Saturday, July 23, 2011

Chase Targeted In Proposed Class Action With Allegations Of Ignoring Legal Obligations, Violating Rights Of Tenants In Foreclosed Homes

The following excerpt has been lifted from a recent lawsuit, filed in Los Angeles, California and that seeks class action status, against JPMorgan Chase accusing it of illegal conduct designed to drive tenants in foreclosed properties out of their homes in violation of local rent control laws:
  • JP Morgan Chase Bank's "evict and sell" business model, in summary, goes as follows: When JP Morgan Chase Bank becomes the owner of a foreclosed property, JP Morgan Chase Bank chooses to evict whatever tenants reside at the property in order to enhance the property's sale prospects.

    JP Morgan Chase Bank has no intent in becoming a landlord of the property or to comply with the law as it concerns the innocent tenants residing on the property.

    In furtherance of JP Morgan Chase Bank's scheme, JP Morgan Chase Bank uses realtors to sell the properties and "handle" the tenants prior to eviction. The realtors only get paid if the property is sold, so the realtors do everything possible to force the tenants off the property.

    They have no incentive or desire to comply with LARSO [Los Angeles Rent Stabilization Ordinance] and help the respective foreclosing bank manage the rental property as a landlord.

    When JP Morgan Chase Bank cannot force tenants to vacate properties by deception and intimidation, JP Morgan Chase Bank resorts to high volume, "eviction mill" attorneys to handle the preparation and service of eviction notices and the filing of Unlawful Detainer complaints.

    The attorneys' job is not difficult and is to illegally force the tenant off the property in violation of LARSO by serving a notice to quit, wait the notice period (whether 30, 60, or 90 days), and then file a Judicial Council form unlawful detainer lawsuit. Under general State law, no reason is required for an eviction as long as the bank provides the proper notice period. As far as JP Morgan Chase Bank is concerned, the "evict and sell" business model is efficient, quick, and cheap.

    The "evict and sell" business model, though, is not legal in the City of Los Angeles, where an entire body of rent control laws protecting tenants - LARSO, protects tenants and promotes stable communities. Evictions must be supported by "good cause," rather than at the owner's whim.

    Moreover, landlords are required to pay tenants fixed relocation assistance when they intend on taking the rental unit off the market, which is the intent of all the banks, including JPMorgan Chase Bank, when foreclosing upon the subject properties, especially when the tenant resides in an "illegal unit."


  • Many of these tenants that are being subjected to JP Morgan Chase Bank's "evict and sell" model are the poorest of the poor and live in intolerable conditions. Also, they do not know their rights or cannot defend themselves against these multi-billion dollar institutions bent on throwing them out of their homes.


  • To further expedite the vacating ofthe units, JP Morgan Chase Bank generally refuses to undertake the necessary repairs or cuts the tenant's utilities. [...] Within the broader group ofLos Angeles tenants falling victim to the JP Morgan Chase Bank's "evict and sell" model, there is a subset of the poorest, often minority residents of Los Angeles living in basements, attics, garages, storage rooms, in corners of a house that have been haphazardly separated by drywall - all of which have been illegally converted into living quarters with varied levels of bathroom, kitchen, and entrance.

    These converted spaces share the same basis of illegality in that these now-dwelling units have been constructed without permits, without the watchful eye of local regulatory agencies, and not in conformity with the laws intended to protect the illegal unit's human habitants. Thus, these illegal units have not been granted a Certificate of Occupancy issued by the City ofLos Angeles Department of Building and Safety ("LADBS").

    Because of the inherent danger of these illegal units, the City of Los Angeles deems them "unapproved" for occupancy. In other words, their existence for the purpose of human habitation is illegal. In such situations, landlords are required to either (a) sufficiently remediate the illegal unit so as to obtain a Certificate of Occupancy and make it habitable, which the banks steadfastly refuse to do, or (b) relocate the tenant and pay the tenant a relocation fee fixed by LARSO.

    Notwithstanding JP Morgan Chase Bank's legal obligations as landlords under rent control, JP Morgan Chase Bank has instead chosen to steadfastly continue with its "evict and sell" model without paying the tenants relocation fees as mandated by LARSO.

For the entire lawsuit, see Gonzalez v. JPMorgan Chase Bank, National Association.

Thanks to Deontos for the heads-up on this litigation.

Florida AG Responds To Recently-Dumped Foreclosure Fraud Fighters With Mud-Slinging Rip Job

The Palm Beach Post reports:
  • The Florida Attorney General's Office released a cutting statement Thursday criticizing the work of two former state foreclosure fraud investigators after a week of national attention paid to the duo's forced resignations.

  • Carlos Muniz, deputy attorney general and chief of staff in Attorney General Pam Bondi's office, said the performance of former Assistant Attorneys General Theresa Edwards and June Clarkson was "unacceptable" and that they were given the option to resign or be fired because of their "failure to improve after multiple warnings."

  • The Palm Beach Post first reported their departure on July 13. Edwards and Clarkson, who resigned their jobs at the South Florida bureau of the office's Economic Crimes Section on May 20, had been investigating the state's so-called "foreclosure mills," uncovering evidence of legal malpractice that also implicated banks and loan servicers.

  • In his statement Thursday, Muniz refers to an April 28 review of the South Florida bureau and Chief Assistant Attorney General Robert Julian that lists staff shortcomings, including "proper identification and analysis of legal issues" and "professionalism to opposing counsel." "Hopefully improvement will be made in these areas in the future," the review concluded. It does not mention Edwards or Clarkson by name.

  • Just seven days earlier, in an interim evaluation of Edwards, Julian praised her work, saying it has been "instrumental in triggering a nationwide review" of foreclosure practices. "I cannot overstate the degree to which I respect Ms. Edwards and her work with this unit," Julian wrote.

  • Edwards said Julian was assigned to another position in Fort Lauderdale in June.

For more, see State rips job quality of two fired foreclosure fraud investigators.

See also:

Loot From Settlement Between Washington AG & 'Stagecoach To Hell' Over Alleged 'Pick-A-Pay' Predatory Home Loan Racket To Fund Ongoing Free Legal Help

In Yakima, Washington, KIMA-TV Channel 29 reports:
  • The Washington State Bar Association (WSBA) is pleased to announce that its Home Foreclosure Legal Aid Project will continue to help homeowners for another two years. The program provides free legal assistance to low- and moderate-income homeowners whose homes are in danger of foreclosure.

  • Since the program’s inception in June 2009, the WSBA; its program partner, the Northwest Justice Project (NJP); and hundreds of volunteer lawyers have helped Washington families in crisis.

  • Program continuation and expansion is made possible by a $1.1 million grant from the Washington Attorney General’s Office to the Washington State Bar Foundation, the WSBA’s charitable arm.

  • Funds came from a settlement the Attorney General’s Consumer Protection Division reached with Wells Fargo regarding its ―Pick a Pay loan scheme. These funds are enabling the WSBA to extend the project through June 2013, and expand staff attorney capacity.

  • The additional attorneys and support staff will provide greater presence in the three counties with the highest rates of foreclosure (King, Pierce, and Snohomish), and they will be able to provide enhanced training and support for the lawyer volunteers.

For the story, see Home Foreclosure Legal Aid Project Continues.

Vacant Foreclosed Homes Without Electrical Service Left Lingering By Negilgent Banksters Leading To Economic Boom For Mold Abatement Outfits?

NPR reports:
  • As huge numbers of foreclosed homes continue to work their way through the real estate pipeline, another problem is blossoming — mold. In most homes, as residents go in and out and the seasons change, natural ventilation sucks moisture up to the attic and out through the roof. It's called the "stack effect." And in many parts of the country, it's driven by air conditioning in the summer and heat in the winter.

  • But no one is going in or out of most foreclosed homes — regardless of climate — and the effects can be devastating.

  • In some states, it's estimated that more than half of foreclosed homes have mold and mildew issues. Realtors across the country say they're seeing the problem in everything from bungalows to mansions.

