Saturday, August 06, 2011

'60 Minutes' To Re-Air Robosigner Segment August 7

The Palm Beach Post reports:
  • The CBS news show 60 Minutes will re-air a segment Sunday featuring a Palm Beach County homeowner fighting an allegedly fraudulent foreclosure that exposed the now infamous robo-signer Linda Green.

  • The segment, which originally aired in April, led officials from Michigan, Massachusetts and North Carolina to pull court documents bearing Green's name and forward them to federal regulators and attorneys general.

  • Green was an employee of a defunct subsidiary of Jacksonville-based Lender Processing Services. The 60 Minutes episode interviews other employees of the company who admit to signing Green's name on thousands of foreclosure documents.

  • Palm Beach Gardens homeowner Lynn Szymoniak, whose foreclosure is highlighted in the show, said she approaches the re-airing with mixed feelings because she said lenders and politicians have largely ignored the evidence presented.


  • Of particular concern, Szymoniak said, was the May ouster of two former Florida assistant attorneys general who had been investigating foreclosure fraud and the involvement of Lender Processing Services, or LPS. The former investigators, Theresa Edwards and June Clarkson, were forced to resign May 20 despite positive performance reviews that lauded their foreclosure inquiries.


  • Szymoniak is still fighting her foreclosure. An update on her case and the issues with Edwards and Clarkson may be included in Sunday's 60 Minutes episode, which airs at 7 p.m. "Before the initial showing, I would have asked 'How can we get judges, prosecutors and legislators to watch this?'" Szymoniak said. "Now I am asking, 'How can we get judges, prosecutors and legislators to care about this?'"
For the story, see '60 Minutes' to re-air show featuring Palm Beach County foreclosure case.

NYC Targets Low-Income Co-Ops For Possible Seizure As Groups Stiff City Out Of Million$ In Real Estate Taxes

In The Bronx, New York, the New York Daily News reports:
  • Shareholders at a low-income co-op at 1175 Gerard Avenue are furious the city is considering turning it over to a real estate developer. They realized the American Dream two decades ago, becoming homeowners at co-op buildings in the Bronx through a city program. Now, the Bloomberg administration wants to seize their properties and transfer them to a real estate company.

  • Three Bronx co-ops created for low-income shareholders have declared bankruptcy in an attempt to keep the city at bay. They owe millions of dollars in unpaid property taxes and are among a slew of low-income co-ops across the city now threatened with tax foreclosure.

  • "It feels like a slap in the face," said Luis Reyes, co-op board president at the six-story 1175 Gerard Ave. "We worked hard for this. You can't just take it away."

For more, see Low-income co-op in the Bronx files for bankruptcy, threatened with tax foreclosure.

Sibling Duo Faces Hate Crimes Charges In Home Repair Scam Targeting Elderly NYC Homeowners; Accused Of Threatening Liens On Homes To Squeeze Victims

From the Office of the District Attorney for Queens County, New York:
  • Queens District Attorney Richard A. Brown [] announced that two Long Island brothers who are not licensed to operate a chimney contracting business in New York City have been charged under New York State’s Hate Crime Law with stealing more than $30,000 from three elderly Queens homeowners for chimney and roof work that was never done.

  • District Attorney Brown said, “This alleged crime is particularly egregious as the defendants are accused of targeting elderly homeowners. It is charged that once they managed to get their foot in the door, they used high pressure sales tactics to steal substantial amounts of additional monies from their victims by telling them that more and more work needed to be done and that if they didn’t pay, a lien would be placed on their properties and they would be forced to move. In two instances, it is alleged that the defendants drove their victims to the bank to collect the money.”

The District Attorney identified the two defendants as Bruce Wimmer, 29, of Holbrook, New York, and his brother Michael Cristiano, 32, of Patchogue, New York. The defendants, allegedly operated either under Reliable Chimney, Inc., a business incorporated by Wimmer and located in Holbrook or under a false name, American Chimney.

The complaining victims included a 94-year female homeowner, a 72-year-old male homeowner, and a 79-year-old female homeowner.

For the Queens County DA press release, see Two Long Island Brothers Charged Under Hate Crimes Statute For Targeting Elderly Homeowners In Chiminey Scam (Allegedly Fleeced Homeowners Out of Over $30,000 For Chimney Work That Was Never Done).

Landlord Pinched For Allegedly Renovating Apartment w/out Permission While Tenant Away On Vacation; Faces Unlawful Eviction, Criminal Mischief Charges

From a recent New York Post Daily NYPD Blotter:
  • A landlord illegally renovated a tenant's apartment in Richmond Hill while the man was on vacation for a week, authorities said. The tenant left his 91st Avenue pad near 104th Street on June 28, only to return on July 5 and find that his belongings had been scattered about the front and rear yards and that "new Sheetrock had been placed in his apartment and some walls had been changed," court papers state.

  • When confronted about the unauthorized alterations, landlord Ancil Goorahoo, 26, allegedly replied, "I have been doing construction." He was arrested later that day and charged with unlawful eviction(1) and criminal mischief, said a spokeswoman for DA Richard Brown.

Source: Daily NYPD Blotter (Queens).

(1) See NYPD Patrol Guide Procedure No. 117-11 setting forth the law and official Police policy regarding the New York City Illegal Eviction Law (and go here for what to do in New York City when victimized by an illegal lock-out.

NYC Cops Collar Phony Real Estate Agent Accused Of Clipping Unwitting Would-Be Tenants Out Of Thousand$ In Upfront Rent On Home He Didn't Own

From a recent New York Post Daily NYPD Blotter:
  • A con man posing as a Realtor duped five people into paying him rent for an apartment in Corona that he didn't own, authorities said.

  • On July 18 and 19, José Ramirez, 36, leased a single apartment on 102nd Street near Lewis Avenue to the five victims and collected between $1,200 and $2,400 from each as payment for the first month's rent and security deposits, court documents show. Cops tracked down Ramirez on July 23, said a spokeswoman for DA Richard Brown.

Source: Daily NYPD Blotter (Queens).

Baltimore Feds Score Guilty Plea From Local Landlord Over Improper Lead-Based Paint Abatement At Rentals Throughout City

From the Office of the U.S. Attorney (Baltimore, Maryland):
  • Cephus Murrell, age 68, of Catonsville, Maryland, pleaded guilty [] to three misdemeanor counts of violating the Toxic Substances Control Act, in connection with improper lead paint abatement at rental properties owned and managed by Murrell, as well as failure to disclose to tenants the presence of documented lead-based paint hazards. Murrell owns and manages approximately 175 rental housing units throughout Baltimore.


  • Cephus Murrell placed Baltimore children at risk of permanent injuries by violating federal law and ignoring repeated orders to comply with lead paint regulations,” said U.S. Attorney Rod J. Rosenstein. “It is unacceptable in 2011 for pregnant women and children to be exposed to lead paint in violation of the law.”


  • [Among a slew of other things,(1)] Murrell provided [the Maryland Department of the Environment] with a Project Notification Form for this project in which he falsely stated that a particular supervisor would be on site at the particular place and date, when in fact no supervisor was on site, also in violation of the lead-paint abatement regulations.

  • Murrell admits that there were several instances in which he falsely certified that workers would be conducting lead abatement work and that a particular supervisor would be on site to supervise the work, when in fact, no supervisor was on site.

For the U.S. Attorney press release, see Baltimore City Landlord Pleads Guilty To Lead Based Paint Violations In Rental Properties He Owns And Manages (Previously Cited by the State for Numerous Lead Paint Violations and Documented Children with Elevated Lead Blood Levels Living in His Properties).

(1) According to the press release, Murrell also admitted that he and his company failed to disclose to tenants the presence of documented lead-based paint hazards when they rented units he owned and managed. Many of these units had a history of lead-based paint problems that had been documented by MDE.

