Saturday, July 30, 2011

Backpeddling MERS Now Forbids Members From Foreclosing In Its Name, Requires Servicers To Obtain, Record Assignments Before Initiating Actions

Reuters reports:
  • MERS, the electronic mortgage registry that faces multiple investigations for its role in thousands of problematic foreclosure cases, changed its rules to lower its profile in court-supervised foreclosures. MERS, a unit of Merscorp Inc. of Reston, Virginia, owns the computerized registry, Mortgage Electronic Registration Systems.


  • In rule changes announced to MERS members on July 21, the company forbade members to file any more foreclosure actions in MERS's name. It also required mortgage servicers to obtain mortgage assignments and record them with county clerks before beginning foreclosures.

For more, see Facing criticism, MERS cuts role in foreclosures.

Return Of The Robosigners

Reuters reports:
  • America’s leading mortgage lenders vowed in March to end the dubious foreclosure practices that caused a bruising scandal last year. But a Reuters investigation finds that many are still taking the same shortcuts they promised to shun, from sketchy paperwork to the use of “robo-signers.”

For more, see Mortgage Mess Redux: Robo-Signers Return (A Reuters investigation finds that many banks are still employing the controversial foreclosure practices that sparked a major outcry last year).

SC Feds Score Pair Of Guilty Pleas In Mortgage Fraud Scam Involving Phony Home Sales That Failed To Deliver Title To Unwitting Homebuyers

In Florence, South Carolina, The Sun News reports:
  • A former mortgage broker and the owner of a defunct manufactured housing dealership in Conway pleaded guilty to felony mortgage fraud charges [] in federal court in Florence. Michael Fortenberry, the mortgage broker, and Glenn Vaught, former owner of G&E Home Sales, pleaded guilty to one charge each of conspiracy to commit loan application fraud, which carries a maximum sentence of five years in prison, a $250,000 fine and three years of supervised release.(1)


  • Fortenberry and Vaught said in plea agreements that they falsified information on loan applications to influence mortgage lenders to make loans that otherwise would not have been approved. The falsified information included appraisals that overvalued the property where the homes were to be located, doctored bank statements that made it appear as if buyers had more money and documents showing down payments that did not exist.


  • The two men obtained mortgages in the buyers’ names and had more than $2 million in loan proceeds sent to G&E Home Sales. Fortenberry and Vaught then split the loan proceeds but never provided any homes to their customers.

For the story, see Former home dealer, mortgage broker plead guilty.

(1) Cynthia Fortenberry -- Michael Fortenberry’s wife -- was indicted [] on seven felony charges of conspiracy to commit loan application fraud, according to the story. Reportedly, she was a mortgage broker who worked with her husband.

Michigan Foreclosure Mill Sweatshop Feels The Heat; Responds With Press Release Denying Robosigner Allegations

Possibly in light of the obliteration of a South Florida foreclosure sweatshop after robosigning and fraud allegations against it picked up steam, a Michigan foreclosure mill has issued a press release responding to similar allegations:
  • Recently Marshall Isaacs, an attorney in the Orlans law firm, has wrongfully come under attack as an alleged "robosigner" of mortgage related foreclosure documents. [...] Unfortunately these false allegations have now been picked up by the mainstream media with little or no scrutiny of the source of the allegations or research into their factual basis. No facts have been proffered to support any of the unfounded allegations against Mr. Isaacs or Orlans.

For the entire press release, see Orlans Law Firm Not Involved in Robosigning.

Homeowners Facing Foreclosure Among Those Targeted In NJ Straw Buyer Mortgage Fraud Scam

From the Office of the U.S. Attorney (Camden, New Jersey):
  • A New Jersey man admitted [] to conspiring to participate in a scheme which caused lenders to release more than $40.8 million based on fraudulent mortgage loan applications and conspiring to launder the proceeds of the fraud, U.S. Attorney Paul J. Fishman announced.

  • Charles Harvath, 33, of Lodi, N.J., pleaded guilty to an Information charging him with one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering. He entered his guilty plea before U.S. District Judge Joseph E. Irenas in Camden federal court.

According to documents filed in this case and statements made during Harvath’s guilty plea proceeding, financially distressed homeowners facing foreclosure were among those targeted by Harvath and other members of the conspiracy, and involved the recruitment of straw buyers who had good credit scores, but lacked the financial resources to qualify for mortgage loans to purchase their properties.

For the U.S. Attorney press release, see New Jersey Man Admits To $40.8 Million Mortgage Fraud Scheme.

Caution Urged For Novice Homebuyers, Rookie Sellers When Considering 'Rent To Own' & Lease-Option Deals

Ontario, Canada real estate lawyer and consumer advocate Bob Aaron writes in the Toronto Star:
  • The rent-to-own concept presents significant risk both to sellers/landlords and buyers/tenants. Perhaps the most significant challenge is that there are no standard lease purchase agreement forms accepted by the real estate industry, and the commonly-used templates that I have seen in my practice leave a great deal to be desired.

  • Trying to determine an option price for a transaction taking place in three to five years in the future is largely guesswork. If the price is too high on the option date, the buyer will back out, and if it’s too low, the seller will walk away for potential additional profit.

  • As well, tenant buyers may be paying more than market rent so that each month some money will be credited against the eventual purchase price. If the buyer backs out at the expiry of the lease option, he or she will lose the option fee and any monies paid along the way as a credit against the purchase price.

  • Buyers may also be exposed to unlicensed real estate agents like the ones who sent me the marketing email last month, or to unscrupulous sellers.(1) Back in September, 2008, the Toronto Star reported on Solution Homes, the operators of a rent-to-own scheme who leased houses from desperate sellers, subleased them to tenants, pocketed the rents without making mortgage payments, and left the tenant buyers to be evicted by the mortgage lenders.

  • For investor sellers, the worst case scenario is when the tenant buyer goes into default. The [Ontario] Landlord and Tenant Board has ruled that it does not have jurisdiction to evict a defaulting tenant who has an option to purchase. Power of sale and foreclosure proceedings cannot be used, and landlord sellers are forced to take defaulting buyers to Superior Court to evict them and terminate the option agreement.

  • This is what happened in the case of Novotny v. Fowler in 2009 [affirmed Novotny v. Fowler, 2010 ONCA 120 (2010)] where the parties retained lawyers and experienced significant delay and expense to unwind their rent-to-own deal when the buyer defaulted.(2)


  • Rent-to-own is not for everyone. For both sellers and buyers it involves a significant amount of risk. Participants in the program should only deal with licensed real estate agents and with real estate lawyers who are familiar with the concept.

For the column, see Rent-to-own deals can be risky business.

(1) Unscrupulous sellers could use these types of 'deferred title transfers' to unload, onto unwitting buyers, homes having significant defects (could be structural/construction defects, undisclosed surprises (ie. mold or meth contamination, etc.), or defects relating to the title to the home (ie. encroachments, code violations, improvements made without the proper permits, crappy title resulting from a defective foreclosure, etc.)). The point here is that a would-be buyer in these types of 'deferred title transfer' deals may not think to conduct the same types of inspections and title searches that a buyer would consider in a conventional, standard buy-sell real estate transaction. Consequently, the enumerated problems could go undetected/undiscovered.

(2) Rent-to-own, lease-option, and land contract (a/k/a agreement for deed, contract for deed, etc.) sellers in the U.S. face the risk that a tenant could claim that the arrangement constitutes an equitable mortgage, which, should a court agree, would make a standard tenant eviction proceeding unavailable to the landlord/seller. Regaining possession of the premises would require a full-fledged foreclosure action. See, for example:

HOA Oversight Leads To Bill For 6 Years Of Accumulated Dues; Homeowner's Failure To Pay Leads To $6K In Add'l Legal Fees, Loss Of Home To Foreclosure

In Charlotte, North Carolina, WCNC-TV reports:
  • Not all the foreclosures emptying homes across the Carolinas originate from banks and lenders. Increasingly, the institution doing the foreclosing is made up of neighbors who run the homeowners association–known as the HOA.

