collapse of Central States Mortgage Co., the now-shuttered firm that was once the largest mortgage broker in the state.
  • The problem: When Williams refinanced with Wauwatosa-based Central States in 2008, cutting his 12.5% interest rate nearly in half, Central States' affiliate, Interim Funding LLC, didn't pay off the original mortgage. [...] Williams - including one that he didn't know still existed. His small home at the corner of 44th and W. Keefe Ave., with a recent assessed value of $117,200, had become collateral for two loans totaling more than $265,000.


  • The closing statement for the refinancing shows that $130,444 of the proceeds were earmarked for paying off the existing loan - but none of the money was paid to Amcore [the existing mortgage lienholder], according to its foreclosure lawsuit. Williams says he didn't receive a dime from the refinancing.


  • Williams' case is not unique. Litigation pending in Milwaukee County Circuit Court details four similar cases involving mortgages written by Amcore with a total value of nearly $500,000. Also, in 2009, Associated Bank persuaded a Milwaukee County judge to freeze $2 million of Central States' assets when the bank charged that Central States borrowed money from Associated to finance 13 mortgage loans, and then sold 12 of those loans to investors - but didn't pay off the original loans after the mortgages were sold.


  • Williams recently filed a claim on the title insurance policy underwritten by Stewart Title Guaranty Co. in Houston, said Geoffrey Gnadt, Williams' lawyer. Gnadt said Flagstar Bank also filed a claim. [...] "This is essentially a business dispute between Central States, Amcore and Flagstar - they're big boys," Gnadt said, contending that the banks, not Williams, should be looking to title insurance for relief. "There are ways for the banks to be made whole, rather than going after the little guy."(1)
  • Central States is in receivership and at the center of a 2-year-old FBI investigation focusing on dealings between it and the credit unions that owned it and Interim Funding.(2)

For more, see Milwaukee homeowner paying on time, yet facing eviction (Refinancing, collapse of Central States leaves him with 2 mortgages).

(1) While this may sound unconventional, this story lends support to the proposition that homeowners should update their existing title insurance policies when refinancing their mortgages. This way, when a refinancing like this takes place, the homeowner need only file a claim with their title insurer over the unpaid existing mortgage and let the underwriter clean up the mess (An owner's title insurance policy purchased when a home is originally purchased only insures against title risks existing as of the date of purchase; in this case, the problems arose in connection with liens that did not exist prior to the original purchase date).

(2) See Subprime mortgage loan canceled (Man says he was duped into buying north side house) for another example of the dubious dealings in which the now-defunct mortgage banker Central States Mortgage Co. had its hands in.

Paralegal Cops 'No Contest' Plea To 21 Charges In Connection With Running Loan Modification Ripoffs, Unlicensed Practice Of Law

In Tulare County, California, The Porterville Recorder reports:
  • Porterville resident Joaquin Uriostegui was one of numerous victims of a local paralegal posing as a foreclosure consultant who promised he would help people save their homes from foreclosure, but instead swindled them of thousands.
  • Uriostegui — a single father of four — sought to modify his mortgage loan for a lower monthly payment, which led him to the offices of Albert Carazolez, owner of Quick Action Paralegal Services in Porterville.
  • Carazolez, 43, pleaded no contest to 21 separate charges pertaining to unlawful activities in conjunction with mortgage loan modification, collecting fees as a foreclosure consultant prior to providing all services and for the unauthorized practice of law.
  • He is out on bail, but as part of the sentence, he has been ordered to pay full restitution in the amount of $19,875 to the Tulare County Probation Department and is facing a sentence of felony probation and one year in county jail. Formal sentencing is scheduled for May 11 in Tulare County Superior Court in Visalia.

For more, see Victim of loan modification fraud speaks out.

