Saturday, July 02, 2011

NY Bankruptcy Court: REMIC Investor Lacks Standing In Chapter 11 Case Where Debtor's Property Secures Loan Included In Pool Held By Trust

Lexology reports:
  • In a recent decision, the Bankruptcy Court for the Southern District of New York concluded that an investor in a Real Estate Mortgage Investment Conduit ("REMIC") lacked standing to object to the sale of a chapter 11 debtor's real property, despite that the property served as collateral for loans held in trust by the REMIC for the benefit of its investors.
For more, see REMIC investor lacks standing to object to sale of collateral in borrower's bankruptcy reorganization (requires subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link for the story).

For the ruling, see In re: Innkeepers USA Trust, Case No. 10-13800 (Bankr. S.D. N.Y. April 1, 2011).

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

Lack Of Good Faith Sinks Alabama Homeowners' 'Chapter 20' Bankruptcy Gambit

A U.S. Bankruptcy Court in Anniston, Alabama recently kiboshed a homeowner/couple's attempt at pulling off a so-called 'Chapter 20' bankruptcy (ie. the filing of a Chapter 7 filing to obtain a discharge of unsecured debts, followed by a Chapter 13 filing to work out a 5-year payment plan on the arrearages on secured debts), finding the filing was made with a lack of good faith.(1)

The indicia of a lack of good faith found by the judge:
  • failure to file a Chapter 13 petition soon after obtaining the Chapter 7 discharge ("They waited over 3 years, during which time they incurred 37 new obligations and increased their debts by $37,620");

  • the lack of a need for a Chapter 13 filing immediately after the Chapter 7 discharge to work out any mortgage arrearages existing immediately thereafter ("And most significantly, their mortgage arrears — 3 monthly installments — was not a leftover from their 2007 Cases.");

  • The Debtors' probable intent to simply buy some time until they again became eligible to file another Chapter 7 petition, at which point they would be strategically positioned to once again stiff all their unsecured creditors (this time, on all new obligations incurred subsequent to the filing of the earlier Chapter 7 petition).

With regard to the last point, the court made this comment:

  • "The Debtors' probable motive for filing this case was to bide their time under the protection of the automatic stay (§ 362), and later a confirmation order (§ 1327), until they become eligible for another chapter 7 discharge. While the Court cannot be absolutely certain of the Debtors' motives, it can look at the totality of the circumstances to determine whether their case was filed in good faith, especially at a time they were not eligible for a discharge."

For the ruling, see In re Gaddis, Case No. 11-40050-JJR-13 (Bankr. N.D. Ala. Eastern Div. June 20, 2011).

(1) The judge's general position on so-called Chapter 20 filings was expressed in this excerpt:

  • This bankruptcy judge believes that with the enactment of BAPCPA, and specifically §1328(f)(1), most chapter 13 debtors are now prohibited from seeking relief under chapter 13 until the 4-year bar from discharge required by § 1328(f)(1) is satisfied; especially debtors who have incurred substantial post-chapter 7 debts and whose principal purpose for seeking chapter 13 relief is not to cure mortgage arrears that were left over after a recently granted chapter 7 discharge.

    In any event, § 1328(f)(1) cannot be ignored, and the ineligibility of a debtor to receive a discharge in a chapter 13 case must be considered as a critical factor in a court's determination of whether a chapter 13 case was filed in good faith as required by Section 1325(a)(7), a section also enacted with BAPCPA. In re Gonzalez, No. 08-15277-B-13, 2008 WL 5068837 (Bankr. E.D. Cal. Nov. 25, 2008).

Texas Homeowners In Foreclosure, Residential Tenants Could Feel Some Effects From New State 'Assignment Of Rents' Law

Lexology reports:
  • The Texas legislature just rewrote all real estate loan documents in Texas which include an assignment of rents to the lender (and almost all commercial real estate loans do) when it passed the new Chapter 64 of the Texas Property Code. The Governor signed the bill on June 17, and the law is effective immediately.

    What does this mean to you?

  • LANDLORDS: As of now, a landlord cannot collect rents after its lender gives it notice of default and demands the rents and must turn over any rents it collects to the lender. The landlord can keep the rents already collected except pre-paid rents.

    COMMERCIAL TENANTS: As of now, a commercial tenant should not pay the landlord rent after it receives notice from the landlord's lender demanding the rents, or the tenant may have to pay rent twice.

Among the effects on homeowners & tenants in residential property:

  • An assignment of rents is not effective in a home equity loan or a reverse mortgage and cannot be enforced against a against the borrower's homestead if the homestead is a one to four family dwelling and the property was the borrower's homestead both when the assignment was executed and when the enforcement action is taken.(1)

  • Upon giving notice, the lender is entitled to all uncollected rents and all pre-paid rents. The lender is not entitled to rents already collected by the borrower, except for pre-paid rents that accrue on or after the date the lender gives notice. The tenant is not obligated to pay to the lender any rent that was prepaid to the borrower (i.e. the landlord) before the tenant received notice from the lender.

  • After the tenant receives the notice, the tenant is obligated to pay rent to the lender and cannot satisfy its obligation to pay rent by paying the landlord (unless the property is the tenant's primary residence).

  • If the property is the tenant's primary residence, the tenant can discharge his or her obligation to pay rent by paying either the lender or the borrower (i.e. the landlord).(2)

For more, see The Texas legislature may have just rewritten your real estate loans (requires subscription; if no subscription, TRY HERE; or GO HERE - then click the appropriate link for the story).

(1) Arguably, this law (at least in theory) should make it that much easier for rent-skimming, non-owner occupant homeowners to be charged criminally with theft, conversion, etc. when pocketing tenants' rent payments while contemporaneously stiffing lenders out of their loan payments when facing foreclosure (provided, of course, that the homeowner's mortgage contains an assignment of rents to begin with - which is not uncommon for mortgages securing 2 to 4-family homes).

(2) Where the residential tenant has the legal option of paying either a financially strapped landlord facing foreclosure or a lender seeking to preserve its loan collateral, he may be well-advised to pay the lender. A landlord facing foreclosure is more likely to pocket the cash and not pay the utility bills (ie. water, electric, trash pick-up, etc.) or make necessary repairs than the foreclosing lender (although don't hold your breath expecting the lender to be too efficient in handling the situation).

'Lien Priority' Battles Between Recorded, Unrecorded Interests In Real Estate Continue; Homebuyer Downpayment Lien Trumps Builder's Construction Loan

Bona fide purchaser fans (including title insurance lawyers & agents, as well as home buyers making downpayment deposits on yet-to-be-built homes & condos, and construction lenders) may find the following butchered summary of some of the facts from a recent ruling of the South Carolina Court of Appeals of some interest:
  1. Covington, an experienced real estate broker, enters into a contract with Wingard, a real estate developer, for the purchase of a yet-to-be built home.

  2. Covington gives Wingard two downpayment checks, one for $10,000, which was deposited shortly thereafter, and one for $276,700, which was given with the instruction that it was not to be deposited until after Wingard obtained a mortgage loan to commence construction of the premises.

  3. The $276,700 check given by Covington was a 'hot check' (ie. he did not have sufficient funds in his bank account to cover this amount).

  4. As a precondition for the yet-to-be obtained construction loan, lender required Wingard to sell the unit for each lot in the development.

  5. Wingard apparently met the condition, as lender subsequently provided a $7,000,000 construction loan.

  6. Shortly after the mortgage securing the construction loan was recorded, Wingard deposited Covington's $276,700 check which, because Covington had since deposited sufficient funds in his account to cover it subsequent to its issuance, was no longer 'hot', and cleared without incident.

  7. Wingard ultimately defaulted on the construction mortgage, and the lender initiated foreclosure.

  8. At some point thereafter, a question arose regarding the lien priority involving the competing interests of the lender's recorded construction mortgage, and Covington's equitable lien(1) (which, by its very nature, is an unrecorded lien) for the amount of his down payment deposit.


