Saturday, June 25, 2011

5,000 Oregonians Score BofA Apology After Receiving Notice Of Delinquent Taxes From Sloppy Servicer

The Oregonian reports:
  • Bank of America said [] it mistakenly sent nearly 5,000 Oregonians letters claiming they owe property taxes and might be risking foreclosure when they, in fact, don't. Washington County Department of Assessment and Taxation director Rich Hobernicht estimates his office has received 1,000 calls since Monday from homeowners who received letters from BAC Tax Services Corp, an arm of the bank's BAC Home Loan Servicing division.

  • In Multnomah County, the bank said it sent 1,600 letters in error, according to county spokesman Shawn Cunningham. "We sincerely apologize to those who received the letter in error," said Jumana Bauwens, a bank spokeswoman. She said the bank is in the process of notifying affected customers in 14 Oregon counties where the erroneous letters went out.

  • Judy Crawford of Aloha and Sharyn Rowe of Bethany said the letters indicated they were delinquent on their property taxes. Neither of them are. The letter said they had 30 days to pay the bill or the bank might do it for them and impose an escrow account to cover its costs, raising their monthly payment."We have always been in good standing in the 15 years we've owned our home," Crawford said. "My husband and I are truly furious."

For more, see Bank of America apologizes for mistakenly accusing 5,000 Oregonians of being late on property taxes.

Go here for BofA's delinquent tax notice.

Illinois Regulator Fines Mortgage Servicer Over Altered Foreclosure Affidavits, Robosigned Documents

From the Illinois Department of Financial and Professional Regulation:
  • PHH Mortgage Company has been fined $290,000 for signing foreclosure affidavits that the company knew would later be altered by its attorneys and for signing affidavits using someone else’s name, according to an order released today by the Illinois Department of Financial and Professional Regulation (IDFPR). The violations were found during an ongoing special investigation of 20 Illinois licensed mortgage servicing companies, which was launched last year after learning of foreclosure improprieties across the country.


  • The order, signed by Manuel Flores, Director of IDFPR’s Division of Banking says that in at least 19 files, PHH failed to sign affidavits after they had been altered by the company’s attorneys and that PHH’s knowledge of and complicity with this process is evidenced by the fact that the original affidavits were incomplete and contained notations such as “will add” when they were tendered to the law firm of Fisher and Shapiro. The law firm, in turn, under penalty of perjury and acting on behalf of PHH, then attested to the completeness of the altered affidavits although they had not been reviewed or re-executed by PHH.
  • The Department discovered other evidence of improprieties on the part of PHH employees in 16 of the 19 affidavits. These 16 affidavits were identified as having all been signed and attested to by the same PHH employee in his or her official capacity. Yet, the Department noted no less than five distinctly different signatures attributed to this same PHH employee, leading the Department to conclude that at least four different people used one employee’s name to sign the affidavits. PHH has ten days to request a hearing on the Department’s order.(1)

For the IDFPR press release, see Mortgage Company fined $290,000 for Incomplete and False Foreclosure Documents.

(1) See Chicago Tribune: Company in foreclosure document probe to dispute fine.

City Attorney To All Victims Of Recently-Convicted Upfront Fee Loan Modification Peddler: 'Pick Up The Phone & Call For Cash!'

In Southern California, The San Diego Union Tribune reports:
  • The San Diego City Attorney's Office is looking for homeowners who paid an up-front fee to a company that promised to lower monthly mortgage payments and never delivered, agency officials said [].

  • Christopher Dixon, the owner of the now-defunct Nations Mortgage Solutions, pleaded guilty in San Diego Superior Court on Friday to acting as an unlicensed real estate agent, while collecting up-front fees for loan modifications, which is illegal in California. Dixon has been ordered to pay a $1,000 fine and $6,500 in restitution to victims.

  • The City Attorney's consumer protection division filed charges against Dixon last year after looking into complaints from people who paid Dixon 1,000 to $3,000 to modify their loans and got nothing in return.

  • Agency officials are on the look-out for more people who may have fallen victim to the scam. Dixon has been ordered to pay restitution to victims who come forward within the next two months. Do you think you were victimized? File a claim by calling (619) 533-5600.

Source: Prosecutors seeking victims in loan-mod scam.

Feds Score $18.8M Settlement With Florida Upfront Fee Loan Modification Outfit Accused Of Rampant Ripoffs From Hapless Homeowners

From the Federal Trade Commission:
  • Under a settlement with the Federal Trade Commission, a federal court banned three men and their company from the mortgage modification business and ordered them to pay nearly $19 million for consumer refunds. The defendants allegedly deceived distressed homeowners with phony claims that they would negotiate with lenders to modify their mortgages and make them more affordable.

  • The FTC sued First Universal Lending and its owners in November 2009 as part of Project Stolen Hope, a continuing federal-state crackdown on mortgage foreclosure rescue and loan modification scams. As alleged in the FTC’s complaint, the defendants encouraged homeowners to stop making mortgage payments, saying lenders would not negotiate unless they were at least a few months behind in their payments. After charging consumers up to $7,000 in up-front fees, the defendants often did little or nothing to help them, the agency charged. The court subsequently halted the defendants’ operation, froze their assets, and ordered them to disable their Web sites and computers.

  • In addition to imposing a judgment of more than $18.8 million against the defendants, the settlement order bans them from the mortgage relief services business. It also permanently prohibits the defendants from misrepresenting material facts about any good or service, violating the Telemarketing Sales Rule, selling or using customers’ personal information, failing to properly dispose of customer information, and collecting payments from their customers.

  • The defendants are First Universal Lending LLC, Sean Zausner, David Zausner, and David J. Feingold, an attorney in Palm Beach Gardens, Florida.

For the FTC press release, see FTC Stops Bogus Mortgage Loan Modification Business Defendants Ordered to Pay Almost $19 Million to Settle FTC Charges.

Go here for some available court filings in this case.

Washington State Regulator: Watch Out For Upfront Fee Loan Modification Ripoffs Masquerading As Forensic Loan Audits, 'Mass Joinder' Lawsuits

From the Washington State Department of Financial Institutions:
  • Many Washington consumers have reported receiving misleading advertisements such as the ones shown here:

    Sample Advertisement 1,
    Sample Advertisement 2.

  • The Department of Financial Institutions has conducted an investigation of the source of these materials, and ascertained that they are neither from the consumer’s lender or any branch of the government, but from companies affiliated with a California law firm, Kramer & Kaslow, and a professional corporation called "Consolidated Litigation Group."

  • In late 2010, these affiliated companies sent mailings to Washington consumers for loan modification services; in early 2011, the advertisements were for forensic loan audits (mortgage loan compliance review).

  • Fees for loan modification services were reported as $3,000 or more; the "mortgage loan compliance review" was quoted as $2,500, fully refundable if no violations are found. If the modification efforts are unsuccessful, or the forensic loan audit uncovers "predatory lending violations", the consumers are then solicited to become a plaintiff in a mass joinder lawsuit with "Consolidated Litigation Group."

  • Initially this inclusion required no extra fees; however, recent consumer reports indicate that the fees to join the "mass joinder lawsuit" are quoted as $1,500 or more.

For more, see Consumer Alert: Kramer and Kaslow (Unlicensed Loan Modification Services and Advance Fees).

Washington State Regulator Tells Out-Of-State Lawyer Allegedly Peddling Loan Modification Services To 'Stop Now!'

From the Washington State Department of Financial Institutions:
  • The Washington State Department of Financial Institutions (DFI) has taken swift action to stop an unlicensed mortgage loan modification company from continuing to harm Washington consumers.

  • DFI issued a Temporary Cease and Desist Order against Home Credit Law Center, its President, attorney Brian R. Linnekens, and an employee, Derek Thomas. The Department ordered the Respondents, all of Los Angeles, to immediately cease and desist unlicensed activity, misrepresenting that Mr. Linnekens was licensed to practice law in Washington, and taking advance fees for loan modification services.


  • As the mortgage crisis continues in Washington, more homeowners are facing the prospect of foreclosure. Some, in a desperate search for relief, cling to any offer of help. Home Credit Law Center employees call Washington homeowners offering that relief for a $3,000 advance fee.

For more, see DFI Orders Unlicensed California Law Firm - Home Credit Law Center - To Stop Offering Unlawful Mortgage Loan Modifications (Brian R. Linnekens and his law firm charged with taking property from Washington residents by fraud or misrepresentation).