  • Bob Bennett runs Farsight Management in northeastern Ohio, specializing in cleaning up water-damaged buildings. A full quarter of his work now comes from moldy, foreclosed homes where the electricity has been shut off. No electricity means no sump pump or dehumidifier for months, even years, and that often means mold — slimy black or green patches creeping up drywall and blanketing bathroom fixtures.


  • Even minor mold abatement can start at $5,000 and cost much, much more. In this particular case, Bennett estimates a price tag of more than $6,000, plus the cost of new floors, walls and carpet.(1) He wears a head-to-toe protective suit on most jobs.

For more, see As Number Of Foreclosed Homes Grows, So Does Mold.

(1) With price tags running into the thousand$, I wouldn't be surprised if the mortgage servicing fraudsters begin gravitating into the mold abatement business in search of a new 'revenue stream' with which to continue the screwing over being given to investors holding the 'moldy' mortgage-backed paper the banksters unloaded on them.

Housing Code Violations Surge As Residential Buildings Fall Into Foreclosure, Leaving Hapless Tenants In Deteriorating Apartments To Pay The Price

In Brooklyn, New York, the New York Daily News reports:
  • More city apartment buildings are going into foreclosure - and low-income neighborhoods in Brooklyn are among the hardest hit. The foreclosure crisis that engulfed individual homeowners has also hit larger buildings, with more getting slapped with foreclosures in the last two years than any time since the early 1990s, according to a new report by New York University's Furman Center for Real Estate and Urban Policy.

  • It's often tenants who pay the price when landlords can't pay the bills, with living conditions deteriorating when a building is foreclosed, the study said. There were 730 apartment building foreclosures in Brooklyn in 2009 and 2010 - up from 454 in the previous two years and the most in any borough.


  • The researchers found that housing code violations surge 21% around the time a building is foreclosed - and the problem has even extended to some of the borough's more affluent neighborhoods.

  • At 294 Fifth Ave. in Park Slope, which went into foreclosure two years ago, tenants are dealing with 131 open violations, from leaky roofs to broken locks. "I'm here alone with these problems. Nobody helps me," said tenant Eulogia Hevandez, 73, who said her kitchen sink has been broken for a month. "I need somebody to fix it .... I use a bucket instead of my kitchen sink."

  • She pointed to numerous dark stains and chipped paint left on her apartment ceiling by leaks and showed a visitor a bill for $140 that she had to pay herself to replace the broken lock on her apartment door. "I have to spend my own money to fix this apartment," she said. "I live alone. I'm afraid. I need to lock my door."

For the story, see Foreclosures on apartment buildings surge reducing living conditions for tenants.

Major Harlem Landlords Pocketed Million$ While Leaving Thousands Of Overleveraged Housing Units & Their Residents Sucking Wind

In New York City, The New York Times reports:
  • At Riverton Houses, a middle- and working-class apartment complex in Harlem, residents noticed a few changes after new owners came in. Lobbies were renovated. New elevators were installed. A decorative fence went up around the entire property.

  • Nearby, the new owners of another complex, Delano Village, were doing similar work with the same goal, to replace rent-stabilized tenants with ones paying market rates.

  • But while they were making improvements — some of which they would eventually charge to tenants — the new owners were piling on debt that their rental income could not support.

  • Yet in each case, they have not exactly suffered: despite plunging the buildings into financial despair, each has been able to take tens of millions of dollars in cash out of the properties.

  • What the owners did was legal, and in the microcosm of a few square blocks of Manhattan, it tells a story of the nation’s real estate bubble and collapse. As millions of homeowners did, but on a much larger scale, the owners refinanced their properties, finding lenders willing to give them far more money than the buildings turned out to be worth.

  • When they refinanced, the owners of Riverton took out as much as $60 million in cash, and the owners of Delano Village, which they renamed Savoy Park, initially took out as much as $105 million, according to loan documents, credit analysts and lenders.

For more, see In Harlem Buildings, Reminders of Easy Money and the Financial Crisis.

Renters In 60 Properties May Have To Pack Their Bags As Another Landlord Stiffs Bank, Utilities Out Of Payments; Water, Electric Shutoffs Threatened

In Mason City, Iowa, the Globe Gazette reports:
  • City Administrator Brent Trout and others are working to resolve a housing crisis caused by an apparent negligent landlord, affecting tenants in 60 properties in Mason City. US Bank has filed foreclose papers on one property. In other cases, tenants whose utility payments are included in their rent have been told their utilities will be shut off for lack of payment. Garbage has piled up around some of the properties, creating a public health hazard.

  • All of the properties are owned by Mike Hammond of Hammond Estates, Swea City. Repeated calls to Hammond’s office have gone unanswered. Hammond purchased many of the properties on contract from Matthew and Christine Birkey of Clermont, Fla., formerly of Mason City, according to court records.

  • Trout has taken several steps to make sure tenants affected are not left homeless and have utility and garbage service. The city’s Neighborhood Services personnel was directed to check all Hammond properties and pick up the garbage.

  • It is a health and safety issue,” said Trout. “The costs associated with the cleanup will be assessed to Mr. Hammond’s property.”

  • The city has agreed to not shut off the water until tenants can find other living arrangements. Trout also has contacted Alliant Energy to try to postpone shutting off tenants’ electricity until other living arrangements can be made.

For more, see Apparent landlord negligence causes crisis for tenants.

Neglect, Deterioration, Water Shutoffs, Landowner Facing Foreclosure All Leave Mobile Home Park Residents Fearing The Worst

In Glenview, Illinois, the Chicago Tribune reports:
  • After his wife died, retired plumber Leonard Selinsky tried to simplify his life by moving into Sunset Village, a mobile home park in Glenview with tidy homes and friendly neighbors. His new home is no trailer — it's a two-story Cape Cod with three bedrooms and an attic. "I love my house," he said. "This is ideal for me."

  • But in recent years, Selinsky and other residents say, the park's streets have been crumbling, water service has cut out for days at a time and they can't drink the water because it's contaminated. Now, the situation has worsened: Sunset Village is in foreclosure, and residents fear it could be sold and demolished, leaving them with homes they can't afford to move.


  • Once derided as trailers, mobile homes are now commonly called "manufactured homes." Most stay on one site for good. Moving such a structure can cost $10,000 or more, so most residents can't afford to leave, according to Terry Nelson, president of the Mobile Home Owners Association of Illinois.

  • Unlike real estate, which is expected to appreciate in value, manufactured homes often lose value, Nelson said. Homeowners at Sunset Village have bought new homes for up to $118,000 but can't sell them for half that. They don't pay property taxes but say they do pay about $950 a month in rent for the ground beneath their homes.

  • Anita Noel, secretary of the residents association, said years of neglect at the park have made it impossible for those who live there to sell their homes. The lack of maintenance has brought lawsuits from the village and the state in recent years.

For more, see Residents of foreclosed mobile home park fight to control their future (If their efforts fail, the families might be priced out of Glenview).

Landlord In Foreclosure With Unpaid Water & Sewer Bills May Drive Mobile Home Park Residents From Premises

In Clermont County, Ohio, the Community Press reports:
  • Residents in three Clermont County mobile home parks are expected to receive shut-off notices because the owner owes almost $100,000 in water and sewer bills and more than $370,000 in taxes.

  • Clermont County Administrator Dave Spinney said the commissioners approved going forward with turning off the water and sewer services to Eastgate Village Mobile Home Park in Pierce Township, Green Acres Mobile Home Village in Miami Township and Lake Remington Mobile Home Park in Miami Township because the owner of the properties, Heritage Management Group in Cincinnati, has not paid their water and sewer bills.


  • Spinney said they are giving the property owner until Oct. 1 to pay the bills because of the number of residents who will be affected. “We decided to extend the time frame to give the residents time to do something. They don’t have any control over the situation because there is one master meter at each location,” he said. “We were informed by the prosecutor’s office that the owner has a property in Hamilton County and there has been a class action lawsuit filed on behalf of the residents.”

  • That case is ongoing and is between Heritage Management Group and the residents of the Compton Hills Mobile Home Park, said Elizabeth Mason, Clermont County assistant prosecutor. The mobile home park, according to records, is on Compton Road near Mt. Healthy.