As between the competing interests of Covington's unrecorded equitable lien and the lender's recorded mortgage, which lien has priority on the premises?

If you guessed that the lender's recorded mortgage had priority over Covington's unrecorded equitable lien for the amount of his downpayment money, GUESS AGAIN.

Given the specific facts of this case, and as set forth in the court's ruling, Covington's equitable lien for his downpayment cash trumps the lender's construction loan, so that any foreclosure of the mortgage will leave Covington's lien for his downpayment unaffected (ie. the bank's construction loan is, in effect, treated as a 2nd mortgage subordinate to Covington's lien; if he does not recover his downpayment money, Covington (along with other would-be buyers who coughed up deposits on the struggling project) will then be able to foreclose on the bank to reclaim his cash).

Further, the court found this to be the case, notwithstanding the fact that Covington's $276,700 check:

  • was held uncashed by Wingard until after the construction loan was made, and

  • was written at a time when there were insufficient funds in the bank to cover the payment (although funds were ultimately made available when the check was eventually deposited).

For full facts, the ruling, and the court's application of the relevant law, see Regions Bank v. Wingard Properties, Inc., Opinion No. 4846 (S.C. Ct. App. June 22, 2011).

(1) I mention in passing that when a buyer pays a downpayment for any purchase of real estate, the buyer is generally entitled to an equitable lien on the premises for the amount of his deposit. The entitlement to such an equitable lien is usually not any big deal - except, of course, in those cases where the transaction ultimately fails to close and the seller and/or escrow agent refuses to refund the deposit back to the buyer.bona fide purchaser

Adult Daughter's Homestead Claim Against Deceased Mom's Estate Trumps Foreclosure Rescue Operator

The following facts are taken from a recent ruling of the Minnesota Court of Appeals ('Yennie' = foreclosure rescue operator; 'Wolf' = now-deceased homeowner):
  • Yennie's claim against the estate is based on a written agreement that he and Wolf executed in August 2004. The agreement, which is entitled "Investment Agreement Conveying Partial Interest in Real Property," relates to Wolf's home in the city of Plainview.

    The agreement provides that Yennie will assist Wolf in redeeming the property from foreclosure, make payments to bring the mortgage up to date, and perform repairs to the house in anticipation of its sale.

    The agreement further provides that, upon the sale of the property, Wolf would receive the first $47,500 in proceeds; Yennie then would receive reimbursement for the expenditures he made; and Wolf and Yennie then would evenly split the remaining proceeds.

    Wolf died intestate on January 22, 2010. Yennie filed a claim against the estate in the amount of approximately $28,000, which reflects expenditures he made pursuant to the 2004 written agreement.

    The personal representative disallowed the claim. Meanwhile, Wolf's daughter, his only surviving heir, filed a [statutory homestead] claim against the estate in the amount of $10,000.

In applying Minnesota law, the state appeals court held that, by reason of the homestead provisions in the state statute, Wolf's daughter was entitled to priority over the claim made by Yennie for the $28,000 he shelled out to fix up Wolf's home and pay the bills.

Inasmuch as there was insufficient money in this case to pay off all the claims made against the estate, and Wolf's daughter cashed out on her $10,000 homestead claim in full, Yennie was consequently left partially holding the bag on his claim, entitled to split whatever was left in the estate with one other claimant, and pocketing only a fraction of what he ponied up to fix up the home of the now-deceased homeowner.

For the ruling, see In re Estate of Wolf, No. A10-2029 (Minn. App. June 20, 2011) (unpublished).

Using California Trust Deeds To Secure Non-Accelerable Or Contingent Serial Obligations - Pitfalls & Possible Solutions

A recent article in Lexology discusses the pitfalls of using real estate in California to secure non-accelerable or contingent, serial obligations, such as rent payments or indemnification obligations, resulting from the operation of, among other related statutes:
  • Section 726 (ie. “one form of action” or "one action" rule, along with with its judicially created corollary rule that a creditor must resort to its “security first”(1)), and

  • Section 580d (the anti-deficiency provision)

of the California Code of Civil Procedure in non-judicial foreclosures under California law.

Along with a discussion of the pitfalls, approaches to deal with them are explored.

For those in California (and, I suppose, anywhere else, for that matter) who have any idea what all this might be referring to and may have some interest,(2) see One deed of trust and several obligations: the case for layered foreclosure in California (requires subscription; if no subscription, GO HERE; or TRY HERE - then click appropriate link for the story).

(1) Go here for links to several dozen California cases addressing the state's "one form of action" and "security first" rules.

(2) If not, don't worry about it, it's not important anyway.

Trusts Appearing Upstream In Chain Of Title & Property Ownership Rights Of Subsequent Purchasers

A recent ruling by the Georgia Court of Appeals may be of some interest to title examiners and attorneys in the title insurance industry when insuring property containing a trust as a title holder somewhere upstream in the chain of title.

While I'm sure that this post will be of interest to absolutely no one other than possibly title insurance professionals and bona fide purchaser aficionados, I know I'll be referring back to this case in the future. Accordingly, it makes the cut and gets posted(1) (bold text is my emphasis):
  • 1. Kitchings first argues that the trial court erred in holding that Patch Nursery and Ameris Bank were bona fide purchasers for value. Kitchings contends that the co-trustees' distribution of all the property in a single transfer to Christine Cannon was sufficient to put a reasonably prudent title examiner on notice that the transfer was a mismanagement of the assets of the trusts, a breach of the trust agreement and a breach of the co-trustees' fiduciary duty to the remainder beneficiaries.

    "As a general rule, a bona fide purchaser for value is protected against outstanding interests in land of which the purchaser has no notice. Farris v. Nationsbanc Mtg. Corp., 268 Ga. 769, 770 (2) (493 SE2d 143) (1997); OCGA §§ 23-1-19, 23-1-20. We have long held that a grantee in a security deed who acts in good faith stands in the attitude of a bona fide purchaser, and is entitled to the same protection." Brock v. Yale Mtg. Corp., 287 Ga. 849, 852 (700 SE2d 583) (2010).

    To qualify as a bona fide purchaser for value without notice, a party must have neither actual nor constructive notice of the matter at issue. Notice sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found that such inquiry might have led. Whiten v. Murray, 267 Ga. App. 417, 421 (2) (599 SE2d 346) (2004). A purchaser of land is charged with constructive notice of the contents of a recorded instrument within its chain of title. VATACS Group v. HomeSide Lending, 276 Ga. App. 386, 391 (2) (623 SE2d 534) (2005). Furthermore, the grantee of a security interest in land and subsequent purchasers are entitled to rely upon a warranty deed that is regular on its face and duly recorded in ascertaining the chain of title.

    Deutsche Bank Nat. Trust Co. v. JP Morgan Chase Bank, 307 Ga. App. 307, 309 (704 SE2d 823) (2010).

    Here, Thomas Cannon, Sr.'s will granted to the trustees the power "[t]o sell, exchange, partition or otherwise dispose of any property at any time held or acquired under this will . . . for such purposes as my personal representatives may deem best. . . ." The will further provided: "[m]y primary desire is that my spouse be supported in a reasonably comfortable manner throughout life rather than the preservation of principal until the termination of this trust, and I wish my Co-Trustees to be guided by this consideration in determining the amount to be used for the support of my spouse. . . ." (emphasis supplied).

    The title search shows that the property was transferred to Christine Cannon through a Trustees Deed of Distribution, from the remainder trust to the primary beneficiary of the trust. The wording of the trusts at issue, as set out previously, allows the trustees to sell or dispose of any property, at any time, for reasons they may deem best, for the benefit of Christine Cannon.

    "A purchaser of land is charged with constructive notice of the contents of a recorded instrument within its chain of title. Conversely, a purchaser is not charged with constructive notice of interests or encumbrances which have been recorded outside the chain of title." Gallagher, supra at 625. Here, there is nothing in the chain of title or the trust instruments that would put either the bank or Patch Nursery on notice that there were any issues affecting title to the properties.

