Saturday, September 10, 2011

“I Want To Choke His Little Irish Neck!” Says Legally Blind Predatory Loan Victim About Contractor Who Played Role In Alleged Home Improvement Scam

In Astoria, Queens, iWatch News reports:
  • Margaret Mosunic is 63 and a devout Christian, but if she ever encounters her building contractor again, she has a specific, violent plan of action. “I want to choke his little Irish neck,” she said in a recent interview in her home of more than 40 years in Queens, New York. As for the mortgage broker who recommended the contractor? “[He is] a devil in the disguise of a man,” she said.

  • On Jan. 9, 2008, Thomas Delaney, a broker at Home Consultants, Inc., drove Mosunic to a law office to close what she thought was a $40,000 bank loan, according to a lawsuit filed by Mosunic in Queens County court. She planned to use the money to pay back taxes and make repairs to a downstairs rental apartment, she said.

  • But that wasn’t the loan that the broker had asked the lender, Emigrant Mortgage Co. of New York to approve, Mosunic’s lawsuit alleges. An hour later, Mosunic claims, she stood on a street corner with a $20 bill that Delaney had pressed into her hand for cab fare, confused and upset.

  • She had just signed her name to a $300,000 mortgage with terms she alleges she couldn’t possibly meet. Mosunic’s loan required a monthly payment of $2,227. At the time, her only income was a $738 monthly disability check. “I was flabbergasted and I was so upset,” Mosunic said when she got her first bill.

For more, see Borrower Nightmares: Disabled homeowner alleges broker, bank sold her mortgage she couldn’t afford.

Foot-Dragging Banksters, Bogus Paperwork, Foreclosure Mill Screw-Ups All Helping To Stabilize Real Estate Market?

In Central Florida, the St. Petersburg Times reports:
  • With foreclosures, final doesn't always mean final. Some Tampa Bay residents are still living in their homes long after the final judgment of foreclosure because banks have canceled the public auction two, three, even five times. Others have had their houses sold at auction, only to have the sale reversed later.

  • Either way, here's a surprising result: Banks' slowness to take title to thousands of homes and condos might actually be helping to stabilize Florida's beleaguered real estate market. "It's helped keep the values up a little bit in that we have a pent-up demand'' for foreclosed houses, says Scott Samuels, a liquidation specialist for Keller Williams.

  • In some cases, banks delay taking ownership to avoid maintenance bills or homeowners association fees. In other cases, houses and condos have yet to get beyond the final judgment stage because of problems with foreclosure documents and errors by lawyers representing the banks.

For more, see Balky banks gum up foreclosure courts, benefiting some owners.

Settlement Of Class Action Suit Alleging Landlord Harassment Drove Below-Market-Paying Renters From Homes Leaves Lawyers Happy; Tenants - Not So Much

In New York City, The New York Times reports:
  • A settlement deal has been reached between lawyers for a large New York City landlord and its rent-regulated tenants, who claimed in a class-action lawsuit that they had been subjected to harassment, unlawful rent increases and aggressive eviction attempts during the real estate boom.

  • Under the terms of the deal, the landlord, the Pinnacle Group, will pay $2.5 million to legal and tenant-rights groups to help current and former tenants make legal claims for damages. The $2.5 million is separate from any damage awards. A court-appointed claims administrator will hear the complaints and decide whether to award compensation.

  • The Pinnacle Group, which owns about 15,000 apartment units citywide, must also set up a help line and follow new protocols like carefully notifying tenants of plans to increase rents or start evictions.

  • Tenant advocates and housing experts hailed the settlement deal, which was reached in early August and announced last week, for strengthening tenants’ legal rights in cases claiming harassment and unlawful evictions.


  • Advocates for residents’ and tenants’ rights have long claimed that people in rent-regulated apartments owned by the Pinnacle Group were widely intimidated as part of the owner’s efforts to empty its buildings to make way for higher-paying tenants.