Illinois Regulator Tags Unlicensed Outfit With Fines, C&D Order For Alleged Racket That Clipped Homeowners With Upfront Fees For Failed Loan Mods

From the Illinois Department of Financial and Professional Regulation:
  • Governor Pat Quinn’s Mortgage Fraud Task Force (MFTF) [] announced the results of a recent investigation into alleged unlicensed and improper mortgage loan modification activities by Avatar Realty Group, also known as Monroe Realty and Financial Enterprises and Arthur R. Monroe of Oswego.
  • The MFTF learned of possible mortgage fraud when a homeowner called the MFTF hot-line. He had gone to the company for help in saving his home from foreclosure after hearing an ad on Polish language radio about loan services offered by Monroe. The company and Monroe demanded a $150 consulting fee and required an up-front payment of $1,125 for loan modification services. The MFTF learned of the situation after the homeowner lost his home because the loan modification services were not performed and the loan was not modified.


  • The MFTF investigation resulted in multiple disciplinary actions. IDFPR is ordering Avatar Realty to cease and desist its unlicensed loan modification activities and is fining the firm $25,000 for violating the Residential Mortgage License Act of 1987. The Department is also revoking the prior loan origination registration of Arthur Monroe for not having a current license to provide loan services and failing to meet the law’s standards of conduct. Finally, the Department has filed a disciplinary action on Monroe’s real estate broker’s license for exceeding the scope of licensed activities.

For the Illinois IDFPR press release, see Mortgage Fraud Task Force Investigation Leads to Multiple Disciplinary Actions.

Go here for the Cease & Desist Order and here for the Complaint.

Friday, June 24, 2011

Ill. Foreclosure Mill Removed Affidavit Signature Sheet & Reattached It To Pages With Altered Content, Says Illinois Suit Seeking Class Action Status

In Chicago, Illinois, the Chicago Tribune reports:
  • A former Chicago resident whose home is in foreclosure has filed a lawsuit against Fisher and Shapiro LLC, the law firm that admitted to Cook County Circuit Court that some of the mortgage foreclosures it handled contained altered documents.

  • The suit, filed in federal court in Chicago Monday, seeks class-action status and comes three months after the court’s Chancery division temporarily halted more than 1,700 mortgage foreclosure cases as a result of the law firm’s admission. Upon further review by the court, the number of cases that was temporarily stayed grew to 2,127.

  • Fisher and Shapiro did not admit to rubber-stamping of documents, as is the case in the various “robo-signing” investigations in states like Illinois, where foreclosure actions are processed through the courts. Instead, the firm said that in some cases, the signature page of foreclosure affidavits was removed, the document’s contents were altered and then the signature page was reattached, according to the general administrative order issued by the court March 2.

  • Stacy Hill, the plaintiff in the suit, alleges that the law firm’s actions violated the Fair Debt Collection Practices Act and the Illinois Consumer Fraud and Deceptive Business Practices Act.

  • In December 2009, Deutsche Bank National Trust Co. filed a foreclosure suit against Hill, who owned a home on Chicago’s south side. Hill has since vacated the home and relocated to the East Coast. That suit, still unresolved, is identified as one of the affected cases containing altered affidavits, according to her attorney, Kelli Dudley.


  • Hill’s suit, which seeks statutory, actual and punitive damages, will not get her home back and Dudley said her client does not dispute the facts of the foreclosure action against her. “This case is only about the procedure,” Dudley said. “The reason for pursuing the litigation is her rights were violated. Before you get to take her house away, you have to follow the procedures.”

For the story, see Law firm Fisher and Shapiro sued over foreclosure cases.

See also, Courthouse News Service: Class Claims Foreclosure Lawyers Doctored Documents.

For the lawsuit, see Hill v. Fisher and Shapiro LLC.

Suit Alleges Banksters Stiffed County Deed Registry Out Of Million$ In Deed Transfer Taxes On Foreclosure Sales

In Ingham County, Michigan, Bloomberg reports:
  • Bank of America Corp., Wells Fargo & Co. and mortgage servicers were sued by a Michigan county official who claimed they failed to pay millions of dollars in transfer taxes on foreclosure sales.

  • The banks and other defendants were part of an effort to “inappropriately” claim state and county tax exemptions on “improperly filed deeds,” Curtis Hertel Jr., Ingham County register of deeds, said [] in a lawsuit in state court in Lansing, the capital city. Hertel also sued Federal National Mortgage Association, Federal Home Loan Mortgage Corp. and two law firms that handle foreclosures.

  • We didn’t specify damages, but I believe it’s in the millions for the county and tens of millions for the state,” Hertel said [] in a telephone interview. “We intend to fight for it.”

  • The county claims that the banks would transfer ownership of a note to Fannie Mae or Freddie Mac to avoid transfer taxes in foreclosures, Hertel said. “Fannie and Freddie would foreclose and claim the exemptionon transfer taxes allowed for government entities, he said. As companies, not government entities, Freddie Mac and Fannie Mae aren’t eligible for the exemptions, he said.

  • The official transfer tax rate for counties in Michigan is $1.10 for every $1,000 of value being transferred, he said. “I want whoever is responsible to pay the transfer tax.”

For the story, see: Bank of America Sued for Foreclosure-Sale Taxes in Michigan.

Closing Agents Get 10 Years After Copping Pleas To Pilfering Proceeds From Loan Refinancings, Leaving Homeowners With Two Mortgages, Ruined Credit

In DuPage County, Illinois, the Naperville Sun reports:
  • Two DuPage County women stole millions intended to refinance their clients’ home mortgages, instead using the money for personal expenses and efforts to keep their own struggling title business afloat. Homeowners, meanwhile, often were left struggling with two mortgages, foreclosure threats and plummeting credit ratings.

  • Pamela Williams and Patricia Johnson [...] were each sentenced to 10 years in prison for the thefts they carried out in 2007 and 2008 while running PLM Title Company in Wheaton.


  • Williams, of Darien, and Johnson, of Naperville, pleaded guilty in April to felony theft charges as part of a plea agreement with prosecutors that limited their maximum prison terms to 11 years. The women also were ordered to pay $1.8 million in restitution, though prosecutors contended the pair likely stole more than $6 million, with thefts dating back to at least 2002.

  • Williams and Johnson pilfered escrow funds primarily from clients who were refinancing existing mortgages, prosecutor Diane Michalak said.

  • The money was supposed to go to pay off a client’s previous mortgage, but Williams and Johnson often used the money for personal expenses, including Chicago Bears season tickets, golf outings and paying at least $6,000 for Williams’ daughter’s wedding.

  • Much of the money, though, was used to cover other refinancing deals. The women even created counterfeit bank statements and other documents to try to hide their scheme, Michalak said. “They stole over and over and over,” Michalak said. “They knew exactly what they were doing and they didn’t care.”

  • Some homeowners said they still are struggling with financial problems caused by Williams and Johnson. “I have two mortgages on property now,” said Joycelyn Cole of Chicago, a U.S. Postal Service worker. “It ruined me, my credit.”

For the story, see Two DuPage County women receive 10-year sentence for mortgage scheme.

Group Convicted In Scam That Used Forged Documents To Swindle Homeowners In Refinancing Ripoff

In Los Angeles, California, the Daily Breeze reports:
  • The operators of a Van Nuys-based mortgage company have been convicted of refinancing a Harbor Gateway couple's mortgage with forged documents, ripping them off and putting them in jeopardy of foreclosure, prosecutors said Tuesday.

  • Khachatour Galdjian, chief financial officer for Liberty One Financial Group Inc., and company employees Vighen Mkrtoumian and Layne Nocera were convicted of conspiracy and multiple counts of grand theft and forgery. Each was ordered to pay $43,584 in restitution and investigative costs, and received sentences ranging from 90 to 120 days in jail as well as probation terms.

  • John DiBona, a telemarketer for Liberty One, and Wayne Stimson, a company broker, were each convicted of one count of false representation in a real estate transaction. Liberty One's chief executive, Garnik Poghosyan, remains sought on a $350,000 warrant.

  • Prosecutors said DiBona "cold called" Harbor Gateway homeowners and offered to refinance an existing mortgage loan on their home. Along with Nocera, DiBona deceived the victims into obtaining refinancing in excess of the amount, interest and monthly payments they were promised by the lender.

  • The victims later learned their signatures had been forged and their income and assets were fabricated on many of the documents. The discrepancies led to the possibility of foreclosure.

Source: Mortgage employees convicted of stealing from local homeowners.

Escrow Agent Gets 4 Years For Real Estate Closing Ripoffs; Handiwork Included Failure To Properly Record Deeds While Pocketing Lien Payoff Proceeds

From the Office of the U.S. Attorney (Baltimore, Maryland):
  • U.S. District Judge J. Frederick Motz sentenced Daniel E. Fink Jr., age 44, of Baltimore, who operated Homemaxx Title & Escrow LLC (Homemaxx), a title company that conducted residential real estate closings with offices in Middle River and Parkville, Maryland, [] to four years in prison, followed by three years of supervised release, for wire fraud in connection with a scheme to defraud lenders and homeowners of more than $2.2 million. Judge Motz also ordered Fink to forfeit $2.2 million and to pay restitution in the full amount of the victims’ losses. The total loss amount has not yet been determined, but is estimated to be at least $2.2 million.


