Saturday, May 28, 2011

Suspect Who Pleaded Guilty In Las Vegas Foreclosure Rescue Scam Ordered To Cough Up $6K In Victim Restitution

In Las Vegas, Nevada, the Las Vegas Sun reports:
  • A man who pleaded guilty to misdemeanor petty theft in connection with a foreclosure rescue scam that he operated in Las Vegas in 2009 was ordered to pay his victims $6,086, Nevada Attorney General Catherine Cortez Masto said []. Vu Thuy Chau, also known as Steve Chau, operated under the business name U.S. Housing Help.

Source: Man ordered to pay $6,086 in foreclosure rescue scam.

Recently-Indicted Title Agent Cops Quick Plea In Serial Refinancing Scam; Accused Of Failing To Terminate Existing HELOC, Then Borrowing Against It

From the Office of the U.S. Attorney (District of Columbia):
  • Ronald Johannes Sneijder, 48, a former owner of a title and escrow company based in the District of Columbia, pled guilty today to the lead count in a recently filed indictment, bank fraud, [...].


  • He also agreed to forfeiture of $1,256,000. He is to be sentenced later this summer or fall [...] . Sneijder faces a probable sentence under the sentencing guidelines of 30 to 37 months of incarceration, restitution in the amount of $1,256,000, a fine, and other conditions.

For more, see Former Title and Escrow Agent Pleads Guilty to Mortgage Fraud Case Involves More Than $1.8 Million in Loans.

Nevada AG Bags Suspect In Alleged Home Equity Theft Ripoff Involving Forged Documents

From the Office of the Nevada Attorney General:
  • [T]he Office of the Nevada Attorney General announced the arrest Shafik Hirji for Theft in excess of $2,500 – a class B felony, and three counts of Uttering Forged Instruments – class D felonies. The arrest was made in connection with Hirji’s alleged theft of home equity in connection with a mortgage loan.

For the Nevada AG press release, see Attorney General Office Announces Arrest Of Shafik Hirji.

Closing Attorney Screws Up, Leaves Homebuyer Holding Foreclosure Notice Over Unpaid Real Estate Taxes; Forks Over Cash After Media Intervenes

In Charlotte, North Carolina, WSOC-TV Channel 9 reports:
  • A Charlotte homeowner was upset he got a tax bill after, he said, his closing attorney made a mistake. Antwan Morris said he got a great deal when he bought a starter home three months ago for $69,000.
  • But weeks later, he said, he got a final tax foreclosure warning for $1,300 in delinquent property taxes the previous owner didn't pay. “It definitely scared me,” Morris said. Morris blamed the attorney who handled the closing for failing to deduct the taxes before giving the seller his settlement check. “The taxes didn't get paid, (and) the attorney is not owning up to his mistake,” Morris said.
  • He said attorney Marcel McCrea of the Phillips McCrea Law Firm promised to pay the taxes but hadn’t and wasn’t returning his phone calls. Action 9 went looking for McCrea at an office he shares on Morehead Street, but a man there said he hadn’t been in that day. Action 9’s Don Griffin then called McCrea. He admitted he made a mistake and said he would pay the taxes.
  • Morris now has a receipt showing the taxes were paid in full. “It’s a relief, a big relief,” he said. “A load off me.” Morris now tells home buyers to get recommendations from their Realtors when selecting a closing attorney.

Source: Man Gets Unexpected Bill After Attorney Makes Mistake.

S. California Man Gets 21 Months In HELOC Scam; Applied For Multiple Accounts Simultaneously From Snoozing Lenders In $672K Ripoff

In Los Angeles, California, The Daily Breeze reports:
  • A former Marina del Rey man was sentenced Monday to 21 months in federal prison for defrauding banks by seeking home equity lines of credit simultaneously from four different federally insured financial institutions.
  • Larry P. Corbi Jr., 36, had pleaded guilty in Los Angeles federal court in November to one count of bank fraud, according to the U.S. Attorney's Office. In addition to the prison term, U.S. District Judge Dale S. Fischer ordered Corbi to pay $356,644 in restitution.
  • According to a plea agreement, Corbi bought a $620,000 home in Granada Hills in November 2007. In March 2008, he applied for four home equity lines of credit in amounts ranging from $122,000 to $191,000 from Washington Mutual Bank, GMAC ResCap, Countrywide Bank F.S.B. and Metlife Bank/PHH Mortgage Corp., prosecutors said.
  • Corbi concealed from each financial institution that he was concurrently applying for other credit lines that would also be secured by the Granada Hills home. Three of the four lines were approved and funded. In total, Corbi obtained $672,144 in loan proceeds, which included $200,000 he borrowed to buy the Granada Hills house, according to federal prosecutors.

Source: Former Marina del Rey man sentenced in home equity scheme.

Financially Strapped NY Mets' Owners To Dodge Foreclosure; Agree To Deed-In-Lieu

The Wall Street Journal reports:
  • The real-estate investment management business controlled by besieged Mets owners Fred Wilpon and Saul Katz is giving up a struggling Long Island office- building complex to its creditors, according to a person familiar with the matter.
  • Facing a foreclosure, a venture led by Sterling American Property Inc. is set to hand the keys of Woodlands Office Park, a 127,000-square-foot complex bought near the top of the market, to its mortgage holder, the person said.
  • The debt on the building, which had a balance of $12.7 million last summer, had been carved up into commercial mortgage backed securities after it was issued. It was being managed by ORIX Capital Markets, a special servicer. Gregory Nero, Sterling American's general counsel, declined to comment on the imminent transfer, known in the real-estate business as a "deed in lieu of foreclosure."


  • Messrs. Wilpon and Katz, of course, are dealing with other challenges much bigger than the loss of one complex by their real estate fund division. They face a $1 billion lawsuit filed by the trustee representing the victims of convicted Ponzi schemer, Bernard Madoff, claiming they should have known about the fraud.

For more, see Mets Owners Set to Turn Over Property.

Cops: Grandson Used Elderly Woman As Dupe To Score Loot In Real Estate Scam; Granny Left Embarrassed, Without Life Savings

In Highlands Ranch, Colorado, KUSA-TV Channel 9 reports:
  • Kirt McGhee lied about his grandmother's income on loan applications and used her credit to buy four homes worth $2.5 million, a Mercedes Benz, a Hummer and $14,000 worth of furniture, 9Wants to Know has learned. He promised to pay it all back, but never did.
  • Court records show he refinanced the homes and walked away with $100,000 in equity while the four homes fell into foreclosure, the Mercedes was repossessed and his grandma's life savings disappeared.(1)
  • "It just breaks my heart to think that my grandson would do this to me," said Mary, who didn't want 9Wants to Know to use her last name because she's embarrassed. "It's shameful to me to think that I fell for it, allowed this to happen to me and I'd rather people didn't know."

For more, see Grandson charged with spending grandma's life savings.

(1) Reportedly, McGhee, 38, has been charged with:

  • theft,
  • defrauding a creditor,
  • identity theft,
  • crimes against at-risk adults,
  • forgery,
  • issuing a false financial statement, and
  • obtaining signature by deception.

In a matter unrelated to the alleged scamming of his grandmother, the Colorado Division of Real Estate reportedly forced McGhee to surrender his real estate license last year, after an investigation found him guilty of making false promises to multiple renters in a rent-to-own racket. According to an investigative report in 2008, McGhee engaged in "a scheme to defraud renters and other participants in the Turn Key Investments, lease to own program," the story states.