  • News of the deal, which is expected to be completed at a fairness hearing in October, drew mixed reactions from tenants. Bobby Jones, president of the tenant association at Dunbar, a large complex in Harlem that Pinnacle recently lost to foreclosure, said that the deal was “better than nothing,” but that Pinnacle had wrought lasting damage on the place. About 45 percent of Dunbar’s tenants left their homes or were forced out during Pinnacle’s five-year ownership, he said.


  • Kim Powell, a tenant leader at an existing Pinnacle building, said she and other named plaintiffs weretotally disappointedwith the deal. Among the issues it left unclear, she said, was who would be eligible for compensation. “The two attorneys may be happy with it, but we’re not,” Ms. Powell said.

For the story, see Deal Would Settle Tenants’ Harassment Suit.

Cops Caught In Middle Of Dispute In Alleged Home Hijacking Scam; Owner In Foreclosure Has The Deed, Unknown Occupants Have Lease, Rental Receipts

In Bakersfield, California, KERO-TV Channel 23 reports:
  • Kern County deputies were called to a home where squatters may have taken over, but the people in the home will get to stay there for now.

  • The home near Morning Drive and Niles Street went into foreclosure. When the owner couldn't keep up the house payments he moved out and tried to give it back to the bank. He says the bank wouldn't take it so he remained the legal owner of the home even though he wasn't living there or making house payments. Then he discovered people living inside the house.


  • When Kern County deputies showed up Tuesday, the owner showed them his deed. Deputies said they also verified with the bank that the man is the legal owner of the house. But the people living there said they have a lease.

  • "They produced rental receipts, a rental agreement and receipts that they have paid since December of last year,” said Kern County Sheriff’s Office Senior Deputy Paul Leonard.

  • Deputies said that since the mortgage crisis began, cases of squatting have become more common. They said because they can’t prove who is right and who is wrong, the people living at the home can stay until the courts can figure it out. "Based upon what they have told us and he has told us and the documents that has been provided, it appears that it is a civil dispute," Leonard said.

For more, see Man Says Squatters Took Over His Empty House (Alleged Squatters Moved In During Foreclosure Process).

For follow-up story, see Alleged Squatters Say They Are Victims (Renters Say Fake Landlord Scammed Them):

  • [Purported tenant Jessika] Vapnar and her roommates say they moved in after driving through the neighborhood looking for a house to rent. They say they found a woman in the front yard of the house who said she was the owner and the house was for rent. The renters say she had keys to the house so they thought everything was legitimate.


  • She says they only have contact with the woman they pay rent to when she comes to get the rent once a month. The receipts they have for the $900 they pay every month are signed with only the first name Gloria. [...] Vapnar and her roommates say the do have a signed rental agreement with the mysterious woman. Deputies took it as part of their investigation. They say they are continuing to investigate the case.

Bankster Takes Homeowner For Ride On 'Stagecoach To Hell' With F'closure Threat Despite Automatically Deducting House Payments From Customer's Account

In Seattle, Washington, KING-TV Channel 5 reports:
  • A University of Washington professor is told her home is in pre-foreclosure. The only problem? She's not behind on her payments.

For more, see Homeowner facing pre-foreclosure can't get answers in writing.

Evicted, Desperate & Facing Possible Death, Homeless 1-Year Old Finds New Home; Adopted By Fla. Family, Youngster Must First Face Sensitive Surgery

In Oakland Park, Florida, the South Florida Sun Sentinel reports:
  • Porkey, the year-old potbelly pig evicted from Pompano Beach last week because he's a swine, has found a new home. Officials with the Humane Society of Broward said Friday that dozens of people called their shelter offering the portly pet a place to live after reading about his plight in the Sun Sentinel.

  • Porkey will be going to a home in Oakland Park with a family that already owns two pigs, said shelter spokeswoman Andrea Silverberg. Unlike Pompano Beach, where pigs are prohibited, ordinances in Oakland Park allow "animals capable of being kept as pets within a home such as those species of animals that generally are kept as pets and live in or about the habitation of humans."

  • Porkey is no longer at risk of being euthanized, but it's not all good news for him. "He has to be neutered before he goes home," said Silverberg.