  • Heritage Management Group also owes more than $370,000 in taxes on the Clermont County properties, according to county auditor’s website. Two of the properties are in foreclosure and the county is working to foreclose on the third property to recoup the delinquent taxes, Spinney said.


  • [Director of the Clermont County Office of Public Information Kathy] Lehr said residents can contact legal aid at 241-9400 or the Clermont County lawyer referral service at 732-2050 if they’d like legal assistance or would like to pursue suing the owner of the parks.

For the story, see Mobile home residents to receive water, sewer shut-off notices.

Friday, July 22, 2011

Wells To Cough Up $85M To End Federal Reserve Probe Into Allegations Of Illegal Loan Steering, Income Inflation On Loan Applications

The Associated Press reports:
  • Wells Fargo & Co. has agreed to pay $85 million to settle civil charges that it falsified loan documents and pushed borrowers toward subprime mortgages with higher interest rates during the housing boom.

  • The fine is the largest ever imposed by the Federal Reserve in a consumer-enforcement case, the central bank said Wednesday.

  • Wells Fargo, the nation's largest mortgage lender, neither admitted nor denied wrongdoing as part of the settlement. The bank agreed to compensate borrowers who were steered into higher-priced loans or whose income was exaggerated.

For more, see Wells Fargo settles mortgage-abuse case for $85M.

Cops Bag Suspect Accused Of Using Forged Deed To Steal Home Out From Under Michigan Couple; Victims Left With Thousand$ In Damages After Water Left On

In Westland, Michigan, WDIV-TV Channel 4 reports:
  • A Westland woman said she was the victim of an elaborate scam which left her begging to get back her home. Erika Pace said a woman forged her signature and her husband's on a quit claim deed in an attempt to steal Pace's home. She said she found the locks changed on her home, and even the alarm on the garage changed.

  • "She was so convincing, she was like, 'Your house is foreclosed. The bank sold it to me," Pace said. Pace said she called her bank. "The bank was like, 'You own your house. It's not foreclosed. She is lying to you,'" Pace said.

  • The woman filed the fake deed to try to convince Pace that her home had been foreclosed. She said the woman even had a real estate agency listing the home for sale. She tried to sell the house back to Pace.

  • Pace said she picked up on the scam right away. "I told her I don't make deals with thieves," Pace said. "And it's my house. You can't sell me my house back."

  • When she couldn't get through to the real estate company after numerous attempts, Pace said she quickly called police and the register of deeds to straighten things out. She said it took four weeks to finally get the woman into custody.

  • The woman was arrested after a police and FBI investigation, Pace said. However, before she was taken into custody and before the real estate company left the property, someone turned on the water upstairs in Pace's house, causing thousands of dollars in damage, Pace said. The water was probably running for weeks, Pace said.

  • Pace said she was stuck with a huge bill to fix the water-damaged home. "They hit me emotionally and financially," Pace said. "And they took up a lot of time."

Source: Westland Woman Falls Victim To Home Deed Scam.

Home Seller Survives Lawsuit Alleging Failure To Disclose Municipal Code Violation Citations Duped Buyer Into Purchasing Dilapidated House

The Minnesota Court of Appeals recently affirmed a lower court ruling rejecting a homebuyer's attempt to sue the seller for fraud where the seller failed to disclose that the house had been tagged with multiple citations for municipal code violations.

Given the specific facts in this case (as set forth in the court ruling), the court concluded that the buyer either knew or should have known that the place was a dump and falling apart, and consequently, that she should have known better.(1)

For the ruling, see Saclolo v. Shaleen, No. A10-2165 (Minn. App. July 18, 2011).

(1) After an analysis of the facts of this case, the Minnesota appeals court ruled as follows (bold text is my emphasis):
  • The district court concluded that, as a matter of law, appellant should have discovered the facts constituting respondent's alleged fraud at the time of purchase. We agree.

    Appellant states that she did not learn of the inspection notices until she received a letter from the City of Mound in April 2007. But she provides no explanation for why she should not have learned about the inspection notices at the time of purchase.

    The undisputed facts show that at that time, appellant knew that the property was in a state of disrepair, and she was aware that respondent lacked permits for work on the property.

    Based on this knowledge, and particularly in light of the extent of the observable disrepair, appellant was on notice that government entities could have cited respondent for code violations or the lack of permits and that, were it a material concern, it would be prudent to investigate whether any such citations had been issued. Under the circumstances, the district court did not err by concluding that appellant's claims were brought outside the limitations period and by entering summary judgment in favor of respondent.

County Agrees To Pay 30% Commission To Outfit That Hunts For Homeowners Claiming Fraudulent Homestead Property Tax Exemptions

In Forsyth County, Georgia, Forsyth News reports:
  • The Forsyth County Tax Assessor’s and Tax Commissioner’s offices are working on a plan to attack fraud. As early as September, a crackdown could begin on residents trying to claim more than one homestead exemption.

  • The resulting penalties, interest and back taxes could bring in as much as $3 million, said Mary Kirkpatrick, Forsyth’s chief tax appraiser. Kirkpatrick got the go-ahead Thursday from the Board of Tax Assessors to pursue using Affiliated Computer Services Inc. to handle the fraud search.

  • At no cost to the county, the company would produce a complete list of potential dual homestead exemption enrollments using public records. Those records would include, among others, voter registration forms, marriage licenses and name changes. Kirkpatrick said for privacy, only names would be provided to the company, not other information such as Social Security numbers.

  • While there is no cost for the list, the company would receive a 30 percent commission of any money collected as a result. "They don’t get paid unless we get paid," Kirkpatrick told the board.


  • "We just found one on the north end of the county, and the revenue recovered on that one was $62,000 where somebody had been claiming two homesteads right next to each other(1) — one in the wife’s name and one in the husband’s name," Kirkpatrick said. "With back years and penalties and interest, the penalty is stiff. When you get caught … you pay back twice what you would have owed."

For more, see Offices target fraud (Homestead exemptions focus of new crackdown).

(1) Unless there is a specific limitation in Georgia law to the contrary, it is arguable that this couple is limited to claiming the homestead exemption on only one of the two properties where both properties are adjacent to each other.

In Florida, for instance, the state supreme court (in nixing the earlier rulings of a trial court and an intermediate appeals court to the contrary) has made clear that a property owner claiming the homestead exemption on one property can claim a second homestead exemption for property subsequently acquired that is adjacent to the first, provided that the total size of the two properties does not exceed the maximum size allowable by the Florida Constitution (1/2 acre if located within a municipality; 160 acres if located outside a municipality).

See Quigley v. Kennedy & Ely Ins., Inc., 207 So. 2d 431 (Fla. 1968):

  • Merely because of the fact the Petitioners did have property of exempt homestead status at the time judgment was awarded against them, did not prevent them from enlarging their homestead holding by the subsequent purchase of the adjacent seven and one-half acre tract. When Petitioners purchased the adjacent vacant seven and one-half acres it eo instanti became a part of the homestead.


  • In 40 C.J.S. Homesteads, § 56, the text reads in part:

    "The amount and extent of the homestead, as fixed by constitution or statute, cannot be exceeded; but a homestead already acquired may be enlarged or increased to the maximum allowed, the addition becoming a part of the homestead * * *"

    Petitioners' homestead is now fifteen acres, which is well within the one hundred and sixty acres allowance of the Constitution.

    The situation would have been different had the parcel purchased by Petitioners not been contiguous to the seven and one-half acres they already owned as their homestead. See
    Pasco v. Harley, 73 Fla. 819, 75 So. 30. Also 16 Fla.Jur., Homesteads, §§ 16 and 41.

    The suggestion of the District Court that a judgment debtor should be restricted to land he already owns as his homestead to prevent him from depositing his funds or surplus out of the reach of his judgment creditor for the purchase of additional homestead lands appears contrary to the clear intent of the homestead provision of the Constitution.