Friday, May 27, 2011

"A Procedure Relying On A Bank Or Trustee To Self-Assess Its Own Authority To Foreclose Is Deeply Troubling To Me!" Says Judge In Another MERS Kibosh

In Medford, Oregon, The Oregonian reports:
  • The foreclosure fight in Oregon jumped to a new level this week after a federal judge in Medford rebuked the industry's sloppy practices in blocking the seizure of a Jacksonville home, and mortgage issuers turned to the Legislature to find a quick fix to the legal quagmire.
  • U.S. District Judge Owen Panner questioned whether big banks should be allowed to foreclose without court supervision -- as required in 23 states but not Oregon, where one in every 500 homes is in foreclosure, according to Realty Trac Inc. That's compared with one out of 600 nationwide.
  • Panner specifically warned of problems in cases involving the Mortgage Electronic Registration System. MERS was set up by the banking industry to rapidly package and sell mortgages as securities without recording each sale in county recorder offices. The "MERS system raises serious concerns regarding the appropriateness and validity of foreclosure by advertisement and sale outside of any judicial proceeding," he said Wednesday in a 16-page ruling.
  • "Given the numerous problems I see in nearly every non-judicial foreclosure case I preside over, a procedure relying on a bank or trustee to self-assess its own authority to foreclose is deeply troubling to me," he wrote. A spokeswoman for MERS, Janis Smith, said it would appeal the ruling, which Smith described as inconsistent with earlier court decisions in the state.
  • Since October, federal judges in six separate Oregon cases have halted foreclosures involving MERS, saying its participation caused lenders to violate the state's recording law.(1)

For more, see Judge blocks Oregon foreclosure, sharply criticizes mortgage industry's practices and MERS.

For the court ruling, see Hooker v. Northwest Trustee Services, Inc., et al., Case 1:10-cv-03111-PA (D. Or. May 25, 2011).

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

California, Illinois AGs Slap Subpoenas On Foreclosure Document Preparation Sweatshop As Some States Begin Acting Independently Of 50-State AG Probe

Bloomberg reports:
  • The attorneys general of four states including Illinois and California announced new demands in their probes of foreclosure practices by banks and the mortgage- servicing industry.
  • California Attorney General Kamala Harris said [] she subpoenaed Lender Processing Services Inc. (LPS) as part of her investigation into so-called “robo-signing,” the practice signing foreclosure documents without verifying their accuracy.
  • Illinois Attorney General Lisa Madigan is issuing subpoenas to Lender Processing and Nationwide Title Clearing Inc., another Florida-based company, she said [].
  • Foreclosure became a rubber-stamping operation that robbed many homeowners of the American dream without a fair and accurate process,” Madigan said in a statement. “California homeowners have been exposed to fraud and crime at every step of the mortgage process,” Harris said in a separate statement.

For more, see Four States’ Lawyers Announce New Foreclosure Probe Actions.

Go here for the AG press releases:

Utah AG To BofA: Continued Illegal Foreclosures Will Lead To Lawsuit

In Salt Lake City, Utah, The Salt Lake Tribune reports:
  • The Utah Attorney General’s Office is preparing to sue Bank of America after sending a warning letter saying the bank was illegally conducting thousands of foreclosures in Utah.
  • John Swallow, chief deputy attorney general for civil litigation, said Wednesday the office would file suit against the Charlotte, N.C.-based banking giant if its foreclosure arm, ReconTrust Co., continued to file foreclosure proceedings in violation of state law.


  • At issue is whether ReconTrust is violating state law by foreclosing on homes in its own name instead of that of an attorney who is a member of the Utah State Bar or a title company registered to conduct business here as required by state law. [...] Salt Lake County Recorder Gary Ott said Wednesday that ReconTrust is continuing to file foreclosure proceedings under its own name.


  • The state also has intervened in a federal lawsuit in which a St. George property owner argued that ReconTrust did not have the legal authority to foreclose on her property. After an adverse ruling in federal court in Salt Lake City, the case is before the 10th Circuit Court of Appeals in Denver, and the Attorney General’s Office has asked that it be sent back to Utah so it can defend the state law.

For more, see Utah A.G. to BofA: We will sue over foreclosures.

Maryland Foreclosure Mills Take Easy Way Out; Opt To Dismiss Lawsuits Rather Than Face Embarrassment Of Explaining Robosigned Paperwork

In Montgomery County, Maryland, The Daily Record reports:
  • Attorneys have gotten the message that it is better to dismiss foreclosure proceedings if they didn't personally sign their names to the documents, Judge John W. Debelius III said Wednesday.
  • "People have dismissed rather than come to a show cause and explain inappropriate behavior," said Debelius, the administrative judge in Montgomery County Circuit Court.
  • Debelius offered that as an explanation for the expeditious handling of show-cause hearings in his Rockville courthouse. They are handled by a special master in a conference room rather than in a courtroom proceeding, as is often done in Baltimore City Circuit Court.

For more, see Foreclosure challenges resolved quickly at Montgomery Co. hearing (requires paid subscription; if no subscription, GO HERE).

Defunct Title Insurance Agency Tagged With Lawsuit Over Alleged Failure To Pay Off Liens At Closing On New Home Sales Involving Dubious Developer

In Clark County, Nevada, Vegas Inc. reports:
  • Lawsuits are piling up in what attorneys call another real estate scam in Las Vegas — one in which buyers of new homes faced foreclosure a few months later because liens hadn’t been paid off during the escrow process and fraudulent title insurance policies were issued.
  • At the center of the litigation is the now-closed Direct Title Insurance Agency Inc., which operated at 8965 S. Eastern Ave., Suite 150. That company and others were hit with a class-action lawsuit alleging racketeering on April 15 in Clark County District Court in Las Vegas by attorney Matthew Callister.
  • Two homeowners in that lawsuit said they bought new homes late last year from Nevada Homes Group Inc./Wagner Homes Inc. in northwest Las Vegas neighborhoods called Day Dawn Vista and Day Dawn Crossing II — but both soon received foreclosure notices. That’s when they learned bank, subcontractor and homeowner association liens they were unaware of hadn’t been paid off at closing.
  • The title insurance policies were fraudulent, the lawsuit charged, because they falsely represented the homeowners were buying homes free and clear of encumbrances.


  • The lawsuit says Paul Wagner is the president of Wagner Homes and is a director of Nevada Homes Group. A different individual, Paul Wagner IV, is president of Nevada Homes Group, the lawsuit says.
  • The suit says Wagner Homes/Nevada Homes Group induced the homebuyers into choosing Direct Title Insurance Agency for escrow and title insurance services, but didn’t disclose that Paul Wagner, the founder of Wagner Homes, had been indicted last year on bank and wire fraud charges.
  • Wagner has pleaded innocent in that case in which a federal grand jury alleged that from 2007 to 2009, as a home builder, he arranged to sell homes at inflated prices to fraudulently kick back money from the mortgage loan to buyers as incentives for them to buy his homes.
  • The plaintiffs were not told that Nevada Homes Group was in reality a change in name only, designed to conceal the fact of Wagner’s indictment, and that the Wagner family still were the owners of Nevada Homes Group, with Paul Wagner IV being president and Paul Wagner being an officer,” the lawsuit charges.

For more, see Lawsuits allege Las Vegas homebuyers victims of title insurance scam.

1031 Exchange Facilitator Convicted In Escrow Funds Swindle; 4 Victims Left Without $21M In Proceeds From Real Estate Sales Earmarked For Reinvestment

From the Office of the U.S. Attorney (Los Angeles, California):
  • Ezri Namvar, a prominent Los Angeles businessman and real estate developer, was found guilty [] of four wire fraud charges for stealing approximately $21 million from four clients who allowed his “qualified intermediary” company to hold their money in safekeeping before it was reinvested in real estate. [...] The jury convicted a second defendant on the four wire fraud charges. Hamid Tabatabai, 63 of Agoura Hills, was Namvar’s right-hand man at the qualified intermediary company.


  • The evidence presented at trial showed that four victims entered into agreements to have approximately $25 million deposited with Namvar’s company, Namco Financial Exchange Corp. (NFE), which held itself out as a qualified intermediary for real estate transactions commonly called “like-kind exchanges,” “tax-free exchanges” or “1031 exchanges.” Under exchange agreements with NFE, the money belonging to the victims was to be held in safekeeping so the money would be available upon demand to effectuate 1031 exchanges.
  • However, instead of holding the money as promised, Namvar, with the assistance of Tabatabai, used the victims’ money for a variety of unauthorized and undisclosed purposes, including paying off creditors and investors of Namvar’s investment company, Namco Capital Group, Inc. (NCG).