Source: Homeless Pompano Beach pig finds new digs in Oakland Park.

See also, Piggy in a pickle: Evicted Broward pet needs a new home.

Go here to see the recently-reprieved Porkey celebrating his new-found freedom. He apparently had no comment on the code enforcement officials and their actions that led to his getting the boot from the swine-sour city of Pompano Beach.

By Day: A Publicly-Funded Kids Charter School In F'closure; By Night: An After-Hours Nightclub Hosting R-Rated Bashes Headlining Bikinis, Boobs, Booze

In South Dade, Florida, The Miami Herald reports:
  • The "Push It To Da Limit: The Flossin Edition" late-night party is still scheduled to go off Saturday night -- but it won't be at a South Miami-Dade charter school, as previously advertised.

  • Miami-Dade School District officials on Friday were still trying to determine whether the Balere Language Academy -- a charter school already facing financial free-fall and increased school district scrutiny -- has also been doubling as an after-hours nightclub.

  • This week district officials learned of R-rated party fliers, featuring bikini-clad women and bottles of booze, promoting a bash at 10875 Quail Roost Dr. -- the address of the South Miami Heights charter school. Older ads, Twitter posts, Facebook photos and a string of parent complaints about smoky smells and empty beer bottles on campus also indicated past parties were held at the school.


  • The controversy comes as Balere struggles to stay afloat amid a barrage of problems. Among them: A lender filed a foreclosure lawsuit against the school in June for failing to make payments on a $1.5 million mortgage -- one of four mortgages on the school's six-acre property, records show.


  • The school's revenue, which comes from public tax dollars directly tied to the number of students, has shrunk from more than $2 million in 2010 to just over $1 million today. As of February, the school owed more than $100,000 to the Internal Revenue Service for unpaid payroll taxes.

For more, see Charter school in adult-club scandal has money woes (Party promoter has ties to the school's principal, records show).

Friday, September 09, 2011

Florida Trial Judge Fumbles Another F'closure Ruling; Sworn Affidavit By One Without Personal Knowledge Of Facts = Inadmissible Heresay: Appeals Court

In West Palm Beach, Florida, The Palm Beach Post reports on the latest, incorrect homeowner-unfavorable ruling by Palm Beach County Circuit Judge Meenu Sasser that has subsequently been reversed on appeal: (1)
  • In a decision that could have staggering implications on foreclosure proceedings statewide, an appeals court ruled Wednesday in favor of the owners of a Wellington home whose bank filed documents sworn to by employees with no personal knowledge of the case.(2)

  • The ruling from the 4th District Court of Appeal reversed in part a 2010 Palm Beach County Circuit Court summary judgment that said homeowners Gary and Anita Glarum owed LaSalle Bank $422,677.

  • That amount was based on an affidavit of indebtedness signed by loan servicer employee Ralph Orsini, who pulled the information from a company computer ­-- a move that appeals court judges said amounts to hearsay.

  • "Orsini did not know who, how, or when the data entries were made into Home Loan Services' computer system," the decision states. "Orsini could state that the data was accurate only insofar as it replicated the numbers derived from the company's computer system."

  • The ruling means the home on Amesbury Court, which has been in foreclosure since September 2008, can't go to a foreclosure sale until the bank either gets another summary judgment or goes to trial. The Glarums still live in the home.

  • Tom Ice, whose firm Ice Legal represents the homeowner, said Wednesday's decision hits at the essence of the nation's foreclosure robo-signing scandal in which tens of thousands of foreclosure court documents were signed by people swearing that they had personal knowledge of cases when they did not.

  • While some lenders called the document problem a technicality, foreclosure defense attorneys called it perjury and fraud.


  • The appeals court ruling was called "rock solid" by Sarasota-based attorney Henry Trawick, an expert on Florida's judicial rules and author of Trawick's Florida Practice and Procedure.

  • He said a valid affidavit of indebtedness would have to be sworn to by the person who actually entered the information into the computer system. He expects the decision to further snarl Florida's courts.