    Furthermore, such suggestion overlooks situations where the acquisition of additional homestead lands may result through the use of borrowed funds or by inheritance or some other manner than that suggested by the District Court.

    The certified question is answered by the foregoing and the decision of the District Court is quashed.


See also: Opinions of the Florida Attorney General:

AGO 2003-08: Homestead exemption on after acquired property:

  • In the situation you have described, the property owner owns four contiguous parcels of land upon which are located his residence and buildings and improvements relating to the enjoyment of the home.

    Nothing in Article VII, section 6(a), Florida Constitution, or sections 193.155 or 196.031, Florida Statutes, limits the amount of property that may constitute homestead property. However, as provided in Article VII, section 6(d), Florida Constitution, the total exemption on all homestead property owned by an individual taxpayer may only reach $25,000.

    Accordingly, I am of the opinion that the Florida Constitution and statutes authorizing a homestead exemption for a "residence and contiguous real property" permit a property owner who is currently receiving a homestead exemption on his or her residence to receive an exemption on adjoining parcels with buildings thereon so long as the property is used principally and in good faith for homestead purposes. The amount of the total homestead tax exemption for all parcels and improvements combined may not exceed $25,000.

AGO 96-79: Homestead exemption, two lots separated by road:

  • [I] am of the opinion that the Florida Constitution and statutes authorizing a homestead exemption for a "residence and contiguous real property" permit the owner of a lot in a platted subdivision to include within the homestead exemption a lot that he owns but that is separated from the lot on which his residence is located by a platted public street, provided that title to the land under the roadway in which the public has an easement is held by the owner and not by a third party.


Support for the proposition that, at least in Florida (and probably in some other states), there is nothing necessarily illegal or otherwise improper about a husband and a wife each claiming a homestead exemption on separate residences ('double homesteads'), see:

  • Florida Administrative Code Rule 12D-7.007(7):

    "A married woman and her husband may establish separate permanent residences without showing “impelling reasons” or “just ground” for doing so. If it is determined by the property appraiser that separate permanent residences and separate “family units” have been established by the husband and wife, and they are otherwise qualified, each may be granted homestead exemption from ad valorem taxation under Article VII, Section 6, 1968 State Constitution. The fact that both residences may be owned by both husband and wife as tenants by the entireties will not defeat the grant of homestead ad valorem tax exemption to the permanent residence of each."
  • Florida Attorney General Opinion 75 Op. Att'y Gen. 146 (1975), Husband And Wife Maintaining Separate Residences May Both Qualify For Homestead Exemption;
  • Florida Attorney General Opinion 05 Op. Att'y Gen. 60 (2005), Homestead Exemption -- separate residences and homestead exemption. Art. VII, s. 6, Fla. Const.
  • Wells v. Haldeos, Case No. 2D09-4250 (Fla. App. 2d DCA, October 22, 2010).

Homeowners Dodging Property Tax Bills By Claiming Fraudulent Homestead Exemptions Now The Target Of Newly-Formed Alliance

From a LexisNexis® press release:
  • LexisNexis® Risk Solutions today announced a strategic alliance with Tax Management Associates, Inc. (TMA) to accelerate its Revenue Discovery and Recovery programs for state and local governments. The programs identify areas of waste, fraud or abuse and seek to increase state and local government revenues through careful administration of existing tax sources.

  • Through the alliance with TMA, LexisNexis has established two new programs, Homestead Exemption Fraud Detection and State Income Tax Refund Fraud. The programs are designed to help government agencies find taxpayers who are out of compliance with state and or local laws, or those individuals who are deliberately trying to fraud the government.


  • The new programs are designed to detect some of the most common fraudulent patterns that state and jurisdictions are currently paying, including: people in prison, deceased, claiming multiple homestead exemptions or tax refunds, undisclosed renters and stolen identities. Overall, the new programs will help state and local governments discover and recover revenue that can significantly improve funding for other programs, such as education and law enforcement.


  • In the coming months, LexisNexis and TMA will leverage their respective skill sets in data and investigation to examine locally filed homestead exemptions on residential property, as well as personal income tax refunds, in order to detect fraud.

For the press release, see LexisNexis® and Tax Management Associates Join Forces to Help State and Local Governments Discover and Recover Revenue (Relationship allows state and local governments to identify areas of tax fraud and abuse).

Thursday, July 21, 2011

Lack Of Standing, Questions Surrounding Validity Of Loan Mod Agreement Lead To Another Appeals Court "Boot Back" Of Lower Court Foreclosure Ruling

In another case where a lower court was apparently not up to the challenge in ruling correctly in a foreclosure case, the Maine Supreme Judicial Court recently vacated a summary judgment that would have allowed a foreclosure sale to proceed.

In this case, the foreclosing plaintiff , according to the the Maine high court, "had no interest in either the note or the mortgage" when the foreclosure action commenced. In addition, there was a question as to the validity of an earlier-entered into loan modification agreement between the foreclosing plaintiff and the homeowners, which led the court to conclude that summary judgment in favor of the foreclosing plaintiff was not appropriate.(1)

The court also pointed out that there was an improper substitution of plaintiffs that occurred in this case, which they nevertheless allowed, only because the homeowners did not challenge the substitution in the trial court, raising the challenge for the first time on appeal. For that reason, the issue was deemed unpreserved (and presumably deemed abandoned).(2)

For the ruling, see Kondaur Capital Corporation v. Hankins, 2011 ME 82 (Me. July 19, 2011).

(1) According to the court:

  • [T]here are genuine issues of fact as to whether the Loan Modification Agreement is valid and, if not, how that invalidity affects the amounts due on the mortgage or, perhaps, whether that invalidity was cured by express or implied ratification of the parties, operation of estoppel, or some other legal theory. See Wilkins v. Waldo Lumber Co., 130 Me. 5, 11-13, 153 A. 191, 194 (1931).

(2) This should serve as a reminder, especially to self-represented (pro se) homeowners, that unless every possible issue in a case is raised in the pleadings (ie. complaint, answer, or counterclaim) or immediately objected to in court when an issue is raised by the adversary during the course of the proceedings, a judge can properly refuse to give the due consideration to the homeowner's unraised claims, defenses, and objections that they may deserve (without regard to how legitimate, meritorious, etc. they may otherwise be).

Bad Publicity Begins For Recently-Elected (& Possibly Mortgage Industry-Owned) Fla. AG After Giving Noted F'closure Fraud Fighters Unceremonious Boot

The Orlando Sentinel reports:
  • A few months ago, two of Florida's assistant attorneys general were blowing the lid off foreclosure fraud in this state. They were turning up evidence of bogus paperwork, exposing the law firms and lenders at fault — and making them pay.

  • If the world of investigatory accounting had rock stars, Theresa Edwards and June Clarkson were Beyonce and Lady Gaga. Right up until they were ousted, anyway.

  • At the height of their popularity, when Edwards and Clarkson were generating national headlines — and making profiteers nervous — Attorney General Pam Bondi's office asked them to leave.

  • So said Edwards, who recalled: "Our director called us in at 3:30 one Friday afternoon and said: 'You can either resign today, or you're going to be fired.'"

  • The news came on the heels of a performance review filled with praise. "Obviously we did our job too well," Edwards said. "We were making too much noise."

  • Bondi's office won't say why the two were ousted — or even confirm that they were. Instead, the office stresses that the two attorneys "resigned." Spokeswoman Jennifer Meale said her office is as committed as ever to rooting out financial fraud. "The resignations of these two individuals will not impede these investigations," Meale said. "In fact, we are more aggressively pursuing these investigations."

  • Edwards found that claim interesting — since neither she nor Clarkson were even allowed to brief anyone else in the office on the year's worth of work. "I couldn't even write a memo," she recalled.

For more, see Attorney general's ouster of 2 top investigators raises troubling questions.

Calif. Appeals Court: Trial Court Goofed In Early Dismissal Of Homeowner's Challenge To Bankster's F'closure Try; Booted Back Suit Gets 'Green Light'

In Bakersfield, California, KGET-TV Channel 17 reports:
  • A Bakersfield homeowner is taking on a bank, in a battle that could have sweeping implications for people facing foreclosure. Mark Demucha wants Wells Fargo to prove it owns his home loan. And, if his lawsuit is successful, it could set a legal precedent that slows or even stops foreclosures across the state.