    The provisions of Cannon, Sr's will gave broad discretion to the trustees. Thus, there was nothing in the documents themselves sufficient "to excite attention and put a party on inquiry." See Whiten, supra at 421. See also Beecher v. Carter, 189 Ga. 234 (5 SE2d 648) (1939) ("Where a purchaser of land from one in possession, who holds a deed thereto [that] is absolute on its face, has paid the purchase-price and taken possession, parties claiming an equity therein of which the purchaser had no notice are not entitled to have purchaser's deed canceled.").

    Accordingly, there was no error in the trial court's grant of summary judgment to Ameris Bank and Patch Nursery on the grounds that they were entitled to the protection of bona fide purchaser for value on Kitchings's claim to cancel their deeds.

For the ruling, see Kitchings v. Ameris Bank, A11A0323 (Ga. Ct. App. June 8, 2011).

(1) Apologies to the handful of you who are here reading this blog on July 4th weekend instead of being away on vacation, and thanx for your forebearance and patronage!

Equitable Subrogation Takes Hit From Kentucky Supreme Court

In another post that may be for title professionals only (also for real estate legal professionals involved in undoing/voiding mortgages on homes arising as a result of a home equity ripoff), Lexology reports:
  • Lenders, title insurance companies and their agents should be aware that on April 21, 2011, the Supreme Court of Kentucky issued a decision that could have a significant effect on Kentucky courts’ application of the doctrine of equitable subrogation in Kentucky. Wells Fargo Bank, Minnesota, N.A. v. Commonwealth, --- S.W.3d ---, 2011 WL 1620578 (Ky. Apr. 21, 2011).


  • [T]he Court reached a number of conclusions that should give lenders, title agents and title insurers pause:

    “[P]rofessional mortgage lenders should be held to a higher standard for purposes of determining whether the lender acted under a justifiable or excusable mistake of fact in failing to duly investigate prior liens.” Id. at 13-14.

    “Equity also demands that the responsibility for a defective title examination be allocated to the party who is most culpable.” Id. at 14.

    Equitable subrogation must not be used to “bail out a negligent title insurer.” Id. at 15.

    “Those title insurers are engaged in the very profitable business of assuring that their lending institution customers receive a clear title by insuring such.” Id. at 15.

    Describing a lender’s decision not to make a loan if it must first satisfy a tax lien as “the sound lending practices that our society deserves, especially in the aftermath of this nation’s 2008 financial meltdown.” Id. at 19.

  • The Wells Fargo Court’s holding was narrowly limited to a conclusion that “a professional lender who has actual or constructive knowledge of an earlier recorded general tax lien may not benefit from an equitable reordering of the liens.” Wells Fargo at 19.

  • The holding does not expressly affect equitable subrogation in the context of competing “professional lenders,” for example, so the ramifications of the decision could be limited. But the above-quoted language could easily lead to further erosion of equitable subrogation, something that would significantly affect lenders, title insurers and their agents.

For more, see Wells Fargo v. Commonwealth: the death knell for equitable subrogation? (requires subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link for the story).

Friday, July 01, 2011

Oregon Judge Slams Brakes On F'closure Eviction; Failure To Record Mortgage Assignment Violates State Law, Allows Homeowner To Unpack Bags & Stay Put

In Columbia County, Oregon, The Oregonian reports:
  • A Columbia County judge has blocked U.S. Bank from evicting a Vernonia woman whose home it purchased in foreclosure, concluding in a case with far-reaching implications that her lenders had not properly recorded mortgage documents.

  • Last week's action appears to be the first in which an Oregon judge has halted an eviction and declared a foreclosure sale void after the fact. The ruling, if it stands, raises questions about the validity of other recent foreclosures in the state and could create serious problems for lenders and title companies, as well as for buyers of such properties.


  • Nearly all foreclosures in the state occur without a judge's involvement under so-called nonjudicial proceedings. But this ruling, legal observers say, could potentially divert more foreclosure actions into courtrooms, a more time-consuming and costly proposition that could exacerbate the state's housing slump. "This will certainly be problematic for lenders," said David Ambrose, a Portland real-estate attorney.

  • It also casts doubt on the validity of already completed foreclosure sales in which lenders resold mortgages without recording the sales in county recorder offices. Many of those questionable transactions, [...] involve the Mortgage Electronic Recording System. MERS was created by the mortgage industry to rapidly securitize loans without recording them.

  • Federal judges in Oregon have ruled that MERS-involved foreclosure actions violated state recording law. MERS also has been tied to so-called robo-signing scandals that prompted a 50-state investigation of the nation's largest loan servicers and banks.

For more, see Oregon judge voids foreclosure sale, casting doubt on others.

For the ruling, see U.S. Bank v. Flynn, Case No. 11-8011 (Columbia Cty. Cir. Ct. June 23, 2011).

Who Are Bank Of America's Newest Robo-Signers?

From Fraud Digest:
  • Who are Bank of America's newest robo-signers? For several years, BOA turned to its subsidiary, BAC Home Loans Servicing, in Collin County, Texas, whenever mortgage assignments were needed in foreclosures. This office, formerly Countrywide Home Loans Servicing, produced hundreds of thousands of assignments, including most all of the assignments to Countrywide CWABS and CWALT trusts.

  • In recent months, however, BOA has turned to its office in Ventura County, California, as the Collin County, TX, signers have become too well known. These assignments are made primarily for CWALT and CWABS trusts that closed in 2005, 2006 and 2007.

  • These assignments claim to assign both the mortgages and the notes to the trusts. On each of these assignments, MERS is stated to be the HOLDER of the mortgage.

Source: Who are Bank of America's newest robo-signers?

(1) Who are the newest signers - who use MERS titles to assign mortgages TO BAC while actually working FOR BAC - signing as if they were MERS officers for dozens of different companies? According to Fraud Digest, The names appearing most often include:

  • Ricki Aguilar, Malik Basurto, Youda Crain, Diana DeAvila, Edward Gallegos, Christopher Herrara, Bud Kamyabi, Tina LeRaybaud, Jane Martorana, Martha Munoz, Srbui Muradyan, Debbie Nieblas, Yomari Quintanilla, Luis Roldan, Miguel Romero, Cynthia Santos, Swarupa Slee.

According to Fraud Digest, these individuals, in 2011, have signed as MERS officers for the following mortgage companies and banks, including many that no longer existed in 2011:

  • Aegis Wholesale Corporation, American Brokers Conduit, America's Wholesale Lender, Amnet Mortgage, Ampro Mortgage, Countrywide Bank FSB, Decision One Mortgage Company, First Choice Funding Inc., First Interstate Financial Corp., First National Bank of Arizona, Market Street Mortgage Corp., M/I Financial Corp., Millenia Funding Corporation, MortgageIt, One Mortgage Company, LLC, Pinnacle Direct Funding Corp., Pulte Mortgage, Quicken Loans, Universal American Mortgage Company, Service Mortgage Underwriters, Inc., Wilmington Finance, Inc.

CoreLogic in Chapin, South Carolina, is the keeper of these documents, and Bank of New York Mellon is the trustee for most of the CWABS and CWALT trusts that use these BAC documents, according to Fraud Digest.

HUD Left Holding The Bag On Potentially 'Flammable F'closure' As Hazardous Materials Crews Step In, Rip Apart Premises In Search For 'Meth' Chemicals

In West Valley, Utah, The Salt Lake Tribune reports:
  • Hazardous materials crews began digging in the backyard of a foreclosed home [] after the previous owner said chemicals used to make methamphetamine may have been buried in the backyard. So far, only a waste basin from an old outhouse and buried garbage and concrete blocks have been found at the scene [...]. Digging will conclude [...] with firefighters on standby.