  • According to Fink’s plea agreement, from February 2003 to July 2004, Fink defrauded lenders, a title insurance company, and homeowners to obtain more than $2.2 million. Fink made arrangements for Homemaxx to act as the title company for real estate settlements and refinancing transactions. Lenders deposited funds in Homemaxx escrow accounts that Fink controlled. As part of the scheme, Fink caused title insurance to be issued to individuals purchasing or refinancing real estate, but concealed facts that negatively affected the buyers’ title in the real estate transactions. Fink also made misrepresentations to lenders in connection with transactions in which Fink purportedly was buying or selling the property and handling the settlement on behalf of Homemaxx.


  • In addition, despite Fink’s representations to lenders that escrow funds were properly distributed after settlement, Homemaxx to failed to pay outstanding first mortgages on real estate transactions or to properly record deeds.


  • In April 2004, Fink was confronted by representatives of the title insurance company about substantial amounts of money missing from the Homemaxx escrow account. Fink later fled the Baltimore area and used aliases to engage in real estate transactions in Florida. On March 26, 2009, a federal grand jury in Baltimore returned an indictment charging Fink with wire fraud and money laundering in connection with the scheme. Fink was arrested in Florida on February 15, 2010 by the Palm Beach Police Department.

For the U.S. Attorney press release, see Title Company Owner Sentenced to 4 Years in Prison for Mortgage Fraud Scheme Involving Losses of over $2.2 Million (Was a Fugitive for Almost a Year).

State Law Enabling Legalized 'Inflated Fee' Ripoffs Involving Unpaid R/E Taxes Has Banksters At Odds With Tax Lien Vultures As Homeowners Get Squeezed

In Jefferson County, Kentucky, the Louisville Courier-Journal reports on the process by which the local municipality peddles liens for unpaid real estate taxes to investors, state law that makes it easy for the investors to pull off 'inflated fee' ripoffs when enforcing these liens, and an apparently outraged banking industry, who object to the investors doing to the banks what the banks are notorious for doing to homeowners:
  • Every year, investors [...] provide schools, metro government and fire departments with money in lieu of property owners who fail to pay their taxes. But in exchange, Jefferson County gives up hundreds of thousands, perhaps millions, of dollars a year that go to investors, typically based out of town — money that could be used to combat the problem of vacant and abandoned properties, according to experts on running city land banks.

  • If the homeowner doesn't pay the back taxes, the investor can collect interest on the debt for up to 11 years or foreclose on the property, as in Henry's case. Like banks with mortgages, tax lien buyers gauge when the money they're owed exceeds a property's market value.

  • Housing advocates say lien buyers can charge “excessive” fees, especially legal costs once a case moves to foreclosure, making it nearly impossible for the homeowner to avoid losing the property.

  • A lot of them, it's so far gone that there's not much we can do,” said John Young, an attorney with Legal Aid Society of Louisville,(1) who represents homeowners fending off tax lien companies.


  • In 2004, American Tax Funding, a Jupiter, Fla., company that calls itself “the nation's leading” bulk-buyer of tax liens, hired a lobbyist and convinced the Kentucky General Assembly to let it and other tax lien buyers add attorneys' fees to the liens, said Jim Ballinger, a Louisville attorney who represents American Tax Funding. That made tax lien investing more attractive because legal costs no longer threatened to eat into profits.


  • State Rep. Steve Riggs of Jeffersontown, who sponsored the 2004 legislation that helped make tax lien investing attractive, said it's a way for cash-strapped schools and fire departments to get at least some of the money that would otherwise go uncollected.


  • The tax lien holders get paid first from any proceeds at the foreclosure sale, which has drawn the ire of banks that hold mortgages. After lobbying unsuccessfully this spring to curb the tax lien buyers' business, the Kentucky Bankers Association recently filed suit in Franklin Circuit Court, calling the whole process unconstitutional.

For more, see Tax lien sales cloud Louisville's control over houses.

(1) The Legal Aid Society of Louisville provides free civil legal services to qualified low income Kentucky residents living in the following counties: Jefferson, Oldham, Trimble, Henry, Shelby, Spencer, Washington, Marion, Nelson, Bullitt, Larue, Hardin, Grayson, Breckinridge, and Meade.

Thursday, June 23, 2011

Politically-Influenced Receivership Appointments That Suck Cash Out Of Buildings In F'closure Origin Of Latest Stench Emanating From NY Court System

In New York City, The New York Times reports:
  • In 2009, a judge in Manhattan had a lucrative appointment to hand out: oversight of a diamond district building that was drifting into foreclosure. Nearly 600 people in Manhattan had been approved for such work. But the job went to a lawyer named Mark D. Lebow, who is the husband of Patricia E. Harris, Mayor Michael R. Bloomberg’s most trusted aide. Since then, Mr. Lebow has earned $352,000 in fees, more than $5,000 a week, according to court records.

  • The foreclosure crisis has caused a surge in the number of court-appointed receivers for distressed properties in New York, and politically connected lawyers are benefiting. Yet even as the fees mount, totaling millions of dollars, it remains unclear why judges are selecting some of these lawyers, and whether the fees are being well spent.

  • The court system in New York State has long been criticized for fostering a system of patronage appointments that enriches lawyers and others with ties to influential politicians. Court officials defend the process of selecting receivers for distressed properties, saying judges are looking for people who they know have done good work.


  • When a building goes into foreclosure, a judge appoints a lawyer as a receiver who acts a property’s temporary landlord during the process. Receivers are entitled to fees that typically amount to 5 percent of a property’s revenues. Judges can award less than 5 percent, but usually do not.

  • The court-appointed lawyers in turn usually hire property managers and other lawyers to assist in overseeing the properties. The receivers do not pay out of their own pockets for the costs of the property managers and other lawyers. That money comes from the properties’ revenues.

  • This is why mortgagees hate foreclosures,” said Harold Shultz, a senior fellow at the Citizens Housing and Planning Council, a nonprofit research group. “During this process all these people are sucking money out of the building.”


  • Perhaps the most profitable recent receivership went in 2009 to a retired judge, Seymour Boyers, 84. He was paid $760,000, or roughly $7,800 a week, to oversee the case of the sprawling Riverton apartments in Harlem. Mr. Boyers has specialized in medical malpractice and product liability while in private practice. Members of his law firm donated $1,000 to the campaign of the judge, Richard F. Braun, who appointed him as a receiver.

  • A court spokesman, David Bookstaver, said Justice Braun was not aware of the campaign contributions. Mr. Boyers “is a highly respected former jurist with outstanding credentials," Mr. Bookstaver said. At Riverton, the state’s housing division ordered rent reductions during Mr. Boyers’s tenure because repairs were not completed. Mr. Boyers said he was not aware of the request for repairs, which he said were sent to the property manager, until months after they were issued.(1)

For the story, see Politically Tied Lawyers Win Jobs Handling Foreclosures in the City.

(1) For other ripoffs having some connection to the NYC court system, see:

Foreclosure Rescue Equity Stripping Victims Burst Into Courtroom Applause As Feds 'Frog-March' Sale Leaseback Peddler To Prison For 13+ Years

In Philadelphia, Pennsylvania, The Associated Press reports:
  • Victims applauded as a Pennsylvania man was sentence to over 13 years in prison for tricking homeowners into turning their houses over to him then evicting them.

  • A federal judge in Philadelphia ordered 47-year-old Gennaro Rauso taken into custody immediately after his sentencing Monday. KYW-AM reports victims who attended the hearing began clapped as he was led from the courtroom in handcuffs. Prosecutors say Rauso offered to rescue more than 200 struggling homeowners by offering them a deal that was too good to be true.

  • Officials say Rauso got his victims to sign over their properties in return for a promise to pay off the mortgage and rent the property back to the owners. But victims say Rauso took their money and homes then dumped them on the street.(1)

Source: Victims applaud mortgage fraud jail term in Pa.

(1) Rauso was also the target of at least one civil lawsuit (a suit that probably serves a good template for those looking to undo these types of real estate swindles) where a homeowner successfully voided the sale leaseback ripoff, and which left the (presumably unwitting) lender which failed to physically inspect the premises and inquire into the rights and equities of the occupants in possession before providing a mortgage loan to finance Rauso's scam partially holding the bag. See:

Philly Feds Complete Prosecution Of Foreclosure Rescue Equity Stripping Racket With Conviction Of Sale Leaseback Peddling Pair

In Philadelphia, Pennsylvania, The Philadelphia Inquirer reports:
  • A Bucks County couple were convicted Tuesday in federal court of a $14.6 million mortgage-fraud scheme targeting homeowners facing foreclosure, prosecutors said. Edward G. and Jacqueline McCusker of New Hope face lengthy prison sentences, prosecutors said. The couple, both 47, also face large fines and possible forfeiture of the proceeds from their fraud.