  • During the course of the fraudulent scheme, the four victims provided NFE with approximately $25 million in 1031 exchange proceeds, of which only approximately $4 million was returned to or used on behalf of the victims.(1)

For the U.S. Attorney press release, see Prominent L.A. Businessman Convicted On Federal Fraud Charges For Stealing $21 Million Entrusted To His Firm.

Go here for other posts on Section 1031 exchange escrow ripoffs.

(1) In addition to losing their money, the victims also face a stiff Federal income tax bill (a bill they were looking to defer by reinvesting their loot within a certain time frame, in accordance with Section 1031 of the Internal Revenue Code) on the profits from the real estate investment sales that generated the proceeds, with the prospect of having insufficient cash to pay it.

Thursday, May 26, 2011

Maine 'Supremes' Kibosh F'closure Based On Crappy Paperwork; Instruct Trial Judge To Consider Clipping Banksters For Sanctions, Homeowner's Legal Fees

The Wall Street Journal reports:
  • The Maine Supreme Judicial Court overturned the foreclosure of a Maine homeowner after concluding that the supporting documentation filed by the foreclosing bank was “inherently untrustworthy.”
  • The decision, handed down Friday, underscores the potential for more delays in foreclosures as banks are unable to foreclose on borrowers after being challenged in court for using questionable paperwork.
  • The issues raised in the case are separate from the robo-signing scandal that first erupted last fall, where bank employees were accused of signing paperwork without reviewing their contents. Instead, Dana and Robin Murphy challenged irregularities in the foreclosure documents that suggested potential fabrications or other shortcuts.


  • The case turned on several affidavits filed by HSBC Mortgage Services Inc. that were designed to establish the facts of the case. The court ruled that affidavits used by HSBC were not “of a quality that would be admissible at trial.”
  • A trial court had initially ruled that HSBC failed to demonstrate standing to foreclose and that it improperly notified the Murphys about the foreclosure. HSBC then filed a new affidavit, and the trial court blessed the foreclosure.


  • The court said it didn’t have enough information to conclude that a fraud had been committed on the court, as the Murphys had implied, but it did rule that the loan paperwork submitted in the cases was unsatisfactory. It returned the case back to the trial court and HSBC won’t be able to foreclose until the issues raised on the appeal are addressed.
  • It is a really clear statement by the Maine Supreme Court about the quality” of foreclosure affidavits “that is going to be required,” said Thomas Cox, one of their attorneys. “That quality has been singularly absent in Maine and throughout the country.”


  • Cox says the ruling is also noteworthy because the Maine Supreme Court appeared to tell the borrowers to seek sanctions, including the payment of legal expenses. “They’re telling us to pursue those motions. It’s the first time I’ve seen a high court do so,” says Cox.(1)

For the story, see Maine High Court Overturns Foreclosure, Cites ‘Untrustworthy’ Paperwork.

For the ruling, see HSBC Mortgage Services, Inc. v. Dana S. Murphy, et al., 2011 ME 59 (May 19, 2011).

(1) The Maine Supreme Court said:

  • On remand, the court should determine, pursuant to either or both M.R. Civ. P. 11(a) and 56(g), whether to award the Murphys their expenses, including reasonable attorney fees, incurred defending against HSBC’s two motions for summary judgment before the court and on appeal.

Court Refuses To Void Contract, Says It's Valid & Binding Despite Forged Signatures Where Victims Were Screwed Over By Their Dishonest Attorney/Agent

Financial Fraud Law reports:
  • A federal district court in New York has ruled that clients are bound when their attorney forges their signature to a settlement agreement they never authorized.
  • In this case, the victims were clients of disgraced New York City lawyer Marc Dreier. The court explained the general rule that "the risk of loss from the unauthorized acts of a dishonest agent falls on the principal that selected the agent."(1)
  • Dreier’s clients retained him and authorized him to negotiate a resolution of the dispute with the third party and he served as the conduit for all of the communications between his clients and the other party. As a result of Dreier's fraud, the other party paid over $6.3 million to him, and “should not be compelled to pay a second time,” the court concluded.

Source: Forged Signature Binds Dreier Clients To Settlement, Court Rules.

For the ruling, see In re Dreier LLP (aka Gardi et. al. v. Jana Partners, LLC et. al.) 08-15051 (SMB), Adv. Pro. No. 10-3642 (SMB) (S.D.N.Y. May 23, 2011).

Thanks to Deontos for the heads-up on the story.

(1) The trial judge made this, among other, observations (bold text is my emphasis):

  • [D]reier duped both parties, and the well-settled rule of agency law dictates that as between two innocent parties, "the risk of loss from the unauthorized acts of a dishonest agent falls on the principal that selected the agent." Kirschner v. KPMG, LLP, 938 N.E.2d 941, 951 (N.Y. 2010) (quoting Andre Romanelli, Inc. v. Citibank, N.A., 875 N.Y.S.2d 14, 16 (N.Y. App. Div. 2009)).

    This precise rule was applied by two state supreme courts in factually similar situations involving an attorney’s forgery of his client’s signature to unauthorized settlement documents.

    In the first case, Cohen v. Goldman, 132 A.2d 414 (R.I. 1957), the attorney settled a lawsuit without his client’s knowledge or consent, and forged the client’s signature on a release and the settlement check. Id. at 415. The trial court vacated the settlement because of the forgery, id. at 416, but the Supreme Court reversed.


  • The Supreme Court of Pennsylvania reached the same result on similar facts in Rothman v. Fillette, 469 A.2d 543 (Pa. 1983). There, Rothman hired Madnick as his attorney to represent him in a personal injury action against Fillette. Without Rothman’s knowledge or consent, Madnick settled the lawsuit and forged Rothman’s name to the release and the settlement check, and converted the proceeds. The lawsuit was marked settled, but after discovering the unauthorized settlement, Rothman sought to reinstate the lawsuit against Fillette. The lower court reinstated the lawsuit and Fillette appealed. Id. at 544–45. The Pennsylvania Supreme Court reversed.

So-Called 'Sovereign Citizen' Gets 17+ Years For Screwing Over 17 Churches In Bogus Debt Reduction Foreclosure Rescue Scam

In Memphis, Tennessee, The Commercial Appeal reports:
  • A Memphis man has been sentenced to 17 1/2 years in federal prison after his conviction earlier this year of running a bogus debt-reduction company that defrauded regional churches of hundreds of thousands of dollars.
  • Charles A. McKuhn Jr. traveled to several states in 2009 and met with pastors and church officials, falsely represented himself as a banker and persuaded them to pay him large sums of money for debt reduction and lines of credit for building funds, court documents show.
  • He also convinced churches that owed debts to banks and other lending institutions not to pay those institutions, but to pay his companies called Intersec Capital Trust and Taurian Worldwide Inc.

For the story, see Memphis man gets 17 years for bilking churches.

For earlier post, see Trial Begins For "Sovereign Citizen" Accused In F'closure Rescue, Loan Reduction Scam; Judge Rejects "Diplomatic Immunity/Moor Defense" As "Gibberish".

For the details of the criminal charges, see U.S. v. McKuhn.