  • Consider one family’s story: Michelle Roberts’ parents helped her and her husband buy their first home in Gaston County in 2003. [...] The Mountain View Community Association off of Spencer Mountain Road near Ranlo, North Carolina and its management company, Hawthorne Management of Charlotte, did not send a bill to the Roberts [for periodic HOA maintenance dues] for years. “Not one word for six years,” said Michelle, “Not one word.”

  • The HOA lost track of the Roberts lot and two others when the builder transferred the property to their family. Then in May of 2009 the HOA sent Michelle’s parents a statement asking for almost six years worth of dues at once–$945.


  • At first the Roberts say they called a neighbor who served on the board of the HOA.“She said, ‘Don’t worry about it. We’ll work it out. It’s not that big of a deal,’” said Darin. That was before the lien notices and threatening letters began arriving from the HOA’s law firm. “We were blindsided,” said Michelle. So the Roberts tried repeatedly to work out a payment plan. “They wanted a $444-a-month payment and refused to accept anything less than that,” said Michelle.


  • The Roberts made payments totaling $888 last May–which sounds like they’d paid off the bulk of their original HOA debt. [...] But no. By that point, the HOA’s attorneys were involved. And they charged far more than the original debt in fees and court costs to try to collect it all. Court records show the Roberts whole payment went to legal fees–not to the HOA.


  • And that original bill of less than a thousand dollars? The attorneys added almost $6,000 in court costs and legal fees. “The people that are benefiting are the attorneys,” said Michelle. “They’re getting five times what the original bill was.” [...] The Roberts say they made a good faith effort to try to pay an old debt during trying times and lost their home in the process.

For the story, see HOA forecloses on family; neighbors lose, attorneys profit.

'Stagecoach To Hell' Pair Nominated For Annual Hedda Hopper Multiple Corporate Hat-Wearing Robosigner Of The Year Award

From Fraud Digest:

    Nicholas Hoye from the Minneapolis, Minnesota offices of Wells Fargo Home Mortgage is the winner of the “Busiest Signer of 2011 Award.” Hoye signed thousands of mortgage assignments in the first six months of 2011. Hoye most often signs to convey mortgages to his employer, Wells Fargo. Hoye has signed as a Certifying Officer for MERS as Nominee for at least 40 mortgage companies.

    The runner-up is Ricky L. Thompson, also from Wells Fargo.

Such prodigious efforts by this duo have earned them nominations for the annual 'Hedda Hopper Multiple Corporate Hat-Wearing Robosigner Of The Year Award.'(1)


(1) For those youngsters in the under-age-60 crowd and others who have no clue who she is, the late Hedda Hopper was an actress and well-known gossip columnist during the first half of the 20th century, and who was aptly described by a noted Brooklyn, New York trial judge (in a 2008 foreclosure/robosigner case) as being "famous for wearing many colorful hats." HSBC Bank USA, N.A. v Charlevagne, 20 Misc 3d 1128, 2008 NY Slip Op 51652, NY Sup. Ct. Kings Cty. (2008) Schack, J.

Friday, July 29, 2011

Banksters Dodge Big Bullet In Major Florida Supreme Court Foreclosure Fraud Case; Reach Settlement With Screwed-Over Homeowner

In Tallahassee, Florida, The Associated Press reports:
  • Both sides have agreed to settle a high-profile foreclosure fraud case pending before the Florida Supreme Court. Details of the settlement were not disclosed in a brief stipulation filed Thursday with the high court. The 4th District Court of Appeal in West Palm Beach had certified the case as a matter of "great public importance."

  • The appeal court ruled Roman Pino couldn't try to prove the Bank of New York Mellon defrauded him when it foreclosed on his Greenacres home. That was because the bank had voluntarily dropped the foreclosure action. The bank was represented in the foreclosure by a law firm being investigated by the state on allegations of "robo-signing" and other questionable practices. The Plantation law firm was headed by David J. Stern. It has since closed.

Source: Florida Supreme Court foreclosure case settled.

See Use Of Voluntary Dismissal To Dodge Scrutiny After Failed Attempt To Dupe Court By Producing, Filing Dubious Docs At Issue In Recent Foreclosure Suit for earlier post on this case.

Disregard Of Paragraph 22, Unreasonable Failure To Allow Amendment To Answer, Defenses Lead To F'closure Reversal For Clueless Florida Judge

From a recent ruling by a Florida appeals court:
  • In this mortgage foreclosure action, Pedro F. Laurencio and Esteves Pedro appeal the trial court's order granting summary judgment in favor of Deutsche Bank National Trust Company.

    Laurencio argues, among several things, that Deutsche Bank failed to meet a condition precedent to filing the complaint and filed suit prematurely, without giving them adequate notice and an opportunity to cure the alleged default.(1)

    Laurencio also argues that the trial court erred in denying the motion to amend the answer and affirmative defenses.(2)

    We agree on both issues and reverse.(3)
The trial judge in this case, Lee County Senior Trial Judge Hugh E. Starnes, obviously failed to meet the judicial challenge of getting it right on a foreclosure ruling, swinging and missing on the legal basics. By the way, this is not the first time Starnes has attained notoriety for his work on the bench in foreclosure cases, and was the target of a less than flattering February, 2011 op-ed column in The News-Press (Fort Myers, Florida).(4)

Regrettably for Judge Starnes, allowing himself to get roped in from out of retirement (possibly succumbing to the lure of a paycheck to supplement his pension) for a role on the notorious Fort Myers, Florida Foreclosure 'Rocket Docket'(5) may have, in hindsight, been ill-advised in that it soiled what for all I know may have been an otherwise unblemished judicial career. To the extent he thought he was doing a good deed by helping out the local court with the foreclosure backlog, maybe he should have known better, being mindful of the old saw, "No good deed goes unpunished."

For the full ruling, see Laurencio v. Deutsche Bank National Trust Co., 2D10-2448 (Fla. App. 2d DCA July 27, 2011).

(1) This screw-up by the trial judge resulted from his blatant disregard in failing to force the bankster in this case to comply with Paragraph 22 of the mortgage, which sets forth pre-suit requirements, including a requirement that the foreclosing bankster first give the borrower thirty days' notice and an opportunity to cure the default prior to filing suit.

On this point, the court stated (bold text is my emphasis):

  • In this case, Deutsche Bank failed to meet its summary judgment burden because the record before the trial court reflected a genuine issue of material fact as to whether Deutsche Bank had complied with conditions precedent to filing the foreclosure action.

    In a case with nearly identical facts, this court recently reversed a summary judgment of foreclosure. See Konsulian v. Busey Bank, N.A., 61 So.3d 1283 (Fla. 2d DCA 2011). In Konsulian, we concluded that the bank was not entitled to summary judgment because it had not established that it had met the conditions precedent to filing suit. Id. at 1285. The record in that case did not establish that the bank had given the defendant the notice which the mortgage required. Id. We reach the same conclusion in this case.
(2) On this point, the court stated (bold text is my emphasis):
  • The trial court also erred in denying Laurencio's motion for leave to file an amended answer and affirmative defenses. Leave of court to amend a pleading shall be given freely when justice so requires. Fla. R. Civ. P. 1.190(a). Public policy favors the liberal amendment of pleadings, and courts should resolve all doubts in favor of allowing the amendment of pleadings to allow cases to be decided on their merit. S. Developers & Earthmoving, Inc. v. Caterpillar Fin. Servs. Corp., 56 So.3d 56, 62 (Fla. 2d DCA 2011).