  • The previous owner said he buried some stuff in the backyard, but he didn’t know where,” said West Valley Fire Capt. Bridger Williams. EnviroCare Inc., which specializes in dealing with hazardous materials, dug a number of holes by hand in search of what the man may have buried. “They (EnviroCare) wanted to make sure the home is safe and the property is safe for those who live nearby and for the eventual buyer,” Williams said.

  • John Hart, COO of EnviroCare said they were told chemicals used to make methamphetamine may have been buried in the backyard, so they used ground penetrating radar to search the area. They found eight areas of interest and started digging with plastic shovels so they didn’t create any sparks.

  • The home went into foreclosure more than a year ago and is now owned by the Federal government’s Housing and Urban Development program. The government is working to clean up the home and property and eventually sell [unload] it.

For the story, see Crews check for buried meth chemicals at foreclosure home.

Texas Homeowner/Couple Facing Demolition Order Head For Court In Effort Thwart Oncoming City Wrecking Ball

In Beaumont, Texas, The Southeast Texas Record reports:
  • Beaumont residents Charles and Angela Richard have filed suit against the city in hopes of saving their residence. [...] According to the petition, on May 18 the city served the Richards with notice that their home was not up to code and was slated to be demolished.

  • In their suit, the Richards claims they have brought the home up to code but the city refuses to rescind its order to vacate. Plaintiffs would (show) sic that there is no remedy at law that is clear and adequate to protect plaintiffs' property interest against this wrongful demolition by defendant," the suit states.

Source: Beaumont residents sues city to save home.

Revocation Of Mobile Home Park Operator's License Could Drive 30 Families Out From Homes

In Bradford Township, Wisconsin, The Janesville Gazette reports:
  • Juan and Anna Iniguez have a brand-new lease on their lot at Shady Hills Mobile Home Park. According to the lease, they can stay through at least December. And they want to stay. Desperately. But the lease doesn’t give them much confidence.

  • The Bradford Town Board has set a public hearing as part of the process to revoke Shady Hills owner David Merriam’s operating license.

  • The Rock County Health Department also has filed orders against the park. The county would support whatever decision the town made about Merriam’s license, Environmental Health Director Tim Banwell said.

  • If the license were revoked, it could mean the residents would have to move. [...] The Iniguezes are among the 30 households that in April were given a letter that states their lot leases were terminated as of Jan. 1. They had until July 4 to move out, the letter states.


  • The town of Bradford building inspector has recommended Merriam’s license be revoked based on the half-torn-down mobile homes, the lack of access for emergency vehicles and work that has been done on some units without a license.

  • The Rock County Health Department has issued an order for streets to be repaired, manholes secured and trash removed.

For more, see Action vs. owner could hurt Shady Hills tenants.

Thursday, June 30, 2011

BofA Director On Countrywide: "Worst Decision We Ever Made!" As Bank Settles 'Crappy Mortgage' Suit For $8.5B; Will Swallow Add'l $5.5B In Buybacks

The Wall Street Journal reports:
  • Just before Bank of America Corp. swooped in to buy Countrywide Financial Corp. in 2008, the bank's then-chief executive, Kenneth D. Lewis, told analysts why he had dropped his resistance to owning a mortgage lender.

  • "Arithmetic overcomes all your issues," he told analysts. "If I ever did anything in the mortgage business, I would have to eat about seven years of my words, so it would have to be pretty compelling."

  • The nation's largest bank by assets has been haunted by Countrywide's numbers ever since the $2.5 billion deal was completed.

  • On Wednesday, Bank of America announced, as expected, an $8.5 billion settlement with investors who took a beating on mortgage bonds issued by Countrywide before the housing market collapsed.

  • The Charlotte, N.C., bank also will swallow an additional $5.5 billion to buy back other defective mortgages in the future. And it took a $6.6 billion hit for lawsuits, foreclosure snarls, a write-off in the value of its mortgage business and loan-servicing adjustments.


  • Of all the deals Bank of America made during its climb to the top of the U.S. banking heap since the 1980s, Countrywide has spawned more regret than probably any other acquisition by Mr. Lewis or his predecessor, Hugh L. McColl Jr.

  • "It turned out to be the worst decision we ever made," said one Bank of America director who voted for the Countrywide deal in January 2008. Mr. Lewis declined to comment through his attorney.

  • Since the purchase, the bank's real-estate division has saddled it with more than $17 billion in losses, most of it coming from the assets inherited from Countrywide. Even Mr. Moynihan has hinted publicly that the deal was a mistake, telling shareholders in May that the bank agreed to take on Countrywide, based in Calabasas, Calif., "just when you shouldn't have done it."


  • Since then, Bank of America's mortgage division has racked up $17.7 billion in net losses amid rising numbers of homeowner defaults. The company has lost $22 billion since the start of 2010 to investors who demanded the bank buy back Countrywide mortgage bonds.

  • Other legal payouts include $8.4 billion for home-loan modifications, $108 million to the Federal Trade Commission to settle claims of excessive fees by Countrywide, and more than half of the $67 million fraud-suit settlement involving former Countrywide founder Angelo Mozilo. Mr. Mozilo declined to comment through his lawyer.

  • Bank of America still faces the prospect of billions of dollars in fines from U.S. and state regulators investigating foreclosure procedures. That mess could cost the company about $7.4 billion on a pretax basis, said Glenn Schorr, an analyst at Nomura Securities.

For more, see BofA Haunted by Countrywide Deal (requires subscription; if no subscription, GO HERE - then click appropriate link for the story).

NY AG: 'Quick, Cheap $20-25B Multi-State Foreclosure Fraud Settlement Not Enough!'; Scneiderman "Stunned" To Find Probe Lacking In Docs, Depositions

The Rochester (New York) Democrat and Chronicle reports:
  • New York Attorney General Eric Schneiderman expects to lead opposition to what he called a "quick, cheap settlement" of a 50-state investigation into foreclosure practices.

  • Schneiderman put the monetary settlement being discussed with the largest U.S. mortgage servicers at $20 billion to $25 billion and said he will take "the hardest line" against it.

  • The probe began in October. New York launched its own investigation two months ago and, Schneiderman said, has found the problem is much deeper. He said he was "stunned" to find the multi-state probe so lacking that no documents or witness depositions had been obtained.

For more, see AG Eric Schneiderman opposes foreclosure deal.

The Saga Of 'Sunny' Sheu - NYC Man Who Fought Foreclosure After Being Victimized By Forged Land Documents Winds Up Dead

In New York City, Black Star News reports:
  • Since his death last summer, associates of Sun Ming Sheu, an activist fighting alleged judicial corruption in New York, remain convinced that he was murdered and that police aren't investigating his death because of a coverup.

  • They point to the alleged kidnapping and death threats by New York Police Department (NYPD) officers Sheu reported to the FBI, the highly suspicious circumstances of Sheu’s injury, the contradictions in the official reports of his death, and most conspicuously, the lack of any investigation by law enforcement, even after the manner of Sheu’s death was ruled "undetermined" by the Medical Examiner, making an investigation legally mandatory.

  • They also cite a motive - the silencing of Sheu three days after he declared that he had discovered proof of felonies by a New York State Supreme Court Judge.

  • Perhaps the most ominous evidence of foul play, the associates say, is the video Sunny Sheu made weeks before his death - now posted on Youtube - in which he predicts his own murder and names the parties he feels will be responsible; parties including a sitting State Supreme Court Judge [Joseph Golia] and two detectives of the Queens District Attorney office whom he had claimed "kidnapped" and threatened him months prior.

For more, see Was Sunny Sheu, Foe Of Judicial Corruption, Murdered? (Activist Dead Weeks After Posting Video About His Fears) (Part One of a Series).

See also, Business Insider: The Unbelievable Story Of The Queens Man Who Fought Foreclosure And Wound Up Dead.