Despite these findings and prior enforcement actions by the State and municipal agencies, Murrell did not provide tenants with the required Lead-Based Paint Notification Disclosure Form and failed to:

  • give prospective tenants an EPA-approved information pamphlet on identifying and controlling lead-based paint hazards;
  • disclose to prospective tenants any known information concerning lead-based paint or lead-based paint hazards, the location of those hazards, and the condition of the relevant surfaces;
  • provide prospective tenants with any records and reports on lead-based paint and/or lead-based paint hazards; and
  • include an attachment to the lease (or to insert relevant language in the lease itself) which provides a Lead Warning Statement and confirms that the landlord has complied with all notification requirements.

Banksters Continue Disregard For Tenants' Rights In F'closed Homes; Illegal Constructive Evictions Believed To Be On Upswing As 'Boot' Filings Decline

In Chicago, Illinois, Community Media Workshop reports:
  • Banks routinely violate state and federal laws protecting tenants in rental buildings in foreclosure, particularly in a “foreclosure belt” stretching across the South and West Sides, according to a new report.

  • Lenders and their agents “willfully ignore” laws that protect tenants in foreclosures(1) and have “institutionalized in their practices the wholesale violation of tenants’ [legal] rights,” according to a report from the Lawyers Committee for Better Housing.

  • Banks “generally ignorefederal law requiring them to honor existing leases after foreclosure on a rental building, according to the report.

  • Banks seek to vacate properties they’ve acquired – through illegal lockouts and through “misleading, harassing and threatening communicationswith tenants – in order to evade legal responsibilities under the city’s tenant landlord ordinance, the report suggests.


  • Eviction filings have fallen steadily since 2007 – and one reason may be that “a substantial number of evictions are carried out extra-judicially,” according to the report. Tenants who refer to existing leases “are routinely ignored,” and when LCBH lawyers alert banks and their attorneys to illegal practices they too “are often ignored,” according to the report.


  • Illegal constructive evictions that lead to building vacancies and boardups have a clear solution: enforce the already existing laws that protect tenants living in foreclosed buildings,” according to the report. It calls for “adding teeth” to existing statutes.

For more, see Foreclosure and renters: banks break the law.

See Banks Avoid Foreclosure Laws, Uproot Renters: A Call for Enforcement of Tenant Protections for the Lawyers Committee for Better Housing report.

Thanks to Deontos for the heads-up.

Editor's Note: Illinois case law suggests that representing poor or otherwise 'cash-lacking' tenants in unlawful eviction cases in the City of Chacago might be somewhat more lucrative than many may think (and, consequently, may pose an unexpected minefield for unscrupulous landlords, banksters, and their henchmen who may find themselves footing the victimized tenant's legal bill in a successful defense of an illegal eviction). See Pitts v. Holt, 304 Ill. App.3d 871, 710 NE 2d 155 (Ill. App. 1st Dist., 6th Div. 1999),(2) a case which, coincidentally, was litigated by the Lawyers Committee for Better Housing.

(1) The Federal Protecting Tenants at Foreclosure Act of 2009 provides important protections for tenants in foreclosed properties, including the right to receive 90 days' notice before being required to leave the property and, in many cases, the right to remain for the length of the tenant's existing lease term.

For more on the rights of tenants in homes/apartments in foreclosure, see National Law Center on Homelessness & Poverty: Staying Home: The Rights of Renters Living in Foreclosed Properties.

(2) The Illinois appeals court made these observations regarding the imposition of a tenant's legal fees upon an unscrupulous landlord (and the calculation thereof) in a successful defense in an illegal eviction case (bold text is my emphasis):

  • In this case, defendant's attorneys itemized 69.40 hours of work performed to defend their client against an unlawful eviction, ultimately securing the maximum statutory damages provided by the Ordinance.

    At the hearing, the court indicated that it had no objection to the amount of work claimed done on behalf of the defendant, with the exception of the fact that she used two attorneys to represent her at the trial when one would have been sufficient. The second attorney's trial work accounted for $3,787.50 of the total $9,368.75 sought by plaintiff.

    The court specifically stated that the rates charged by the defendant's attorneys were low, and further stated that, given their experience, higher rates could have been charged if the defendant's attorneys had been in private practice.


  • Defendant suggests that the trial court discounted the defendant's fee award based upon the fact that her attorneys were employed by a not-for-profit legal services agency. Comments made by the court support this inference. If this is in fact the basis of the court's low award, we simply reject it, pointing out the lack of Illinois precedent supporting consideration of such a factor.

    Indeed, at least one Illinois decision has rejected the notion that legal services attorneys should be compensated at lower-than-market rates. See Merchandise National Bank v. Scanlon
    , 86 Ill.App.3d 719, 728-29, 41 Ill.Dec. 826, 408 N.E.2d 248 (1980).

    As the federal courts have recognized, discounting the legal fees awarded to legal aid attorneys would serve only to chill the impulse of attorneys to pursue and continue careers in legal service work since the receipt of such fees promotes the health and continued existence of their employing organizations. See Torres v. Sachs
    , 538 F.2d 10, 13 (2d Cir., 1976); Rodriguez v. Taylor, 569 F.2d 1231, 1245 (3d Cir., 1977).

    We agree with the observation made in Fairley v. Patterson
    , 493 F.2d 598 (5th Cir., 1974), where the court wrote:

    "`Whether or not [the client] agreed to pay a fee and in what amount is not decisive. * * * The criterion for the court is not what the parties agreed but what is reasonable.' [Citation] Whether the attorney charges a fee or has an agreement that the organization that employs him will receive any awarded attorneys' fees are not bases on which to deny or limit attorneys' fees or expenses." Fairley
    , 493 F.2d at 607, quoting Clark v. American Marine Corp., 320 F.Supp. 709, 711 (E.D.La., 1970), aff'd. 437 F.2d 959 (5th Cir., 1971).

    In addition, we note that assessing reasonable fees has the potential added benefit of deterring wrongdoing in the first place. Rodriguez
    , 569 F.2d at 1245.

Banks' 'Bulldozer' Efforts Used To Alleviate Choking On Unwanted F'closed Collateral, Avoid Accumulating Fines, Full Cost Of Abating Self-Created Mess

Bloomberg reports:
  • Bank of America Corp., faced with a glut of foreclosed and abandoned houses it can’t sell, has a new tool to get rid of the most decrepit ones: a bulldozer.

  • The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property.

  • The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co., Citigroup Inc., JPMorgan Chase & Co. and Fannie Mae are conducting or considering their own programs.(1)

For more, see BofA Donates Then Demolishes Houses to Cut Glut of Foreclosures.

(1) According to the story:

BofA will pay as much as $7,500 for demolition or $3,500 in areas eligible to receive funds through the federal Neighborhood Stabilization Program. Wells Fargo and Fannie Mae already started donating houses and demolition funds in Ohio. San Francisco-based Wells Fargo, the biggest U.S. home lender, gave 26 properties and $127,000 to the Cuyahoga land bank, said Russ Cross, Midwest regional servicing director for Wells Fargo Home Mortgage. Since 2009, Wells Fargo made more than 800 donations, the bank said.

Fannie Mae, the mortgage-finance company operating under U.S. conservatorship, made its first deal with the Cuyahoga land bank in 2009, and sells houses to the organization at a “very nominal value,” or about $1 and an additional $200 in closing costs, said P.J. McCarthy, who heads alternative disposition programs.

JPMorgan, the second-biggest U.S. bank, has donated or sold at a discount almost 1,900 properties valued at more than $100 million in more than 37 states since late 2008, including 22 in Cleveland, said Jim O’Donnell, manager of community revitalization. The majority aren’t demolished, he said.

Citigroup has been donating foreclosures since 2008 through the National Community Stabilization Trust, according to an e- mailed statement from Natalie Abatemarco, managing director for the bank’s office of homeownership preservation.

Abandoned Homes In Foreclosure Called 'Ticking Time Bombs;' Banksters File Actions, Then Sit On Unwanted Collateral As City Bureaucrats Fiddle

In The Bronx, New York, the New York Daily News reports:
  • The Garcia family lost three family members in an April blaze on Prospect Avenue. Reports say innumerable building code violations in forclosed Bronx buildings could lead to more such catastrophes.