  • I think a whole lot of summary judgments on these foreclosures are not valid because of this," said Trawick, who is also concerned about how allegedly bogus affidavits will affect getting clear title to homes. "The real problem ahead of us is years to come when all these properties are being sold."

For more, see Ruling in Wellington case could further complicate Florida foreclosures.

See also, Reality Check: Florida Appeals Court Rules Banks Must Follow The Rules:

  • Ruling that LaSalle’s affidavit of indebtedness was inadmissible hearsay was unremarkable as a matter of law. But in a state where some judges have displayed pro-bank bias so powerful they don’t require the banks to follow the rules, the decision is stunning.

For the ruling, see Glarum v. Lasalle Bank, No. 4D10-1372 (Fla. App. 4th DCA September 7, 2011).

(1) This is not the first foreclosure screw-up by Judge Sasser that Florida's 4th District Court of Appeal has been compelled to clean up (maybe she's just trying to 'pad her resume' when she quits the bench and goes into private practice working for a foreclosure mill sweatshop? Possibly following in the footsteps of her Broward County, Florida judicial colleague, Victor Tobin? See "See No Evil, Hear No Evil" Broward County Chief Judge Knew Exactly What He Was Doing After All! ).

For examples of Judge Sasser's other reversed foreclosure 'handiwork', see:

(2) Unmentioned by The Palm Beach Post story, but deserving of attention, is that the appeals court also reversed another screw-up by the trial judge in this matter, Palm Beach County Circuit Judge Meenu Sasser, in which she improperly sanctioned homeowner's attorney Ice Legal, P.A. for allegedly filing frivolous pleadings, pursuant to section 57.105, Florida Statutes. (Go here for more on Section 57.105).

From the court ruling:

  • The trial court also entered sanctions against appellants’ counsel for filing a “form affidavit” from an expert, Rita Lord, who opined on the ability of lay persons to distinguish between original and high-quality copies of promissory notes.

    Lord did not represent in the affidavit that she reviewed the papers at issue in this case. Nevertheless, the trial court was distressed by appellants’ counsel’s habit of filingthe same affidavit in ten different cases, when [Lord] hasn’t seen the documents in this case.”

    The court awarded LaSalle its reasonable attorney’s fees for having to file a motion to strike Lord’s affidavit.

    We note that LaSalle moved for sanctions under section 57.105, Florida Statutes. That statute permits a trial court to award a “reasonable attorney’s fee” to the “prevailing party” where the plaintiff’s claim was frivolous or to a party to compensate for the opposing party’s dilatory conduct. § 57.105(1)-(2), Fla. Stat.

    The trial court did not find that appellants’ claims were frivolous, and the trial court did not conclude that Lord’s affidavit was filed to cause unreasonable delay. Thus, section 57.105 could not serve as a basis for the award of attorney’s fees to LaSalle.

    To the extent that the trial court may have been exercising its inherent authority to sanction parties or their attorneys, we also find error. “[A] trial court possesses the inherent authority to impose attorneys’ fees against an attorney for bad faith conduct.” Moakley v. Smallwood, 826 So. 2d 221, 226 (Fla. 2002).

    To impose attorney’s fees as a sanction under its inherent authority, the trial court must make anexpress finding of bad faith conduct” that is “supported by detailed factual findings describing the specific acts of bad faith conduct that resulted in the unnecessary incurrence of attorneys’ fees.” Id. at 227.

    The trial court did not make any specific findings of bad faith on the record, and the sanctions order must be reversed without prejudice. See Finol v. Finol, 912 So. 2d 627, 629 (Fla. 4th DCA 2005). “Upon remand, should the court be asked to reconsider the issue, any future hearing and order must comply with the requirements of Moakley.” Id.

See also, Daily Business Review: 4th DCA bars affidavit over failure to verify:

  • The 4th DCA also tossed out a disciplinary action against Ice and his firm, Legal Ice in Royal Palm Beach.