For an August 4, 2009 post on Sonny Sheu, see Queens Homeowner Fights To Hold Onto Home Stolen In Deed Theft Scheme; May Lose House Anyway Despite Successful Forgery Prosecution Against Scammers.

Judge To Bill Collectors: Courtroom Is Not A "Land Of Oz!"

From a May, 2010 story in The New York Times:
  • As New Yorkers have tumbled into credit card debt in large numbers during the great recession, bill collectors have inundated the courts to get what they say is due. In turn, the courts have issued hundreds of thousands of orders against residents. Some consumer groups argue that by doing so, the courts have become little more than an arm of the debt collection industry.

  • Now, a few judges in New York State are suggesting that they agree, at least in part, with the consumer groups. They have fumed at debt collectors and their lawyers, scolding them for interest as high as 30 percent a year and berating them for false statements and abusive practices.

  • Some of the rulings have even been sarcastic or incredulous. In December, a Staten Island judge said debt collectors seemed to think their lawsuits were taking place in a legal Land of Oz, where everyone was supposed to follow anticonsumer rules invented by some unseen debt-collection wizard.


  • In the Staten Island case, the judge, Philip S. Straniere, said a credit card company was claiming interest of 28 percent on the balance due, which would be illegal as usury under New York law. The company argued that the credit card issued to a New Yorker that seemed to be from a national company had actually been issued by a one-branch bank in Utah, which had no usury law.

  • Like the Land of Oz, run by a Wizard who no one has ever seen,” Judge Straniere wrote, “the Land of Credit Cards permits consumers to be bound by agreements they never sign, agreements they may never have received, subject to change without notice and the laws of a state other than those existing where they reside.”(1)

  • The judge ruled that the supposed agreement allowing unlimited interest charges was not enforceable in New York.(2)

For the story, see In New York, Some Judges Are Now Skeptical About Debt Collectors’ Claims.

For Judge Straniere's ruling, see American Express Travel Related Services Company, Inc. v. Assih, 2009 NY Slip Op 29527 (NYC Civ. Ct., Richmond Cty., 2009).

(1) Commenting on the rules governing the consumer credit and debt collection industries, Judge Straniere makes this observation:

  • Having dealt with thousands of consumer credit cases over the years the court is sometimes caused to wonder if the regulations governing this industry originated in the "Wonderful Land of Oz" and not in the legislature of the various states and national government.

(2) Judge Straniere gave the lender the kiblosh on the usury issue with this remark:

  • The Wizard in the "Wizard of Oz" warned Dorothy and friends, "Do not arouse the wrath of the great and powerful Oz," I am sure the court will likewise be arousing the wrath of the plaintiff by finding that the credit card agreement entered into by the defendant with any of the plaintiff's entities is void as in violation of New York's usury statute.

Indiana U.S. Senate Candidate Caught Taking Double Homestead Exemptions; Says He Didn't Mean To, Agrees To Pony Up Unpaid Back Taxes

Buried at the end of a recent article, the Evansville (Indiana) Press & Courier reports:
  • An Indianapolis television station reports that state treasurer and U.S. Senate candidate Richard Mourdock has taken more property tax breaks than allowed. WTHR-TV says Mourdock had a homestead exemption on a home in Evansville and a second one for an Indianapolis condominium, even though multiple homestead exemptions are not allowed.

  • Mourdock says he filed a form to cancel one of the exemptions but learned this month that Marion County officials misplaced the form. He says he has since filled out another form to cancel the credit and has made arrangements to pay back taxes.

  • Marion County Deputy Auditor Claudia Fuentes wrote in a memo this month that a previous owner applied for the deduction. Mourdock is a Republican seeking the U.S. Senate seat currently held by GOP Sen. Richard Lugar.

Source: Mourdock's taxes under scrutiny.

Wednesday, June 29, 2011

Defective Foreclosure At Center Of REO Homebuyers' Dilemma; Discover They Acquired Crappy Title When Subsequent Refinance Attempt Failed

In Cape Coral, Florida, The News Press reports:
  • Brian and Holly Barnhart thought they were home free when they bought their Cape Coral dream house from Wells Fargo Bank - but the bank didn't even own the house.

  • Now the Barnharts, who emptied their life savings to buy the house for $153,000 cash and renovate it for another $80,000, are stuck in limbo along with their two small children and a baby due in July.


  • At the heart of the problem is a mortgage foreclosure lawsuit filed by Wells Fargo in 2007 against Richard Riccobono for a mortgage he had on the house. The bank won the suit and then took back possession of the house, but moved July 30, 2009, to set aside its ownership.

  • That caused ownership of the house to revert to Riccobono. But on Nov. 3, 2010, Wells Fargo sold the house to the Barnharts - who discovered two months later they didn't really own it when they applied for a mortgage.

  • Their plight is the latest in a string of cases in which people are suffering the aftershocks of the wave of foreclosures that swept through the county after the real estate bubble burst at the end of 2005.(1)

For more, see Exclusive: Cape Coral family pays Wells Fargo for home bank didn't own.

(1) Unless they updated their owner's title insurance policy (assuming, of course, they obtained one when they bought the home in the first place) to reflect the additional $80,000 investment for renovations (or unless they have something in their existing policy that addresses market value increases - for which they would have paid an additional insurance premium), the Barnhart's may find that their title insurance coverage is limited to the $153,000 they paid for their home. (It may be possible, however, that the Barnhart's can go to court and request that a judge impose an equitable lien on the property for the $80K expended to fix the place up.)

Virginia Homeowner's F'closure Challenge Leaves Public Auction Buyer Out $310K With Ongoing Tax Bills, In 2-Year Tug-Of-War For Possession Of Premises

In Richmond, Virginia, the Richmond Times Dispatch reports:
  • The foreclosure mess rocking the nation is playing out in Richmond.

  • On one side is a father-and-son team who bought a house in Windsor Farms as an investment at a foreclosure auction nearly two years ago but can't take possession of the house.

  • On the other is the couple who owned the house — and claim they still do, alleging that the foreclosure process was improper and should be voided.

  • Now, the case is tied up in the courts. [...] Judge Walter W. Stout of Richmond Circuit Court said Monday that the case has become a quagmire because of questions relating to title and possession.


  • Similar cases are likely to pop up, as foreclosures continue to mount nationwide and lenders and attorneys general in all 50 states review foreclosure procedures for possible improprieties.


  • The Watsons paid $310,200 for the house at a foreclosure auction on the steps of the John Marshall Courts Building in July 2009. Their name was recorded a couple of weeks later on the deed of trust. They have paid property taxes of nearly $15,000 since then, said their attorney, William K. Grogan.

  • But it's not clear who owns the house. The Nicholsons have not paid any mortgage or rent for at least 30 months, Grogan said in court filings. But the Nicholsons allege that the foreclosure process on their home was bogus, according to court records. [...] The couple has posted more than $19,000 in bonds, the Nicholsons' attorney said. "He is not a freeloader," Henry W. McLaughlin, one of two attorneys representing the Nicholsons, said at a recent court hearing.

For more, see Windsor Farms foreclosure case a quagmire.

"This Is Only The Beginning!" Warns Florida Lawmaker As Insurance Industry Begins To Jack Up Rates On Homeowner Policies

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Brace yourself before you open your next home insurance bill. When Paul Hobson received his State Farm Florida renewal this month, he was shocked to find the annual premium to insure his 2,200-square-foot house had increased to $2,715 from $1,092.

  • "That's a 152 percent increase. I called to make sure the figure was right," Hobson said. "Did the end of the world happen or something?" The State Farm office he called in Jupiter assured him the amount for his St. Lucie West home was correct and due in August.

  • In April, regulators granted State Farm an average 18.8 percent rate increase, but as Hobson discovered, those averages mean little because there is no cap. Some homeowners are being hit with huge increases.

  • "This is only the beginning. The rates are being approved quicker and easier on behalf of the insurance industry. It's quite sad," said state Sen. Mike Fasano, R-New Port Richey, who has been an advocate for consumers on insurance. "We have a governor now who is sympathetic to the insurance industry."