  • Bronx foreclosures have racked up hundreds of building code violations of the type that led to a deadly fire on Prospect Ave., according to new report released on Monday. As of July, there were 899 open violations at 273 bank-owned buildings across the borough, including a property less than three blocks away from 2321 Prospect Ave., the site of the April blaze that killed a family of three.

  • Banks such as Wells Fargo and Deutsche Bank are ignoring a state law that requires lenders to maintain and secure the foreclosures, said state Sen. Jeff Klein (D-Bronx/Westchester), who issued the damning report. The law took effect in 2010.

  • The banks and the city Department of Buildings need to better to safeguard the buildings, said Klein, calling the foreclosures "ticking time bombs."

  • "The banks are very quick to foreclose on a family and deny them the American Dream, but then do nothing to fix the property," he said, standing in front of the charred shell of 2321 Prospect Ave. "I'm calling on the Buildings Department and the banks to maintain the property."

  • The three-family home in Belmont, owned by car dealer Domingo Cedano, had been illegally subdivided into 12 single-room units when it burst into flames. Prior to the blaze, Buildings recorded five complaints of illegal units with faulty wiring and blocked exits, and inspectors visited the site 10 times. But drug dealers operating there wouldn't let the inspectors inside.

  • Bank of New York Mellon failed to keep up the property, despite obtaining a foreclosure judgment in 2009, Klein said. Juan Lopez, 36; Christina Garcia, 43; and their son Christian, 12, were trapped as the building burned. "It was so tragic what happened," said neighbor Elba Marrera, 49. "But the bank didn't care. The landlord didn't care."

  • Klein's report lists the worst foreclosures in the Bronx, including 1055 Martin Luther King Jr. Blvd. in Highbridge, with 84 open violations. A two-family home near Prospect Ave., 2209 Beaumont Ave., boasts 13 complaints for illegal subdivisions.

  • "We have a tough law on the books that allows the Buildings Department to make repairs and send the lender the bill," said Klein. "We can prevent fires, we can prevent dangerous situations and we can save lives."

  • In June, Buildings teamed up with the Department of Investigation to file criminal charges against landlords who ignore dangerous violations. Hundreds of owners have been charged. Mayoral spokeswoman Julie Wood said the Bloomberg administration attempts to hold banks accountable, but insisted that Buildings inspectors have no right to force entry.

  • Meanwhile, the drug dealers who operated out of 2321 Prospect Ave. have moved to an empty building next door, said neighbor Chancy Marsh, 39. "If you live on Prospect Ave. you live in fear of low-level criminals," he said.

For the story, see Bank-owned Bronx buildings 'Ticking time bombs'; Wells Fargo and Deutsche ignore building codes.

Rat Incident Rate Skyrockets While Quality Of Life Declines In Baltimore As Boarded Up Foreclosed Homes Accumulate, Remain Neglected

In Baltimore, Maryland, The Huffington Post reports:
  • Richard Faison didn't mind that a neighbor's home was seized and boarded up until the rats from the vacant house killed one of his dogs. "That's when it hit me," said Faison, a Baltimore retiree. "That home is hurting mine."

  • Baltimore's continuing foreclosure epidemic is a particularly poignant example of the continuing national foreclosure crisis. The city has affixed some of the blame on one major lender, Wells Fargo. In a case that has captured headlines, the city sued Wells in 2008, arguing that it targeted African-American communities with subprime loans the bank knew would not be repaid.


  • But while that action plays out in the courtroom, a daily battle plays out on city streets, as homeowners try to maintain their properties in the face of abandonment and rot in seemingly every direction.


  • The rise in rats is an example of the declining quality of life in some sections of the city as foreclosures and vacant properties have begun to take their toll. Since 2003, rat incidents in his majority-black city of nearly 621,000 are up more than 300 percent, according to the Baltimore Neighborhood Indicators Alliance-Jacob France Institute at the University of Baltimore. There were more than 37,000 reports of rats in 2009, data show.

For more, see Rats Spread As Baltimore Fights Foreclosures.

Rental Complex Owner/Developer, Architect Settle 'Inaccessibility' Allegations With NYC Feds In Civil Rights/Fair Housing Lawsuit

From the Office of the U.S. Attorney (New York City):
  • PREET BHARARA, the United States Attorney for the Southern District of New York, announced [] that the United States has settled a federal civil rights lawsuit alleging that The Melar, a 22-story, 143-unit residential apartment complex in Manhattan, is inaccessible to persons with disabilities and in violation of the federal Fair Housing Act.

  • The United States has entered into settlement agreements with L&M 93RD STREET LLC, the developer and owner of The Melar, and COSTAS KONDYLIS & PARTNERS, LLP, the architectural firm that designed the building, in the form of two consent decrees.


  • The federal Fair Housing Act prohibits discrimination in housing on the basis of race, color, religion, sex, familial status, national origin, and disability. Since 1991, the Fair Housing Act has required that new multi-family housing complexes with four or more units be built with certain accessible features.

For the entire U.S. Attorney press release, see Manhattan U.S. Attorney Settles Civil Rights Lawsuit Against Developer And Architect Of Manhattan Rental Complex.

Friday, August 05, 2011

Massachusetts Homeowners, Tenants Score Big Win As State High Court OKs Foreclosure Challenge In Post-Sale, Housing Court Eviction Process

In Boston, Massachusetts, The Boston Globe reports:
  • The state’s highest court has ruled that people fighting eviction from homes they lost to foreclosure can challenge the validity of a property seizure in housing court after the fact, a decision that housing rights advocates are calling a major victory.

  • The Massachusetts Supreme Judicial Court’s unanimous ruling, released yesterday, involved KC Bailey of Mattapan, whose home was taken back by his lender through foreclosure in 2007. Two years later, Bailey, 65, contested his impending eviction during a housing court proceeding, saying the foreclosure process was flawed.

  • Bailey claimed he learned of the foreclosure only after finding an eviction notice taped to a fence surrounding his three-bedroom Colonial, which had been in his family since 1979. The Vietnam veteran said he refused to leave because he was not given proper notice of the sale and is still living there.

  • Bank of New York, which set out to evict Bailey, argued that the housing court didn’t have the authority to consider a challenge to a foreclosure already finalized, and the judge agreed. Bailey appealed and the Supreme Judicial Court decided to take the case. It now goes back to housing court.

  • The decision was hailed by local housing rights advocates, who said it will force lenders to prove they legally own a property before evicting occupants, and will lead to more negotiations with financially-distressed borrowers seeking to save their homes.
  • Because Massachusetts doesn’t require courts to sign off on foreclosures, the eviction process can be the first opportunity for a former homeowner to contest a property seizure in court.

  • The ruling also will provide a new legal tool to tenants fighting evictions from foreclosed homes, housing attorneys said.

  • This decision ensures that if a bank is going to walk into court and try to evict a homeowner, it has to prove there has been a valid foreclosure,’’ said Esme Caramello, deputy director of the Harvard Legal Aid Bureau, a branch of Harvard Law School that provides free representation to low-income clients and represented Bailey.

  • Pamela S. Kogut, an attorney who filed a brief in support of Bailey’s appeal for a group of nonprofits, said yesterday’s ruling will give former homeowners a place to contest the validity of a foreclosure during the eviction process, without having to file an additional lawsuit in state Superior Court. “The burden shifts to the bank to establish that it does have title,’’ she said.
For the story, see SJC expands right to challenge bank seizures (Mattapan man’s objection that he wasn’t told of sale goes back to housing court).

For the ruling, see Bank of New York v. Baliey, SJC-10801 (Mass. August 4, 2011).

Go here for the case docket and links to the various legal briefs filed in this case.

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

Bankster Makes Land Grab When Payment One Day Late; Judge: "There's No Business Sense Any More In The F'closure Industry [...] Totally Blows My Mind!"

In St. Petersburg, Florida, the St. Petersburg Times reports:
  • Saji Mathew missed the Oct. 12 mortgage payment on the Mobil gas station he co-owns. On Oct. 13, he took the money to the bank, thinking that would make things right. He tried to make his November and December payments as well. But each time, BB&T kicked back his money. Ten months later, Mathew is still trying to pay.