    Ice had presented an affidavit from a document review expert that didn't sit well with Sasser. The expert testified that it was hard to prove if the note presented by the lender at the hearing was the original document, as required by law. Ice asked the judge for more time to make a technical analysis of the note to determine that it wasn't a "mere" copy of the original document, he said.

    "Judges across the state have a tendency to believe that when they see blue ink on a signature, that is the original note" and make a decision based on a document that could be a copy, he said.

    Sasser rejected Ice's argument and entered sanctions against Ice Legal at the request of LaSalle, which called the action a frivolous claim.

    The judge ordered Ice Legal to pay the lender's attorney fees. The 4th DCA reversed the sanctions against the Ice firm.

Federal Appeals Court: Proposed Arizona Class Action Plaintiffs Failed To Allege Facts, Cite Law Proving MERS To Be Fraudulent Conspiracy

Reuters reports:
  • A lawsuit accusing several mortgage lenders of fraud over home loans maintained within the industry's private electronic database cannot proceed, according to a U.S. appeals court ruling.

  • The lawsuit targeted lenders, including Bank of America Corp, JPMorgan Chase & Co and Wells Fargo, over their use of the Mortgage Electronic Registration System. MERS, a unit of Merscorp Inc of Reston, Virginia, owns the computerized registry which tracks the transfer of the beneficial interest in home loans, as well as any changes in loan servicers. It was also a defendant.

  • Mortgage loan giants Fannie Mae and Freddie Mac and several of the largest U.S. banks established MERS in 1995 to circumvent the costly and cumbersome process of transferring ownership of mortgages and recording the changes with county clerks.

  • However, MERS's role in foreclosure cases has made it a lightning rod in recent months in other court decisions which have held that loan servicers' use of the registry violates basic real estate and mortgage laws.


  • A proposed class action in an Arizona federal court alleged a conspiracy among MERS members to commit fraud and facilitate predatory lending practices. [...] A lower court judge dismissed the lawsuit, and on Wednesday the 9th Circuit upheld that decision.

  • "Although the plaintiffs allege that aspects of the MERS system are fraudulent, they cannot establish that they were misinformed about the MERS system,"(1) wrote Judge Consuelo Callahan for the unanimous three judge 9th Circuit panel.

For the story, see Appeals court rejects mortgage database suit.

For the ruling, see Cervantes v. Countrywide Home Loans, Inc., No. 09-17364 (9th Cir. September 7, 2011).

(1) For sake of completeness, Judge Callahan's full quote follows:

  • Although the plaintiffs allege that aspects of the MERS system are fraudulent, they cannot establish that they were misinformed about the MERS system, relied on any misinformation in entering into their home loans, or were injured as a result of the misinformation.

  • If anything, the allegations suggest that the plaintiffs were informed of the exact aspects of the MERS system that they now complain about when they agreed to enter into their home loans.

  • Further, although the plaintiffs contend that they can state a claim for wrongful foreclosure, Arizona state law does not currently recognize this cause of action, and their claim is, in any case, without a basis. The plaintiffs’ claim depends upon the conclusion that any home loan within the MERS system is unenforceable through a foreclosure sale, but that conclusion is unsupported by the facts and law on which they rely.

  • Because the plaintiffs fail to establish a plausible basis for relief on these and their other claims raised on appeal, we affirm the district court’s dismissal of the complaint without leave to amend.

Editor's Note: A careful reading of this case should lead any objective observer to conclude that MERS did not win a carte blanche approval for all of its 'handiwork' in foreclosure actions nationwide. The ruling simply states that, given the specific facts as alleged, and given the specific laws plaintiffs relied on to establish their case, plaintiffs failed to allege viable causes of action. Contrary to what banksters and their apologists may claim to the contrary, there are no national implications to come from this ruling.

Accused Upfront Fee Loan Modification Scammer Gets 90 Days After Copping Plea; Cases Against Two Others Remain Pending: Sacramento DA

In Sacramento, California, Fair Oaks Patch reports:
  • One of the men said to have preyed on local homeowners threatened with foreclosure was sentenced Tuesday to 90 days in county jail as part of a plea agreement reached with the Sacramento County District Attorney’s Office, the office announced.