  • The McCuskers operated Axxium Mortgage Inc. They worked with codefendants Jeffrey A. Bennett and Stephen G. Doherty, both lawyers, who have pleaded guilty and await sentencing. Codefendant John Bariana also has pleaded guilty and is awaiting sentencing. The defendants sought homeowners facing foreclosure and promised to help them find an investor to save their homes.

  • Prosecutors said the defendants engaged in real estate transactions with "straw" purchasers to obtain fraudulent mortgages. They took the equity the homeowners had left, used some of it to pay the new mortgages, and kept the remaining money for themselves.

  • Doherty solicited and referred homeowners to Edward McCusker, and used fraudulent bankruptcy filings to delay some foreclosures. Bennett handled the closings for real estate transfers, manipulating information provided to lenders. They operated from their Doylestown law firm of Bennett & Doherty. The case was investigated by the FBI and the Pennsylvania Department of Banking.

Source: Bucks County couple convicted in mortgage fraud.

$100K Bail For Suspect Pinched For F'closure Rescue Fraud; Allegedly Stiffed Strapped Homeowners On Services After Clipping Them Out Of Upfront Fees

From the Office of the Ventura County, California District Attorney:
  • Ventura County District Attorney Gregory D. Totten announced [] that the Ventura County District Attorney's Office Real Estate Fraud Unit has filed a felony complaint against Aquilino Hernandez (aka Lino Hernandez, DOB 7/5/64) of Bellflower. The felony complaint charges Hernandez with two counts of foreclosure consultant fraud (Civ. Code § 2945.4(a)).

  • The charges filed against Hernandez arise out of a fraudulent home foreclosure rescue program he ran primarily under the business name of “Terra Bella Management” [...] in Bellflower, California. Hernandez is alleged to have targeted predominantly monolingual Spanish-speaking residents of Ventura County who were facing foreclosure of their homes.

  • Hernandez is accused of demanding or collecting thousands of dollars in upfront fees from victims while promising to save their homes from foreclosure. In reality, Hernandez completed no actual services for the victims who eventually lost their homes in foreclosure.


  • The arrest and prosecution of Hernandez is the result of a long-term investigation being conducted by the Ventura County District Attorney's Office Real Estate Fraud Unit into suspicious home foreclosure rescue schemes and follows the pending felony case of People v. Maria Victoria Santos [...]. On February 22, 2011, Santos pled guilty to four felony counts of foreclosure consultant fraud and four counts of felony grand theft. Santos is scheduled to be sentenced on June 28, 2011. Bail was set at $100,000 for Hernandez.

Go here for the Ventura County DA press release.

Wednesday, June 22, 2011

Feds Tag Banksters w/ Suits On Behalf Of Now-Collapsed Credit Unions Left Holding Bag On Crappy Securitized Mtgs; Regulator: More Complaints To Come

The Wall Street Journal reports:
  • Federal regulators accused J.P. Morgan Chase & Co. and Royal Bank of Scotland Group PLC of duping five large credit unions into buying more than $3 billion in mortgage bonds that were "destined to perform poorly," and that quickly sank the credit unions.

  • The two civil lawsuits filed Monday in U.S. District Court in Kansas City, Kan., by the National Credit Union Administration are the most aggressive move yet by U.S. regulators to recover losses from Wall Street firms for alleged wrongdoing before and during the financial crisis.


  • The collapse of the five large institutions, called wholesale credit unions, "resulted in the worst crisis faced by the credit-union industry in its history," said NCUA Chairman Debbie Matz. "We believe numerous parties within the chain, primary underwriters and intermediaries as well, have responsibility."


  • Officials at the NCUA, a federal regulator that supervises the nation's credit unions, expect to file additional lawsuits against as many as eight more banks and securities firms that pooled individual mortgages into securities and sold them to the five credit unions, which failed in 2009 and 2010, according to people familiar with the situation.

  • The NCUA has issued 986 subpoenas to companies involved in the mortgage machine, including lenders that originate loans, investment banks that sell mortgage-backed securities, mortgage servicers and credit-ratings agencies, a spokesman said.

For more, see Feds Sue Bankers Over Fall in Bonds (requires paid subscription; if no subscription, GO HERE; or GO HERE - then click appropriate link for the story).

For the lawsuits, see:

Virginia Woman Gets 12 Years For Role In Peddling Forensic Loan Audit/Mortgage Elimination Ripoff Targeting Homeowners

From the Office of the U.S. Attorney (Alexandria, Virginia):
  • Linda Sadr, 52, of Manassas, Va., was sentenced [] to 144 months in prison, followed by three years of supervised release, for her role in a “mortgage elimination” scheme that caused more than $11 million in losses. Sadr was also ordered to pay more than $9 million in restitution to the victims.


  • According to court documents, from 2004 through 2008, Sadr marketed a scheme known as a “Mortgage Elimination Program.” Sadr represented to the homeowners that lenders making refinance loans were operating illegally by, among other things, bundling the loans for resale and selling them to investment banks, which then used the loans as collateral to borrow additional funds.

  • Sadr fraudulently represented to homeowners that she and her companies could arrange for the satisfaction of the homeowners’ mortgages on their residences. Sadr represented that she would challenge the lenders, on behalf of the homeowners, for their purported illegal actions, would prevail in the challenges, and would thereby eliminate the mortgages.

For the U.S. Attorney press release, see Manassas Woman Sentenced to 12 Years in Prison for Mortgage Elimination Scheme.

Career Ripoff-Related Cons Go Down Again For Roles In Boiler Room Loan Mod Racket Purporting To Have Staff Of Attorneys, Forensic Accountants, Etc.

In San Diego, California, ABC News reports:
  • A San Diego man featured in an ABC News investigation has been sentenced to 30 months in federal prison and ordered to pay $460,000 for defrauding desperate homeowners who were trying to modify their home mortgages.

  • Michael Trap, who ran a business called Nations Housing Modification Center, pled guilty to wire fraud and money laundering after duping homeowners who were falling behind on their mortgages into paying $2,500 to $3,000 for loan modification services. Trap's partner Glen Rosofsky, who was also featured in the ABC News investigation, has already been sentenced to more than five years in federal prison for his role in the scam, which prosecutors say earned the men nearly $1 million.

  • As detailed in earlier reports by ABC News, Nations Housing Modification Center boasted a prestigious Capitol Hill address in Washington, D.C., and sent letters marked with the seal of the U.S. Capitol to prospective customers. According to NHMC's mail solicitation, the company's staff of "attorneys, forensic accountants and lender specific negotiators" could help homeowners lower the principal on their loans and reduce their mortgage rates to "as low as 2 percent."

  • ABC News found that the firm's Washington address was really a mailbox at a UPS Store. The firm actually worked out of a nondescript office building in San Marcos, Calif., where, as part of a "boiler room" operation, telemarketers read from a script tailored for anxious homeowners, according to a former Nations employee-turned-whistleblower. The company had no accountants or lawyers on staff. In his guilty plea, Trap admitting making false statements to convince homeowners to win business. Prosecutors say more than 300 homeowners took the bait.


  • Trap, Rosofsky and a third man running NHMC were well known to law enforcement authorities for their previous activities. Rosofsky and Bryan Rosenberg were convicted by federal prosecutors in 2003 of charges connected to a mortgage fraud scheme in Baltimore. Both men received jail sentences for their role in the fraud.


  • Michael Trap also has a criminal past. In 2003, Trap pleaded guilty to lying to a federal grand jury in connection with the PinnFund scandal, the largest Ponzi scheme in San Diego history.

For more, see San Diego Man Gets Prison For Bilking Homeowners in Massive Mortgage Fraud.

Trial Gets Green Light For Pair Facing Charges For Allegedly Hijacking Vacant Homes In Foreclosure; Duo To DA On Plea Offer: 'Take A Hike!'

In Barstow, California, the Desert Dispatch reports:
  • Judge Glenn Yabuno ruled Thursday that there was enough evidence to go to trial for a man and a woman charged with forgery after allegedly renting out several homes going through foreclosure last year.

  • Evelyn Thompson, 51, was charged with six counts of forgery and one count of unauthorized property entry last year after Barstow Police conducted an investigation into suspected housing fraud at six Barstow residences. Police said Thompson would pose as a property manager and offer the homes for rent — even though the homes were going through foreclosure and the owners never gave permission to rent the homes.

  • Edward Tafoya, 54, was also charged with four counts of forgery after police said he helped Thompson prepare the homes for rental.


  • Both refused plea deals at the beginning of the hearing Thursday that would have landed Thompson in state prison for 16 months and would sent Tafoya to county jail for 180 days with probation. Both Thompson and Tafoya would have had to accept the plea deal to get reduced sentences.

  • Thompson remains out of custody on $100,000 bail and Tafoya remains out of custody on his own recognizance. Thompson and Tafoya are scheduled to be arraigned on the updated charges during a hearing June 29.