  • In circuit court on Tuesday, he offered BB&T $50,000, the total amount due since October. BB&T didn't want the money. It wants the gas station. "They won't take my money,'' said Mathew. "I want them to take it. I was one day behind paying the mortgage."

  • BB&T's stance flabbergasted the judge in the case. "All the people that understand anything about mortgage foreclosures need to know this stuff," Circuit Judge Amy Williams said in court. "This is the idiocrasy of this stuff. This is why we're in a worldwide financial crisis because there's no business sense any more in the foreclosure industry, none. And it blows my mind. Totally blows my mind.''

For more, see One day late with mortgage payment, gas station owner could lose business to foreclosure.

Suit: BofA Harassed Widow w/ Repeated Calls To Speaker Phone During Hubby's Wake To Collect Debt, Failing To Give Her 30 Days To Sort Out Affairs

In Honolulu, Hawaii, Courthouse News Service reports:
  • A widow says Bank of America cruelly harassed her during her husband's wake, making repeated dunning calls to a speaker phone set up for condolences, though the bank knew her husband had just died, and that it would get its money as soon as she received her life insurance check.

  • Deborah Crabtree sued Bank of America Home Loans Servicing, Bank of America, and Countrywide Home Loans on 16 counts, including unconscionability, bad faith, outrage, misrepresentation, unjust enrichment and violations of state laws.

  • She says the bank called her "incessantly every day" after her husband died. During the wake at their home, she says, she and her children had set up a speaker phone to receive condolence calls. She says the bank called "every 15 minutes during the wake," broadcasting "throughout the house, stating, 'This is Bank of America, and we are calling to collect with regards to a debt.'"

  • Crabtree says that other companies granted her requests for 30 days to get her husband's business affairs in order, and her life insurance money - but not Bank of America.

  • She says the bank's collectors called throughout the wake, "every 15 minutes, forcing plaintiff, her son, Daniel, or her daughter, Tracy, to rush to the phone to hang it up before the message was broadcast throughout the house again."

For more, see Widow Says BofA Dunned Her at Wake.

For the lawsuit, see Crabtree v. Bank of America Home Loans Servicing, L.P., et al.

Attorney Suspected Of 'Renting Out' Law License To Outfit With Ties To Man Implicated In Fla AG Loan Mod Lawsuit Slammed With Emergency Bar Suspension

The Palm Beach Post reports:
  • The Florida Supreme Court has ordered the emergency suspension of a Boca Raton attorney after the Florida Bar said his home loan modification and foreclosure defense business was causing "great public harm." William O'Toole, whose firm Summit Legal Group worked with as many as 3,000 clients nationwide, is prohibited from accepting new clients and withdrawing money from company accounts per the July 25 order.(1)


  • A Florida Bar petition asking for O'Toole's suspension says he is the subject of 20 bar disciplinary matters filed by disgruntled customers. According to the petition, O'Toole's troubles stem from business he conducted in conjunction with non-attorneys in his company where up-front fees of between $1,500 and $3,000 were charged to clients.

  • It is against Florida law for loan modification firms to accept up-front fees from clients, but there is a provision that allows for up-front fees to be paid to attorneys representing clients seeking loan modifications. The Florida Bar has warned attorneys to be wary of groups trying to skirt the fee law by joining forces with a lawyer.(2)

  • In a deposition, O'Toole admitted that he allows almost exclusive control of the office to the non-lawyers who control all the contact with the clients from the initial call to advising the client of the outcome of their case.


  • "I did think it was weird dealing with a Florida company," [one unwitting homeowner] said, "but they told me they had lawyers all over the country." O'Toole was the only lawyer in the firm, according to his deposition.

  • Also implicated in O'Toole's deposition is Randy Baker, who is listed in state records as secretary for the former Boca Raton company of Baker, Kennedy and Associates. The company is facing a state attorney general's lawsuit that accuses it of posing as a law firm and taking up-front fees for loan modifications.

  • Baker went on to a management position at Summit Legal Group. A woman answering the phone at a number listed for Summit referred calls to a Fort Lauderdale attorney who did not return a message.

For the story, see Boca Raton attorney's office was causing 'great public harm,' Florida Bar says.

(1) See The Florida Bar v. O'Toole for the Florida Supreme Court order.

(2) See The Florida Bar News: ETHICS ALERT : Lawyers should be very wary of loan modifiers.

Michigan Homeowners Warned Against Florida Outfits Peddling Possible Foreclosure Scams Involving Loan Modification Pitches, Mass Joinder Lawsuits

In Ingham County, Michigan, The Michigan Messenger reports:
  • Ingham County Register of Deeds Curtis Hertel, Jr. is alleging that two Florida companies may be engaged in scams involving Michigan residents facing foreclosure. Hertel, in an interview with Michigan Messenger, says he received complaints from residents about the two different companies over the last month. As a result he called both, and confirmed what residents were telling him they were experiencing.

  • The first company, Hope for Hamp, says on its website it is selling people software that will assist them in getting their mortgage refinanced. But Hertel says when he called the company, he had a very different experience.


  • The first company, Home for Hamp, started out talking about software but quickly changed the subject to modifications. [They said] that they worked with hundreds of banks across the country to get people modifications. Every time I asked about the software they said it was not important and that they were trying to save my home,” Hertel said.


  • The site is also coming under fire by the campaign team for President Barack Obama for using the campaign logo as well as an image of the White House, implying the programs are supported by the President. “The use is not authorized, and they will be asked to cease use immediately,” said a campaign spokesperson.

  • In the second example Hertel is warning residents about, the company is soliciting participants for litigation against the banks and foreclosure mills. The catch? They are asking for thousands of dollars up front for the homeowner to participate in a class action lawsuit. This company in question is the Mortgage Relief Center.

  • The second company offered to get me legal representation for case. They again wanted to know my story. I gave them a few pieces of information and they quickly believed I would be perfect for the mass joinder suit that was being filed,” Hertel says.

  • When I asked how much it would cost they said I would receive a call from a supervisor. When I asked how much on average he told me roughly $5000. I asked if I could talk to the attorney that would be handling my case and i was told not until I paid the $5,000. I asked if any of the attorneys referenced in their materials would be the one handling my case. They told me it would likely be an associate.”

For more, see Hertel warns of possible foreclosure scams (Two companies accused of bilking victims).

Allegations Of Real Estate Agent's Short Sale Fraud, Closing Attorney's Mortgage Refinance Ripoffs Among Charges That Mark Recent Miami Indictments

In Miami, Florida, The Miami Herald reports:
  • Four separate indictments were unsealed Tuesday by the U.S. Attorney’s Office in Miami accusing 27 people in various mortgage fraud schemes against banks and South Florida homeowners. The charges range from mail fraud to insurance fraud to arson, and highlight the problems that South Florida faces as the nation’s top market for mortgage loan fraud, U.S. Attorney Wilfredo Ferrer said.


  • [According to one indictment,] In 2009, [Miami real estate agent Gerardo] Wilhelm engaged in a fraudulent short sale of the property, selling it to a friend for $77,000, despite the fact that he owed $300,000 on the mortgage. A year after the sale, the buyer transferred the property to a company controlled by Wilhelm. That company, whose vice president is Wilhelm’s mother, sold the townhome in March for $240,000.


  • A [separate] case charges Miami attorney David Donet Sr. with misappropriating more than $1 million in client funds during the closing process of real estate transactions. Instead of using the proceeds of a client’s refinance to pay off the existing mortgage, Donet allegedly kept the money for personal use, leaving homeowners susceptible to foreclosure.

For the story, see U.S. attorney accuses 27 in South Florida of mortgage fraud (U.S. Attorney Wilfredo Ferrer announced charges in four separate cases against South Floridians accused of participating in various mortgage fraud schemes).

For the U.S. Attorney press release, see Mortgage Fraud Take-Down Leads To Charges Against Twenty-Seven South Florida Residents.