  • "Filled out the same paperwork over and over again." Mark Demucha says all he wanted was to keep his house. "Sent it to them over and over again. I couldn't give you the exact time frame, but it's ridiculous," he said.


  • Demucha turned to family friend Michael Finley who happens to be a lawyer. "A company that does not have a legal right to collect mortgage payments should not have the right to foreclose," said Finley.

  • Now, in a case that could have far-reaching implications, Demucha and Finley say they have one simple request. "If they are going to take my house, I should be able to see they have a legal right to take it from me," said Demucha.

  • "They come to me and want me to have every single piece of paper I was ever supposed to have. But, when I say 'hey where is my promissory note?' they look at me like I'm a thief." That's because Wells Fargo didn't loan Demucha the money to buy his house. Another company called CTX Mortgage, did.


  • "Why should the bank not still be required to possess a single piece of paper that they are the right place to home the consumer should make the payments?"

  • Earlier this month, a state appellate court agreed, overturning a Kern County judge's ruling that Wells Fargo could foreclose on the home. The case is headed back to our county where the same judge will have to decide if Wells Fargo can prove it legitimately holds title to the Demucha's home.


  • "Wells Fargo essentially ignored them until the fifth district appellate court said Wells Fargo you can't ignore Mark and Sherry Demucha any more," said Finley. The appellate court ruling has arrived back here in Kern County but a hearing has not yet been scheduled.(1)

For more, see 17 News Investigation: Homeowner challenges bank.

For the ruling, see DeMucha v. Wells Fargo Home Mortgage Inc., No. F059476 (Cal. App. 5th Dist. July 5, 2011) (unpublished).

(1) The California appeals court begins its ruling by giving this lesson in 'Sustaining Demurrers 101" (in California, a demurrer is akin to, what courts in other states call, a motion to dismiss) which, hopefully, will help some judges avoid ordering premature dismissals of foreclosure challenges, no matter how anxious beleaguered, overworked, underpaid trial judges may be to move their presumably heavy caseloads along (bold text is my emphasis):

  • This case presents a classic example of the longstanding rule that "in passing upon the question of the sufficiency or insufficiency of a complaint to state a cause of action, it is wholly beyond the scope of the inquiry to ascertain whether the facts stated are true or untrue" as "[t]hat is always the ultimate question to be determined by the evidence upon a trial of the questions of fact." (Colm v. Francis (1916) 30 Cal.App. 742, 752.)

    The trial court dismissed this civil action after sustaining the demurrer of respondent Wells Fargo Home Mortgage, a division of Wells Fargo Bank, N.A. (Wells Fargo), to the first amended complaint of appellants Mark and Cheryl DeMucha. Appellants contended in the trial court, as they do on this appeal, that the allegations of their pleading were sufficient to survive demurrer.

    As we explain, we agree with appellants on all of their causes of action except the second (their attempt to state a cause of action for removal of a cloud on title) and the fourth (their attempt to state a cause of action for intentional infliction of emotional distress).

    We reverse the judgment, remand the matter to the trial court, and direct that court to overrule respondent's demurrer as to all causes of action except the second and fourth.

Virginia Loan Modification Outfit Accused Of Clipping Homeowners Out Of Illegal Upfront Fees To Fork Over $54K To Turn Off State AG Heat

In Virginia Beach, Virginia, The Virginian Pilot reports:
  • A Virginia Beach-based company has agreed to pay $54,200 to settle allegations that it charged homeowners facing foreclosure thousands in illegal upfront fees to help save their homes, Virginia Attorney General Ken Cuccinelli announced Monday.

  • Cuccinelli filed a lawsuit in Virginia Beach Circuit Court a year ago against Nationwide Loan Modification Bureau LLC. The suit alleged the company had illegally demanded money upfront for services and in some cases never performed. Virginia law prohibits a company that provides foreclosure-prevention services from charging a fee upfront.


  • In addition to the settlement with Nationwide, the attorney general also announced that the state has recovered $7,233 from Jason T. Gillentine, the firm's sole member and manager.

  • Gillentine did not respond to an email seeking comment late Monday. In an interview last year, he said he shuttered his company after the attorney general's office began its investigation.

For more, see Va. Beach loan modification firm to pay $54K to settle suit.

Wednesday, July 20, 2011

Lawmakers Call For Hearings, Further Probes Into Seemingly Never-Ending Mortgage Industry-Perpetrated Robosigner Scam

The Associated Press reports:
  • Lawmakers and enforcement agencies called for hearings and further investigation Tuesday after learning that the illegal practice known as robo-signing has continued in the mortgage industry.

  • The Associated Press reported on Monday that county officials in at least three states — Massachusetts, North Carolina and Michigan — say they have received thousands of mortgage documents with questionable signatures since last fall. That's when forged signatures and false affidavits — also called robo-signing — led to a temporary halt to foreclosures. Banks and mortgage processers promised to stop the practice. But the findings of the county officials indicate that robo-signing is still a widespread problem.


  • Early Tuesday, an official from the office of Minnesota attorney general, Lori Swanson, contacted the Essex County's John O'Brien to get more information for its own investigation into robo-signing. The Massachusetts attorney general's office also confirmed that it is meeting with several of the state's 21 registers of deeds to assess the extent of robo-signing in the state.

  • Also on Tuesday, nine recorders of deeds in Illinois held a press conference to say they will assist the state's attorney general Lisa Madigan who is investigating robo-signing in her state.

For more, see Lawmakers call for hearings on robo-signing.

Robosigned Documents Continue To Litter Courthouses, Recording Offices Nationwide, Fueling Ongoing Real Estate 'Chain-Of-(Crappy)Title' Deterioration

The Associated Press reports:
  • Mortgage industry employees are still signing documents they haven't read and using fake signatures more than eight months after big banks and mortgage companies promised to stop the illegal practices that led to a nationwide halt of home foreclosures.

  • County officials in at least three states say they have received thousands of mortgage documents with questionable signatures since last fall, suggesting that the practices, known collectively as "robo-signing," remain widespread in the industry.


  • The county officials say the problem could be even worse than what they're reporting. That's because they are working off lists of known robo-signed names, such as Linda Green and Crystal Moore, that were identified during the investigation that began last fall. Officials suspect that other names on documents they have received since then are also robo-signed.


  • The legal issues are grave, deeds officials across the country say. At worst, legal experts say, the document debacle has opened the property system to legal liability well beyond the nation's foreclosure crisis.

  • So someone buying a home and trying to obtain title insurance might be delayed or denied if robo-signed documents turn up in the property's history. That's because forged signatures call into question who owns mortgages and the properties they are attached to.

  • "The banks have completely screwed up property records," says L. Randall Wray, an economics professor and senior scholar at the University of Missouri-Kansas City.(1)

For more, see AP Exclusive: Mortgage 'robo-signing' goes on (if link expires, TRY HERE).

(1) For more on the crappy title problem in connection with the filing of bogus land documents and improperly foreclosing on homes, see:

Consumer Confidence In 50-State AG Foreclosure Fraud Probe Beginning To Wane?

ProPublica reports:
  • Since flawed foreclosure practices by the nation’s biggest banks became last fall’s biggest scandal, federal bank regulators and the attorneys general of all 50 states launched simultaneous investigations. But there are an increasing number of warnings that neither of those efforts have addressed the full scope of the problem.

  • Most notably, Elizabeth Warren, a senior Obama administration advisor, warned about the ongoing probes in Congressional testimony last week: “I think there’s a real question about whether there’s been an adequate investigation.”

  • After news about fraudulent and missing mortgage documentation raised questions last fall about the legitimacy of foreclosure actions, all 50 states launched a joint investigation. A group of federal bank regulators launched a separate investigation.

  • As we'd noted, some observers had low expectations for the federal investigation all along, especially given the involvement of the historically bank-friendly Office of the Comptroller of the Currency.