  • Ashik Ahmed Azeez, 50, of Sacramento pled no contest to three misdemeanor counts of mortgage fraud. According to Sacramento Superior Court records, he was facing 23 counts for his involvement in a loan modification business that illegally siphoned advance service fees from seven victims, including individuals with properties in Fair Oaks and Carmichael.

  • An arrest warrant filed in March said a Fair Oaks couple that solicited the help of Azeez’s business, Turbo Mortgage Modification, ended up losing their home when Azeez didn’t follow up on his promise to deliver a loan modification.

  • The couple first entered Azeez’s Arden Way office suite in September 2010. According to the warrant filing by prosecutor Michael Blazina, Azeez gave the couple the impression that their “loan modification was guaranteed” and had them pay him $2,500 in cash the following day.


  • Even with the cash, the Fair Oaks couple’s loan modification never materialized, with Azeez telling them three months later they hadn’t gotten him additional information in a timely manner, the warrant filing asserted.The couple lost their home to foreclosure last December.


  • Azeez ran the company, later named Turbo Solutions, with Frank Joseph Ferris, 69, and Vicente Jose Perez, 49, both of Sacramento. DA spokeswoman Shelly Orio said the cases against those two individuals remain ongoing and declined to comment further.

  • Online court data, however, shows that Perez was scheduled for a plea hearing Tuesday morning, just as Azeez was. He faces 11 misdemeanor charges. Ferris is not yet facing active prosecution, at least according to online court records.

For more, see Man Sentenced After Defrauding Homeowners (Fair Oaks couple lost home to mortgage scheme).

Lawsuit: 'Set Aside' Of Dubious F'closure Leaves REO-Buying Couple Without Legal Title To Property After Sinking $230K Into Home Bought From Bankster

In Cape Coral, Florida, The News Press reports:
  • Brian and Holly Barnhart of Cape Coral - who were sold a house by Wells Fargo Bank even though the bank didn't own the property - have filed a lawsuit alleging fraud and negligence.

  • The Barnharts, who emptied their life savings to buy the house for $153,000 cash and renovate it for another $80,000, bought the house in November.

  • But it turned out Wells Fargo had given the house back to its original owner, Richard Riccobono, for a mortgage he had on the house. The bank won a foreclosure suit and took back possession of the house, but moved July 30, 2009, to set aside its ownership. As a result, Wells Fargo sold the house to Barnhart even though by then it belonged to Riccobono.

For more, see Cape Coral couple sue Wells Fargo (Bank sold them home it didn't own).

Suit: Allstate's Paperwork Boot Leads To Force-Placed Insurance On Ike-Hammered Home, Driving Owner Into F'closure While Away Working In Saudi Arabia

In Galveston, Texas, The Southeast Texas Record reports:
  • Alleging Allstate Insurance Co. and agent Steve Wolverton's actions after Hurricane Ike caused him legal troubles, League City resident Bradley J. Gana has filed a lawsuit. Recent court documents filed Aug. 26 in Galveston County District Court claim the defendants neglected to deliver a certificate of destruction to Gana's lenders after the Category 2 storm destroyed his house on Sept. 13, 2008.

  • Gana, who was working in Saudi Arabia at the time, says the apparent failure prompted the lenders to force their captive insurance upon him and cause a negative amortization to occur to his loans.

  • "The plaintiff's home was placed in foreclosure as a result of this omission," the suit states. The original petition says that Gana incurred numerous attorneys' fees to keep his home out of foreclosure and ultimately resorted to obtaining a temporary restraining order.

  • His case was elevated to federal court where a settlement and payment of certain insurance proceeds were reportedly paid to the lenders. Gana finally received the certificate earlier this year along with an admission against the defendants' interest that they had forgotten to send it before.

  • The suit summarily faults the respondents for negligence, gross negligence, breach of contract and vicarious liability and agency. Consequently, Gana seeks unspecified monetary damages and a jury trial.