    A trial court's refusal to permit an amendment of a pleading is an abuse of discretion unless it is clear that: (1) the amendment would prejudice the opposing party, (2) the privilege to amend has been abused, or (3) the amendment would be futile. Id. at 62-63. "Courts should be especially liberal when leave to amend `is sought at or before a hearing on a motion for summary judgment.'" Gate Lands Co. v. Old Ponte Vedra Beach Condo., 715 So.2d 1132, 1135 (Fla. 5th DCA 1998) (quoting Bill Williams Air Conditioning & Heating, Inc. v. Haymarket Co-op. Bank, 592 So.2d 302, 305 (Fla. 1st DCA 1991)).

    Here, the record does not show that Deutsche Bank established any of the three exceptions to amendment of pleadings. There is no basis for concluding that Laurencio abused the privilege to amend or that Deutsche Bank would be prejudiced by the amendment which alleges, inter alia, the bank's failure to comply with its own documents.

    And the amendment clearly would not be futile considering the unrefuted allegations that Deutsche Bank failed to comply with conditions precedent to suit. See Wayne Creasy Agency, Inc. v. Maillard, 604 So.2d 1235, 1236 (Fla. 3d DCA 1992) ("A denial of leave to amend a pleading is an abuse of discretion where the proffered amendment indicates that a plaintiff can state a cause of action. The same holds true where a defendant demonstrates he could prevail with the assertion of a properly available defense." (citation omitted)). Therefore, the trial court should have granted Laurencio leave to file an amended answer and affirmative defenses.

(3) In footnote 2 of the Florida appeals court ruling, the 3-judge panel noted that, since it decided this appeal based on the two issues discussed in the opinion, it was unnecessary to address the merits of the homeowner's other arguments. Maybe the court felt the need to show some mercy on Judge Starnes by declining to rule on the remaining (possibly erroneously-decided) issues, thereby avoiding the appearance of 'piling on' their 'senior' lower court colleague.

(4) Regrettably, the op-ed piece does not appear to be available any longer on The News Press website.

See Some 'Rocket Docket' Judges Remain Unabashed In Their Cluelessness As They Continue To Bulldoze Home Foreclosure Cases Through System for a 'copied-and-pasted' reasonable facsimile of The News Press op-ed column.

See: The Florida Foreclosure Fraud Weblog: Banks Don’t Have to Follow the Rules in Lee County, Says Judge Starnes for a somewhat scathing observation on one of Starnes' rulings in a foreclosure matter.

(5) For more on the no-longer-state-funded, and now-defunct Fort Myers, Florida Foreclosure 'Rocket Docket,' see:

Bankster Axes, Sues Now-Former Employee Alleging Improper Taking & Disseminating Of Confidential Foreclosure Information

Bloomberg reports:
  • Ally Financial Inc., among the five largest U.S. mortgage originators and servicers, sued a former employee who moonlighted as a foreclosure defense attorney over claims she stole confidential information.

  • Ally terminated the employee, Tanya L. Blackwell, last week for failing to disclose “a clear conflict” of her dual employment as a foreclosure specialist for Ally’s GMAC unit and as a practicing foreclosure defense attorney, according to court papers filed yesterday in federal court in Philadelphia.

  • Prior to her termination, Blackwell allegedly improperly obtained confidential company information including organization charts for Ally’s foreclosure operations, according to the complaint.


  • Ally, based in Detroit, is seeking a court order barring Blackwell’s use of the information, which she allegedly sent to third parties, according to court papers. The case is Ally Financial Inc. v. Blackwell, 11-cv-4694, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).

For more, see Ally Financial Sues Former Employee Over Secret Foreclosure Data.

Thanks to Deontos for the heads-up on this story, and to Foreclosure Hamlet for uploading a copy of the lawsuit.

Philly Feds Sink Foreclosure Surplus Snatcher Who Used Forged Docs To Swipe Unwitting Ex-Homeowners' Proceeds From Forced Sales In Excess Of Liens

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):
  • Amin A. Rashid, a/k/a “Lawrence D. Wilson,” 62, of Philadelphia, was convicted [] of mail fraud and aggravated identity theft in connection with a three-year fraud scheme that defrauded former property owners and their families of over $650,000, announced United States Attorney Zane David Memeger. A sentencing date has not yet been scheduled.

  • From at least December 2005 to August 2008, Rashid operated “The Center for Constitutional and Criminal Justice” under the guise of assisting former owners of properties sold at Sheriff’s sales.

  • Rashid told these clients that he could help recover their properties or the proceeds from the Sheriff’s sales. Rashid took fees from these clients and photocopies of their drivers licenses but typically did nothing in return.

  • Rashid altered his clients’ driver’s licenses and submitted them to a title company along with forged power of attorney documents to steal Sheriff’s sale proceeds due to other former property owners.

  • The forged power of attorney documents carried signatures of former property owners who actually died years before they purportedly signed the documents. In addition, Rashid submitted bogus corporate resolutions that purportedly authorized him to collect Sheriff's sales proceeds that were due to these corporations. Rashid used his family members to pose as officers of these corporations.

For the U.S. Attorney press release, see Philadelphia Man Convicted Of Defrauding Former Property Owners And Their Families Of Over $650,000.

Illinois AG Tags Two Alleged Loan Modification Rackets In Separate Suits Charging Outfits With Screwing 40 Homeowners Out Of Upfront Fees

From the Office of the Illinois Attorney General:
  • Attorney General Lisa Madigan [] filed suit against two Chicago companies for mortgage rescue fraud schemes that illegally charged consumers more than $61,000 in upfront fees that resulted in little, if any, help to stay in their homes.

  • The Attorney General filed suit [] in Cook County Circuit Court against Avatar Realty Group Inc., formerly known as Monroe Realty & Financial Enterprises Inc. and Monroe Realty Corporation, and its president Arthur Monroe.

  • Madigan filed a separate lawsuit against Skyline Capital Inc. and Rahul Shah, company president.

  • The lawsuits seek to shut down the businesses and obtain restitution for the 40 consumers who have reported being victimized.

For more, see Attorney General Madigan Sues Chicago Area Mortgage Rescue Schemes (Companies That Promised Mortgage Help Defrauded Consumers of $61,000).

Indiana AG Tags California Loan Modification Outfit With Lawsuit Alleging Illegal Operations

In Shelbyville, Indiana, The Journal Gazette reports:
  • Indiana Attorney General Greg Zoeller was in Shelbyville [] to file a complaint against a California-based foreclosure consultant company. According to the lawsuit, homeowners in seven Indiana counties signed contracts with the company believing it would help prevent foreclosure based on claims made on the defendants’ website and advertising; but the company was operating illegally.

  • Named as defendants in the lawsuit were the company, Premier Legal Advocates which has addresses in Agoura Hills, Calif., and Westlake Village, Calif., and its owner, Brian Pascal. The Attorney General filed the lawsuit [] in Shelby County Court.

For more, see Indiana sues foreclosure consultant.

Voidable Or Void Ab Initio (Or "Void Unless & Until Later Ratified")?

In a 2010 court case, the U.S. Court of Appeals for the 5th Circuit was asked to determine, in an apparent ripoff where a 'rogue' member of a two member LLC deeded a 520-acre tract of land in Panola County, Mississippi owned by the LLC to a second LLC, 'wholly-owned' by the rogue member, without the knowledge of the other, unwitting member, whether the deed used in the conveyance was void ab initio, or merely voidable.