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

Post-Closing Meth Contamination Discovery Keeps Couple From Moving Into 1st Home As 'Wells' Unloads REO Once Used By Squatters As 'Party Pad'

In Colorado Springs, Colorado, The Gazette reports:
  • In a scenario that plagues all too many homebuyers throughout the U.S., the Hardys discovered they’d bought a house contaminated by methamphetamine. In this case, the contamination apparently came from people using, not manufacturing, meth. (Click here to read a Q&A on how properties can become contaminated with meth.)
  • No matter; several samples taken from the house tested positive for meth contamination, and not willing to expose themselves to it anymore than they already had, the Hardys haven’t entered it since.
  • Now, they’re stuck with a $1,114-a-month house payment on a property they can’t occupy, while facing enormous cleanup costs. All their belongings, including the new furniture, remain in the house. Lauren, who learned she was pregnant right around the closing, miscarried a few weeks later.
  • Lauren’s father, Bob Wenz, has become the couple’s advocate, trying to make things right and hold someone accountable, but it may be a difficult battle to win. “It’s a mess,” Wenz said.
  • The Hardys want theirs to be a cautionary tale for anyone purchasing a house in Colorado, and they offer one piece of advice: Spring for the money for a meth-contamination test, because you can’t count on current laws to protect you, and you can’t know for sure what once took place in that property.


  • The house, built in 1989, went into foreclosure in July 2009. Wenz said it appears the owners had been renting it, and the renters trashed it. The bank that serviced the mortgage, Wells Fargo, took ownership of the house, then turned it over to the Veterans Administration, which guaranteed the loan.
  • Around that time, neighbors were reporting suspicious activity at the house, with people coming and going at all hours of the day. One neighbor, Mary Meredith, called the Wells Fargo office in San Francisco and spoke to someone in the president’s office.
  • What I told them was that there was a lot of traffic going in and out of the house,” she said. “We felt there were people who were actually — I guess the term would be squatting — in the house, and we suspected extensive drug use in the house, if not trafficking.”
  • It’s possible that Meredith’s complaint could have triggered a test for meth contamination and a cleanup, but no one acted on it. Jason Menke, a spokesman for Wells Fargo Home Mortgage, says their records show that neighbors called twice in July 2009 to report the property was “not secure,” and Wells Fargo passed along the information to the VA.
  • Our records indicate we were made aware that the property was not secure, but there’s nothing specific related to drug use or activity,” he said. The VA did not return phone calls to discuss what information they were given or whether they had reports of drug use at the house.
  • A series of arrests at the house in 2009 also failed to trigger any notification of possible meth contamination. In June 2009, sheriff’s deputies went to the house to check on a complaint about barking dogs and arrested a woman for possession of drug paraphernalia.
  • About three months later, deputies were called to the house again, and encountered the same woman, who admitted she had been “partying heavily the past few weeks,” according to the report. Deputies found meth in the master bedroom and another bedroom. The house was in shambles, the toilets were full of feces, and dog feces littered the basement floor.

For more, see Meth contamination haunts Springs homebuyers ('It really is buyer beware').

(1) For other stories relating to the unwitting purchase of homes infected with methamphetamine residue, see:

$200K+ Engineering Screw-Up May Force Alabama Couple, Neighbors Out Of Custom-Built Homes

In Autaugville, Alabama, the Montgomery Advertiser reports:
  • Jim and Lisa White stand inside their home at Cottrell Landing subdi­vision, not knowing if engi­neering errors will force them to leave it because their house does not meet floodplain ordinance standards.
  • Two years after they moved into their custom-built home that sits alongside Swift Creek, they learned it was constructed five-feet below the required flood ele­vation. It wasn't just their home, but the homes of four other fami­lies in their subdivision of six houses.
  • The Whites, whose home is 10 feet off the ground from the front lot line, have been told to fix the problem at their own cost. That's some/thing they can't af­ford to do. "I want someone to step up and take care of this," Jim White said. "We've been trying to get the issue taken care of outside of a lawsuit."
  • The Cottrell Landing homes are in violation of the Autauga County Floodplain ordinance, which requires that their homes' finished floor elevation be con­structed 1 foot above the base flood elevation, which is de­termined by the Federal Emergency Management Agency.
  • The Whites recognize the danger of floods. It's hard for them not to as they follow the cresting waters of the Mississippi River and the damage it is causing as it flows through state after state until it reaches New Orleans and the Gulf Coast.
  • The Whites' home was built high above the nearby waters, just not high enough. "Their situation is more unique," said David Bufkin, Autauga County engineer. "The houses were built and they used an erroneous benchmark and it messed all of them up, so all of the houses are off, about 4.5 feet too low."
  • A little more than four feet may not sound like much, but raising the house would cost more than $200,000 and not raising it could cost them their home since they could be forced out of the house if it is not in compliance. The Whites said they and their neighbors built their houses to comply with what they were told were the building requirements.

For the story, see Engineering errors may force families out of homes.

Wednesday, May 25, 2011

State AGs: Banksters Face $17B+ In Potential Liability In Possible UDAP Suits If Foreclosure Fraud Settlement Isn't Reached

The Wall Street Journal reports:
  • State attorneys general told five of the nation's largest banks on Tuesday they face a potential liability of at least $17 billion in civil lawsuits if a settlement isn't reached to address improper foreclosure practices, according to people familiar with the matter.
  • The figure doesn't cover additional billions of dollars in potential claims from federal agencies such as the Department of Housing and Urban Development and the Justice Department. State and federal officials haven't proposed a specific comprehensive settlement figure, but Tuesday's discussions represented the first effort to formally quantify potential liability.


  • Banks have proposed a $5 billion settlement that would be used to compensate any borrowers previously wronged in the foreclosure process and provide transition assistance for borrowers who are ousted from their homes. Federal and state officials have dismissed that as insufficient. Some officials have pushed for a total price tag of more than $20 billion to resolve foreclosure-handling abuses that surfaced last fall.
  • State attorneys general from all 50 states and the District of Columbia announced investigations last fall. Tuesday's discussions highlighted the potential for lawsuits alleging unfair and deceptive practices [ie. "UDAP"] if a settlement isn't reached.
  • The U.S. Trustee Program, a part of the Justice Department that oversees bankruptcy cases, has asked for an additional $500 million to $1 billion in penalties, according to people familiar with the matter. Officials of the unit have raised questions in several cases over the authenticity of foreclosure documents.


  • The latest development comes as state and federal officials are intensifying their scrutiny of other parts of the mortgage machine. Attorneys general in California and New York have announced wide-ranging mortgage investigations.

For the story, see Banks Face $17 Billion in Suits Over Foreclosures.

"There Can Be No Settlement For Pennies On The Dollar!" Two Deed Recording Officials Tell Lead AG In 50-State Foreclosure Fraud Probe

Housing Wire reports:
  • Two Registers of Deeds asked Iowa Attorney General Tom Miller [] to postpone a settlement with the nation's largest mortgage servicers until the cost damage to land records is better understood.
  • John O'Brien, Register of Deeds of Southern Essex County in Massachusetts, and Jeff Thigpen, Register of Deeds of Guilford County in North Carolina, wrote a letter to the attorney general, stressing the need to appropriately settle terms with servicers based on the amount of damaged practices such as robo-signing caused.
  • "We need to take a long hard look at the damage that these banks have caused, not only to our economy but also to people's chains of title," O'Brien commented. "There can be no settlement for pennies on the dollar."

For more, see Registers of Deeds ask Iowa AG to postpone servicer settlement.

4 Sentenced In Straw Buyer Scam That Fleeced Banks, Then Used 'Rent To Own' Lure To Dupe Would-Be Buyers Into Paying On Homes That Ended In F'closure

In Raleigh, North Carolina, The News & Observer reports:
  • Triangle, state and federal officials say they used a relatively new state law to break up a mortgage fraud ring in the Triangle that bilked housing lenders across the state out of millions of dollars. Four people were charged with being part of the ring and were the first to be convicted under the N.C. Residential Mortgage Fraud Act of 2007.
  • Douglas Scott Allen, 37, his wife Renee Keiser, 44; Antonious Iskander, 27; and Matthew Garrett, 45, all were sentenced to prison as a result of their involvement in a mortgage fraud scheme with Saving Carolina, a company that operated in Wake and Durham counties, according to state Commissioner of Banks Joseph Smith Jr.(1)


  • Authorities say they participated in a scheme that involved the purchase of residential properties by illegitimate borrowers, who submitted false information about their employment and income to qualify for mortgage loans.
  • The properties were then rented to residents who hoped eventually to own the properties. The conspirators pocketed the cash but never repaid the loans, causing the properties to go into foreclosure, resulting in millions of dollars in losses to the home lenders.