For more, see Local man, woman accused of housing fraud to stand trial.

Fringe Tucson Mayoral Candidate Goes On 'Home' Hijacking Spree, Staking Claims To Vacant Fannie-Owned REOs Throughout Metro Phoenix

In Phoenix, Arizona, The Arizona Republic reports:
  • A Tucson mayoral candidate from a fringe political party has seized dozens of foreclosed homes in metro Phoenix, changing the locks, kicking out real-estate agents and posting "Do Not Trespass" signs.(1)

  • [The curiously-surnamed] Marshall Home, who claims many foreclosures are illegal, has filed documents in the past two weeks with the Maricopa County Recorder's Office showing he has supposedly taken ownership of at least 21 homes belonging to government-owned mortgage giant Fannie Mae. But none of the documents shows any money has changed hands, and Fannie Mae says it has not sold the houses.

  • Real-estate agents and experts say Home's documents, a type of real-estate form called a special-warranty deed, aren't valid.

For more, see Tucson mayoral candidate on odd spree of house claiming (He seizes, but doesn't own, 21 foreclosures).

(1) Reportedly, two real estate agents got a call from their brokerage telling them Independent Rights Political Party Trust had sent a letter saying it "acquired all rights" to a Fannie Mae REO they had listed for sale. The notice reportedly told the real-estate agents they had 72 hours to remove their signs and lockboxes, but after rushing to the house wondering what was happening, Home's group had already taken their lockboxes, installed new locks and posted signs saying the house was under video surveillance and any trespassers would be "dealt with to the fullest extent of the law." A special-warranty deed, stamped by the Maricopa County Recorder's Office, also was posted on the window of the home, saying Federal National Mortgage Association had conveyed the property to the Independent Rights Party, signed by Home and his notary, but with no signatures from Fannie, the story states.

Tuesday, June 21, 2011

Florida High Court Battle Begins Over Use Of Voluntary Dismissal By F'closure Sweatshop After It Gets Bagged Submitting Allegedly Bogus Mortgage Docs

The initial brief in a case involving the use of a voluntary dismissal by a foreclosure mill in a foreclosure action to dodge court scrutiny of dubious documents that were submitted with the lower court was filed earlier this month with the Florida Supreme Court.

This issue was raised in Pino v. The Bank of New York Mellon, a Florida appeals court case, and involves conduct by the defunct foreclosure sweatshop headed by attorney David J. Stern.

For the brief, see Initial Brief - Pino v. The Bank of New York Mellon (go here for Appendix to initial brief).

Go here for links to other documents filed with the Florida Supreme Court.

Evidence Of Life Surfaces At Fla Bar; Lawyer Regulatory Body Finally Files Disciplinary Complaint Against Dethroned King Of F'closure Mill Sweatshops

The Palm Beach Post reports:
  • The Florida Bar is asking for disciplinary action against South Florida attorney David J. Stern for ignoring a 5th District Court of Appeal order in a foreclosure case where his firm represented SunTrust Bank.

  • A complaint filed Friday with the Florida Supreme Court charges Stern, whose Plantation-based company was once the largest foreclosure firm in the state, with violating rules of professional conduct and disobeying a court obligation.

For more, see Ex-foreclosure giant David J. Stern faces Bar trouble.

For the complaint, see The Florida Bar v. Stern, Case No. 11-1192 (June 17, 2011).

Go here for links to other relevant court documents.

Dubious Document Signed Years After Lender Tanked Surfaces In Ongoing South Carolina Foreclosure Action

Buried in a recent story in The Myrtle Beach Sun News on the foreclosure fraud scandal (story mentions Docx, Linda Green, LPS - the 'usual suspects') is the following excerpt on how one couple facing foreclosure was victimized by a dubious assignment of mortgage that was signed a couple of years after the mortgagee of record went out of business:
  • Bob and Christine Dorrie moved to Myrtle Beach from the Bronx in New York in 1998. Like many people during the economic boom, the Dorries used their credit cards to finance a lifestyle beyond their means. So, in September 2007, they decided to refinance their home in the Island Green East neighborhood to pay off some of their bills.


  • The Dorries' mortgage payment, which had been $987 a month, soared to $1,340 a month after the refinance. As the economy grew worse, the Dorries quickly fell behind on their house payment.

  • Wells Fargo Bank, the new owner of the Dorries' loan, filed a foreclosure lawsuit against the couple on Sept. 2, 2009. Bob Dorrie's emergency bankruptcy filing three days before the house was to be sold at auction has put everything in limbo. The Dorries now are questioning how Wells Fargo came to own their loan.

  • Ace Funding - the company that gave the Dorries their loan in 2007 - filed for bankruptcy protection and went out of business the following year, never officially assigning the Dorries' loan over to Wells Fargo.

  • Wells Fargo didn't file the assignment on behalf of the defunct Ace Funding until more than three weeks after the foreclosure lawsuit was filed. A lawyer representing Wells Fargo in the foreclosure lawsuit signed the document for Ace Funding, even though he "really has no authority to assign this mortgage," according to Terry Walden, an audit originator and attorney liaison for New South Financial.

For the story, see Mortgage papers raise Myrtle Beach real estate fraud claims (Signatures on documents used in foreclosure cases under review).

Attttorney Gets 8 Years For Clipping Clients' Trust Account Out Of $380K; Prosecutors: Lawyer Used Cash To Finance Costa Rican Casino Crapshoot

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:
  • A former Fort Lauderdale lawyer who cheated his clients out of more than $380,000 was sentenced on Thursday to eight years in prison, the Broward State Attorney's Office said. Mitchell Olin, 50, made an open plea putting his legal fate in the hands of Broward Circuit Judge Andrew Siegel.

  • He imposed the sentence and ordered Olin to repay the seven families he represented in real estate transactions and insurance settlements starting in 2002.(1) He also sentenced Olin to 15 years probation. And, Olin promised to help three of the families in foreclosure proceedings, the State Attorney's Office said.

  • The money had been placed in trust, but Olin used it to finance a casino venture in Costa Rica, prosecutors said. Olin's bank caught the discrepancies in the trust account and alerted the Florida Bar.

Source: Former Broward lawyer sentenced in fraud case.

(1) The Florida Bar's Clients' Security Fund compensates people who have been victims of of misappropriation or embezzlement of cash or property by a Florida-licensed attorney. For those ripped off by dishonest attorneys in other states and Canada, see:

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

Monday, June 20, 2011

Failure To File Motion Within 90 Days Of Deed Delivery Consummating NY Foreclosure Sale Sinks Lender's Move To Score Deficiency Judgment

A recent ruling by a New York intermediate appellate court serves as a reminder that, in New York, where the proceeds of the foreclosure sale fail to cover the entire amount due on the loan, a foreclosing mortgage lender will be deemed to be legally "out of luck" in any attempt to obtain a deficiency judgment against those liable on the loan if it fails to file a motion for a deficiency judgment "within ninety days after the date of the consummation of the sale by the delivery of the proper deed of conveyance to the purchaser", as one recent lender sadly discovered.(1)

The lender's desperate attempt to salvage the situation with the argument that the '90-day meter' should not begin to run until the referee's (foreclosure) deed could, under state law, legally be recorded fell on unpersuaded judicial ears.(2)(3)

For the ruling, see Cicero v Aspen Hills II, LLC, 2011 NY Slip Op 05153 (NY Sup. Ct. App. Div. 3rd Dept. June 16, 2011).

(1) Contrast the 90-day time period in New York with the five year time period in Florida (with an additional 20 years to collect). See Time in which the plaintiff must apply for a deficiency judgment in a Florida foreclosure case. Check state law for the applicable time frame in your state.

(2) From the ruling:

  • Pursuant to the RPAPL, "the mortgagee in a mortgage foreclosure action [may] recover a deficiency judgment for the difference between the amount of indebtedness on the mortgage and either the auction price at the foreclosure sale or the fair market value of the property, whichever is higher" (BTC Mtge. Invs. Trust 1997-SI v Altamont Farms, 284 AD2d 849, 849-850 [2001]; see RPAPL 1371 [2]).

    The statute requires, however, that a motion for a deficiency judgment be made "within ninety days after the date of the consummation of the sale by the delivery of the proper deed of conveyance to the purchaser" (RPAPL 1371 [2]).

    The 90-day period is a provision in the nature of a statute of limitations, thus "[f]ailure by plaintiff to serve notice within the 90-day period is a complete bar to the entry of a deficiency judgment" (Amsterdam Sav. Bank v Amsterdam Pharm. Dev. Corp., 106 AD2d 797, 797 [1984]).