The reason this distinction was crucial was because, after illegally hijacking title to the property, the rogue member then went out an obtained a $300,000 mortgage loan in the name of his 'wholly-owned' LLC, secured by the ripped-off 520-acre tract, stuck substantially all of the loan proceeds in his pocket, and ultimately stiffed the bank out of its payments.

Consequently, the lender's interest in this deal hinged on whether the ripoff was merely voidable (in which case, it would hold a valid interest in the tract - provided, of course, that it otherwise qualified for protection as a bona fide purchaser/encumbrancer), or void ab initio (in which case the secured lender is really left unsecured and, regrettably for it, also left holding the bag).

In considering the question, the Federal appeals court made this analysis of the existing law of Mississippi:
  • Mississippi courts have held several types of deeds voidable rather than void ab initio. For example, when a corporation takes an ultra vires action not authorized by its charter, the result can usually be ratified and thus cannot have been void ab initio. See Home Owners' Loan Corp. v. Moore, 184 Miss. 283, 185 So. 253, 255 (1939) ("An act of a corporation relating to the subjects within its powers though it should exceed those powers is not void."); see also Haynes v. Covington, 21 Miss. (13 S. & M.) 408, 1850 WL 3405, at *2 (Miss.Err. & App.1850).[5]

    Similarly, a fraudulent conveyance is voidable rather than void ab initio—i.e., it is subject to the intervening rights of a bona fide purchaser for value without notice of the fraud. See Parker v. King, 235 Miss. 80, 108 So.2d 224, 226 (1959) (fraudulently induced execution of a mineral deed is voidable); see also Guice v. Burrage, 156 F.2d 304, 306 (5th Cir. 1946); Lee v. Boyd, 195 Miss. 794, 16 So.2d 30, 30 (1943); Sanders v. Sorrell, 65 Miss. 288, 3 So. 661, 663 (1888).

    A forged conveyance, on the other hand, is void ab initio and cannot pass title to a bona fide purchaser. See
    Securities Inv. Co. of St. Louis v. Williams, 193 So.2d 719, 722 (Miss.1967) ("The note and trust deed having been forgeries, even an innocent purchaser, for value and without notice that they were forgeries, could acquire no title.").

    Mississippi courts have held deeds void ab initio in homestead cases. A homestead occupied by husband and wife cannot be conveyed without the signature of both spouses, and any deed made without both signatures is absolutely void and passes no title. See
    Thornhill v. Caroline Hunt Trust Estate, 594 So.2d 1150, 1152 (Miss.1992).[6]

    Mississippi courts have also held unauthorized tax sales by the State to be void ab initio rather than voidable. See Pittman v. Currie, 391 So.2d 654, 655 (Miss.1980); see also In re Hardy, 910 So.2d 1052 (Miss.2005) (citing a tax sale case in support of its holding that certain deeds made by an agent who exceeded her power of attorney were void ab initio); Money v. Wood, 152 Miss. 17, 118 So. 357, 360 (1928); Hit-Tuk-Ho-Mi v. Watts, 15 Miss. (7 S. & M.) 363 (Miss.Err. & App. 1846).

In concluding that "[none] of these classes of cases answered the voidable/void ab initio question presented here" and that "[t]he issue has serious and potentially far-reaching public policy implications for Mississippi LLCs and those who do business with them[,]" the 5th Circuit appeals court did the only smart thing that any Federal appeals court could do when asked to address an issue of state substantive law where the state case law is not clear: it declined to rule on the case.

Rather than making what has been described as a "reasoned attempt to anticipate what the state's [highest] court[] would decide" (often referred to as making an "Erie guess"), it 'punted' the case over to the Mississippi Supreme Court (the court most qualified to interpret its own state law(1)), and respectfully requested that the state high court figure out the answer to the question.

The Mississippi high court graciously granted the request (a grant that is purely discretionary, not mandatory), and for the reasons set forth in its ruling, found that the deed used in the ripoff was neither void ab initio, nor voidable.

It approached the issue by applying the rules of agency and found the deed to be "void unless and until later ratified." It went further and concluded that, because the rogue member "had neither actual nor apparent authority to transfer [the LLC's] property, and because [the LLC] did not ratify the transaction, [the deed] was void and of no legal effect ([alterations] mine, not in the original text).(2)

Having answered the 5th Circuit's question on what the state law was, it kicked the case back over to them, at which point, the 5th Circuit affirmed a ruling by a U.S. District Court which, in turn, affirmed a U.S. Bankruptcy Court ruling finding that the deed was to be treated as a nullity and of no legal effect (consequently restoring the unwitting LLC member's interest in the 520-acre tract of land, and leaving the unwitting mortgage lender, BancPlus, with an unsecured position on the $300,000 loan made to the rogue LLC member).

For the rulings, see:

(1) The U.S. Supreme Court has stated that, in cases when the Federal courts have been asked to rule on issues involving the interpretation and application of substantive (as opposed to procedural) state law, "the State's highest court is the best authority on its own law." Commissioner v. Estate of Bosch, 387 U.S. 456 (1967).

(2) Specifically, and for the reasons it set forth in its ruling, the Mississippi high court said (see In re Northlake Development II, at paragraphs 15-16):

  • ¶ 15. So where no actual or apparent authority exists to transfer a principal's property, we decline to characterize the deed as voidable. Rather, it is void unless and until later ratified. Ratification is a principal's after-the-fact, conscious decision to be bound by an agent's unauthorized act, and it is that decision that can trigger the principal's liability to third parties. Where the agent has no actual or apparent authority, a principal has no need to repudiate an agent's unauthorized act in order to "put things back" the way they were. Absent ratification—and prior to ratification—nothing changes.

    ¶ 16. Earwood was without authority (actual or apparent) to convey the property to Northlake. The conveyance therefore had no effect on Kinwood's interest in the property. Once Kinwood learned of the purported conveyance, it could have ratified it—but didn't. Kinwood's rights in the property are therefore unaffected by the actions of Earwood, Northlake, or any other subsequent party. DeedVoidVoidable

Thursday, July 28, 2011

Prolific Ally/GMAC Robosigner Linked To New 'Dubious Doc' Flap; Media Review Suggests Paperwork Signed 3 Yrs After Now-Defunct Firm Sank Not Unique

Paul Kiel at ProPublica reports:
  • GMAC, one of the nation's largest mortgage servicers, faced a quandary last summer. It wanted to foreclose on a New York City homeowner but lacked the crucial paperwork needed to seize the property.

  • GMAC has a standard solution to such problems, which arise frequently in the post-bubble economy. Its employees secure permission to create and sign documents in the name of companies that made the original loans. But this case was trickier because the lender, a notorious subprime company named Ameriquest, had gone out of business in 2007.

  • And so GMAC, which was bailed out by taxpayers in 2008, began looking for a way to craft a document that would pass legal muster, internal records obtained by ProPublica show.

  • "The problem is we do not have signing authority—are there any other options?" Jeffrey Stephan, the head of GMAC's "Document Execution" team, wrote to another employee and the law firm pursuing the foreclosure action. No solutions were offered.

  • Three months later, GMAC had an answer. It filed a document with New York City authorities that said the delinquent Ameriquest loan had been assigned to it "effective of" August 2005. The document was dated July 7, 2010, three years after Ameriquest had ceased to exist and was signed by Stephan, who was identified as a "Limited Signing Officer" for Ameriquest Mortgage Company. Soon after, GMAC filed for foreclosure.

  • An examination by ProPublica suggests this transaction was not unique. A review of court records in New York identified hundreds of similar assignment documents filed in the name of Ameriquest after 2008 by GMAC and other mortgage servicers.


  • GMAC said it is still pursuing foreclosures based on assignments signed by Stephan. As part of a bid to rebrand itself, GMAC renamed its holding company Ally Financial last year.