For more, see Uptick in homeowners insurance rates 'only the beginning'.

Use Of Quiet Title & Slander Of Title In Undoing Real Estate Equity Ripoff, Voiding Deeds & Mortgages

The successful use of a quiet title and slander of title lawsuit in an effort to undo a real estate equity scam perpetrated on an elderly property owner by his nephew and a gang of others was the focus of a December, 2009 ruling of an Illinois appeals court.

The fact pattern involved, among other things, a purported sale leaseback, coupled with a repurchase option, of property and the recording of forged land documents.

For those in Illinois (and possibly elsewhere) in the business of undoing and unwinding these ripoffs on behalf of the victims, there may be some points of interest, including the following:
  • action to quiet title,

  • requirements for adequately proving slander of title,

  • essential elements of a forgery,

  • cloud on title ("is the semblance of title" which is "unfounded" or "which it would be inequitable to enforce"),

  • authority of an agent (may be actual or apparent and, if actual, may be express or implied),

  • ratification of agent's unauthorized acts,

  • failed attempt by the bank that financed the ripoff to reinstate its mortgage lien that had been voided by the trial court (unsuccessfully argued judicial estoppel and unclean hands),

  • imposition of punitive damages in a slander of title case,

  • availability for an attorney fee award for the victim in a slander of title case,(1)

  • factors in determining an appropriate award for attorneys fees for the victimized property owner (liability for which is imposed on the scammers),

  • applicability of a contingency fee risk multiplier in calculating the award for attorneys fees(2) (court approved use of a multiplier of 3 to determine the total fee award of $595,574 for the contingent portion of the fee).

For the ruling, see 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)).

(1) With respect to the appropriateness of awarding attorneys fees in a slander of title action, the Illinois appeals court made this observation:

  • Contrary to the Wolf defendants' argument, there is authority in Illinois providing that recovery for slander of title actions permit recovery of those costs and attorney fees which directly flow from the wrongful disparagement. Home Investments Fund v. Robertson, 10 Ill. App.3d 840, 844, 295 N.E.2d 85 (1973).

    Further, plaintiffs were entitled to recover those costs and attorney fees directly related to the quieting of title and to those damages directly related to a slander of title, i.e., loss of vendibility, etc.
    Robertson, 10 Ill.App.3d at 844, 295 N.E.2d 85.

(2) For more on the use of risk multipliers in calculating prevailing party attorney fees in pro bono and contingency fee cases, see:

More On Void vs. Voidable

Whether one is looking to undo or unwind an abusive real estate deal, set aside a deed, mortgage or other conveyance, or vacate/void a foreclosure judgment, the distinction between its status as void and voidable may, in many cases, be the most important issue to address.

In this regard, the following reminder as to the fundamental difference between void and voidable (in the context of a court judgment under attack) appeared in a recent ruling from an Ohio appeals court, a reminder that can't be repeated enough:
  • {¶11} " 'The distinction between "void" and "voidable" is crucial. If a judgment is deemed void, it is considered a legal nullity which can be attacked collaterally.

    Conversely, if a judgment is deemed voidable, it will have the effect of a proper legal order unless its propriety is successfully challenged through a direct attack on the merits. * * * ' " GMAC, LLC v. Greene, 10th Dist. No. 08AP-295, 2008-Ohio-4461, ¶27, quoting State v. Montgomery, 6th Dist. No. H-02-039, 2003-Ohio-4095, ¶10, quoting Clark v. Wilson (July 28, 2000), 11th Dist. No. 2000-T-0063.

    A judgment is void where service of process has not been accomplished or where the court lacks subject-matter jurisdiction. Deckerd v. Deckerd (June 24, 1999), 7th Dist. No. 98-CO-59.

    In contrast, "[a] voidable judgment is one rendered by a court having jurisdiction and although seemingly valid, is irregular and erroneous." GMAC at ¶26, quoting Montgomery at ¶9, citing Black's Law Dictionary (7 Ed.1999) 848

The significance of the distinction(2) lies in:

  1. the timing and (in the context of court judgments) method of attack relating to any challenge made by the injured party:

    (void - can be challenged at any time and (in the context of court judgments) can be collaterally attacked; voidable - subject to time constraints and (in the case of court judgments) rules set forth in the state rules of civil procedure);
  2. the effect on the rights of those who subsequently acquire an interest in any property, the title to which may be implicated by the judgment, conveyance, contract, etc.:

    (void - all subsequent acquirers are out of luck and acquire nothing, even those who may otherwise qualify as bona fide purchasers; voidable - will not trump the rights of subsequent purchasers and encumbrancers if, and only if, they qualify for protection as bona fide purchasers).

For the ruling, see Wagenbrenner v. Wagenbrenner, 2011-Ohio-2811 (Ohio App. 10th Dist., Franklin County, June 9, 2011).

(1) For Ohio civil procedure junkies, the court then added this point:

  • {¶12} It is well-settled that a court has the inherent authority to vacate a void judgment and that a void judgment may be challenged at any time. The Milton Banking Co. v. Dulaney, 4th Dist. No. 09CA10, 2010-Ohio-1907, ¶26.

    However, "[a] voidable judgment is subject to direct appeal and to the provisions of Civ.R. 60(B). A Civ.R. 60(B) application for relief must be made to the trial court that rendered the judgment from which relief is sought." Montgomery at ¶9 (internal citations omitted). See also GMAC; Deckerd (exclusive means to challenge a voidable judgment is Civ.R. 60(B)); Brown v. Brown (Feb. 5, 1991), 2d Dist. No. 90-CA-41 (because the judgments were voidable and not void the appellant should have sought relief through Civ.R. 60(B)); McIntyre v. Braydich, 11th Dist. No. 96-T-5602 (a court has no inherent authority to vacate voidable judgments); Evans v. Supreme Court of Ohio, 10th Dist. No. 02AP-736, 2003-Ohio-959, ¶17 (voidable judgments may only be challenged on direct appeal); Mayfield Hts. v. N.K., 8th Dist. No. 93166, 2010-Ohio-909 (because the judgment was voidable the trial court did not have the authority to vacate it).

(2) See Beyond a Definition: Understanding the Nature of Void and Voidable Contracts for an analysis (in the context of contracts) of the problems encountered when making the distinction between what is truly void, and what is merely voidable (footnotes conained in the original text omitted):

  • Contract law has a problem. With predictable recurrence, court opinions, statutes, scholarly literature, and contract draftsmen use the words “void,” “voidable,” and “unenforceable” – as well as dozens of other terms of the same ilk – to describe flawed contracts.

    Yet the meaning of these declarations is persistently and maddeningly slippery. In the rare case where the precise meanings of these words are pressed into service in the courtroom, litigants are often surprised to find the court announce that a transaction formerly (and unequivocally) declared to be void is, in fact, merely voidable or unenforceable.

    The scope of the problem is as widespread as it is trifled; though the distinction between void and voidable is sometimes the most important issue in contract disputes, very little serious, scholarly attention has been paid to the nature of the distinction. DeedVoidVoidable

Tuesday, June 28, 2011

Appeals Court Says 'No Way' To BofA's F'closure Eviction Attempt; Crappy Affidavit Sinks Effort To Boot Homeowner; Another Lower Court Ruling Reversed

A defective affidavit filed by an officer ("Hiatt" - maybe a robosigner?) of loan servicer Bank of America in an action for ejectment targeting a recently-foreclosed borrower was the focus of another appeals court reversal of a lower court ruling adverse to homeowners.

After considered analysis of the facts of the case, and the state law applicable thereto, the Alabama Court of Civil Appeals ruled as follows:(1)
  • In the case now before us, Hiatt's affidavit did not show that Bank of America was a participant in the servicing of the mortgage or in the foreclosure.