For the story, see Four sentenced for mortgage fraud.

For the North Carolina Commissioner of Banks press release, see N.C. Commissioner of Banks and Wake County District Attorney Stop Mortgage Fraud Ring.

(1) According to the story:

  • Allen pleaded guilty to five counts of obtaining property under false pretenses and was sentenced to 44 to 62 months in prison;
  • Garrett pleaded guilty to one count of residential mortgage fraud and was placed on 18 months of probation and fined $5,000. Garrett's real estate license was suspended;
  • Iskander pleaded guilty to two counts of residential mortgage fraud and was placed on 18 months of probation and fined $2,000;
  • Keiser spent eight months in jail and was sentenced to time served after she pleaded guilty to residential mortgage fraud. rent skimming

$2,700 For Property Inspections Costing $9.60 Each Shows That Loan Servicing Abuses Continue Unabated

The New York Post reports:
  • On Wednesday, consumer defense attorney Linda Tirelli added another outrageous example of mortgage servicer misbehavior to her growing file of hundreds of such abuses against New York homeowners.
  • The overcharging by a servicer -- which manages mortgages day-to-day for lenders -- to bill a homeowner in foreclosure over $2,700 for property inspections that cost just $9.60 a pop came as federal and state regulators are investigating shoddy practices by servicers and big banks, which are often one and the same.


  • Tirelli asked for invoices, as mandated by federal bankruptcy law, but the bank's attorney told Tirelli he wasn't sending them until she started litigation. "That, to me, is abuse," Tirelli told The Post. "How are you supposed to face your creditor if your creditor is not going to substantiate his claim?"
  • Unsubstantiated claims are just one of the many forms servicer abuse takes. The most common, experts say, include:

    * Junk fees, which are inflated or erroneous charges for property inspections, property preservation fees, and broker price opinions.

    * Misapplied or rejected payments. Servicers are known for rejecting homeowners' checks or applying funds to the wrong account, generating late fees and penalties that put a struggling homeowner further in arrears.

    * Attorneys' fees. North Carolina consumer defense attorney O. Max Gardner III has documented instances of bankrupt mortgagees being billed for attorneys' fees paid by servicers, despite the court awarding a lower amount.

    * Dual-tracking, or assuring a homeowner that a trial modification is going well, while proceeding with a foreclosure essentially behind the homeowner's back.
  • Well-documented evidence of these abuses dates back many years, and millions of American homeowners have suffered questionable, if not illegal, foreclosures because of these practices. "Many foreclosures didn't follow the rule of law, and you can't take private property away from someone in this country without due process," said a spokeswoman for the Center for Responsible Lending, which conducted the study.
  • Most of New York's more than 40,000 families in foreclosure struggle without legal help, waiting for a long-delayed lifeline from regulators. Homeowners can find cautious new hope on three fronts.
  • The US Trustee's office is now investigating abusive servicing practices. The Department of Housing and Urban Development's inspector general undertook audits of five major banks, and is accusing them of defrauding taxpayers in foreclosures on government-backed home loans, according to published reports.
  • Also last week, New York State Attorney General Eric Schneiderman said he is investigating Bank of America, Goldman Sachs and Morgan Stanley's mortgage securitization practices.

For the story, see Mortgage servicer abuse facing state, fed probes.

$350K In Pilfered Proceeds From Client Home Sales Leaves Lawyer Facing Prison; 1-Year Buy-Down Sentence Reduction To Cost $169K In Upfront Restitution

In White Plains, New York, The Journal News reports:
  • A former real estate lawyer who operated out of Yonkers will go to prison after admitting that he stole more than $350,000 by pilfering checks given to him by well-to-do clients.
  • Bruce Mogavero, an Eastchester resident, pleaded guilty Friday in Westchester County Court in White Plains to two felony counts of second-degree grand larceny and one of first-degree scheme to defraud.
  • His prison term will depend on how much he can repay when he is sentenced. If he makes a lump-sum payment of $169,350, he would be sentenced to one to three years. If he cannot pay that amount, he would serve two to four years, according to the Westchester County District Attorney's Office. He will eventually have to repay all the money, and is to be sentenced Oct. 25.
  • According to prosecutors, Mogavero stole $270,000 between August 2008 and April 2010. The money came from proceeds of a house sale on Oakland Avenue in Tuckahoe. Mogavero had deposited a $455,000 check into an escrow account until the sellers reached a divorce settlement, but he dipped into the account for his own use.
  • Mogavero also stole $82,700 from a client selling an apartment on Bronx River Road in Yonkers. Mogavero was accused of stealing money from nine other clients from 2008 to Jan. 1 of this year.
  • In an interview with The Journal News last year, Mogavero, 55, said he borrowed the money so he could keep his business afloat to help struggling homeowners fight foreclosure. He said he helped more than 200 people stay in their homes, and had already repaid some money.(1)

Source: Lawyer who stole $350,000 from clients must pay -- with prison time and cash.

(1) To the extent Mogavero fails to cough up the restitution cash, The Lawyers’ Fund For Client Protection Of the State of New York exists to protect legal consumers from dishonest conduct in the practice of law in the state, to preserve the integrity of the bar, to safeguard the good name of lawyers for their honesty in handling client money, and to promote public confidence in the administration of justice in the Empire State. It attempts to secure these goals by, among other things, reimbursing client money that is misused in the practice of law.

For similar "attorney ripoff reimbursement funds" that 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.

Servicemembers Find Themselves Battling On Home Front As Well As In War Zones; Financial Struggles Make Maintaining Security Clearances Uncertain

In Las Vegas, Nevada, the Las Vegas Review Journal reports:
  • These soldiers and airmen have dropped bombs or have seen them explode in Iraq and Afghanistan, so they know firsthand the stress of fighting the nation's wars. Now they are battling a different kind of stress at home in the Las Vegas Valley -- the chronic stress that weighs on them from being at ground zero of the mortgage crisis.
  • When they get orders to move somewhere else, they have no choice but to go. In many cases, they face six-figure losses on their homes through short sales or foreclosure.
  • They also risk losing their security clearances, which could prevent them from flying warplanes and leading troops after they arrive at their new assignments. "This has been more stressful than my deployment," said Lt. Col. Eric Wishart, who is trying to sell a home worth 60 percent less than he paid for it. "And going to Afghanistan is no picnic."
  • Wishart is not alone. More than a thousand airmen at Nellis Air Force Base have been trapped in the mortgage crisis and are unable to refinance, according to a survey by Rep. Joe Heck, R-Nev. The survey found 740 airmen upside down on their mortgages don't qualify for the Pentagon aid program, another 263 can't sell their homes at a break-even price and some are renting them at a monthly loss.
  • Of the base's 8,932 personnel, 32 are in foreclosure and 98 have completed short sales or are in the process of completing one. After seeing this snapshot of what is happening at Nellis, Heck proposed an amendment to a defense bill to shed more light on the problem. While the bill doesn't provide funding for an assistance program, it would study the problem nationwide across all branches of the services.
  • "Service members become distracted by personal and financial issues, rather than focusing on their mission," Heck said earlier this month , noting that a soldier's ruined credit makes it difficult for them to maintain their security clearances.

For more, including the stories of a couple of the airmen, see When troops get orders to move, some risk losing houses.

Tuesday, May 24, 2011

NY AG Tacks On Three More Banksters To Target List In Mortgage Securitization Probe; Tags Four Bond Insurers With Subpoenas

Bloomberg reports:
  • JPMorgan Chase & Co., UBS AG and Deutsche Bank AG are being investigated as part of New York Attorney General Eric Schneiderman’s expanded probe of mortgage securitization, according to a person familiar with the matter.
  • Four bond insurers also were subpoenaed: Ambac Financial Group Inc., MBIA Inc., Syncora Holdings Ltd. and Assured Guaranty Ltd., according to the person, who couldn’t be identified because the probe isn’t public.
  • Schneiderman is seeking information on claims paid out during and after the economic crisis and any information or documents related to litigation or settlements with the banks, according to the person. The expanded investigation was reported earlier by the Wall Street Journal.
  • Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley were already part of the probe, the person said earlier this month. Schneiderman, who took office in January, is examining mortgage practices and the packaging and sale of loans to investors, according to the person. [...] Royal Bank of Scotland Group Plc is also one of the companies being investigated by the attorney general, the Financial Times reported.