Thursday, August 04, 2011

Mortgage Broker Gets 60 Months In Straw Buyer Mortgage Scam That Included Targeting Homeowners In Foreclosure With Bogus Sale Leaseback Ripoffs

From the Office of the U.S. Attorney (New York City):
  • PREET BHARARA, the United States Attorney for the Southern District of New York, announced that MICAH MEYERS was sentenced [] in Manhattan federal court to 60 months in prison for his role in a sub-prime mortgage fraud scheme involving dozens of residential mortgages that totaled more than $10 million.


  • As part of the scheme, MEYERS identified properties for sale primarily in New York City and Long Island (the "target properties"). In some instances, he identified target properties whose homeowners were facing foreclosure, and fraudulently convinced them that selling their properties would be a way to pay off their debts and save their homes. In other instances, MEYERS identified target properties that he believed could be resold quickly, or "flipped," so that he would bear minimal risk of loss should the properties' values decline.


  • Once the purchase of the target properties had been funded, MEYERS often failed to make mortgage payments as he had promised, causing some of the straw buyers to default on their mortgages. As a result, mortgage lenders were forced either to foreclose on those properties or to re-purchase the properties from the straw buyers for less than the face amount of the loan.

  • This often left the original homeowner -- who had been promised that selling his or her home would be a way to save it -- facing eviction. With respect to other target properties, MEYERS rented them to tenants and used the rent and other monies earned from the scheme to make mortgage payments on behalf of the straw buyers for a certain period of time before allowing the mortgages to go into default.

For the U.S. Attorney press release, see Manager Of Mortgage Brokerage Firm, Bridgewater Funding, LLC, Sentenced In Manhattan Federal Court To 60 Months In Prison For His Participation In A Multi-Million Dollar Mortgage Fraud Scheme.

Questionable Activities At Fla. AG's Office Surrounding F'closure Fraud Probe Attracts Continued Media Heat, Leads Office To Request Independent Probe

The Palm Beach Post reports:
  • Florida Attorney General Pam Bondi asked [] for an independent examination of her office's ouster of two former foreclosure fraud investigators as queries escalate over the reason for the duo's abrupt dismissal.(1)

  • Bondi said she has questions herself as to why there was no documentation to support the May ultimatum given former assistant attorneys general June Clarkson and Theresa Edwards to resign or be fired.

For more, see Florida Attorney General seeks an independent review of investigators' dismissal.

(1) See Orlando Sentinel: Taxpayers fund, get smacked by Bondi's 'revolving door':
  • Earlier this year, the Florida Attorney General's Office was in the midst of a pull-no-punches investigation into foreclosure fraud. Investigators were exposing rampant abuses. They'd netted a $2 million settlement from one company. And they were gunning for more.

  • But then in May, two things happened:

    First, the "special counsel" to Attorney General Pam Bondi left to take a high-level job with one of the very companies the office was investigating.

    One week later, the investigators were forced out of their jobs, told late on a Friday afternoon that they had 90 minutes to decide whether to resign or be fired.

  • No longer could Assistant AGs Theresa Edwards and June Clarkson investigate Lending Processing Services — the company at which Bondi's former special counsel, Joe Jacquot, was now a senior vice president. Bondi says the two things were unrelated.

  • One thing about Jacquot's departure is sure: It wasn't unusual. It is, in fact, way too common for high-ranking officials in Florida to suddenly leave their public jobs to work for the very companies their offices regulate.


  • Bondi claims her office's recent ousters weren't affected by cozy relationships with anyone — that Edwards and Clarkson were ousted purely for "poor performance." But she is suspiciously low on proof.

  • Despite several requests, Bondi's office has been unable to provide a single document that specifically names and accuses either employee of substandard performance before they were ousted. Though Bondi's chief deputy says he repeatedly spoke with the two about his concerns, he apparently never documented them. To the contrary, the paper trail on Clarkson and Edwards paints a picture of top-notch investigators.

See also:

The Bradenton Times: AG Firings Need to be Investigated:

  • It is unfortunate to be able to so easily imagine a scenario where LPS's financial contributions and political connections will allow them to escape scrutiny, but to assert otherwise would be laughable. [...] What makes the possibility of the foreclosure investigators falling victim to political payback so much more egregious is its ripple effect.

The Bradenton Times: AG Firings Draw Broader Criticism, Calls Ring Out for Federal Inquiry,

The Palm Beach Post: Bondi picks the wrong side.

Use Of 'Chapter 20' Bankruptcy In 2nd Mortgage Lien-Stripping Case To Circumvent Unsecured Debt Limitation Under Chapter 13 To Unload $390K Loan?

The following facts have been roughly adapted from a recent ruling of a U.S. Bankruptcy Court:
  • The homeowners in this case owned a primary residence that was valued at $967,500, and subject to a first mortgage of $1,264,327.41, and which left the homeowners completely underwater.

  • On top of that, they owed additional money on a second mortgage in the amount of $392,927.

  • Under the applicable rules of a Chapter 13 bankruptcy, a lien for a claim that is entirely unsecured, based upon the value of their primary residence and the amount of the first priority lien against the residence, can generally be avoided as an encumbrance against the home, leaving the debt itself subject to discharge just as any other unsecured debt.

  • However, bankruptcy law limits the use of a chapter 13 filing to those debtors with unsecured debts of less than $360,475.

  • Because the amount of the homeowners' 2nd mortgage ($392,927) exceeded the maximum Chapter 13 limit (less than $360,475), the homeowners were precluded from filing under Chapter 13, right?

Apparently, in the view of U.S. Bankruptcy Judge Edward D. Jellen, not really. What the homeowner appears to have done is the following:

  • Debtors first filed a chapter 7 petition, and received a discharge on March 16, 2010.

  • The discharged eliminated all personal liability the homeowners had in connection with the promissory note secured by the 2nd mortgage, but left the lien of the mortgage itself in tact.

  • Less than 11 months later, on February 7, 2011, Debtors filed a chapter 13 petition (a situation where a debtor files a Chapter 7 bankruptcy petition in which a discharge is obtained, followed by a Chapter 13 petition shortly thereafter, is sometimes informally referred to as a 'Chapter 20' bankruptcy - '7+13=20').

  • The homeowners then asked the court to remove the lien of the mortgage because, based on the value of the home ($967,500) and the amount on the 1st mortgage ($1,264,327.41), the 2nd mortgage was completely unsecured and, therefore, was subject to the Ch.13 lien-stripping provisions of Chapter 13.

  • The 2nd mortgage holder objected, citing the $360,475 unsecured debt limitation under Chapter 13.

  • In making their argument, the homeowners asserted that, because they are no longer personally liable for $392,927 debt secured by the 2nd mortgage, that debt should not be included in the calculation for applying the unsecured debt limitation.

Based on his analysis of the applicable statute and case law, Judge Jellen agreed with the homeowners, and accordingly, overruled the objection of the 2nd mortgage holder.(1)

For the ruling, see In Re Shenas, Case No. 11-41332 EDJ (Bankr. N.D. Cal. July 28, 2011).

(1) Judge Jellen's analysis follows (bold text is my emphasis):

  • On February 7, 2011, Debtors filed the current chapter 13 petition. The chapter 13 plan proposed by the Debtors provides for the avoidance of Green Tree's lien because it is wholly unsecured. Chapter 13 Plan, doc. no. 15; In re Zimmer 313 F. 3d 1220, 1226-27 (9th Cir. 2002).

    Scovis v. Henrichsen, the Ninth Circuit held that eligibility for chapter 13 should be determined by the debtor's originally filed schedules, and that the undersecured portion of a secured debt is to be counted as unsecured debt for purposes of the § 109(e) calculation.[2] Scovis v. Henrichsen, 249 F.3d 975, 982-84 (9th Cir. 2001).

    Debtors herein scheduled Green Tree's claim as entirely unsecured, based upon the value of their primary residence and the amount of the first priority lien against the residence.
    [3] See Schedules A and D, doc. no. 16. As Green Tree applies the Scovis holding, its $392,927 claim should be characterized as unsecured, rendering Debtors ineligible for relief under chapter 13.