For more, see Internal Doc Reveals GMAC Filed False Document in Bid to Foreclose.

Go here for links to other articles by Paul Kiel on the rackets involving bank foreclosures and loan modifications.

Heat Rising For Alleged 'Ghetto Loans' Peddler As DOJ Focuses Crosshairs On 'Stagecoach To Hell' Over Reverse-Redlining Allegations

The Huffington Post reports:
  • The Department of Justice is preparing a lawsuit against Wells Fargo, the nation's largest home mortgage lender, for allegedly preying upon African American borrowers during the housing bubble and steering them into high-cost subprime loans, according to three people with direct knowledge of the probe.

  • The company, the fourth-largest U.S. bank by assets, is currently embroiled in pre-lawsuit negotiations with the Justice Department in hopes it will settle the accusations and avoid a public lawsuit, these people said. The allegations mirror those in public actions taken by the Federal Reserve and a separate lawsuit filed by the city of Baltimore.(1)

  • Last week, the Fed said that perhaps more than 10,000 borrowers were inappropriately steered into subprime mortgage loans or had their loan documents falsified by bank personnel. Wells Fargo agreed to pay $85 million to settle the civil charges.(2) It did not admit wrongdoing.

  • In its ongoing case against Baltimore, Wells Fargo stands accused of using those same practices, but deploying them against black borrowers in majority-black neighborhoods, an act commonly known as "reverse redlining." The city alleges that the bank targeted black borrowers, knowing they'd ultimately default on their loans, but did not fear shouldering the cost because Wells sold those loans to investors.(3) Wells Fargo denies the allegations.


  • The previously-undisclosed Justice probe, which is being led by the Civil Rights division's Fair Lending Unit, lends credence to the city's lawsuit, sources told The Huffington Post. [...] Taken together, the various investigations paint a picture of a lender that profited by knowingly targeting less-sophisticated borrowers, in particular preying upon those communities that traditionally lacked access to a full range of consumer credit products.


  • Wells Fargo has fought lawsuits from Baltimore and the city of Memphis alleging that the bank preyed upon black borrowers;(4) settled claims it illegally steered credit-worthy borrowers into subprime loans and misled investors about the risks of mortgage-backed securities it sold; and fought investigations and regulatory actions stemming from revelations that it employed so-called "robo-signers," the agents directed by lenders to process foreclosure filings en masse without examining the underlying paperwork.

For the story, see Wells Fargo Target Of Justice Department Probe; Agency Alleges Discriminatory Lending.

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

(2) See Fed $85M 'Pick-A-Pay' Settlement With 'Stagecoach To Hell' - Just Another Wrist-Slap?

(3) See The Daily Record: Ex-workers allege race-based loan approach at Wells Fargo, which describes, in Baltimore's earlier complaints, testimony from two former high-ranking Wells Fargo employees stating that Wells Fargo intentionally made bad loans to African-Americans.

The employees, who worked out of Virginia and Maryland but knowledgeable about the company's national lending practices, according to the complaints, said Wells Fargo marketed subprime loans to predominantly African-American ZIP codes and churches, used software to "translate" marketing materials into African-American vernacular, joked that borrowers who were deceptively steered from prime into subprime loans were "riding the stagecoach to Hell," and that company officials referred to the loans in minority communities as "ghetto loans" and to the borrowers as "mud people," according to The Daily Record story.

(4) See Memphis, Shelby County Get Green Light In 'Reverse Redlining' Fair Housing Litigation Against Alleged "Ghetto Loans" Peddler.

See also, Pennsylvania Joins Baltimore, Memphis With Pending Lawsuit Accusing Alleged "Ghetto Loans" Peddler With Reverse Redlining In Philly Neighborhoods, where the state of Pennsylvania also weighed in with 'reverse-redlining' allegations in a lawsuit against Wells Fargo in connection with loans made in the city of Philadelphia. See Commonwealth of Pennsylvania v. Wells Fargo Bank, N.A.

Illegal Bid Rigging Racket? Or Mere Innocent 'Joint Bidding' Arrangement?

Real estate investors and others who have gotten themselves pinched on charges alleging participation in an illegal bid rigging scam at a public auction(1) may wish to consider an observation made by a Colorado Appeals Court in a 2010 ruling in considering whether to mount a defense before deciding to 'race to the prosecutor's office' and spill their guts about the racket, throwing their co-conspirators under the bus in the process in an attempt beat the rap, or at least reduce any anticipated prison sentence.(2)

In the ruling, the court made the following distinction between what you can do and what you can't do when teaming up with others when bidding at auctions (bold text is my emphasis):
  • Federal antitrust cases distinguish between unlawful bid rigging and lawful joint bidding. Bid rigging has been found when two or more competitors coordinate their bids to a third party. United States v. Mobile Materials, Inc., 881 F.2d 866, 869 (10th Cir. 1989).

    However, "[b]id rigging should not be confused with joint bidding, which allows bidders to pool their resources to place bids on property which they would otherwise be unable to afford."
    Love v. Basque Cartel, 873 F. Supp. 563, 577 (D. Wyo. 1995), aff'd sub nom. Dry Creek Cattle Co. v. Basque Cartel, 95 F.3d 1161 (10th Cir. 1996) (unpublished table decision).[7](3)

    In Love, 873 F. Supp. at 566, 568, on which the trial court relied, the court determined that the bidding at an auction for a 90,000-acre ranch did not constitute bid rigging because the auction encouraged joint bidding: in early rounds, bids were taken on individual subdivided parcels; in later rounds, bids were taken on the ranch as a whole. Id. at 567, 578.

    The Love court concluded that in pooling their resources to bid on the entire ranch, the individual defendants had not suppressed competition as to the individual parcels. Id. at 577. And it found no evidence that anyone had been prevented from bidding on the entire ranch. Id.


  • In United States v. Guthrie, 814 F. Supp. 942 (E.D. Wash. 1993), aff'd, 17 F.3d 397 (9th Cir. 1994) (unpublished table decision), a bidder who twice paid other bidders not to attend foreclosure sales at which he submitted winning bids for $1 above minimum bid levels was convicted of bid rigging.

    Although unlike here Guthrie rigged the bids before the sales, the court's explanation of the anticompetitive nature of bid rigging as "an agreement between two or more persons to eliminate, reduce, or interfere with competition for a job or contract that is to be awarded on the basis of bids," is instructive. Id. at 949.

For the court's ruling, see Amos v. Aspen Alps 123, LLC, No. 08CA2009 (Colo. App. 2010),(4) which decided how to apply the foregoing cases to the facts before it, and its legal analysis in considering whether a foreclosure sale tainted by illegal bid rigging should be voided.

(1) See e.g. California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (Investigation Yields Eight Plea Agreements).

(2) "When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed." United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) (referring to the not-uncommon 'race to the courthouse' that breaks out among participants in an uncovered criminal conspiracy).

(3) In Kearney v. Taylor, 56 U.S. 494, 520 (1853), the Court explained that if "[t]he property at stake might be beyond the means of the individual, or might absorb more of them than he would desire to invest in the article, or be of a description that a mere capitalist, without practical men as associates, would not wish to encumber himself with," an agreement established joint bidding, rather than bid rigging. Joint bidding does "not . . . prevent competition, but . .. enable[s] . . . the persons composing [the agreement] to participate in the biddings." Id. at 521. However, "shutting out competition, and depressing the sale, so as to obtain the property at a sacrifice" is bid rigging. Id.

(4) Subsequent History: Writ of certiorari granted in part and denied in part Amos v. Aspen Alps 123, LLC, 2011 Colo. LEXIS 279 (Colo. Mar. 28, 2011).