Monday, April 25, 2011

Law Firm & Big Retailer A 'Target' Of Civil RICO Class Action Robosigner Suit Alleging Use Of "False Affidavit Factory" In Debt Collection Activities

In Pittsburgh, Pennsylvania, The Associated Press reports:
  • A western Pennsylvania woman filed a federal lawsuit Wednesday against Target Corp. and its law firm over the discount department store chain's debt collection practices, saying false affidavits were used to go after customers who allegedly owed money to a subsidiary bank that issues the store's credit cards.
  • Vicki Higgins' lawsuit seeks class-action status on behalf of thousands of Target customers who have repaid Target National Bank debts, paid legal fees, lost lawsuits or had their credit scores damaged as a result of debt collections using the allegedly false affidavits.


  • Officials with Target National Bank of Sioux Falls, S.D., and the chain's law firm, Patenaude & Felix APC, did not immediately return calls from The Associated Press. The suit also names a Target official identified only as Adam Grim, who signed the debt affidavits, a notary public who attested to the documents, and several "John Doe" defendants — one being an unknown "officer at Target Corporation who authorized the implementation of the false affidavit factory" described in the lawsuit.


  • [T]he affidavit was one of hundreds rubber-stamped by Grim which, the lawsuit contends, is illegal because the affidavits are used to coerce customers, or convince courts to enforce the debt, under the false impression that the financial information contained has been reviewed by the bank.
  • "TNB took the false and misleading affidavits and utilized them to secure judgments against hundreds, and perhaps thousands, of alleged debtors," the lawsuit said,(1) allegedly violating federal racketeering and Pennsylvania's fair credit laws.

For more, see Pa. woman sues over Target debt collection.

(1) Borrowng from the words used by U.S. Bankruptcy Judge Elizabeth W. Magner in a recent robosigner foreclosure case (see In re Wilson, Case 07-11862 (Bankr. E.D. La. April 6, 2011) (p. 21-22, 25), the scenario described here may be one more example of a debt collection sweatshop employing an individual with no training or experience in banking or lending, who can be best described as a document execution clerk, and cloak him with a 'title' in a purposeful attempt to convey an experience level and importance beyond his actual abilities; an individual who slavishly adheres to procedures set by his employer without any understanding of the importance of his duties, and who has not been provided by his employer with the tools to question the information to which he attests. The individual is cloaked with a title that implied knowledge and gravity by an employer that wanted to perpetrate the illusion that he was a person with personal and detailed knowledge of the debts to which the affidavits related.

MI Appeals Court: MERS' Screw-Up Makes F'closure Proceedings Void Ab Initio (Does State Now Have 'Ibanez' Problem w/ Respect To Future Titleholders?)

WOOD-TV Channel 8 reports:
  • The Michigan Court of Appeals reversed the foreclosure of a house on Canal in Wyoming and one in Jackson County because the wrong party did the foreclosure. The Mortgage Electronic Registration System (MERS) is not a mortgage lender. Rather, it is a big computer system created by the lending industry to allow lenders to quickly trade mortgages from one to another to another. MERS acts as their agent on all the mortgages they register in their system -- around 60 million mortgages -- and even forecloses on them.
  • But the Michigan Court of Appeals ruled MERS can't foreclose on houses in this state. "The (Michigan) legislature says you have to have an interest in the mortgage, and MERS didn't have an interest in the mortgage," said Hastings attorney Dave Tripp, who filed the appeal. "The Court of Appeals said, 'if you don't have an interest in the mortgage, you can't foreclose.'"(1)

For more, see MI appeals court reverses foreclosures (Judge: MERS not mortgage lender, can't foreclose).

For the majority opinion, see Residential Funding Co, LLC v Saurman, ___ Mich App ___, ___ NW2d ___ (April 21, 2011) (for publication)

Go here for the dissenting opinion.

(1) In actuality, MERS held the mortgage in this case, but did not establish that it owned an interest in the promissory note. In addressing this point, the court stated (bold text is my emphasis):

  • In these cases, a promissory note was exchanged for loans of $229,950 and $207,575, respectively. Thus, reasonably construing the statute according to its common legal meaning, ISB Sales Co, 258 Mich App at 526-527, the defendants’ indebtedness is solely based upon the notes because defendants owed monies pursuant to the terms of the notes.