    The court disagrees. The debtors received a chapter 7 discharge before they filed the current chapter 13 case. That discharge operated to render their debt to Green Tree unenforceable as a personal liability of the Debtors. Section 524(a).

    Being unenforceable as a personal liability, the debt is not allowable as an unsecured claim in this case. Sections 502(b) and 506(a). It follows that the Debtors do not owe any unsecured debt to Green Tree for purposes of the unsecured debt limitation of § 109(e).
    Cavaliere v. Sapir, 208 B.R. 784, 787 (D. Conn. 1997) (holding that a secured claim discharged in a prior chapter 7 case, and unenforceable under § 502(b)(1) in the current chapter 13 case, should not be included in the § 109(e) eligibility calculation); In re Osborne, 323 B.R. 489 (Bankr. D. Or. 2005)(holding similarly in the context of a chapter 12 petition).

    Quintana v. IRS, 915 F.2d 513 (9th Cir. 1990), is not to the contrary. In that case, the Ninth Circuit held that the entire amount of a creditor's claim must be included in the eligibility determination, despite the creditor's waiver of a deficiency judgment in an upcoming foreclosure action, and the potential for offset by damages alleged by the debtor. Id. at 517. However, Quintana is readily distinguished from the present case because the chapter 7 discharge that rendered the Green Tree claim unenforceable as a personal liability against the Debtors was entirely consummated prior to the filing of the petition herein. See In re Osborne, 323 B.R. at 492.

    At the July 21, 2011 hearing, counsel for Green Tree argued that because the Debtors have not yet filed their motion to avoid its lien through their chapter 13 plan, Green Tree held an extant lien on the petition date, and its lien must be included in the § 109(e) calculation under Scovis.

    The court is not persuaded. Bankruptcy Code § 502(b)(1) provides that a claim shall not be allowed if it is unenforceable "under any agreement or applicable law". The legal bases for avoiding a wholly unsecured lien against real property are well-established. Green Tree does not have an enforceable claim in this case, and did not have one at the petition date. See, e.g.,
    Scovis, 249 F.3d at 983 ("a claim secured only by a lien which is avoidable by a declared exemption is unsecured for § 109(e) eligibility purposes.").

    The court holds that the $392,927 claim asserted by Green Tree is not properly included in the unsecured debt calculation for purposes of § 109(e) eligibility because it is not enforceable against the debtors. See
    Cavaliere v. Sapir, 208 B.R. at 787.

    The objection to eligibility raised by Green Tree is therefore OVERRULED. The court will issue its order accordingly.

Wednesday, August 03, 2011

Insurance Underwriter Lawsuit: Million$ Mi$$ing From Title Agent's Escrow Accounts; Existing Liens Left Unpaid, Homeowners Now Stuck With 2 Mortgages

In Mineola, New York, Courthouse News Service reports:
  • TitleServ, one of the largest title agencies in the country, swiped $7.9 million from customers' escrow funds, the underwriter WFG National Title Insurance Co. claims in Nassau County Court.(1)

  • New Jersey Title Insurance Co.(2) has filed a similar complaint against TitleServ, which "was authorized to write title insurance policies in at least 26 states, including New York, on behalf of plaintiff," according to the complaint.

  • WFG says that "TitleServ was one of the nation's largest title insurance agencies and was authorized to write title insurance policies on behalf of other title insurance underwriters in 47 states." It also "engaged in escrow and settlement services on its own behalf."


  • WFG says TitleServ was "evasive" when it tried to schedule an audit of the company in early March. By the end of the month, TitleServ had refused to set a date, and WFG says it "became uncomfortable" and terminated their contract. WFG says that on April 3, Citibank and Chase told their mortgage managers to stop using TitleServ, which closed up shop five days later.


  • TitleServ refused to grant the auditors access, then "relented" four days later, after negotiations with its president James Conway III's attorney, WFG says. TitleServ's President Conway and Chief Financial Officer Rocco Abbondandolo are co-defendants, along with 20 John Does. WFG claims that TitleServ never gave its auditors "complete access to TitleServ's books and records" to which WFG was entitled, but the partial review gave indications of "suspicious activity."


  • In an April 15 phone call with WFG representatives, "defendant Conway acknowledged that approximately $6 million was missing from the TitleServ trust accounts. Conway was unable or unwilling to declare who or what was responsible for the missing trust funds," the complaint states. "Additional documents and information reveal that approximately $7.9 million is actually missing from TitleServ trust accounts related to WFG insured closings."

  • The FBI raided TitleServ's offices in Woodbury, N.Y., on April 27, and carried away boxes of documents.

For the story, see Underwriter Says Title Insurer Swiped Millions.

See also, Newsday: Suits allege $18M missing from Titleserv escrow:

  • Three lawsuits filed against Woodbury-based title insurance agent Titleserv since its abrupt closing April 8 allege that more than $18 million slated for paying off mortgages, taxes and other costs is missing.

For the lawsuit, see WFG National Title Insurance Company v. Titleserv, Inc., et al.

(1) For more on Titleserv, see:

(2) New Jersey Title Insurance Company has recently issued a statement that, at present, it is not writing new title insurance policies. It apparently has taken a big hit as a result of certain defalcations that have recently belted the company, and is reportedly focusing on the resolution of said defalcations and claims received on issued policies. See Financial Stability Rating® of New Jersey Title Insurance Company Withdrawn.

Chase To Forgive $100K In Short Sale, Stick $35K In Homeowner's Pocket; Finally Coming To Its Senses, Or Acknowledging It Can't Prove It Owns Loan?

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • The bank spent the last two years denying Deborah Johnson's efforts to save her Sarasota home from foreclosure, and then out of nowhere, last month, sent her an unbelievable offer.

  • If Johnson can find someone to buy the property for half of what is owed on the mortgage, JP Morgan Chase bank will not only forgive the remaining $100,000 or so of debt, but also send her away with $35,000 in her pocket.

  • The proposal was far better than a foreclosure, which would punish her credit score more severely, strand her without money for a new place to live, and expose her to collection efforts for the unpaid balance for the rest of her life.

  • "I thought it was a gimmick," Johnson said of the offer. So she called the phone number given, and yes, the offer is real and it surprises even veteran real estate experts.


  • At least eight other homeowners in Sarasota and Manatee counties have received cash offers up to $35,000 from Chase in the last two months to encourage so-called "short sales," say attorneys who work with troubled homeowners.


  • But real estate attorneys who work with troubled homeowners suspect banks have a less benign reason for the offers: covering up for bad or missing paperwork that would make foreclosure in court difficult. [...] "My only guess there is these guys don't have the note," [Real estate attorney Anne] Weintraub said.

For more, see Bank makes foreclosure offer she can't refuse.

NYC Comptroller: Banking Regulator Gave Financial Firms Free Pass For Roles In F'closure Crisis, Blowing Chance To Squeeze Them Over Improper Conduct

From the Office of New York City Comptroller John C. Liu:

  • City Comptroller John C. Liu stated the following in response to questions about today’s New York City Banking Commission vote to designate 35 financial institutions as depository banks:

    “Today the New York City Banking Commission rubber-stamped a motion to assign these banks the privilege to serve as depositories without first considering what, if any, role they are playing in the current foreclosure crisis.

    This obscure but powerful commission had the opportunity to engage financial institutions in a dialogue on how keep New Yorkers in their homes and they blew it by giving these banks a free pass.

    “Most New Yorkers have never heard of the Banking Commission, which is controlled by City Hall and has been given broad authority to regulate financial institutions holding City deposits.

    As a result of today’s development, my office will be working with the City Council to enact legislation aimed at holding banks designated as depositories accountable to New York City homeowners and taxpayers. In addition, my staff will be analyzing ways to restructure the Commission in order to better serve New Yorkers.”

For the rest of the NYC Comptroller press release, see Liu: NYC Banking Commission Misses Opportunity To Help New Yorkers Facing Foreclosure (Rubber-Stamps Approvals for Depositories, Liu to Explore Legislation and Other Means to Spur Change at Mayoral-Controlled Commission).