  • But Warren herself had once expressed higher hopes for the effort led by the states: "Right now my money is on the attorneys general," she'd told the L.A. Times last fall. Now nine months later, it seems she's not so confident about either.

For more, see Officials Warn That Foreclosure Probes May Prove Inadequate.

Feds' Campaign Tagging Banksters With Allegations Over Crappy Mortgage-Backed Paper That Led To Credit Union Failures Continues; More Lawsuits Planned

The Wall Street Journal reports:
  • U.S. credit-union regulators filed their second lawsuit against Royal Bank of Scotland Group PLC ["RBS"], alleging that the bank violated securities laws when it sold nearly $1.6 billion in bonds backed by risky mortgages to a now-defunct credit union.

  • The lawsuit, filed Monday by the National Credit Union Administration in U.S. District Court in Los Angeles, seeks damages in excess of $629 million and accuses RBS of selling mortgage-backed securities that "were destined from inception to perform poorly."

  • The securities were bought by Western Corporate Federal Credit Union, or WesCorp, a wholesale credit union that was seized by the NCUA in March 2009. An RBS spokesman declined to comment on Monday's lawsuit. The lawsuit is the third filed by the NCUA since June—and the second against RBS.(1)

  • The NCUA was saddled with roughly $50 billion in bonds following the collapse of WesCorp and other troubled credit unions that loaded up on bonds that got battered during the financial crisis. NCUA officials plan to file a total of five to 10 legal actions in an effort to recover losses.


  • Forty-seven credit unions have failed since the start of 2009. Survivors are being forced to absorb some of the costs of the failures. To offset those costs, some credit unions are charging higher interest rates on loans and paying less interest on deposits.

For more, see RBS Faces Second Suit Tied to a Credit-Union Failure (may require paid subscription; if no subscription, TRY HERE; or GO HERE - then click the appropriate link for the story).

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

For the earlier-filed lawsuits, see:

Tuesday, July 19, 2011

West Virginia AG: Out Of State Loan Modification Racket Illegally Clipped Homeowner For Upfront Fees, Leaving Victim To Lose Home To Foreclosure

From the Office of the West Virginia Attorney General:
  • Responding to the case of a Clay County homeowner who was the victim of fraud while seeking help with his mortgage, Attorney General Darrell McGraw today took action against National Relief Group for charging illegal advance fees and misrepresenting that the company would obtain loan modifications for consumer mortgages.

  • McGraw’s Consumer Protection Division filed a petition in Kanawha County Circuit Court to enforce a subpoena against the California-based company.

  • The Glen, West Virginia, homeowner stated that he had contacted National Relief Group seeking help with a mortgage loan modification. The company informed him that he had been pre-approved for a modification and that payment for services would be required in advance. Although the consumer paid up front for the promised loan modification, the company did not secure any relief for the homeowner. Eventually, the consumer lost his home to foreclosure.

For the West Virginia AG press release, see Attorney General Darrell McGraw Takes Action Against California’s National Relief Group.

NJ Cops Pinch 'Sovereign Citizen' On Forgery, Theft By Deception For Allegedly Filing Phony Deed In Attempt To Claim Title, Possession To Fannie REO

In Mullica Township, New Jersey, the Press of Atlantic City reports:
  • Mullica Township police say a woman moved her family into a foreclosed home for more than three months and filed a fraudulent deed to act as if she owned the property. Police said that Jolanda S. Bordley-Jackson EL, 41, essentially stole a foreclosed home on Elwood Road worth about $300,000 that was already under contract to a family in Mullica.

  • Listing agent Joe Pipitone, with Century 21 Graham Realty in Vineland, said that he first found out about the issue when a title company found the forged deed on record. Fannie Mae, the owner of the property following the foreclosure, hired an attorney soon after, and the police were contacted.

  • But it took officials months to resolve the complicated legal questions in the case, Capt. John Thompson said, given the fake deed and uncertainty about whether the former owners made any sort of deal with Bordley-Jackson EL. The woman even changed the locks and put the utilities in her name. The investigation eventually confirmed that the woman was indeed illegally living in the home.

  • Mullica police charged her with theft by deception and forgery, with another forgery charge filed in Hamilton Township since that is where she filed the deed. She was taken to the Atlantic County Justice Facility with bail set at $85,000, with a 10 percent option.

  • Thompson said that the woman is a member of the Moorish Science Temple of America, a small organization and spiritual group with some adherents who believe they do not have to obey laws. He also said that Bordley-Jackson EL is originally from the Vineland area, and that while he was unsure how many family members were actually living in the home, it did include children of various ages.

  • Pipitone said the home is still under contract, and that the family moving in is not happy about the situation.

Source: Woman charged with forging deed to 'steal' house in Mullica Township.

Vegas Law Firm Ad Campaign: 'Stop Paying Your Mortgage - We'll Show You How!' Outfit Unresponsive To Interview Requests

In Las Vegas, Nevada, the Las Vegas Review Journal reports:
  • Your neighbors aren't paying on their mortgages so why should you? That provocative question is being posed by a Las Vegas law firm's TV ad campaign, and the commercials are stirring debate.

  • The Haines & Krieger law firm's spots, promising to show homeowners how to stay in their homes without paying on their mortgages, seem to be bringing in business, said a staffer for the law firm who asked not to be named.


  • In the commercials, Haines & Krieger attorneys make a tempting offer: They promise to show people how to a stay in their homes without paying on their home loans -- just like your neighbors and families are doing.

  • The law firm did not respond to repeated requests for interviews or more details.

For more, see Las Vegas attorneys build business by telling homeowners to stop paying mortgages.

Monday, July 18, 2011

'Sewer Service' Sinks Another Foreclosure; Sale Resulting In $120K Home Lost For $8K Voided; Crappy Affidavit Fails To Establish 'Diligent Search'

A ruling of a panel of the New Jersey appeals court affirmed a lower court ruling kiboshing a tax foreclosure sale by reason of a crappy attempt to serve process on a homeowner who was delinquent on his real estate tax bills. A 'butchered' summary of the case follows:
  1. The process server made a lousy attempt at finding the homeowner to serve him personally with the notice of a foreclosure action for unpaid real estate taxes.

  2. Instead, service of process was completed by an alternative method, in which the papers were served by mailing, both by certified and by regular mail.

  3. The affidavit filed by the process server to justify the use of the alternative, or substituted, method of service only contained the notation "that despite diligent effort and inquiry personal service cannot be made."

  4. The lower court ruled that this notation was not sufficient to justify use of the substituted method of service, stating that affidavits of diligent inquiry typically include the dates and times of attempted personal service and the circumstances of failure. Accordingly, it voided the judgment of foreclosure.

  5. In a shameless attempt to salvage the situation, the foreclosing plaintiff filed a motion for reconsideration, submitting a new affidavit from the process server. The new affidavit stated the dates, times, and circumstances of the five failed attempts to serve the homeowner personally.

  6. At oral argument, the lower court commented that the new affidavit would have been sufficient to show diligent effort, but that the original deficiency of service could not be corrected after the fact.

  7. The lower court confirmed its earlier ruling voiding the foreclosure judgment, and the New Jersey appeals court affirmed.

For the ruling of the appeals court, see Arianna Holding Companu v. Cummings, No. A-1420-10T1, N.J. Super. App. Div., July 11, 2011) (unpublished) (if link expires, TRY HERE).

See Opportunity To Reclaim Homes For Foreclosed Owners Victimized By "Nail & Mail" Sewer Service? for another post on how a crappy effort by a process server to serve lawsuit paperwork on a defendant can 'submarine' a plaintiff's effort to obtain a judgment.

Go here for links to court rulings involving "nail & mail" method of process-serving and the due diligence required before using this method.

(1) The appeals court affirmed the lower court ruling essentially for the reasons stated orally by the trial judge at the time of oral argument on the motions in the lower court proceeding, but saw fit to add this additional tidbit (bold text is my emphasis):

  • We reject plaintiff's argument that due process and the requirements of Rule 4:4-4(b)(1)(C) for substituted service by mail are satisfied if the facts later show that the defendant actually resided at the address to which process was mailed.