Central Florida Cops Refuse To Budge; Cite Lack Of Criminal Intent, Insist That 'Foreclosure' Home Trashing Is Nothing More Than A 'Civil Matter'

In Brooksville, Florida, WTSP-TV Channel 10 reports:
  • The Hernando Sheriff's Office was inundated with angry calls and e-mails after we reported criminal charges wouldn't be filed against a company which cleaned out and trashed a man's home. After our first story, the sheriff's office re-opened the case, but is now sticking to its guns.


  • But Detective Dustin Mormando says the SO's investigation pretty much contradicted what he was reporting. Mormando says Boudreau had abandoned the property when the mortgage company hired the contractor to clean out the home. However, there was a major problem: the mortgage company hadn't filed foreclosure papers.

  • Because the proper foreclosure papers had not been filed, 21 Mortgage really had no right to hire a contractor to go onto Boudreau's property and clean it up. But the sheriff's office says it couldn't file criminal charges, because the local contractor had no idea there was any problem with the paperwork.

  • "There was no criminal intent," Mormando says. "It's not up to them to verify the mortgage company filed the proper paperwork." He says the contractors are in a business relationship with this mortgage company, who've given them jobs for years.

  • The sheriff's department can't get involved, because as Mormando explains, there are no arrestable offenses committed. Boudreau's only recourse is a civil suit against the mortgage company.

For the story, see Hernando Sheriff's Office says it will not prosecute contractor who cleaned out a home for a mortgage company.

Home Health Care Aid Gets Nearly 3 Years For POA Abuse; Used Stroke-Stricken Senior's Home As Loan Collateral, Then Stiffed Bank, Leading To F'closure

In Columbia, South Carolina, The Associated Press reports:
  • An Aiken woman has been sentenced to nearly three years for defrauding an elderly woman. U.S. Attorney Bill Nettles said [] Tabitha Ruth Smith-McDaniel was also ordered to pay more than $98,000 restitution to the estate of the woman, who has since died. Smith-McDaniel pleaded guilty to mail fraud in September.

  • Prosecutors say she provided home health care to a North Augusta woman who had suffered a stroke. With the woman's power of attorney, Nettles says Smith-McDaniel opened charge accounts in the woman's name and used her home as collateral for a loan.

  • The home was repossessed and sold in foreclosure. Nettles says Smith-McDaniel also terminated the woman's life insurance policy and deposited a refund check into her own account. The woman died shortly after filing for bankruptcy in 2006.

Source: Prosecutors: Aiken woman sentenced to nearly 3 years for defrauding elderly woman of savings.

Utah Appeals Court Rejects Homeowner's Position In Foreclosure Battle With Banksters

In Salt Lake City, Utah, The Salt Lake Tribune reports:
  • A state appeals court decision could have a wide impact on dozens of lawsuits filed in Utah over home foreclosures that washed across the state in the wake of the Great Recession. The Utah Court of Appeals has agreed with a lower court that a key loan servicer and an entity created by mortgage bankers have the legal right to foreclose on an Eagle Mountain home.

  • Lower federal and state courts have dismissed numerous foreclosure suits in Utah on the same grounds, but this decision is the first from a higher court, and its ruling may guide future judicial actions. The decision invalidates one of the legal theories that have guided dozens of lawsuits challenging the tens of thousands of foreclosures in Utah.


  • But Craig Smay, the attorney for the homeowner, said he will either ask for reconsideration of the decision or appeal to the Utah Supreme Court. “Our intention is to not to let it stand. It’s obviously wrong.”

For more, see Utah ruling a setback for foreclosure challenges.

For the ruling, see Commonwealth Property Adcocates LLC v. Mortgage Electronic Registration System, Inc., 2011 UT App 232 (Ut. Ct. App. July 14, 2011).

Wednesday, July 27, 2011

Vermont Supreme Court Boots Foreclosure Action Marked By Potentially Dubious Filings; Score Victory For Homeowner, Non-Profit Law Firm (& Trial Court)

The Vermont Supreme Court recently weighed in with a ruling in a foreclosure action, affirming a trial court ruling that gave a foreclosing lender the boot, with prejudice, in a foreclosure action because of a lack of standing to bring the lawsuit.

The court's ruling contains an analysis of the applicable provisions of the Uniform Commercial Code, as well as Vermont's version thereof.

The following point, which merits highlighting, reflects the filing of potentially dubious documents by the foreclosing lender that homeowner characterized as inconsistent and "likely fraudulent filings" (among the documents filed in the foreclosure action was a copy of an instrument entitled "Assignment of Mortgage," signed by the notorious, nationally-recognized robo-signer Jeffrey Stephan) (Note: the following 'bulleted' text has been slightly adapted from the text of the court's ruling):
  • Initially, the foreclosure was based solely on an assignment of the mortgage by MERS. The complaint did not allege that the foreclosing lender held the original note. It simply attached a copy of the note with an allonge endorsement in blank. Homeowner successfuly challenged this evidence as insufficient to show that the lender held an interest in her note.

  • At that point, US Bank abandoned its claim of assignment of the mortgage and instead asserted that it held the original note, and submitted the note with an allonge containing two undated specific endorsements, one to the lender. The supporting affidavit claimed that the note had been endorsed to US Bank, but provided no information about when and failed to explain why a note with a blank endorsement was the basis for the complaint.

In ruling in favor of the homeowner, the Vermont high court stated (from the original text, bold text is my emphasis):

  • Based on this contradictory and uncertain documentation, the trial court did not err in concluding that there was no evidence to show that US Bank was a holder of the note at the time it filed the complaint. US Bank failed to allege or demonstrate that it held the original note endorsed in blank when it commenced the foreclosure action.

    In fact, US Bank asserted that the note with the blank endorsement was an earlier copy that was mistakenly attached to the complaint. It also alleged that the blank endorsement was stamped with RFC's name in 2005. Therefore, it could not possibly have held the original note with a blank endorsement when the complaint was filed. Further, there is no evidence to show that US Bank held the original note endorsed to its name before the complaint was filed.

    While US Bank eventually produced the original note with an endorsement to it, none of the evidence submitted at summary judgment by US Bank established the timing of the endorsement. Given US Bank's failure to show it had standing, the foreclosure complaint was properly dismissed.

After the foreclosing lender made what the court implicitly indicated was a decent argument in favor of overlooking the initial defects because it now produced the original note with a chain of endorsements ending in U.S. Bank, the court excoriated the foreclosing lender with the following comments:

  • US Bank argues that for reasons of policy it should be permitted to proceed because it would be wasteful to prevent it from being able to "cure" its standing problem. While we are sympathetic to the desire to avoid wasteful and duplicative litigation, the source of the unnecessary proceedings in this case was not an overly wooden application of the rules, but US Bank's failure to abide by them.

    It is neither irrational nor wasteful to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit.

    Nor is it irrationally demanding to expect the foreclosing party to provide adequate, satisfying proof in response to a motion for summary judgment challenging standing to bring suit.

    What should have here been a fairly straightforward, if not a summary, proceeding under the rules, was rendered inefficient by US Bank's failure to marshal its case before compelling homeowner and the court to waste time and resources, twice, by responding to what could not be proven. There was nothing inequitable in dismissing this matter.

Another point worthy of note is that the Vermont high court remanded the case back to the lower court to consider the homeowner's attorney's fees request.

The homeowner filed a motion for attorney's fees asserting that US Bank had filed affidavits in bad faith. The Vermont Supreme Court agreed that the request for attorney's fees under Rule 56(g) was timely and properly raised in the trial court, and that the court erred in failing to consider the motion. It therefore kicked the case back to the trial court for consideration of homeowner's request.