Tuesday, August 02, 2011

Report Profiles Suspected 'Paper Terrorist' Accused Of Claiming 'Sovereign Citizen' Status To Snatch Homes As Cops Fiddle; FBI Says 'Please Stop'

In Central Florida, the Sarasota Herald Tribune reports:
  • On paper, Jacob-Franz Dyck is one of the largest property owners in Florida. More than 600 deeds have been filed in the name of trusts he controls in 17 counties, including eight in Sarasota and Manatee.

  • But Dyck never paid a penny for those properties. A self-proclaimed "sovereign citizen" who believes that U.S. laws don't apply to him, the 72-year-old Dyck filed some deeds with the purported goal of helping people facing foreclosure remain in their homes. Others were to help evicted owners reclaim their property.


  • But Dyck -- a man stripped of his dental license in 1988 and imprisoned for six years for grand theft a decade later -- has alarmed law enforcement officials. They say he and members of his anti-government group are committing "paper terrorism" by clogging courts with an avalanche of almost unintelligible lawsuits and "wild deeds" that purport to protect property by placing it into "pure trusts" defended by "land patents."

  • There is nothing illegal about the suits and deeds, lawyers and real estate experts say, but at least two title agencies have already sent out statewide warnings about Dyck's activities.

  • Dyck himself acknowledges that he has been visited by an FBI agent, who warned him to stop attempting to mass-produce his activities.

For more, see Anti-government activist takes on foreclosures.

In a related story, see Economy boosts sovereign-citizen movement:

  • Paper terrorism. That is what the FBI believes sovereign citizens like Jacob-Franz Dyck are committing when they file lengthy lawsuits loaded with non sequiturs and so-called wild deeds backed by supposedly all-powerful land patents on behalf of people facing foreclosure.

F'closure Surplus Snatcher Grabs $800K+ In Unclaimed Excess Funds From Forced Sales Out From Under Tenn. Chancery Court; Loot Belongs To Ex-Homeowners

In Memphis, Tennessee, The Commercial Appeal reports:
  • Rickey Beard's hard luck started eight years ago when his wife died of cancer. Then, in 2008, he lost his three-bedroom home in a tax foreclosure. Now undergoing kidney dialysis, the 61-year-old grandfather and Air Force veteran thought he'd finally caught a break when he learned Shelby County Chancery Court owes him $39,900 -- money he needs for medical bills and to pay an IRS debt.

  • When the court auctioned his home in 2008 to pay delinquent property taxes, the sale generated a large surplus of funds that Beard is legally entitled to recover. But when he petitioned the court this month to collect, he was denied any funds -- his money is missing, the court said, along with another $800,000 stolen in an embezzlement scheme.


  • In one of the more ignominious episodes of local public corruption in years, the misappropriation of as much as $850,000 in Chancery Court tax sale funds -- under investigation by the FBI for three months -- is posing tough questions for court officials as well as hardships for families whose money has disappeared.


  • So far, no one has been charged, but the investigation is focused on former court bookkeeper Brandon Gunn, 46, who quit in April as the FBI probe was launched. He's not responded to requests for comment.


  • The court keeps a ledger, however, that attempts to track receipts and debits connected to individual properties sold at tax auctions. That ledger shows surplus funds generated from the sale of [one victim's] home were paid to First Family LLC, a company with no known business office or corporate charter. The payment appears among 32 suspicious checks written to First Family and Sunset Thirty-three LLC, a company Gunn set up.

For more, see Thefts in Shelby County Chancery Court add to Memphis veteran's bad luck (Authorities can't find profit from sale of foreclosed home).

See also, Editorial: Homeowners suffer twice (Chancery Court officials should move swiftly to clear up the legal issues that are tying up money owed to some citizens).

Lenders Beginning To Steer Foreclosure Actions Away From Clogged State Courts & Into Faster-Moving Federal Courts?

Are attorneys for lenders beinning to navigate their foreclosure cases away from slow-moving state courts that are flooded with these lawsuits, and deciding to flood the federal courts instead (ie. enjoy unclogged dockets, dodge foreclosure mediation requirements imposed by state judiciary, make it tougher for homeowners to find a foreclosure defense attorney admitted to practice in, and familiar with, the local federal court)?

Maybe so, at least according to the following footnote buried in a recent U.S. Circuit Court of Appeals ruling involving another screw-up by a foreclosing 1st mortgage lender, and dealing with the application of the state law of Pennsylvania:(1)

For the footnote, see National City Mortgage Company v. Stephen, No. 09-1731 (3d Cir. July 22, 2011) (footnote 2).

(1) The issue in the case itself involved the following mess created by the foreclosing 1st mortgagee and its foreclosure mill law firm:

  • A foreclosing 1st mortgage lender failed to serve notice on a junior lienholder of the foreclosure sale.

  • The negligent foreclosing lender subsequently foreclosed and took title to the property.

  • The junior lienholder then claimed that the consequence of the foreclosing lender's failure to notify it of the sale results in the junior lien's survival after the sale (ie. the junior lien does not get wiped out by foreclosure of the superior lienholder's interest), thereby allowing it to move up the ladder of lien priority, and leaving the foreclosing lender with a property subject to the junior lien.

  • The negligent 1st mortgage lender tried to fix the error by trying to set aside the sale, and ask for a second chance in serving the foreclosure notice to the junior lienholder.

  • The federal judge refused to rule on what to do, saying that the parties have to go to state court and ask it to figure out the answer.

  • The federal appeals court said no, saying that, since the foreclosure action was already litigated before the federal trial judge, it can't now punt on figuring out what to do.

The case contains a discussion of some of the Pennsylvania cases that may be applicable to this fact pattern, as well as some federal case law involving the procedure issue that caused the appeals court to remand the case back to the lower court.

Crappy Titles From Foreclosure Fallout, Uncleared Issues Purportedly Covered By Letters Of Indemnity Pose Big Challenges For Title Insurance Industry

In New York City, The Real Deal reports:
  • Late one Thursday afternoon last month, title insurance agent Rafael Castellanos got an urgent call from an attorney whose client needed a title search on a Brooklyn home that was selling three days later in a foreclosure auction. [...] Castellanos, a managing partner at Expert Title Insurance Agency in Manhattan, got cracking on the search first thing the next morning.


  • For Castellanos's part, the Monday after he received that urgent call, his research had already uncovered a property file in complete disarray. Among other flaws, the property's tax lot and block were misindexed, and the prior owner had not been personally served with a notice of foreclosure.

  • Given these facts, Castellanos rated the property uninsurable -- a conclusion he's reaching all too often these days. "Right now, 60 to 70 percent of the foreclosures have problems," said Castellanos, who does just over 30 percent of his business in Manhattan and nearly 25 percent of his business in the city's other boroughs. "We find all these problems, and we have to tell the client, 'I'm sorry, we can't insure this.'"

  • Heading into the second half of 2011, Castellanos and other title insurance executives can add intensifying foreclosure-related woes to a lengthy and growing list of challenges in their industry. Those challenges range from increasing financial losses to widespread consolidation through the industry -- there were just 54 operating underwriters nationally last year, a 43 percent drop from 2008. That has a direct impact on both how many title insurance agents the industry can support, and how the remaining agents have to split up the pie of available business.


  • Title insurers must also deal with another troubled legacy of the housing boom: letters of indemnity. Such letters were often issued in New York during the boom and remain common.

  • For example, if the seller's title insurance company couldn't produce a necessary document in time for a closing date, it would issue a letter taking responsibility for legal claims that might arise from omitting that document, so the new title insurance policy for the buyer could be issued without delay. The practice helped deals get done.

  • Now, however, it's unclear how many of these letters were issued, and how many of those cases actually had legal issues that are still not cleared up. "There's a web of indemnity out there, and some of it will shake out, and create a financial impact on some title agents and, more specifically, the underwriters," said [one title agency executive].