    It did not explain how Hiatt, in his capacity as an officer of, and attorney-in-fact for, Bank of America, would have acquired personal knowledge of the information he testified to in his affidavit.

    Moreover, none of the documents that accompanied his affidavit were sworn, certified, or otherwise authenticated.

    Consequently, based on the holding of the supreme court in Crawford, we hold that the testimony contained in Hiatt's affidavit and the documents that accompanied his affidavit were inadmissible and, therefore, that the trial court erred in entering a summary judgment in favor of the Secretary.

    Therefore, we reverse the summary judgment and remand the cause for further proceedings consistent with this opinion.

For the ruling, see Smith v. Secretary of Veterans Affairs, No. 2100194 (Ala. Civ. App. June 24, 2011).

(1) Before addressing the admissibility of the affidavit, the court addressed BofA's defense that, because the homeowner failed to file a motion to strike the affidavit in the trial court, he effectively waived his right to challenge it:

  • In the case now before us, although Frank did not move to strike Hiatt's affidavit and the unsworn, uncertified, and unauthenticated documents that accompanied it, Frank's response to the summary-judgment motion called the trial court's attention to the inadmissibility of the affidavit and those documents by objecting to them and stating the grounds of the objection.

    Therefore, we find no merit in the Secretary's argument that Frank waived his objection to the Hiatt affidavit and the documents that accompanied it because he failed to move to strike them. See Ex parte Elba Gen. Hosp. & Nursing Home, Inc.

Call Out The Homeowner Pitchfork Brigade! Maine Banksters Win Preliminary Skirmish In Battle Over Proposed Anti-Crappy F'closure Document Legislation

Buried in a recent article in The Portland (Maine) Press Herald is this blurb on one of a number of bills that state lawmakers are trying to advance:
  • L.D. 145, "An Act to Protect Homeowners Subject to Foreclosure by Requiring the Foreclosing Entity to Provide the Court with Original Documents," sponsored by Rep. Roberta Beavers, D-South Berwick. The bill would require a mortgage holder to produce the original mortgage note as part of the civil foreclosure complaint.

  • Despite a unanimous vote in support from the Judiciary Committee, intense lobbying from the banking industry threatened the bill, so it was sent back to committee, Beavers said.

Source: Lawmakers put key proposals on hold.

Facing Financial Squeeze, D.C. Tax Collector Goes On Prowl Hunting For Homeowners Claiming Fraudulent Homestead Exemptions

In Washington, D.C., The Washington Post reports:
  • Perhaps the most important lesson about tax breaks is this: You have to know when you are eligible, and then you have to ask for them.

  • The D.C Official Code contains two popular real-property tax exemptions: the homestead exemption and the senior-citizen real-property tax exemption. These exemptions can save a homeowner many thousands of dollars annually. Understanding the eligibility rules is key because the tax savings are significant — and there are serious penalties for those who receive these tax benefits despite being ineligible.

  • In these times of tight municipal budgets, you’d better believe the District is aggressively auditing these valuable tax exemptions. In 2006, the Office of Tax and Revenue established a separate Homestead Audit Unit. According to the office’s spokeswoman, Natalie Wilson, the audit unit conducts approximately 10,000 “annual” audits and up to 3,000 “daily” audits.

  • This unit has been quite successful. In fiscal year 2010, it collected approximately $6.6 million in additional revenue for the District’s coffers. There is no statute of limitations on how far back the District can audit, bill and seek to collect delinquent taxes, penalties and interest.

For more, including homestead eligibility, filing requirements, and penalties for gaming the system, see D.C. property tax exemptions: Know when you’re eligible, and know when you’re not.

Lack Of Competent Evidence Supporting Confirmation Of Non-Judicial Foreclosure Process Sinks Sale; Lower Court Foreclosure Ruling Reversals Continue

A ruling by the Georgia Court of Appeals reinforces the fact that a lower court hearing to confirm the results of a Georgia non-judicial foreclosure sale under a power of sale is not to be treated as an exercise in rubber-stamping, a lesson that a reversed state trial judge recently received.

From the ruling (bold text is my emphasis; footnotes from the original text omitted):
  • Franklin argues that the trial court erred by finding that the properties sold for their true market value because no evidence was introduced as to the regularity of the sales, no evidence was introduced showing foreclosure sales ever took place, and no evidence was introduced regarding the actual prices received for the properties at the alleged sales.

    Franklin contends that First Georgia produced only the notices of sale under power for the properties and the testimony of two appraisers, who provided evidence of the market value of the properties, but First Georgia failed to produce competent evidence as to the occurrence or outcome of the sales. We agree and reverse.


  • The confirmation statute requires the trial court to determine whether the sale under power was properly executed. Here, the trial court's determination as to the regularity of the sales is not supported by any competent evidence in the record.

    Although the report to the judge contained allegations of fact concerning the sales, the report was not verified and not supported by testimony or other evidence at the hearing. Although First Georgia's attorney stated that the properties sold for $170,000; $48,000; and $300,000; this statement was not competent evidence.

For the ruling, and the analysis of the applicable Georgia law, see Franklin v. First Georgia Banking Co., A11A0216 (Ga. Ct. App. June 23, 2011).

Monday, June 27, 2011

Lawsuit: BofA At Center Of Another Illegal Trashout As 82-Year Old Man Away On Extended Trip Returns Home To Find Premises Emptied & Padlocked

In Hillborough County, Florida, the St. Petersburg Times reports:
  • After going out of town, an 82-year-old man returned home to find his house emptied out. Even the trash was gone. He found a padlocked door and a sign for a company that cleans out properties in foreclosure. But Benito Santiago Sr.'s home wasn't in foreclosure, public records show.

  • In a lawsuit filed this month in Hillsborough Circuit Court, Santiago claims that Field Asset Services Inc., took his property and changed his locks in the fall of 2009. He sued the company, along with Countrywide Home Loans, for damages.

  • A Hillsborough County sheriff's deputy estimated in an Oct. 5, 2009, report that the Santiago's possessions were worth $29,100. In an interview, Santiago, a retired antiques dealer, guessed they were worth $100,000. "At least," he said.

  • Pictures of his deceased wife were among the items taken. He lost everything, including his furniture and an antique wagon wheel. The incident upset him enough that he moved in with a friend. "Everything was taken out of the property," he said. "I feel nervous. I'm not going back."

  • Neither Field Asset Services nor Bank of America, which now owns Countrywide, commented on the incident when contacted by the St. Petersburg Times. Field Asset Services said it doesn't discuss client cases. Bank of America requested a copy of the suit.


  • Carlin Phillips is a Massachusetts attorney who specializes in cases of wrongful "lock-outs" and "trash-outs." In the past year, he's had hundreds. Sometimes, the homeowner is delinquent, but the lockout is premature. Sometimes, cleaners go to a "road" instead of a "court." And in some cases, people who just purchased a bank-owned home will return to find it cleaned out, because no one took it off the foreclosure list.

  • Phillips says banks have failed to adopt policies to make sure they have the right house. His experience doesn't bode well for Santiago's possessions. "We have never gotten one piece of property back," he said.(1)

For the story, see Tampa retiree says he lost belongings in foreclosure blunder.

(1) For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

Another Sale Leaseback Peddler Feels The Pinch As Norfolk Feds Bag Foreclosure Rescue Operator To Face Equity Stripping Allegations

In Norfolk, Virginia, The Virginian Pilot reports:
  • Kathleen Harps of Chesapeake was arrested Friday by the FBI after she was indicted by a federal grand jury Tuesday, according to a news release from the U.S. Attorney’s office. Harps, 51, is being charged with one count of conspiracy to commit mail and wire fraud, three counts of mail fraud and three counts of engaging in unlawful monetary transactions.

  • The indictment says that Harp operated a business named the New Beginnings Group in Hampton Roads that specialized in “foreclosure rescue” during 2006. Harps and others solicited homeowners facing home foreclosure and agreed to sell their homes to Harps or other buyers.