  • Federal regulators and all 50 state attorneys general are scrutinizing how the biggest U.S. financial firms handle home loans. Last month, as states coordinated settlement talks with banks over foreclosure practices, Schneiderman said that any joint accord shouldn’t preclude individual states, such as New York, from continuing their own inquiries.

For more, see JPMorgan, UBS, Deutsche Bank Said to Be Added to New York Mortgage Probe.

Florida Appellate Courts Continue The Clean-Up; Another Lower Court Error In Rubber-Stamped Foreclosure Case Caught, Booted Back

Confronted with another screw-up by a state trial judge (this time, it was Charlotte County Circuit Judge Lee A. Schreiber) presiding over a home foreclosure action, a Florida appeals court once again found itself compelled to find error and kick the case back to the lower court for further proceedings.

Among the highlights here were:
  • a lender's attorney filing a motion for summary judgment prior to the homeowner filing an answer to the complaint,
  • the homeowner/couple withdrawing a motion to dismiss the day before the hearing and then filing an answer to the complaint, containing several common defenses, including a claim that the foreclosing entity had not provided the notice of acceleration that the standard language in the mortgage requires it to provide,
  • the trial court improvidently entering a summary judgment against the homeowner/couple even though nothing in the record refuted the homeowners' claim that they had not received the notice of acceleration.(1)

For the ruling, see Goncharuk v. HSBC Mortgage Services, Inc., 2D10-2629 (Fla. 2d DCA, May 20, 2011).

Representing the homeowner was Gregg Horowitz, Sarasota, Florida.

(1) The 3-judge appellate panel addressed this issue in the following excerpt (bold text is my emphasis):

  • Vasiliy and Marina Goncharuk appeal a final judgment of foreclosure entered after the trial court granted a motion for summary judgment in favor of HSBC Mortgage Services, Inc. We reverse. The procedural posture of this case and the disputed issue of fact that requires reversal of the summary judgment appear to be virtually identical to those in Sandoro v. HSBC Bank, USA National Ass'n, 55 So.3d 730 (Fla. 2d DCA 2011).


  • HSBC Mortgage seems to believe that the Goncharuks did something improper by waiting until the day before the hearing to withdraw their motion to dismiss and file an answer. At least in this context, we are aware of no rule of procedure that would prevent the Goncharuks from taking this step. Given that the answer contains no unusual defenses, nothing suggests that this step was taken for any improper purpose.

    As we explained in Sandoro and in several earlier cases, a plaintiff who moves for summary judgment before a defendant files an answer has a difficult burden.

    When a plaintiff moves for summary judgment before the defendant answers the complaint, the plaintiff "must not only establish that no genuine issue of material fact is present in the record as it stands, but also that the defendant could not raise any genuine issues of material fact if the defendant were permitted to answer the complaint."

    Sandoro, 55 So. 3d at 732 (quoting BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques,
    28 So.3d 936, 938 (Fla. 2d DCA 2010)). See also Howell v. Ed Bebb, Inc., 35 So.3d 167, 168 (Fla. 2d DCA 2010); Brakefield v. CIT Group/Consumer Fin., Inc., 787 So.2d 115, 116 (Fla. 2d DCA 2001).

    The plaintiff must essentially anticipate the content of the defendant's answer and establish that the record would have no genuine issue of material fact even if the answer were already on file. In Sandoro, the lender failed to address the notice of acceleration in its motion for summary judgment and accompanying affidavits. 55 So. 3d at 731-32. HSBC Mortgage failed to address the same issue in this case; therefore, we must reverse the final judgment of foreclosure and remand for further proceedings.

    Reversed and remanded.

Failure To Search Title Leads To F'closure For Homeowner Despite Making All Payments; Builder Failed To Pay Off Existing Lien In Owner-Financed Sale

In Weslaco, Texas, KRGV-TV Channel 5 reports:
  • A sign of the future connected to pain of the past. Behind the plastic and metal of the auction sign is an experience too sad for Nelda Rodriguez to bear. "There I go again," said Rodriguez as she wiped her tears. This home was her dream. It was her escape from violence. "It's just one thing after another after another," said Rodriguez. Rodriguez said her ex husband abused her.
  • She moved here to get away. A year later she gets this a notice. "The attorney to Compass Bank said this house is not mine," said Rodriguez. The notice said she didn't own the home and the true owner is in foreclosure. "I have my receipts and I was paying everything I was suppose to be paying," said Rodriguez. She called CHANNEL 5 NEWS for help. We investigated.
  • We pulled records on the property and the home. Turns out, Compass Bank is right: Rodriguez doesn't own this home. She owner-financed it through a construction company. "I feel real bad. In a way, I feel dumb because I let this happen to me," said Rodriguez.
  • Dunlyn Homes, L.L.C., the construction company, owned the house Rodriguez moved into. They had financed the building of the home through the bank. The bank claimed it had not been paid and demanded payment in full. Dunlyn Homes wasn't able to meet that obligation. The bank foreclosed on the house.
  • We tracked down the man in charge of the company. Juan Noriega was president of the construction company at the time Rodriguez bought her house. Noriega agreed there was a lien on the home, but he claimed it was a mistake. He says the bank agreed to extend the loan and take his payments. He claims he made them.
  • "Texas State Bank said don't worry about it. Just rent it or owner finance the houses, whatever you do as long as you take the payment. We'll worry about it in a couple of years," said Noriega over the phone.

For more, see Owner Financed Home Foreclosed.

California AG Announces Formation Of 25-Person Strike Force To Target Mortgage, Foreclosure Ripoffs Of Any Size

The Los Angeles Times reports:
  • California Atty. Gen. Kamala Harris, saying that years of unscrupulous lending still haunts the state, is creating a 25-person task force to target mortgage fraud of any size — from small operations that preyed on troubled borrowers to corporations that sold risky loans as safe investments.(1)


  • Creation of the state's Mortgage Fraud Strike Force, [...] comes as other states turn up the heat on the lending industry. New York Atty. Gen. Eric Schneiderman is seeking records from three major Wall Street banks as part of a broad investigation into the mortgage crisis. Also, a months-long investigation by all 50 state attorneys general into the foreclosure practices of the nation's five largest mortgage servicers is continuing.

For more, see California creating mortgage fraud task force (The team of 17 lawyers and eight special agents from the state Department of Justice will pursue corporate fraud, scams and fraudulent lending practices, Atty. Gen. Kamala Harris says).

Thanks to Deontos for the heads-up on the story.

(1) Reportedly, the team of 17 lawyers and eight special agents from the state Department of Justice will pursue three major areas, Harris said in an interview:

  • Corporate fraud, including instances in which bundled mortgages were sold as securities to the state or its pension funds under false pretenses. Harris said her office plans to prosecute some cases under California's False Claims Act, which she described as "one of those very powerful tools that California uniquely has … to pursue, in essence, what are false claims that are submitted to the state."
  • Scams, including instances in which consultants, lawyers and others took fees from people in foreclosure, saying they would help the homeowners get loan modifications or other remedies, but delivered nothing.
  • Fraudulent lending practices, including deceptive marketing, failure to fully disclose loan terms and qualifying people for loans who couldn't afford the terms.

Process Server Bagged For Filing Affidavit Asserting 'Sewer Service' On Dead Homeowner Facing Foreclosure?