    Consequently, in order for a party to own an interest in the indebtedness, it must have a legal share, title, or right in the note. Plaintiffs’ suggestion that an “interest in the mortgage” is sufficient under MCL 600.3204(d)(1) is without merit.

    This is necessarily so, as the indebtedness, i.e., the note, and the mortgage are two different legal transactions providing two different sets of rights, even though they are typically employed together.

    A “mortgage” is “[a] conveyance of title to property that is given as security for the payment of a debt or the performance of a duty and that will become void upon payment or performance according to the stipulated terms.” The mortgagee has an interest in the property. See Citizens Mtg Corp v Mich Basic Prop Ins Assoc, 111 Mich App 393, 397; 314 NW2d 635 (1981) (referencing the “mortgagee’s interests in the property”). The mortgagor covenants, pursuant to the mortgage, that if the money borrowed under the note is not repaid, the mortgagee will retain an interest in the property.

    Thus, unlike a note, which evidences a debt and represents the obligation to repay, a mortgage represents an interest in real property contingent on the failure of the borrower to repay the lender.

    The indebtedness, i.e., the note, and the mortgage are two different things. Applying these considerations to the present case, it becomes obvious that MERS did not have the authority to foreclose by advertisement on defendants’ properties.

    Pursuant to the mortgages, defendants were the mortgagors and MERS was the mortgagee. However, it was the plaintiff lenders that lent defendants money pursuant to the terms of the notes. MERS, as mortgagee, only held an interest in the property as security for the note, not an interest in the note itself. MERS could not attempt to enforce the notes nor could it obtain any payment on the loans on its own behalf or on behalf of the lender.

    Moreover, the mortgage specifically clarified that, although MERS was the mortgagee, MERS held “only legal title to the interest granted” by defendants in the mortgage. Consequently, the interest in the mortgage represented, at most, an interest in defendants’ properties. MERS was not referred to in any way in the notes and only Homecomings held the notes.

    The record evidence establishes that MERS owned neither the notes, nor an interest, legal share, or right in the notes. The only interest MERS possessed was in the properties through the mortgages. Given that the notes and mortgages are separate documents, evidencing separate obligations and interests, MERS’ interest in the mortgage did not give it an interest in the debt.

    Moreover, plaintiffs’ analysis ignores the fact that the statute does not merely require an “interest” in the debt, but rather that the foreclosing party own that interest. As noted above, to own means “to have good legal title; to hold as property; to have a legal or rightful title to.” None of these terms describes MERS’ relationship to the note.

    Plaintiffs’ claim that MERS was a contractual owner of an interest in the notes based on the agreement between MERS and the lenders misstates the interests created by that agreement. Although MERS stood to benefit if the debt was not paid—it stood to become the owner of the property—it received no benefit if the debt was paid. MERS had no right to possess the debt, or the money paid on it. Likewise, it had no right to use or convey the note. Its only “right to possess” was to possess the property if and when foreclosure occurred. Had the lender decided to forgive the debt in the note, MERS would have had no recourse; it could not have sued the lender for some financial loss.

    Accordingly, it owned no financial interest in the notes. Indeed, it is uncontested that MERS is wholly without legal or rightful title to the debt and that there are no circumstances under which it is entitled to receive any payments on the notes.


Before concluding its ruling, the majority appears to take a parting shot at MERS with this observation:

  • The separation of the note from the mortgage in order to speed the sale of mortgage debt without having to deal with all the “paper work” of mortgage transfers appears to be the sole reason for MERS’ existence.

    The flip side of separating the note from the mortgage is that it can slow the mechanism of foreclosure by requiring judicial action rather than allowing foreclosure by advertisement.

    To the degree there were expediencies and potential economic benefits in separating the mortgagee from the noteholder so as to speed the sale of mortgage-based debt, those lenders that participated were entitled to reap those benefits. However, it is no less true that, to the degree that this separation created risks and potential costs, those same lenders must be responsible for absorbing the costs.