    Here, no dispute exists that the appointed referee delivered the deed to plaintiff on November 23, 2009, or that there was any deficiency in the deed itself. Plaintiff was required, therefore, to file the motion by February 21, 2010 — 90 days from delivery of the deed — and, accordingly, Supreme Court properly held that plaintiff's March 25, 2010 motion was untimely (see Citicorp Mtge. v Strong, 227 AD2d 818, 820-821 [1996]; National Bank of Sussex County v Betar, 207 AD2d 610, 612 [1994]).

    Plaintiff asserts, instead, that the 90-day period did not begin to run until the expert's appraisals of the mortgaged properties were delivered to plaintiff on January 13, 2010. Specifically, because the deed could not be recorded in New York State until two tax forms were completed — the TP-584 and the RP-5217 — which could not be executed until the fair market value was derived from the appraisals, plaintiff argues that consummation of the sale, and the commencement of the 90-day period, did not occur until the appraisals were delivered.

    We disagree. Both our statutory and common laws dictate that transfer of real property occurs at the delivery of a properly executed deed, rather than when the deed is recorded (see Real Property Law § 244; Manhattan Life Ins. Co. v Continental Ins. Cos., 33 NY2d 370, 372 [1974]; Janian v Barnes, 284 AD2d 717, 718 [2001]).

    Plaintiff's attempt to read the clear reference to "delivery of the proper deed of conveyance" in RPAPL 1371(2) to require something more than the delivery of the properly executed deed to commence the limitations period is not persuasive (see Citicorp Mtge. v Strong, 227 AD2d at 820-821; Savings Bank of Utica v 561-575 Delaware Ave., 201 AD2d 946, 946 [1994]; Crossland Sav. v Patton, 182 AD2d 496, 496 [1992], lv denied 80 NY2d 755 [1992]).
(3) This ruling should serve as a reminder to foreclosed homeowners in New York (and elsewhere) that the unpaid balance on a foreclosed loan cannot be collected (either by the lender, some zombie debt buyer who may have swooped in and bought the crappy paper for 'pennies on the dollar', or any other scavenger) unless and until:
  • a motion requesting a hearing for the granting of a deficiency judgment is filed with the court within the proper time period,
  • a judge holds the hearing (with all parties receiving proper notice thereof), and
  • a judge grants the deficiency judgment, determining exactly what the deficiency amount is (typically, and as set forth in Cicero v Aspen Hills II, LLC, it is "the difference between the amount of indebtedness on the mortgage and either the auction price at the foreclosure sale or the fair market value of the property, whichever is higher").
A word of caution to foreclosed homeowners: beware of zombie debt buyers and other vultures that gobble up these unpaid deficiency debts from foreclosing lenders (see e.g. Short Sellers, Foreclosed Borrowers May Be In For Big Surprise As Collection Firms Scramble To Buy Up Unpaid Loan Deficiencies), and who then attempt to collect on them without first having obtained a deficiency judgment. Keep in mind that, not only are they not allowed to do this, but if they do, they are giving you a good case for a lawsuit against them for violation the federal Fair Debt Collection Practices Act, as well as any applicable state law.

See Fla. Appeals Court Nabs Sneaky F'closing Lender In Attempt To Improperly Go After Foreclosed Property Owner's Personal Assets To Satisfy Unpaid Debt for an example of one foreclosing lender who almost got away with duping a snoozing trial judge into signing a court order allowing for the collection of an unpaid post-foreclosure sale debt where the lender did not first obtain a deficiency judgment in the court that granted the foreclosure.

Trafficking In Deficiency Judgments An Upcoming Cottage Industry Being Seen On The Horizon?

The following excerpt buried in a recent story in the Sarasota Herald Tribune serves as a caution to financially-strapped homeowners and 'strategic defaulters' thinking of walking away from their underwater homes and investment property:
  • Florida is gliding quietly into a new and potentially painful part of the boom-bust cycle, where stacked-up "deficiency judgments" for unpaid condo fees and unsatisfied mortgages could come back to haunt past owners. Many of them thought they had escaped further costs when they handed their home over to their lender.

  • When a lender sells a foreclosed home for less than the mortgage, the difference -- or "deficiency" -- is typically registered in the court proceedings as being owed by the original borrower, but it is seldom paid.

  • The same thing can happen with unpaid condo or homeowner fees. Either as part of the bank foreclosure or through a separate foreclosure action, the homeowner or condo association can ask the court for a deficiency judgment.

  • In either case, even if these debt instruments gather dust for years, they remain valid and are accruing interest at the rate of 6 percent to 18 percent per year.


  • [In Florida, t]here is a five-year period from the end of a case judgment to establish a deficiency judgment.(1) Then that judgment lasts for 10 years and it can be renewed for another 10 years. "You can even sue at the end and get more time, so there is all the time in the world to collect on these things,"(2) Soto said. "Yet there is this pervasive rumor that you can somehow walk away from your house and never have to worry about it again. And it is simply not true."(3)
For more, see Foreclosure fees haunt homeowner associations.

(1) See Time in which the plaintiff must apply for a deficiency judgment in a Florida foreclosure case.

(2) See Burshan v. Nat'l Union Fire Ins. Co., 805 So.2d 835 (Fla. 4th DCA 2001):
  • The "main purpose of an action on a judgment is to obtain a new judgment which will facilitate the ultimate goal of securing satisfaction of the original cause of action." Adams v. Adams, 691 So.2d 10, 11 (Fla. 4th DCA 1997).

    If a limitations period has almost run on a judgment, a judgment creditor "can start the limitation period anew by bringing an action on the judgment to obtain a new judgment." 47 AM.JUR.2D Judgments § 945 (1995); accord Adams
    , 691 So.2d at 11 (quoting Koerber v. Middlesex College, 136 Vt. 4, 383 A.2d 1054, 1057 (1978)). A party may not relitigate the merits of the original cause of action in an action on a judgment. See Klee v. Cola, 401 So.2d 871, 872 (Fla. 4th DCA 1981).

(3) There is also a pervasive belief (and seemingly persuasive argument) that a judgment creditor can just sit on its claim, without making any attempt to collect on the money owed, wait for the debtor to get financially back on his feet, and then go after him for the unpaid debt, all the while accumulating additional judgment interest on the amount owed.

Specifically in Florida (and elsewhere, I'm sure), a "foot-dragging" creditor intentionally twiddling its thumbs in such a case may be found to to have "slept on its rights" and, consequently, leave itself vulnerable to a laches defense, as some presumably flabbergasted creditors in Florida have mournfully discovered, even though the 20-year period had yet to expire. See:

  • Winter v. Allstate Mortg. Corp., 303 So. 2d 399 (Fla. App. 3d DCA. 1974):

    Of course, a party ordinarily has twenty years in which to enforce a judgment in Florida. However, when undue delays are exercised without sufficient reason, it has been held that equitable defenes may be raised which may cut off the right to satisfy a judgment. Orr v. Allen-Hanford, Inc., Fla.1946, 158 Fla. 34, 27 So.2d 823; Blackburn v. Venice Inlet Co., Fla.1949, 38 So.2d 43.

    In the instant case, no effort was undertaken by the original judgment creditor, Brown, to satisfy his judgment, and it was not until eight years later that the appellee brought this action which informed the appellants for the first time of the existence of the judgment.

    It is also apparent that appellee's motive in purchasing the judgment was to assist it in acquiring the appellants' property at a reduced price. To permit foreclosure on a relatively valuable piece of property to satisfy the comparatively meager sum due because of the judgment would be inequitable under the circumstances of this case.

    Therefore, for the reasons stated, the judgment appealed is reversed and the cause is remanded with directions to enter judgment in favor of the appellants.
  • Blackburn v. Venice Inlet Co., Fla.1949, 38 So.2d 43:

    In the case of Orr v. Allen-Hanford, Inc., 158 Fla. 34, 27 So.2d 823, we held that a creditor may satisfy his judgment within twenty years, but when undue delays are exercised without sufficient reasons shown therefor, equitable defenses become available that may cut off the right to satisfy the judgment.

See also, NH Couple Beats Back Debt Scavenger's Attempt To Collect On Zombie Debt From Old Foreclosed Mortgage:

  • The judge also agreed with Wright's argument, under a legal doctrine known as a "Laches" defense, that Cadle had waited to try to collect the debt so that interest and late fees would pile up. The original loan deficiency on the Lessards' note was about $14,000, but Cadle was trying to collect nearly $30,000 by the time the lawsuit was filed.

Zombie Debt That Came Back To Life & Bite 'Deed-In-Lieu-Conveying' Homeowner Leads To Suit Against Fannie, BoA, Foreclosure Mill Sweatshop

In Fort Myers, Florida, The News Press reports:
  • David Cruz Jr. got what he believed was a great offer in a foreclosure lawsuit filed against him by giant mortgage lender Fannie Mae. If Cruz deeded the modest Fort Myers investment house back to Fannie Mae, the government-backed company would release him from the loan's $123,750 note: the obligation underlying his mortgage.