In Broward County, Florida, the South Florida Sun Sentinel reports:
  • Some homeowners trying to defend themselves against foreclosure have said the lender didn’t properly serve them. And in one recent case, the homeowner wasn’t properly served because he was dead, Sunrise lawyer Andrew Dinnerstein said.
  • Dinnerstein, who’s representing the family of the deceased, said in court papers that a representative of process server ProVest served the homeowner on April 21, 2011. But the homeowner had passed away Aug. 4, 2010. Dinnerstein is not identifying the man to protect the family's privacy.
  • ProVest falsified a document, saying it properly served the defendant when it didn't, Dinnerstein said. "It's equivalent to perjury," he said. "The system is being abused to such an extent that people aren't even being served properly."
  • When a homeowner is deceased, the lender must ask the court to assign an administrator to the case and then serve foreclosure papers to the administrator, Dinnerstein said. He will seek sanctions against the lender and ProVest. A ProVest spokesman did not immediately respond to a request for comment Monday.
  • The company already is under investigation by the Florida Attorney General’s office for allegations of false returns of service under oath and forged signatures of process servers.

Source: Deceased homeowner served with foreclosure papers.

Monday, May 23, 2011

Ohio Appeals Court Reverses Another Lower Court Error In F'closure Action; Nixes Bankster Affidavit Based On Computer 'Screenshot' Of Account Details

Lexology reports:
  • In Deutsche Bank National Trust Company v. Hansen, 2011 WL 899625 (Ohio App. 5 Dist., 2011), borrowers defending a foreclosure action successfully challenged whether a bank's representative could testify in an affidavit concerning the amount due based on a screen shot when the bank's representative could not explain how such information was collected and compiled. Based on such facts, the borrowers argued the bank could not qualify the screen shot under the business record exception to the hearsay rule.
  • The borrowers argued that the trial court erred in admitting the screen shot as evidence of the amount due and sought to strike the affidavit of the bank representative, asserting that it was not based on her personal knowledge.
  • The bank representative testified at her deposition that she did not know who entered the information into the computer to generate the amount owed, nor did she know how such information was collected and compiled. The borrowers argued that while her affidavit states that it was based on personal knowledge, the bank representative's deposition testimony reflected that while she saw a screen shot of the balance due, she could not explain how that figure was arrived at by the bank.


  • The Court of Appeals for Fairfield County determined that the bank's representative did not have personal knowledge as to how the bank arrived at the balance due as viewed on the screen shot. The borrowers argued the screen shot is hearsay and did not meet the exception for a business record because there is no evidence of its origins or the circumstances surrounding its existence.

For more, see Court erred in admitting screen shot as evidence of amount due for purposes of granting summary judgment (Rule 803(6) of the ohio rules of evidence, business records hearsay exception, construed) (requires paid subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link for the story).

For the ruling, see Deutsche Bank Natl. Trust Co. v. Hansen, 2011-Ohio-1223 (Ohio App. 5th Dist. March 10, 2011).

Representing the homeowner were Benjamin D. Horne, Peggy P. Lee, and Luke Feeney of Southeastern Ohio Legal Services,(1) Lancaster, Ohio.

(1) Southeastern Ohio Legal Services is a non-profit law firm that, within its coverage area, gives legal help without attorney fees to people with low income and limited savings and assets, and also serves organizations of low-income people.

Option To Convert From Non-Judicial To Judicial Process Now Possible For Hawai'ian Homeowners Facing Foreclosure

From the Office of the State of Hawai'i Judiciary:

For more, see New Court Rules to Convert Non-Judicial Foreclosures to Judicial Foreclosures.

Defending A Foreclosure Defense Case Pro Bono? Don't Forget The Contingency Risk Factor When Sticking Losing Lender With Tab

A recent ruling by a Florida appeals court held that a homeowner successfully fending off a foreclosure action is entitled to clip the losing foreclosing entity for a recovery her attorney’s fees as a prevailing party under subsection 57.105(7), Florida Statutes (2009), after the lower court granted a motion to dismiss a mortgage foreclosure action and dismissed the case without prejudice. (Nudel v. Flagstar Bank, FSB, No. 4D10-3001 (Fla. App. 4th DCA, May 18, 2011).(1)

Although the ruling was silent on a sometimes-related point, a court case cited therein briefly addressed the issue regarding the application of a contingency fee multiplier (in those cases where winning counsel took the case on a pro bono or contingency fee basis) when calculating the amount of the homeowner's legal fee tab that the losing lender will ultimately be stuck with. This multiplier reflects "a contingency bonus to the basic fee award in cases that the [client] was unlikely to win, to give lawyers for non-paying clients an incentive to take risky as well as sure cases."(2)

In that case, the court approved the use of a contingency fee multiplier of 2.5 in determining the amount of the homeowner's legal fees that the improperly foreclosing lender was hammered with.
While this point only merited a brief mention in that ruling, I mention it here as a reminder to those private attorneys, non-profit law firms, and others who take, or are considering taking, foreclosure defense cases on a pro bono basis, that a mechanism exists in Florida law (by the way, Florida is not unique in this(3)) allowing winning counsel, not only to collect legal fees from the foreclosing lender in a successful foreclosure defense (generally based on the number of hours spent on the case multiplied by an hourly rate, subject to court approval), but to enhance the earned legal fee by a contingency fee multiplier, thereby potentially making it worth one's while taking on these types of cases, at least occasionally.(4)

While not a guarantee to make the winning attorney rich beyond his/her wildest dreams, I'm sure the extra cash will come in handy.(5)

For the court ruling, see Bank of New York v. Williams, 979 So.2d 347 (Fla. 1st DCA 2008).

Representing the homeowner in this case was James A. Kowalski, Jr., Jacksonville, Florida.

(1) See also, Fla. Appeals Court: Homeowner Entitled To Nail Bank For Prevailing Party Legal Fees After Lender Voluntarily Dismissed F'closure Case w/out Prejudice.

(2) The Yale Law Jounal: The Contingency Factor In Attorney Fee Awards.
(3) See, for example:
  • Nebraska: Eicher v. Mid America Financial Investment Corp., 270 Neb. 370, 702 N.W.2d 792 (2005), where the Nebraska Supreme Court, in slamming an equity stripping, sale leaseback peddler with a prevailing party attorneys fee award of $378,000 payable to the lawyers representing a dozen homeowners who had their home titles ripped off in a foreclosure rescue scam, applied a multiplier of 1.3 in calculating the award (the foreclosure rescue operator was found to have violated the Nebraska Consumer Protection Act).

  • Illinois: Gambino v. Boulevard Mortg. Corp., 398 Ill. App. 3d 21, 922 NE 2d 380 (Ill. App. 1st Dist., 6th Div. 2009) (Appeal denied by Gambino v. Blvd. Mortg. Corp. (W.W. Funding, L.L.C.), 2010 Ill. LEXIS 909 (Ill., May 26, 2010)), where an Illinois Court of Appeals approved use of a contingency multiplier of 3 to the lodestar attorney fee calculation to arrive at a total fee award of $595,574 in a case where an elderly property owner successfully sued in a quiet title / slander of title action in an effort to undo a real estate equity scam perpetrated by his nephew and a gang of others involving a purported sale leaseback (coupled with a repurchase option) of property and the recording of forged land documents. The appeals court noted that the trial judge found the use of a multiplier of 3 to be "imminently reasonable."

  • Washington State: Pelascini v. Pace-Knapp, No. 63758-4-I (Wash. Ct. App. Div. 1, Feb. 14, 2011) (Reported at Pelascini v. Pace-Knapp, 2011 Wash. App. LEXIS 422 (Wash. Ct. App., Feb. 14, 2011)), where a Washington State appeals panel awarded $134,425 in attorney fees including a lodestar multiplier of 15 percent to a homeowner who successfully sued after getting ripped off in a sale leaseback, equity stripping racket. The sale leaseback peddlers were found to have violated the state Consumer Protection Act.