    "`[S]ubstantial deviation from service of process rules' typically makes a judgment void." M & D Assocs. v. Mandara, 366 N.J.Super. 341, 352-53 (App. Div.) (quoting Jameson v. Great Atlantic and Pacific Tea Co., 363 N.J.Super. 419, 425 (App. Div. 2003)), certif. denied, 180 N.J. 151 (2004).

    The court lacks jurisdiction to enter a judgment when there is violation of the rules pertaining to mailed service of process. Sobel v. Long Island Entertainment Products, Inc., 329 N.J.Super. 285, 293 (App. Div. 2000); see also Driscoll v. Burlington-Bristol Bridge Co., 8 N.J. 433, 493 ("The requirements of the rules with respect to service of process go to the jurisdiction of the court and must be strictly complied with. Any defects . . . are fatal and leave the court without jurisdiction and its judgment void."), cert. denied, 344 U.S. 838, 73 S.Ct. 25, 97 L. Ed. 652 (1952).

    Moreover, our courts have for many years strictly construed the procedural requirements for obtaining a judgment of foreclosure in tax sale cases. See, e.g., State v. Landis Twp., 50 N.J.L. 374, 379 (Sup. Ct. 1888).

    The purpose of the rule requiring an affidavit of diligent inquiry is to assure the court that it has personal jurisdiction to enter judgment and that the defendant's right to due process has not been violated. See M & D Assocs., supra, 366 N.J. Super. at 353-54. The court must carefully scrutinize the affidavit of diligent inquiry for sufficiency of its factual averments. Id. at 353.

    Permitting correction of defective service of process after the fact would weaken the purpose of the rule and risk violation of due process rights of foreclosure defendants. Here, Judge Buczynski scrutinized the affidavit of diligent inquiry, together with its attachments, and he found appropriately that the original document from Guaranteed Subpoena Services was not sufficient to show diligent effort to effectuate personal service.


One of the cases cited above, M & D Assocs. v. Mandara, 366 N.J.Super. 341 (N.J. Super. App. Div.) deserves highlighting in that, in deciding a case in the context of a tax foreclosure, it noted that a review of the affidavit of service merits hightened scrutiny in certain situations:

  • We are of the view that particularly in situations like the one involved in this case, where there is substituted service, as well as a tremendous disparity between the amount due on the tax certificates and the value of the property subject to foreclosure (here approximately $4,500 versus potentially $100,000 to $200,000 for the property), careful scrutiny of the affidavit of inquiry requires the Chancery Judge to demand more than cursory inquiries or recitals not only as a matter of due process, but also of fundamental fairness. See Bron v. Weintraub, supra (42 N.J. at 93-96, 199 A.2d 625).

    The Chancery Judge in such foreclosure cases should be alerted when the face of the documentation indicates that a significant windfall might result if adequate scrutiny of the affidavit of inquiry is not undertaken.

    Here, when on the surface M & D was to receive such a windfall, it was appropriate to require an expanded inquiry of any alleged diligent inquiry. This is especially so where M & D knew that one of the owners of the Property was not residing, and had not resided with the other owner and there was no evidence of communication between them.[5]

    Whether this situation might have required the hiring of an investigator rather than superficial checking of phone directories[6] and tax rolls is something we leave for future cases. In any event, we note defense counsel's argument that Carmelo's address can be found in the Division of Motor Vehicle records and at the Passaic County Voter Registration Board.[7]

    A diligent inquiry requires more than a search with election officials for the particular town where the property was located and where coincidentally one of the individuals on the deed resided. Moreover, a mere recital that a person does not appear in the voting records (apparently erroneous in this case), should not be based on hearsay statements, but requires a certification from a custodian of documents from the Board of Election.

    In this information age, adequate search instruments are available by computer or other means to make searches relatively simple and inexpensive. In sum, we are satisfied that there was not a sufficient diligent inquiry under the circumstances of this case, and that service by publication was improper and rendered the judgment void as to Carmelo Mandara.

Findings In Foreclosure Fraud Report Compiled By Squeezed-Out Florida AG Lawyers Significant In Recently-Booted Brooklyn Foreclosure Case

In West Palm Beach, Florida, The Palm Beach Post reports:
  • A foreclosure fraud report compiled by two ousted Florida investigators was instrumental this month in winning a New York homeowner her case. The report by former state assistant attorneys general June Clarkson and Theresa Edwards is a step-by-step account of how some lenders allegedly sidestepped foreclosure laws using flawed and possibly fraudulent paperwork. The report, which cites Ocwen Financial Corp., a loan servicer that has workers in West Palm Beach, was first reported in The Palm Beach Post.

  • Edwards said she and Clarkson were abruptly asked to resign or face firing from the attorney general's office in late May without reason and with no time to brief other employees on their foreclosure investigations.


  • "It is telling that, once again, a New York court is more interested in exposing fraud taking place right here in Palm Beach County than our own Florida courts, even citing to the investigation of the Florida Attorney General," said Tom Ice of Ice Legal in Royal Palm Beach.


  • New York Supreme Court Justice Arthur Schack in his July 1 ruling against HSBC Bank(1) questions variations in signatures of Ocwen employees, who serviced the home loan for HSBC. He also ruled that HSBC had no standing to file the foreclosure because of a faulty assignment of mortgage.

  • Schack read about the report by Edwards and Clarkson titled "Unfair, Deceptive and Unconscionable Acts in Foreclosure Cases" in a Palm Beach Post article published in January.(2) The article included information in the report on signatures of alleged Ocwen robo-signer Scott Anderson.

For more, see Florida fraud report key to New York foreclosure case.

(1) See:

(2) See The Palm Beach Post: State details foreclosure chaos.

Washington Man Gets 25 Years In "Bonded Promissory Note" Foreclosure Rescue Ripoff; Pocketed Upfront Fees, Rent From Bogus Sale Leasebacks

In Los Angeles, California, Central Valley Business Times reports:
  • Jeff McGrue, 51, of Tacoma, Wash., who was found guilty in January of swindling California homeowners facing foreclosure, has been sent to prison for up to 25 years for running a foreclosure rescue ripoff.

  • He had promised to prevent foreclosure through the paying off of their mortgages, but in reality doing no more than sending their lenders fake notes and keeping the money the homeowners sent to him, prosecutors say.


  • Mr. McGrue and the others identified homeowners who were facing foreclosure or who were “upside-down” on their mortgages. Relying on a network of “consultants,” many of whom were real estate agents, he recruited the homeowners into his “Gateway Program.”

  • Through the Gateway Program, Mr. McGrue and the others falsely told homeowners that, if they paid an enrollment fee and monthly rent and signed over title of their homes to Gateway, he would use “bonded promissory notes” purportedly drawn on a U.S. Treasury Department account to pay off their mortgages, thereby stopping foreclosure proceedings.

  • The homeowners were falsely told that lenders were legally required to accept the notes, that they would be able to buy their homes back from Gateway International at a discount, and that they would receive up to $25,000, even if they chose not to re-purchase their houses.


  • Mr. McGrue and his co-schemers enrolled more than 250 victims in the “Gateway Program,” but they did not save a single home. Instead, he collected approximately $1 million in the form of enrollment fees and rent from these victims, say prosecutors.

  • The evidence at trial showed that Mr. McGrue signed bogus documents to make it appear the victims’ outstanding mortgages had been paid off so he could re-sell the victims’ properties, which had been re-titled in Gateway’s name, to unsuspecting buyers.

For the story, see Foreclosure scammer sentenced to prison for $55 Million swindle (Faces a quarter century behind bars for ripping off desperate homeowners).

For the U.S. Attorney (Los Angeles) press release, see Washington State Man Sentenced To 25 Years For Orchestrating Foreclosure-Rescue Scheme.