  • He deeded the house back to Fannie Mae, but court records show he didn't get what he bargained for. Now, experts say, he and thousands of others in Florida who took the same deal from Fannie are at risk of being stalked by a so-called "zombie note:" debt that appears dead and gone but still can come back to life.

  • Cruz, of Fort Lauderdale, is suing Fannie in Lee circuit court along with its loan servicer Bank of America and their attorney, Fort Lauderdale-based Law Office of Marshall C. Watson, which handled the foreclosure and the deed-back deal.


  • Even if Fannie has the note, Cruz should take little comfort from the fact he's dealing with a federally backed entity, said Jack Williams, resident scholar at the American Bankruptcy Institute and a bankruptcy professor at Georgia State University. "That note is a legal obligation," he said, and even if Fannie Mae doesn't sue, it could sell the debt to someone who would.

  • "We saw something very similar to this in the debacle in the '80s, people buying notes from the government and suing," Williams said. "I won't rule out that could happen again. They sold the note to collection agencies and law firms and places like that."

  • In the real estate meltdown of the '80s, he said, it was the Resolution Trust Corp., set up by the federal government to liquidate mortgage loans and other real estate assets held by failed savings and loan associations.

  • "Let me tell you, people made millions of dollars suing homeowners back in the day," Williams said. Some of the debt was in the form of deficiency notes: court judgments saying a certain amount was owed even after the property was sold at public auction. But in other cases, Williams said, it was the note, straight up.

For more, see 'Zombie notes' live to haunt deed transfers (Thousands affected by Fannie Mae tactics) (if link expires, TRY HERE).

Failure To Record Earlier-Created Mortgage No Bar To Priority Over Later-Created, Recorded Mortgage, Says Brooklyn Trial Court

The following facts are taken from a recent ruling of a Brooklyn, New York trial court denying a defendant's motion for dismissal by one bankster in litigation against another bankster:
  1. On or about August 10, 2005, a property owner, one Hemant, and a co-owner obtained a $302,250 mortgage loan from Fremont Investment and Loan.

  2. Inexplicably, Fremont failed to record the mortgage (further, at the time of the litigation in this matter, Fremont admitted that it was not in possession of the mortgage documents).

  3. Thereafter on March 30, 2007, Hemant executed a deed purportedly conveying all of his right title and interest to the premises to defendants Seema and Sushma, his daughters.

  4. The deed was recorded on March 30, 2007. On March 30, 2007 Seema and Sushma executed a note and mortgage for $423,750 secured by the Premises, said note and mortgage ultimately winding up in the hands of HSBC.

  5. In the process of carrying out the March 30, 2007 transaction, Hemant delivered two affidavits at the closing in which he states that he has received zero consideration for the transfer of the premises, that the transfer was between family members and two transfer tax documents which state that the consideration for the transfer was $0.

  6. In contrast to those documents, the HUD-1 form states that Hemant received $296,000 in consideration for the transfer.

  7. Also, the checks issued at the closing were endorsed to parties other than Hemant and his daughters (an attorney's affirmation authenticating copies of checks issued in connection with this closing, which involved Delta Finding (now held by HSBC) and the parties was submitted to the court affirming that the checks were issued to persons and entities including Sushma Rambaran, HKR Construction, Varsha Construction, and 81-83-85 Blake Avenue LLC).
In this case, the court was asked to address, as between Fremont (holder of the earlier-created mortgage that recklessly went unrecorded) and HSBC (holder of the later-created, but earlier recorded mortgage), whose mortgage has priority on the property in question. Specifically, Defendant HSBC moved to be dismissed from what apparently was a foreclosure action brought by Fremont (actually, by MERS, as Fremont's nominee), HSBC claiming that its mortgage had priority over Fremont's mortgage.

Question: Which has priority over the other, Fremont's earlier-created, unrecorded mortgage or HSBC's later-created, earlier-recorded mortgage.

Answer: If you said HSBC's recorded mortgage has priority over Fremont's unrecorded mortgage, you may very well be wrong. Based on the foregoing facts (which have been assumed to be true in deciding a motion to dismiss), Kings County Supreme Court Justice Herbert Kramer denied HSBC's motion to dismiss, "hold[ing] that a genuine issue of material fact exists as to whether the mortgagee was a bona fide purchaser due to the discrepancies in the closing documents."(1)

For the ruling, see Mortgage Elec. Registration Sys., Inc. v Rambaran, 2011 NY Slip Op 50966(U) (NY Sup. Ct. Kings County, May 23, 2011).

  1. Inasmuch as attorneys from The Law Division of Fidelity National Title Group., Inc., New York City, represented HSBC in this case, one can reasonably surmise that Fidelity was the insurance company that issued HSBC its mortgagee's title insurance policy (which means Fidelity, along with the agent who ostensibly butchered the closing of the March 30, 2007 transaction, may ultimately be the ones left holding the bag on this apparent screw-up).
  2. While apparently not central to Justice Kramer's ruling, Mortgage Electronic Registration Systems played a role in the origination/servicing of both mortgages involved in this controversy. Yet another fine mess MERS finds itself in the middle of.

(1) Justice Kramer begins his analysis by stating that New York follows the (seemingly) universally well-known general rule that, as a 'race-notice' state, an earlier-recorded instrument (ie. HSBC) has priority over a later-recorded or unrecorded instrument (ie. Fremont).

He then refers to what is seemingly a universally unknown (or, at least, not fully understood) exception to the general rule, in this excerpt:

  • However, there are several exceptions carved out of this general rule. For example, a prior recorded mortgage would lose priority to an unrecorded mortgage if the mortgagee had notice, actual or constructive of such a conveyance.

    If a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty if a degree of negligence equally fatal to his claim, to be considered a bona fide purchaser. Maiorano v. Garson, 886 N.Y.S.2d 190 [2d Dep't 2009] citing Williamson v. Brown, 15 NY 354, 362 (internal citations omitted).

In the following brief discussion, Justice Kramer sets forth his reasons for denying HSBC's motion to dismiss:

  • The defendant, HSBC moves for dismissal on the grounds that the defendant's purported lien was not recorded at the time that HSBC took a mortgage on the subject property. HSBC asserts that it had no knowledge, actual or constructive of the purported lien and therefore a bona fide good faith purchasers/encumbrancers and that the mortgage which they hold has priority.[2]

    Plaintiff, in opposition to the motion contends that HSBC is not a bona fide purchaser in good faith because, as discussed above, the closing documents associated with the transfer of the property between Hemant and his daughters conflict. Plaintiff further asserts that the contradiction between the documents raised HSBC's duty to inquire as to whether the transfer was a fraudulent transfer designed to evade Hemant's creditors.

    This Court holds that the discrepancies in the closing documents were sufficient to put HSBC on notice to further inquire as to the bona fides of the transaction. No evidence has submitted that HSBC engaged in any additional investigation in light of the discrepancies. Rather, it seems that HSBC simply pushed the documents through without the critical eye which is required in these transactions.

    Gone are the days in which closing documents are merely meant to be shuffled and stacked. A lending institution has an affirmative duty to inquire into the bona fides of the documents, prior to taking mortgage on a property. If they fail in that duty their status as a bona fide purchaser is threatened. See, Southwell v. Middleton, 17 Misc 3d 1129(A) [Sup. Kings. 2007].
    [3] [Where the court held that discrepancies between the closing checks gave rise to a duty to further investigate the transactions].

    Accordingly, the motion is denied.

Sunday, June 19, 2011

Failure To Name Scam-Financing Lender As Defendant In Suit To Undo Sale Leaseback Equity Stripping Ripoff Leads To Never-Ending Litigation Marathon

An Indiana sale leaseback ripoff transaction that dates back to 2002 has been the subject of multiple rounds of court proceedings over the last eight years, and was the subject of a recent ruling by the Indiana Court of Appeals. In a nutshell:
  1. One, Swafford (the home owner), who was unable to obtain conventional financing through a mortgage company, asked one, Seitzinger, the agent of the mortgage company, if she could help him save his home from foreclosure.

  2. Seitzinger contacted Hodges, her brother, who proposed a sale leaseback arrangement, whereby Swafford sold the home to Hodges, and where a land contract between Swafford and Hodges was contemporaneously entered into to effect the planned repurchase by Swafford.

  3. The total effective sale price paid by Hodges to Swafford was $39,514.17, and the contemporaneous buy back agreement (the land contract) required Swafford to repurchase his home for $59,000.00, with interest at the rate of 8.50 percent per annum.

  4. As part of consummating the transaction, Hodges obtained an institutional mortgage loan for $57,400, paying Swafford $39,514.17 (all but $4,000 going to pay off existing liens/debts), and pocketing the balance.

  5. In 2003, a year after the deal was done, and after some disagreements that arose, Swafford filed a lawsuit against Hodges & Seitzinger to rescind the deal, alleging violations of the federal Truth in Lending Act, the federal Home Ownership and Equity Protection Act, the federal Real Estate Settlement Procedures Act, the Indiana Deceptive Consumer Sales Act, among other claims.