  • New Jersey: Rendine v. Pantzer, 661 A.2d 1202 (N.J. 1995), where, in approving a one-third enhancement of the lodestar calculation (ie. a multiplier of 1.333), the New Jersey Supreme Court made this holding on the use of contingency fee enhancements, generally, in state court litigation in New Jersey (bold text is my emphasis):

    We hold that the trial court, after having carefully established the amount of the lodestar fee, should consider whether to increase that fee to reflect the risk of nonpayment in all cases in which the attorney's compensation entirely or substantially is contingent on a successful outcome. We understand and carefully have evaluated the various objections advanced to contingency enhancements, including the often-repeated admonition that "[t]hese statues were not designed as a form of economic relief to improve the financial lot of [attorneys]." Dague
    , supra, 505 U.S. at 563, 112 S.Ct. at 2642, 120 L.Ed.2d at 457 (quoting Delaware Valley I, supra, 478 U.S. at 565, 106 S.Ct. at 3098, 92 L.Ed.2d at 456).

    Both as a matter of economic reality and simple fairness, we have concluded that a counsel fee awarded under a fee-shifting statute cannot be "reasonable" unless the lodestar, calculated as if the attorney's compensation were guaranteed irrespective of result, is adjusted to reflect the actual risk that the attorney will not receive payment if the suit does not succeed. The reasoning underlying our holding often has been explained, and most effectively in simple terms. As the late Judge Charles Wyzanski once observed:

    No one expects a lawyer to give his services at bargain rates in a civil matter on behalf of a client who is not impecunious. No one expects a lawyer whose compensation is contingent upon his success to charge, when successful, as little as he would charge a client who in advance had agreed to pay for his services, regardless of success.

    Cherner v. Transitron Elec. Corp.
    , 221 F. Supp. 55, 61 (D.Mass. 1963).]

    See also
    , supra, 465 U.S. at 903, 104 S.Ct. at 1551, 79 L.Ed.2d at 905 ("Lawyers operating in the marketplace can be expected to charge a higher hourly rate when their compensation is contingent on success than when they will be promptly paid, irrespective of whether they win or lose.") (Brennan, J., concurring); Berger, supra, 126 U.Pa.L.Rev. at 324-25 ("The experience of the marketplace indicates that lawyers generally will not provide legal representation on a contingent basis unless they receive a premium for taking that risk."); 2 Derfner & Wolf, supra, ¶ 15.01[2][c], at 15-16 ("Most courts realize that where payment of a fee is contingent on success an attorney should receive a larger overall fee than where payment is guaranteed regardless of outcome....") (footnote omitted).

  • Texas: Dillard Department Stores, Inc. v. Gonzales, 72 S.W.3d 398 (Tex. App.-El Paso 2002), where, in doubling the attorney's usual rate (ie. a multiplier of 2), a Texas appeals court made the follwing observation on the use of fee enhancement multipliers in Texas litigation (bold text is my emphasis):

    Texas courts consistently allow the use of a multiplier based upon the contingent nature of a fee under Texas statutes allowing recovery of attorney's fees. Guity v. C.C.I. Enterprise Co.
    , 54 S.W.3d 526, 529 (Tex.App.-Houston [1st Dist.] 2001, no pet.); Borg-Warner Protective Services v. Flores, 955 S.W.2d 861, 870 (Tex.App.-Corpus Christi 1997, no pet.); Crouch v. Tenneco, 853 S.W.2d 643, 648 (Tex.App.-Waco 1993, writ denied).

    Moreover, we note that at least one state court has specifically rejected the U.S. Supreme Court's ban on a contingency multiplier in interpreting its own state anti-discrimination statute. See
    Rendine v. Pantzer
    , 276 N.J.Super. 398, 648 A.2d 223, 254 (1994) (holding that trial judge correctly considered contingent nature of fee in doubling the lodestar, rejecting Dague after extensive discussion), aff'd as modified, 141 N.J. 292, 661 A.2d 1202 (1995). Considering this, we cannot find the trial court acted without reference to guiding principles.
(4) The appeals court's brief mention approving the use of the multiplier follows:
(5) For those attorneys, law students, paralegals and other fans of the law who find something counterintuitive about an attorney for a prevailing party being able to score attorney fees from the losing litigant in pro bono cases (I suppose that refering to these cases as contingency fee, rather than pro bono, would be more apt), there's really nothing new about it, believe me. See, for example:

Recently-Elected Ohio AG Caves In Lawsuit With Mortgage Servicer; Settlement Requires Outfit To Do What It Should Have Already Been Doing Anyway

From the Office of the Ohio Attorney General:
  • Ohio Attorney General Mike DeWine and Ohio Department of Commerce Director David Goodman [] announced an assurance of voluntary compliance (AVC) with Carrington Mortgage Services, LLC to resolve a 2009 lawsuit and to provide relief to Ohio homeowners facing foreclosure.


  • The Attorney General, the Ohio Department of Commerce and Carrington Mortgage Services agreed to mortgage servicing standards that will apply to all Carrington Mortgage Services-serviced Ohio loans. The servicing standards include:

    1 - Borrowers who complete a loan modification application will be assigned a single point of contact with Carrington Mortgage Services.

    2 - Carrington Mortgage Services will implement a specific timeline for all loan modification requests.

    3 - Carrington Mortgage Services will temporarily suspend foreclosures when a borrower completes a loan modification application and will implement an internal review process for denied loan modifications.

For the Ohio AG press release, see Attorney General DeWine and Ohio Department of Commerce Announce Settlement with Carrington Mortgage Services.

Go here to view signed agreement.

Sunday, May 22, 2011

Foreclosure Judgment Vacated; AZ Appeals Court: Law Firm "Harmed The Integrity Of The Judicial Process & The Administration Of Justice"

A a 3-judge panel of the Arizona Court of Appeals recently vacated a judgment in a foreclosure action, pointing to the improper handiwork of Mesa, Arizona law firm Maxwell & Morgan in obtaining the judgment on behalf of its client, a homeowners' association, as one reason for its ruling.(1)

An excerpt:
  • ¶44 Here, the HOA's attorneys committed a fraud upon the court that justified setting aside the default judgment under Rule 60(c)(6).

    First, the lien foreclosure complaint stated that there were two deeds of trust on the property but did not disclose that one of them was a first deed of trust. The complaint referred to § 33-1807(A) regarding creation of an assessment lien, and § 33-1807(H) regarding attorneys' fees but did not refer to § 33-1807(B)(2) which plainly subordinates the assessment lien to a first deed of trust. The complaint falsely stated that the assessment lien had priority over all other liens.

    Second, the judgment of foreclosure that the HOA lawyers presented to Commissioner McCoy to enter did not reflect that there was a first deed of trust on the property, nor did it refer to § 33-1807(B)(2) but merely stated that the assessment lien had priority over all other liens and falsely stated that the default judgment foreclosed all other liens, including the first deed of trust.

    Third, although the complaint alleged that the CC&Rs gave the HOA a lien on the property which was perfected upon recordation, it did not refer to section 7.9 of the CC&Rs, which gave the first deed of trust priority over the assessment lien.

    Finally, to obtain the default judgment, the attorney representing the HOA at the default hearing avowed to the court that the allegations set forth in the complaint and the proffered judgment of foreclosure were true and correct.

    These material omissions and misrepresentations made in an ex parte proceeding prevented the commissioner from reaching an informed and impartial decision regarding entry of the default judgment, made it impossible for the court to properly perform its function of adjudicating the case in a fair and lawful manner, and harmed the integrity of the judicial process and the administration of justice.

For the entire ruling, see Cypress On Sunland Homeowners Association v. Orlandini, Nos. 1 CA-CV 10-0142, 1 CA-CV 10-0235 (Consolidated) (Az. App. Div.1 Dept. B, May 19, 2011).

(1) According to footnote 3 of the ruling, the record reflected that the lower court judge provided a copy of his ruling to the State Bar of Arizona for consideration of possible ethical violations. Pursuant to their ethical obligations, the 3-judge appellate panel similarly are providing the State Bar with a copy of this opinion.