For the ruling, see U.S. Bank v. Kimball, 2011 VT 81 (Vt. July 22, 2011).

See VT Sup CT: Yes US Bank, You Have to Prove Standing for commentary on this case.

Representing the homeowner in this case was Grace B. Pazdan of Vermont Legal Aid, Inc., a non-profit law firm that, according to their website, provides free civil legal services to people throughout Vermont who are poor, elderly, or have disabilities, and has six offices througout the state.

(1) Although this foreclosure action was dismissed by the trial court with prejudice, the Vermont Supreme Court cautioned the homeowner against getting too excited about winning a 'free' house in the following excerpt:

  • Thus, this may be but an ephemeral victory for homeowner. Absent adjudication on the underlying indebtedness, the dismissal cannot cancel her obligation arising from an authenticated note, or insulate her from foreclosure proceedings based on proven delinquency. Cf. Indymac Bank, F.S.B. v. Yano-Horoski, 912 N.Y.S.2d 239, 240 (App. Div. 2010) (reversing trial court's order canceling mortgage and debt).

    Homeowner's arguments supporting a dismissal with prejudice are not convincing.
    Homeowner relies on Nolen v. State, but that unpublished three-justice decision simply affirmed the trial court's decision to dismiss with prejudice plaintiff's constitutional claim for lack of standing without a challenge to or any analysis of the "with prejudice" designation. No. 08-131, 2009 WL 2411832, at *2 (Vt. May 29, 2009) (unpub. mem.), available at

    Further, the court's order does not support plaintiff's assertion that the court was warranted in dismissing with prejudice on equitable grounds given what homeowner characterizes as inconsistent and "likely fraudulent filings" submitted by US Bank. See New Eng. Educ. Training Serv., Inc. v. Silver St. P'ship, 156 Vt. 604, 613,
    595 A.2d 1341, 1345-46 (1991) (affirming dismissal of foreclosure action where recovery on the underlying note would be unconscionable).

    While the trial court may have had discretion to exert its equitable powers in this manner, no findings were made to support such a conclusion, and we will not speculate on a matter of such importance.

Chase's "Unmitigated Disaster" Continues; Add 'Accidental' Issuance Of 400 Long Island Loan Satisfactions To Bankster's 'Egg-On-Face' Mortgage Mess

In Suffolk County, New York, the New York Post reports:
  • Just when you think you've heard every possible way a bank's mortgage department can mess things up, the moneylenders come up with a new way to amaze.

  • For example, one of the country's largest mortgage lenders, JPMorgan Chase, was in a Long Island courtroom yesterday trying to get the OK to put liens back on about 400 homes it accidentally classified as having satisfied mortgages after the homeowners refinanced their mortgages. The mistake happened four years ago, according to court papers.

  • Since 2007, the 400 Suffolk County families could have stopped paying their mortgages, and it appears that Chase wouldn't have had the right to foreclose. It was an innocent bank error, Chase's lawyers said.

  • While not a single homeowner nor Chase appears to have been financially harmed because of the mistake, it highlights the tricky and sticky situation banks find themselves in. Every time a bank executive says he has his arms wrapped around the mortgage morass, new evidence pops up to prove him wrong. Meanwhile, these same bank executives want investors to believe the worst has passed.

  • "It's fairly incredible to me that an error of this magnitude would happen," said Mark Goldsmith, a lawyer at Jakubowski, Robertson, representing one of the Suffolk County homeowners. Said another lawyer, David Shaev, who is not involved in the Long Island case, "I've never seen anything like this as far as this many accidental [mortgage] satisfactions."


  • The law firm handling Chase's Suffolk case is Steven J. Baum PC, which is reportedly being investigated by federal and state authorities for its alleged shoddy case work. [...] JPMorgan Chase CEO Jamie Dimon(1) recently described the mortgage mess as "an unmitigated disaster."(2)

For the story, see Farce of habit at JPM (Another mind-blowing mortgage mess for bank).

(1) A hard copy of the New York Post edition that ran this story showed a photo of the 'respected' Chase CEO Jamie Dimon with egg on his face. Regrettably, the photo apparently never made the online edition. In lieu thereof, this photo will have to suffice.

(2) Among the other recent messes that are integral parts of Chase's 'unmitigated disaster,' as reported by the Post:

  • Chase, together with Bank of America, Citigroup, Ally Financial, Wells Fargo, is facing as much as $25 billion in penalties and fines related to the robo-signing and lost-document fiasco that has slammed the nation's housing market;
  • Chase recently admitted that it foreclosed on active-duty servicemen in violation of foreclosure rules. The bank agreed to pay tens of millions in cash to thousands of active-duty military personnel who were mistakenly overcharged on their mortgages or were wrongfully kicked out of their homes.

Massachusetts AG To Nix Any 50-State Deal Letting Banksters Off Hook On Securitization, MERS Issues If Foreclosure Fraud Probe Remains Incomplete

In Boston, Massachusetts, Bloomberg reports:
  • Massachusetts Attorney General Martha Coakley said the state won’t sign on to any settlement of a nationwide foreclosure probe that includes certain liability releases for banks, joining officials in at least two other states(1) who have raised concerns over terms of a possible deal.

  • The banks in settlement talks with state and federal officials are seeking broad releases to protect them from legal claims. Massachusetts Attorney General Martha Coakley said yesterday she won’t support an agreement that includes releases for securitization of mortgages and conduct related to a database of mortgages known as MERS.

  • Massachusetts will not sign on to any global agreement with the banks if it includes a comprehensive liability release regarding securitization and the MERS conduct,” Coakley wrote to the Norfolk County register of deeds in Dedham, Massachusetts. “These investigations must continue.” The registry keeps real estate records.

The Boston Globe adds:

  • Massachusetts Attorney General Martha Coakley is beefing up her investigation into foreclosure fraud, targeting a powerful lender-created company in Virginia that claims to be the official owner of tens of millions of mortgages nationwide.

  • Yesterday, Coakley said she will ask county registers to provide information to see if Mortgage Electronic Registration Systems Inc., known as MERS, is violating Massachusetts laws related to property seizures. She is concerned that MERS failed to pay government fees as well as “impaired the integrity’’ of the state recording system by failing to document loan transfers.

For the stories, see:

(1) According to the story, Delaware Attorney General Beau Biden said in an interview that he had “strong reservations” about releasing claims other than for servicing of mortgages because he is investigating related issues, including securitization. Likewise, New York Attorney General Eric Schneiderman’s office said in a statement last week that he “remains concerned by any settlement agreement that would preclude state attorneys general from conducting comprehensive investigations of the mortgage crisis.” Schneiderman is conducting his own investigation.

Underwater Fla Homeowners Using State 'Wildcard' Exemption In Bkrptcy Urged To Resist Being Squeezed By Rogue Trustees Using Unsavory Ch. 7 Shakedowns

Jacksonville, Florida bankruptcy attorney Chip Parker writes in the Bankruptcy Law Network:
  • As I previously reported, we have a problem in the state of Florida with a few rogue bankruptcy trustees using unsavory tactics to shakedown Chapter 7 debtors.

  • Specifically, in the State of Florida, a debtor can choose between his homestead exemption and his wildcard exemption. The homestead exemption grants the debtor protection of all his home equity while the wildcard exemption grants $4,000 per debtor that can be applied to any property.

  • Since, according to CoreLogic, half of all Florida homes have zero or negative equity, the home equity exemption is worthless. Therefore, debtors are opting to select the wildcard exemption to protect more of their personal property from the bankruptcy estate.