  6. When filing the suit, however, Swafford failed to name, as an additional defendant, the holder of the mortgage loan that financed Hodges' purchase from Swafford.

  7. Swafford ultimately prevailed in Round 1 of this litigation, with the sale leaseback being voided by the trial court. Among other things, Swafford recovered title to his home, subject to the mortgage loan Hodges obtained to finance the sale leaseback, and Hodges was instructed to continue making payments on said loan.

  8. In Round Two, the ruling of the trial court was affirmed on appeal. See Hodges v. Swafford, 863 N.E.2d 881, amended on reh'g, 868 N.E.2d 1179 (Ind. Ct. App. 2007).

  9. At some point after losing Round 2, Hodges stopped making the payments he was ordered to make to the mortgage lender, and the lender began Round 3 of this battle by filing a foreclosure action against both Hodges, the sale leaseback peddler, and homeowner Swafford.

  10. In Round 3, the trial court concluded that because the transaction between Swafford (the homeowner) and Hodges (the sale leaseback peddler) had been rescinded, Hodges had no interest in the property when he obtained his loan, and as a result, the mortgage never attached to Swafford's home.

  11. The trial court therefore concluded that the Bank could not foreclose on the property; however, it was entitled to summary judgment against sale leaseback peddler Hodges for the remaining amount due and owing under the mortgage loan. Homeowner Swafford (now with a home free & clear of Hodges' mortgage) was dismissed from the foreclosure action.

  12. Unsatisfied with this result, the bank commenced Round 4 and filed this appeal.

After an analysis of the federal Truth in Lending Act, the Indiana Court of Appeals ruled that the mortgage loan made to Hodges by the lender was not void ab initio, but merely voidable. Accordingly, it reversed the trial court finding that the mortgage did not attach at the time the sale leaseback was consummated, seemingly resulting in a reinstatement of the mortgage as a lien on Swafford's home.

However, the appeals court then went further, and instructed the trial judge to begin Round 5 of this seemingly never-ending mess by holding off on proceeding with a foreclosure sale of Swafford's home until certain issues have been addressed, as explained in the following excerpt (bold text is my emphasis):

  • It does not necessarily follow, however, that the Bank is entitled to foreclose on the mortgage. We believe that substantial genuine issues of material fact remain regarding the equities of this case, and the interplay between those equities and the Bank's security interest in Swafford's property.

    Because Swafford has already paid off the amount he owed to the Hodgeses, it may be inequitable to allow the Bank to foreclose on the mortgage and thereby deprive Swafford of ownership of the property.

    On the other hand, it may be inequitable to cut off the Bank's right to foreclose on the mortgage based on the Hodgeses' wrongdoing, assuming the Bank was not in a position where it knew or should have known of that wrongdoing.

    We find it particularly troubling that the Bank was not joined as a necessary party to Swafford's action to enforce his right to rescind under the TILA. It seems evident on the face of the record that the Bank was a necessary party to any action seeking to transfer title to the property subject to the Bank's mortgage. See In re Paternity of C.M.R., 871 N.E.2d 346, 349 (Ind. Ct. App. 2007) (noting that a necessary party as one who must be joined in the action for a just adjudication).

    If the Bank had been made a party to the underlying litigation, the parties may have been able to reach a settlement or, if no settlement could be reached, the trial court could have fashioned a complete and appropriate, equitable remedy at a much earlier time.

    If Swafford was aware of the Bank's interest in the property during the course of his suit to enforce his right to rescind under TILA, but nevertheless chose not to join the Bank, he may be estopped from denying the Bank's interest. See Zoller v. Zoller, 858 N.E.2d 124, 127 (Ind. Ct. App. 2006) (noting that all forms of estoppel "are based upon the same underlying concept: a person who, by deed or conduct, has induced another to act in a particular manner will not be permitted to adopt an inconsistent position, attitude, or course of conduct that causes injury to the other.").

    Likewise, if the Bank was aware of the litigation and chose not to intervene, it may be estopped from asserting any right to enforce or reform the terms of the mortgage. See id..

    Swafford's level of sophistication ("a retired laborer, has a sixth grade education and is illiterate, except that he can read numbers and sign his name") and whether he was aware that the Hodgeses intended to finance their loan to Swafford by mortgaging the property, together with the extent to which the Bank's assignor knew or should have known of Swafford's interest in the property at or about the time the Hodgeses executed the promissory note and mortgage at issue will also be very relevant in balancing these equities.(1)

    For all of these reasons, we reverse and remand with instructions for the trial court to receive additional evidence on whether any legal or equitable remedy is available to the Bank, and if so, what the terms of that remedy should be

    Reversed and remanded with instructions.

For the Indiana appeals court ruling in Round 4 of this continuing litigation marathon, see Wells Fargo Bank, N.A. v. Hodges, No. 55A01-1007-MF-334 (Ind. Ct. App. June 10, 2011) (unpublished).

(1) In suggesting that a determination should be made of the extent, if any, to which the bank "knew or should have known of Swafford's interest in the property at or about the time the Hodgeses executed the promissory note and mortgage at issue ...", it may be that the appeals court is telegraphing to the parties that the bank, by reason of Swafford's retained and continued possession of the premises at the time the bank financed the sale leaseback and thereafter, may have been been on notice of Swafford's ownership interest in the premises at that time. In such case, and assuming the bank failed to conduct a physical inspection of the premises in ascertaining the rights of persons in possession, Swafford may be able to successfully void the bank's mortgage and eliminate the lien thereof from his home after all.

Indiana case law appears to support the proposition that a lender's failure to examine the premises prior to making a mortgage loan will leave it vulnerable to the unrecorded rights and equities of the occupants, and without the protection of the recording statutes as a bona fide purchaser / bona fide mortgagee, as one disappointed Indiana lender sadly learned last year. Thomas v. Thomas, 923 N.E.2d 465 (Ind. Ct. App. 2010):

  • "[T]o qualify as a bona fide purchaser,[[1]] one has to purchase in good faith, for a valuable consideration, and without notice of the outstanding rights of others." Kumar v. Bay Bridge, LLC, 903 N.E.2d 114, 116 (Ind.Ct.App.2009) (citation omitted). "The theory behind the bona fide purchaser defense is that every reasonable effort should be made to protect a purchaser of legal title for a valuable consideration without notice of a legal defect." Id. (citation omitted).

    There is no dispute that Benjamin failed to file a lis pendens notice when he filed his quiet title action against Richard on September 12, 2001. The trial court, however, concluded that Trustcorp did not qualify as a bona fide mortgagee because it did not act in good faith and had constructive notice of Benjamin's lawsuit. Trustcorp contends that these conclusions were erroneous. The record supports conclusions that Trustcorp did not act in good faith and can be imputed with notice of Richard's fraud and Benjamin's lawsuit.

    The Indiana Supreme Court has squarely held that "one who fails to examine land which he is about to purchase, and to inquire as to the rights of one in possession, is not acting in good faith and will not be treated as a bona fide purchaser."
    Mishawaka, St. Joseph Loan & Trust Co. v. Neu, 209 Ind. 433, 443, 196 N.E. 85, 90 (1935).

    Regarding notice of competing claims, the Court also held that "means of knowledge, with the duty of using them, are equal to knowledge itself." Id. The Indiana Supreme Court has also held that possession of land puts the world on notice that the possessor may have a claim of ownership and right to possession. See
    Olds v. Hitzemann, 220 Ind. 300, 308, 42 N.E.2d 35, 38 (1942) ("[Appellees] were still in possession of their land, and their possession was notice to the world of their claims to ownership and right to possession.").

    Quite simply, it is undisputed that Benjamin was in possession of the property in question and that Trustcorp nonetheless did nothing to ascertain his rights to it. It is apparent that even a cursory investigation would have quickly uncovered both Richard's fraud and Benjamin's claims on the home. Under the circumstances, Trustcorp cannot have been a bona fide mortgagee, and we therefore affirm the trial court's judgment in this regard.

(By the way, in footnote 1 of Thomas v. Thomas, the appeals court gives this reminder that, in Indiana, "[t]he law regarding bona fide purchasers applies with equal force to mortgagees. See, e.g., Weathersby v. JPMorgan Chase Bank, N.A., 906 N.E.2d 904, 910 (Ind. Ct. App. 2009).")

See also, Failure To Inspect Property & Inquire Into Rights Of Parties In Possession Prior To Making Loan Leaves Indiana Lender With Voided Mortgage.

See Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire for case law in other states addressing the effect of possession and a real estate purchaser's or lender's duty to inquire into the rights of the occupants when seeking the protection of the recording statutes as a bona fide purchaser or bona fide mortgagee/lender/encumbrancer.