  • [C]astellanos is worried that other proposed legislation intended to help homeowners avoid wrongful foreclosure will backfire, leading to widespread ownership challenges on purchases of foreclosed homes in New York. That, in turn, would lead to huge costs for underwriters and even greater difficulties writing new title insurance policies than Castellanos is seeing now.

For the story, see Title's battles (Insurance industry, hurt by slump in home sales, struggles with foreclosure woes).

Monday, August 01, 2011

AZ Appeals Court Sets Aside Judgment Based On Crappy Service Of Tax F'closure Notice; Says Mailing To Address Based On 8-Year Old Info Not Sufficient

A half-hearted attempt at serving a notification of a tax lien foreclosure action was at the heart of a recent ruling by a 3-judge panel of the Arizona Court of Appeals.

In another reversal of a trial court ruling in a foreclosure matter, the appeals court determined that the lien holder's failure to comply with the state statute in attempting proper notification, sending correspondence (to an address taken from an earlier-recorded document that was eight years old) that was returned unopened, after learning from a process server that the property owner was no longer at the address listed at that address, was enough to void a default foreclosure judgment against the property owner.(1)

For the ruling, see Advanced Property Tax Liens Inc. v. Sherman, 1 CA-CV 10-0371 (Ariz. App. Div. 1, Dept. D July 26, 2011).

(1) The court elaborated (bold text is my emphasis):
  • ¶18 On this record, we conclude that APT did not send the notice of intent to foreclose to the Shermans and therefore did not comply with A.R.S. § 42-18202(A). APT sent the notice to an eight-year-old address without, apparently, determining whether by doing so it was sending the notice to the "property owner of record," that is, to the Shermans.

    Having learned that the Pioneer address was no longer current for the Shermans and that the envelope containing the notice of intent to foreclose had been returned "unclaimed" and unopened, APT could no longer conclude that it had complied with the statutory requirement under A.R.S. § 42-18202(A) of mailing the notice to the Shermans. Section 42-18202(A) requires more than mailing the notice of intent to foreclose to an eight-year-old address that is no longer current, especially after learning the address was no longer current.

    ¶19 Our conclusion is further supported by the statutory provisions setting forth the alternative method of notification that requires the lien holder to send notification to one, two, or three specified addresses ascertainable from the records of the county assessor and county treasurer. A.R.S. § 42-18202(A)(1)(a)-(c).

    The legislature, by providing this alternative notice procedure, intended to provide lien holders with a notice procedure that could be reasonably satisfied and objectively proven, while at the same time achieving a high probability that the notice of the lien holder's intent to foreclose will reach the property owner.

    ¶20 If a lien holder tasked with sending notice of intent to foreclose under A.R.S. § 42-18202(A) has identified the "property owner of record" according to the county recorder's records and has a current address for that owner, the first alternative notice procedure in §42-18202(A) may be preferable. But if the lien holder is not confident that the available address for the owner of record is current, the lien holder may prefer to follow the more extensive notice procedure set forth in subparagraphs 42-18202(A)(1)(a)-(c).

    ¶21 Because APT failed to mail its notice of intent to foreclose to the Shermans, as required by A.R.S. § 42-18202(A), the trial court was not authorized to proceed with APT's action to foreclose. A.R.S. § 42-18202(C).

    As a result, the judgment is void and the court erred in denying the Shermans' Rule 60(c) motion.

Feds: 'Crappy-MBS' Peddler Unloaded $4.5B In Smelly Paper On Unwitting Fannie, Freddie; Suit Seeks $900M+ Loss Recovery; More Actions Planned

From the Office of the Federal Housing Finance Agency:
  • The Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac (the Enterprises), has filed a lawsuit [...] against UBS Americas, Inc., and related defendants alleging violations of federal securities laws in the sale of residential private-label mortgage-backed securities (MBS) to the Enterprises. FHFA seeks to recover losses and damages sustained by the Enterprises as a result of their investments in UBS Securities.

  • The lawsuit alleges that UBS Americas made numerous material misstatements and omissions about the mortgage loans underlying the private-label MBS, including the creditworthiness of the borrowers and the quality of the origination and underwriting practices used to evaluate and approve such loans. The defendants also failed to conduct adequate due diligence.

  • This lawsuit seeks to recoup the losses suffered by the Enterprises related to their $4.5 billion investment in securities sold by UBS.


  • "FHFA is taking this action consistent with our responsibilities as conservator of each Enterprise," said FHFA Acting Director Edward J. DeMarco. "From the issuance of 64 subpoenas last year to the filing of this lawsuit and further actions to come, we continue to seek redress for the losses suffered by the Enterprises."(1)

For the FHFA press release, see FHFA Sues UBS to Recover Losses to Fannie Mae and Freddie Mac.

See also, Reuters: Fannie/Freddie regulator sues UBS on $900 million loss.

For the 102-page lawsuit, see Federal Housing Finance Agency v. UBS Americas, Inc., et. al.

(1) The FHFA appears to be following the lead of its sister agency, the National Credit Union Administration (the federal regulator that oversees creit unions), in bringing civil lawsuits over the crappy, mortgage-backed investments that were unloaded on them (and, by extension, the U.S. taxpayer). See Feds' Campaign Tagging Banksters With Allegations Over Crappy Mortgage-Backed Paper That Led To Credit Union Failures Continues; More Lawsuits Planned.

BofA 'Piling On' Continues As 15 C-Wide Investors Opt Out Of One Class Action & $624M Settlement, Bring Another Demanding Bankster Cough Up More Cash

Reuters reports:
  • Bank of America Corp was sued by 15 former Countrywide Financial Corp institutional investors who said they lost money after being misled about the mortgage lender's financial condition and lending practices.

  • BlackRock Inc, the California Public Employees' Retirement System (CalPERS), T Rowe Price Group Inc, TIAA-CREF and the other plaintiffs, including some in Europe, sued in Los Angeles federal court, after deciding not to join a $624 million settlement that won court approval in February.(1)

  • These plaintiffs believed they could recover more by suing on their own over the "massive and pervasive" fraud at Countrywide, which Bank of America bought on July 1, 2008.


  • According to the 425-page complaint by the 15 plaintiffs, Countrywide and officials like former Chief Executive Angelo Mozilo abandoned prudent lending, reserved too little for bad loans and inflated earnings, in a drive to triple market share to 30 percent and enrich themselves. [...] The plaintiffs seek unspecified damages and class-action status for the March 12, 2004 to March 7, 2008 period.


  • Bank of America shares have fallen close to 60 percent since it bought Countrywide,(2) roughly three times as much as the KBW Bank Index.

For more, see BofA legal troubles deepen as big investors sue.

See also, Bloomberg: Bank of America Sued by Countrywide Financial Investors Alleging Fraud.

(1) According to Reuters, the February 25 settlement approved by U.S. District Judge Mariana Pfaelzer in Los Angeles called for Bank of America to pay $601.5 million to former Countrywide investors, and set aside $22.5 million for claims of investors that opted out.

(2) See BofA Director On Countrywide: "Worst Decision We Ever Made!" As Bank Settles 'Crappy Mortgage' Suit For $8.5B; Will Swallow Add'l $5.5B In Buybacks for more on Bank of America and its 'brilliant' move in allowing Angelo Mozilo to unload Countrywide on these geniuses and its decision to buy Countrywide.

Editor's Note: Reading about the seemingly continuous pounding BofA is taking by literally everyone (whether it be homeowners victimized by illegal trash-outs suing for thousands, well-heeled investors suing for hundreds of million$, and those in between - everyone seems to get a turn) reminds me of the the old schoolyard game we called 'Johnny-Ride-A-Pony' that we played as kids. For those who know what I'm talking about, BofA reminds me of the team that bends over (with the lead member wrapping his arms around a tree, telephone pole or similar object)), forming the 'horse,' and the members of the other team (the 'jumping' team), after getting a running start, each jumps on the backs of the 'horse' team, one at a time as they accumulate, pounding the living crap out of the 'horse' team until they collapse, causing them all to come crashing down onto the ground.