  • The trustee’s job is to maximize the bankruptcy estate for the benefit of creditors, and he’s none too happy about the size of the estate being shrunk by up to $8,000 in a joint case where debtors elect the wildcard exemption. While the mainstream trustees have accepted this new reality, the rogue trustees have deployed guerrilla-like tactics against Florida debtors.

  • Specifically, the rogue bankruptcy trustee demands that the debtor “turn over the keys” to their home if they fail to claim the homestead exemption. Now, we all know the trustee doesn’t want the house or the keys. He is merely attempting to extort money from a frightened debtor with visions of being booted to the curb.

  • In a recent Jacksonville case, Jacksonville bankruptcy lawyer Ed Jackson demanded (in a motion) that the trustee “administer or abandon” the house, and Judge Paul Glenn agreed. He ordered the trustee to present a “bona fide contract to sell or otherwise administer” the debtor’s house within 60 days.

  • So, can the trustee get a real estate agent to agree to short sell an underwater house? Sure, but no credible realtor would ever testify that the bankruptcy estate would get any money from the short sale. Therefore, the house would be “inconsequential” to the estate and therefore NOT subject to administration. Checkmate! Debtor wins.

  • If a bankruptcy trustee demands that you turn over the keys to your home because the house isn’t claimed as exempt, what should you do?

  • The issue is whether the house will generate money for the estate. A house will only generate money if it can be sold at a net profit for the estate or if it is rented for an amount greater than the mortgage payment and maintenance costs (that means homeowners association dues, taxes, insurance, etc.).

  • Therefore, the first thing you do is file a Motion to Compel Trustee to Abandon or Administer Property. Second, set the trustee’s deposition, and ask him to explain his plan for generating money for the bankruptcy estate.

  • Some trustees are ruthless, but they are all smart. None of them want to look stupid at a deposition, and the rogue trustee knows a decent lawyer will box him in a corner. Rather than lose some teeth in a street fight, the trustee will back down.

  • If your bankruptcy lawyer won’t go to bat for you, it’s time to start looking for new representation.

Source: Can my Chapter 7 trustee kick me out of my Florida home? (Not if you hire an experienced bankruptcy lawyer).

See Osborne v. Dumoulin, 55 So. 3d 577 (2011), in which the Florida Supreme Court addressed the the circumstances under which a debtor is entitled to the statutory $4000 personal property 'wildcard' exemption from legal process for debtors who do not claim or receive the benefit of a homestead exemption.

In a related post, see Bankruptcy Trustee's Attempt To Boot Homeowner In Underwater Home Fails; State 'Wildcard' Exemption Allows Debtor To Stay Put.

Bankster Turns To Title Insurer For $24M 'Cough-Up' For Losses Over Soured HELOCs

In Minneapolis, Minnesota, Courthouse News Service reports:
  • The foreclosure meltdown has led the U.S. Bank National Association to demand $24 million from First American Title Insurance Co., claiming the title company charged more than $20 million for a new product supposed to protect the bank from defaults on home loans, then walked away when the disaster came.

  • U.S. Bank claims the title company charged it more than $20 million in premiums and fees for its "FACT product," and new "service" that First American introduced in 2001.

  • First American claimed its product would "benefit institutions such as U.S. Bank when making home equity loans to consumers, by simultaneously allowing the lender to make faster lending decisions and insuring the lender against the risk that such faster decisions might fail to uncover, among other things, undisclosed intervening liens, title defects, errors in legal description, or vesting problems that would impair the lender's collateral in the even the customer later defaults on the loan," according to the federal complaint.

For more, see Bank Claims Title Company Scammed It.

Tuesday, July 26, 2011

State Appeals Court Bags Snoozing Fla. Trial Judge Allowing Bank Without Note & Mortgage To Bring Foreclosure Action, Introduce Inadmissible Evidence

Another Florida trial judge's ruling suffered a reversal in a foreclosure action.

In this case, the state's 1st District Court of Appeal found that, "Because the documentary evidence necessary to establish the amount owed under the note and mortgage was admitted without proper foundation(1) and it is undisputed that M & I Bank was not the holder of the mortgage and note," it had no choice but to reverse an earlier ruling by the ostensibly snoozing Levy County Circuit Court Judge Stanley H. Griffis, III.

(Once again, we have another example where, had a faulty foreclosure ruling not been pursued on appeal, homeowners defending against a foreclosure action would have been unfairly screwed over. Fortunately for these homeowners, limited finances was apparently not an obstacle to pursing this appeal, and they were represented by counsel who knew that the lower court ruling was incorrect and who knew how to handle appeals, something which, regrettably, can't be said for all attorneys who claim to do foreclosure defense work.)

For the ruling, see Mazine v. M&I Bank, Case No. 1D10-2127 (Fla. App. 1st DCA July 22, 2011).

(1) The court's analysis with respect to the inadmissible evidence allowed in by Judge Griffis follows (bold text is my emphasis):
  • The only witness to testify at the bench trial regarding the allegations of the amended complaint was David Taxdal, the regional security officer for "M & I Marshall and Ilsley Bank" in the State of Florida.

    According to Taxdal's testimony, his "duties and responsibilities are fraud investigation, internal investigation and physical security for the branches" in Florida, and he does not originate loans, service loans or collect loans in default.

    Through Taxdal, the bank attempted to introduce several documents, including an affidavit as to amounts due and owing. The affidavit was executed by Michael Koontz, who did not appear at trial, and the bank sought to introduce it as a business record.

    Taxdal testified that he had no knowledge as to who prepared the documents submitted at trial by the bank as he is not involved in the preparation of documents such as the ones proffered by the bank, that he does not keep records as a records custodian, that he has no personal knowledge as to how the information in the affidavit as to the amounts due and owing was determined or whether it was prepared in the normal course of business, and that he did not know whether such information was accurate.

    Counsel for the defendants vigorously opposed admission of the affidavit of indebtedness, the only evidence of the amount allegedly in delinquency, as a business record. Counsel observed that the affiant (Koontz) was not subject to cross-examination, and that given the matters to which Taxdal testified it was evident that Taxdal "has no knowledge of the basis upon which this affidavit was prepared."

    The trial court denied defendants' objection and admitted the affidavit without explanation.

    This was error. Before a document may be admitted as a business record, a foundation for such admission must be laid. Section 90.803(6), Florida Statutes (2010), allows the admission of records of a regularly kept business activity when the business record was made at or near the time of the matters reported and when the business record is made by a person having personal knowledge of the matters reported or when the information supplied in the record is supplied by a person with knowledge.

    Further, it must be shown that the business record was kept in the ordinary course of a regularly conducted business activity and that it is the regular practice of the business keeping the record to make such a business record. Yisrael v. State,
    993 So.2d 952 (Fla. 2008).

    While it is not necessary to call the individual who prepared the document, the witness through whom a document is being offered must be able to show each of the requirements for establishing a proper foundation. Forester v. Norman Roger Jewell & Brooks,
    610 So.2d 1369, 1373 (Fla. 1st DCA 1992).

    Here, none of the requirements for admission of a business record were met. As noted, Taxdal candidly admitted that he had no knowledge as to the preparation or maintenance of the documents offered by the bank, including the affidavit as to amounts due and owing. Taxdal did not testify and, indeed, could not testify, that the affidavit as to the amounts owed was actually kept in the regular course of business.

    Further, he did not know if the source of the information contained in the affidavit was correct. He did not know if the amounts reported in the affidavit were accurate. There was no attempt to admit the affidavit by certification or declaration pursuant to section 90.803(6)(c), Florida Statutes.

    Accordingly, because no foundation was laid, the admission of the affidavit was erroneous. Because the affidavit was the only evidence as to the amount of defendants' default, the error was harmful necessitating that the amended final judgment of foreclosure be reversed.