  • Harps promised them that during a one-year period after the sale, the homeowners would remain in their homes without having to pay the mortgage so they could buy back their homes at the end of the year. This didn’t happen, the indictment said.

  • Instead, the indictment says Harps and other property buyers lied to fraudulently obtain mortgage loans, which later defaulted. Foreclosures soon followed and the homeowners lost their homes and equity they built up, which they paid to Harps’ business, according to the indictment.

  • Harps faces a maximum of twenty years in jail for each of the conspiracy and mail fraud counts, and ten years in jail for the unlawful monetary transaction count.(1)

For the story, see Chesapeake woman charged with foreclosure fraud.

(1) In a recent case with reported similarities:

See Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals for links to some earlier posts on government prosecutions involving these deals.

See National Consumer Law Center, Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-Stripping Foreclosure 'Rescue' Scams for more on this type of scam (which, by the way, is just the latest mutation of a real estate equity ripoff that's been around for centuries, as any student of the old common law cases from states around the U.S. (which, in turn, are based on the pre-1787 English common law) addressing the equitable mortgage doctrine (involving a conveyance of a 'deed absolute' in exchange for a loan) will attest to).

Lawsuit: Robosigning, Securitization-Documentation "Liabilities Appear To Be Hanging Like The Sword Of Damocles Over Wells Fargo & Its Shareholders"

Housing Wire reports:
  • Two pension funds filed a shareholder derivative lawsuit against Wells Fargo [last] week, claiming the bank and its leaders failed to properly address mortgage documentation issues, leaving Wells exposed to $15 billion in potential liabilities.


  • The pension funds claim the bank's leadership failed to promptly address robo-signing and documentation issues tied to the mortgage securitization process, resulting in a situation where "liabilities appear to be hanging like the sword of Damocles over Wells Fargo and its shareholders." The plaintiffs specifically named Wells Fargo CEO and Chairman John Stumpf a defendant, along with other board members and officers.

  • Investors in the pension funds claim Wells Fargo's leadership ignored early reports that robo-signing and issues with the Mortgage Electronic Registration System during the securitization process tainted some foreclosures and property titles.

  • The plaintiffs, who own a combined 169,000 shares of the banking giant's 5.3 billion shares outstanding, said in court papers the leadership continued "to prolong the illusion of Wells Fargo's success, concealing the adverse facts concerning Wells Fargo's actual financial condition, its lack of ownership over real estate debt that had been securitized through the MERS system, and the company's lack of clean title to real property, in judicial foreclosure states."

  • "This wrongful conduct exposed the company to billions of dollars of liability to investors in the secondary securitized debt markets, and hundreds of millions of dollars in litigation related expense and liability stemming from wrongful foreclosure and related litigation arising in judicial foreclosure jurisdictions," the pension funds allege. As part of the derivative suit, the two groups are suing Wells Fargo's directors and executives, claiming they breached their financial duties.

  • MERS, which is a subsidiary of Merscorp Inc., is accused in the complaint of aiding and abetting the bank by assisting and ignoring in some of the material breaches of fiduciary duties.

For the story, see Pension funds sue Wells Fargo, alleging executives breached fiduciary duties.

Broken Loan Modification Promises Continue To Haunt, Say Now-Booted Ex-Homeowners Who Suffered F'closure While Payment Workout Plan Still Under Review

ProPublica reports:
  • Four years into the foreclosure crisis, banks say they've made major improvements in how they handle struggling homeowners. They've promised, for example, not to foreclose on homeowners who are being considered for mortgage modifications. But that's still happening.
  • Consider the cases of Laurie Pinkerton and Lisa Peterson. The two women, both Californians and Bank of America customers, had been assured by the bank that they wouldn't lose their homes before they'd been evaluated for a possible modification. Both had their homes sold last month. [...] Both Pinkerton and Peterson said their homes were sold after foreclosure for far less than they're worth.
  • Regulators have done little to stop the practice, and the "problem appears to be getting worse," said Kevin Stein, associate director of the nonprofit California Reinvestment Coalition.
  • Last month, the coalition surveyed 55 foreclosure-avoidance counselors throughout the state. Collectively they serve thousands of borrowers every month. Almost all of the counselors, 94 percent, reported having worked with clients who'd lost their homes while under review for a modification. About half of the counselors reported this happened "often." This year's totals, which are due to be publicly released next week, are higher than those in the group's survey last year.

For more, see Bank Errors Continue to Cause Wrongful Foreclosures.

Go here for more from Paul Kiel at ProPublica on the problems surrounding loan modifications that face homeowners seeking to re-work their house payments.

Sunday, June 26, 2011

Despite Successfully Obtaining Pinheaded Lower Court Foreclosure Ruling, Defense Attorney Gets Slammed With Sanctions, Bar Disciplinary Referral

A recent ruling by Florida's 3rd District Court of Appeal is evidence that a homeowner facing foreclosure can be the beneficiary of a pinheaded lower court ruling (Miami-Dade County Circuit Court Judge Peter Adrien), only to have it reversed on appeal.

The facts set forth in the 3-judge panel's ruling are 'mind-boggling' (a term used by the court elsewhere in the opinion), as evidenced by these excerpts:
  • Debtors and their counsel, Attorney Paul B. Woods, managed to convince the trial court that a mere letter of "tender" and a fabricated Unilateral Note, without payment of any kind, were sufficient to discharge the entire debt owed to Washington Mutual. Judge Adrien, in turn, granted the Motion to Vacate, vacated the final judgment, discharged the lis pendens, and dismissed Washington Mutual's complaint with prejudice.


  • Despite the nonsensical terms of the Unilateral Note, the Debtors amazingly claim that they are satisfying "any amount due Plaintiff pursuant to original promissory note" by tendering this newly concocted document, and therefore, owe nothing to Washington Mutual.

    The absurdity of this argument notwithstanding, there is absolutely no evidence in the record that Washington Mutual "negotiated and agreed [to]" the Unilateral Note, nor is there any evidence that Washington Mutual ever considered a possible pre-judgment modification of the Mortgage or renegotiation of the Promissory Note.

    Moreover, other than the Debtors' self-serving, unsupported statements, the record is devoid of any evidence demonstrating that the final judgment, much less the Promissory Note or the Mortgage, were ever satisfied. Given the sheer lack of evidence that there had been a satisfaction of any kind by the Debtors, the requirements of Florida Rule of Civil Procedure 1.540(b)(5) were simply not met, and, thus, there was no basis for vacating the final judgment.

    Accordingly, we reverse the trial court's April 2010 Order and remand with instructions to reinstate Washington Mutual's lawsuit, lis pendens, and the final judgment. The trial court is further instructed to reschedule the foreclosure sale.

The appeals court then went further:


  • Accordingly, we grant Washington Mutual's motion for appellate attorneys' fees and sanctions against both the Debtors and their attorney, Paul B. Woods, jointly and severally. See id.; §57.105 Fla. Stat.

    Also, given the essentially fraudulent behavior of the Debtors, and the potentially unethical conduct of their counsel, based upon and in furtherance of this behavior, we refer Paul B. Woods to the Florida Bar for its determination of whether professional discipline is warranted.
For the ruling, see JPMorgan Chase v. Hernandez & Hernandez, No. 3D10-1099 (Fla. App. 3d DCA, June 22, 2011).

(1) Once again, Section 57.105 of the Florida Statutes rears its head in a foreclosure case, and is expected to do so quite a bit as these cases continue to float up to the various Florida appeals courts.

For Florida foreclosure counsel unfamiliar with the operation of this statute, the Section 57.105 reading list is somewhat long. Whether one is seeking a recovery of prevailing party attorneys fees for a client, or looking to have a court impose sanctions on adversaries for their conduct (or dodge sanctions requested by one's adversaries), it might be a good idea to familiarize oneself as to how and when the statute has been applied in the past.