Suit: DB Securtized, Then Dumped $1B+ In Already-Defaulted Loans While Betting $10B On Their Failure; NYS 6-Year Statute Of Limitations Comes In Handy

Thompson Reuters News & Insight reports:
  • Bernstein Litowitz Berger & Grossman filed a scorcher of a suit against Deutsche Bank Wednesday, claiming that the bank sold financial services group Dexia more than $1 billion in mortgage-backed securities at the same time Deutsche Bank bet $10 billion that those notes would fail. The 175-page (!) New York state supreme court complaint is Bernstein Litowitz's second major new MBS filing in a week, coming on the heels of Allstate's suit against Morgan Stanley (Go here for Allstate v. Morgan Stanley lawsuit).

  • The Deutsche complaint is filled with eye-popping allegations. Bernstein claims, for instance, that senior traders at the bank described the securities they were peddling to clients like Dexia as "crap," "pigs," and "generally horrible."

  • One trader, Greg Lippman, allegedly wrote, "DOESN'T THIS DEAL BLOW" in an e-mail to a colleague about an offering Dexia sank $23 million into.(1)

  • In another e-mail the complaint cites, this one to a hedge fund investor, Lippman allegedly disclosed a $1 billion short position on mortgage-backed securities that was going to make him "oceans of money." (That Lippman e-mail is from 2005, but thanks to New York State's convenient six-year statute of limitations, Dexia's fraud and negligent misrepresentation claims can go way back.)

For more, see Dexia sues Deutsche Bank over $1 billion MBS investment.

Thamks to Deontos for the heads up on the story.

(1) See also: Dexia suit: DB securitized mortgages it sued originators over"

  • But the new MBS complaint Dexia filed Thursday against Deutsche Bank includes an assertion I haven't seen before. Dexia's lawyers at Bernstein Litowitz Berger & Grossman claim Deutsche Bank securitized mortgage loans that had already defaulted by the time they were repackaged and sold to investors-and that Deutsche Bank engineered those securitizations even as it sued mortgage loan originators to demand that they repurchase the deficient loans.

  • According to the Dexia complaint, Deutsche Bank was deceiving both MBS issuers and loan originators. It was including the "early payment default" loans in MBS pools despite telling investors that the securities were backed by loans that met underwriting standards. And at the same time, Deutsche Bank was claiming in repurchase suits against mortgage originators such as Cameron Financial, First Capital, Lancaster Mortgage, and Liberty Mortgage that it couldn't include the early payment default loans in securitizations, even though it had already packaged the loans into offerings it sold to Dexia and other investors.


  • "This type of conduct--complaining in court that loans cannot be securitized due to early default and then securitizing those very loans and selling the securities to its clients--exemplifies the duplicitous nature of the fraud Deutsche Bank perpetrated against Dexia, and demonstrates Deutsche Bank's knowledge that these securities were destined to fail," said Dexia counsel Avi Josefson of Bernstein Litowitz.

For the lawsuit, see Dexia SA/NV, et al. v. Deutsche Bank AG, et al.

Chief Chase Bankster: "There Have Been So Many Flaws In Mtgs That It’s Been An Unmitigated Disaster [...] Everybody's Going To Sue Everybody Else!"

Bloomberg reports:
  • JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said clashes over faulty mortgages may drag on as investors and regulators demand compensation for soured loans issued at the peak of the housing market.

  • There have been so many flaws in mortgages that it’s been an unmitigated disaster,” Dimon said during a conference call today. “We just really need to clean it up for the sake of everybody. And everybody is going to sue everybody else, and it’s going to go on for a long time.”

For more, see Dimon Says Mortgage Clash Swells as ‘Everybody Is Going to Sue’.

Sunday, July 17, 2011

D.C. City Council Tweaks New Foreclosure Law In Response To Bellyaching Title Insurers Who Threatened To Stop Issuing Coverage On REO Sales

In Washington, D.C., The Washington Post reports:
  • The D.C. Council enacted emergency legislation Tuesday to amend a controversial clause in its foreclosure mediation law that threatened to stall the sale of foreclosed affected homes across the city.

  • The move came just days after The Washington Post reported that two large title insurers, which account for nearly 80 percent of the D.C. market share, stopped insuring sales of foreclosed homes because of concerns over the law.


  • The issue is resolved,” said Roy Kaufmann, a lobbyist for the D.C. Land Title Association, which includes the two insurers, Fidelity National Title Group and First American Title Insurance, which withdrew from the foreclosure market.

  • Fidelity and First American had argued that the council’s law, which requires lenders to begin mediation with a homeowner before foreclosing on a home, was too broad and posed too much risk for them in insuring foreclosed properties.

  • To allay their concerns, the council took out a controversial clause, which said that any violation of the law would void a foreclosure sale, and replaced it with specific language endorsed by the D.C. Land Title Association about what constitutes a violation.

For more, see D.C. Council alters foreclosure law, adds new consumer rights.

Texas AG: Zombie Debt Buyer Used Fraudulent Robosigned Affidavits To Dupe Judges Into Believing Dubious Claims Bought For "Pennies On $" Were Legit

From the Office of the Texas Attorney General:
  • Texas Attorney General Greg Abbott [] charged Encore Capital Group, Inc. with falsifying and robo-signing affidavits, attempting to collect debts based upon inaccurate or incomplete account information, and employing unlawful and deceptive debt collection tactics.


  • Encore, which is one of the nation’s largest debt collection companies, and its subsidiaries – Midland Funding, LLC and Midland Credit Management, Inc. – are named as defendants in the case.

  • According to state investigators, Midland Funding purchased debt portfolios from a broad spectrum of creditors for pennies on the dollar. As the purchaser of the debt, the defendants attempted to collect the money that was allegedly owed to various creditors.

  • However, the defendants’ debt collection letters contained very little information about the debt they were attempting to collect, provided no supporting documentation, and included no proof that they actually acquired the debt from the original creditor. When Texans contacted the defendant to dispute the legitimacy of an alleged debt or seek additional information, the defendants made little or no effort to investigate or verify whether their collection efforts were proper.

  • Court documents filed by the State indicate the defendants sometimes even used incomplete or inaccurate account information, targeted the wrong individuals for collection and attempted to collect debts that had been fully or partially paid.


  • When individuals refused to comply with Midland Funding’s improper collection efforts, the defendants hired attorneys to sue the accused debtors. Court documents reveal that the defendants’ lawyers filed breach of contract lawsuits demanding principal, interest and attorneys’ fees.

  • The defendants have filed more than 60,000 lawsuits in Texas since 2002. According to state investigators, the defendants’ lawsuits contained inaccurate information and used false statements to claim they were owed certain debts.

  • To protect Texans from being sued for debts they did not actually incur, the law may require that debt collectors verify the validity of their claims through “sworn affidavits.” However, the defendants submitted falsified affidavits, which the courts relied upon as proof that the debt collector properly verified the identity of the debtor and the amount owed.

  • The State’s investigation revealed that the defendants also employed robo-signers” to supply the legally required verification. Court documents filed by the State indicate the defendants’ robo-signers routinely signed more than 300 affidavits per day and did not actually review the underlying credit agreements or the alleged debtor’s payment history.

  • In sworn testimony provided to state investigators, the defendants’ robo-signers acknowledged that they also had no personal knowledge of the original debt or the defendant’s acquisition of the debt portfolios – which was contrary to the information contained in sworn affidavits that these defendants filed with the courts.

  • Because the court presumed the falsified affidavits were truthful, judges relied upon them to issue judgments against debtors. As a result, the Attorney General charged the defendants with defrauding the Texas judicial system by knowingly submitting false affidavits to state courts.

  • Because 90 percent of the defendants’ lawsuits named individuals who were not represented by counsel, these purported debtors did not have lawyers to challenge the legitimacy of the defendants’ claims. As a result, default judgments were improperly entered against them based upon the defendants’ falsified affidavits.

For the Texas AG press release, see Attorney General Abbott Charges Encore Capital Group with Violating Texas Debt Collection Laws (State’s enforcement action cites Encore for employing unlawful tactics against debtors, relying upon “robo-signers” to sign thousands of false affidavits).

For the lawsuit, see State of Texas v. Midland Funding LLC, et al.