In concluding its ruling, the court provided this significant tidbit regarding the void status of the foreclosure proceeding undertaken by MERS in this case:

  • Defendants were entitled to judgment as a matter of law because, pursuant to MCL 600.3204(1)(d), MERS did not own the indebtedness, own an interest in the indebtedness secured by the mortgage, or service the mortgage. MERS’ inability to comply with the statutory requirements rendered the foreclosure proceedings in both cases void ab initio.

    Thus, the circuit courts improperly affirmed the district courts’ decisions to proceed with eviction based upon the foreclosures of defendants’ properties.

The significance of the foreclosure proceedings being rendered void ab initio is that, at least based on this position, anyone who may have purchased a home in Michigan that has a recent foreclosure in its chain of title, where said foreclosure has the same or a similar fact pattern as in this case, may find themselves having an Ibanez problem with respect to the home they thought they purchased and paid for (ie. they hold no title to the home purchased, notwithstanding any status as a bona fide purchaser that may have been otherwise available).

60 Minutes' Report Triggers Statewide Search For Bogus, Foreclosure-Related Docs Littering Deed Registries Throughout MI; Criminal Complaint Expected

WILX-TV Channel 10 reports:
  • [I]n the last few days, counties across Michigan have started searching for possible forged mortgage documents. So far, Ingham, Eaton, Clinton, and Hillsdale Counties have found questionable documents signed by Linda Green and others. Jackson County will start it's search this week.
  • "We're only the tip of the iceberg with this problem. We're probably going to see across the country the same exact thing going on," said [Ingham County's Register of Deeds Curtis] Hertel.


  • The register of deeds in several counties say it's difficult to locate and contact victimized homeowners of this fraud. They recommend going to your county's register of deeds website and looking at your mortgage assignment document. If you find the company "Docx" or signatures with "Linda Green" or "Tywanna Thomas" on that document--- you may be a victim.(1)
  • The Michigan Association of Register of Deeds plans to file a criminal complaint with the Michigan Attorney General's office in two weeks.

For the story, see Suspected Forged Mortgage Documents Found in Mid-Michigan.

See also:

Lansing State Journal: Some Lansing-area foreclosure papers may be fraudulent (Ingham official says bank's signature on 60 documents fake):

  • The real Linda Green works for neither company. She was an employee of Docx,(2) a company hired by several major financial institutions to execute mortgage-related documents, a company that, according to a recent report by 60 Minutes,(3) hired workers to do nothing more than sit and sign those documents eight hours a day. In most cases, the names they signed weren't their own.
  • "It's almost embarrassing that they thought they could get away with this," Hertel said. Following the 60 Minutes report, he and many other registers of deeds in Michigan went searching for mortgage assignments they'd received from Docx. Hertel found 60. Eaton County found 40, Clinton 14.
  • "In Michigan, filing a fraudulent document in my office is a 14-year felony," Hertel said. He's already spoken with the state police and county prosecutor. Next month, when other counties have completed their searches, the plan is to go to the state attorney general.

WLNS-TV Channel 6: Officials Investigating Foreclosure Fraud In Ingham County:

  • The hunt for foreclosure fraud is now underway in Jackson County. [...] It only took 15 minutes to find the same phony signatures that are popping up on documents all over the country.
  • It all started with a recent 60 Minutes piece that highlighted the scam where some big banks are faking forms to speed up the foreclosure process. One by one officials are finding thee documents in Jackson County.


(1) See Mortgage Loan Servicing's 'Dirty Dozen' for a partial list of other notorious, multiple corporate hat-wearing vice-presidents and their confederates littering deed registries and courtrooms throughout the country with robosigned, foreclosure-related documents in efforts to illegally repossess homes.

(2) For more on Docx, see LPS Shuts Down Alleged Bogus Foreclosure Document "Manufacturing" Racket; Pumped Out Over A Million Mortgage Assignments In Last 2 Years.

(3) See CBS' '60 Minutes' On Foreclosure Fraud - 'The Many Faces (& Signatures) Of Linda Green'.