Source: League City man says insurer cost him numerous legal fees after Hurricane Ike.

Thursday, September 08, 2011

Procedures vs. Outcomes: Which Matters More In Foreclosure Process?

From a recent article in American Banker:
  • Is it "just" a technicality if a mortgage servicer, foreclosing on a borrower who in all likelihood has defaulted, creates documents to prove the servicer’s client acquired the loan years ago?

  • Consider this (admittedly imperfect) analogy: is it just a technicality if a criminal wasn’t read his rights before being arrested? If we know such a person is guilty, it fair to say that such a person was "not harmed" by the police officer’s procedural misstep? Is it worse to violate his constitutional rights or let him back out on the street?

  • You can hear echoes of that age-old friction between due process and the messy, often infuriating results of honoring it, in reader reactions to American Banker’s recent story about servicers backdating paperwork to support foreclosures.


For more, see 'Procedures Matter' in Foreclosure; Do Outcomes Matter More?

NY Bankruptcy Judge To Foreclosure-Desirous Bankster: 'Hit The Road!' Lift Stay Motion Denied Despite Lack Of Objection By Debtor, Chapter 7 Trustee

From a recent ruling by a U.S. Bankruptcy Court (Southern District, NY):
  • [T]he issues discussed in this Opinion are neither novel nor complex, but highlight a well-publicized and persistent problem with inadequate mortgage foreclosure documentation.

  • The failure to properly document the transfer of the note and mortgage raises the question whether the movant has standing to seek relief—here, an order vacating the automatic stay, but, if successful here, then a judgment of foreclosure in state court.

  • Neither the Debtor's counsel nor the Chapter 7 trustee filed an objection to the Motion.

  • But the lack of objection does not relieve U.S. Bank from the burden of establishing its right to relief. The Court denies the Motion because U.S. Bank has not established its standing for stay relief.

For the entire ruling, and the court's analysis and reasoning, see In re Lippold, Case No. 11-12300 (MG) (Bankr. S.D. N.Y. September 6, 2011).

Loophole Allows Some Detroit Property Owners To Stiff City On R/E Taxes & Water Bills, Then Buy Back Subsequently F'closed Homes For Pennies On The $1

In Detroit, Michigan, The Detroit News reports:
  • Landlord Jeffrey Cusimano didn't pay property taxes on seven of his east-side rentals for three years, owing the city of Detroit more than $131,800. Typically, that would mean losing the properties. But Cusimano not only got to keep them — his debt, including interest, fees and unpaid water bills, was virtually wiped free.

  • Cusimano and a growing number of Detroit property owners are using a little-known loophole to erase tax debt by letting their properties go into foreclosure and then buying them back a month later at the Wayne County Treasurer's auction for pennies on the dollar.

  • It's legal. But that doesn't mean it's fair, said homeowner Marilynn Alexander, who lives on Fairmount next door to one of Cusimano's rentals. The landlord owed $26,200 in taxes and other fees on the bungalow, but bought it back in October for $1,051.

  • "He shouldn't be able to get away with that," said Alexander, a 57-year-old laundry worker who said she scrapes together every year her $1,500 in property taxes at the house where she's lived for 20 years. "That's not a fair break to anybody else out here."

  • Critics described it as a growing problem as the foreclosure crisis deepens. A record number of properties — nearly 14,300 — are expected to be auctioned this fall, and officials predict more owners will try to buy back their properties.

  • The News identified about 200 of nearly 3,700 Detroit properties sold at auction last year that appeared to be bought back by owners, some under the names of relatives or different companies and many for $500. The total in taxes and other debts wiped away was about $1.8 million.

  • "I don't think it's OK; it's just how things are," said Cusimano, who argues Detroit taxes are so unfairly high he was forced to buy back the foreclosed properties. At the September auction, the properties' prices are the debt that's owed. But in October, the county treasurer sells off whatever is left at a $500 opening bid. That's where most of the sales happen, including owners buying back their properties.(1)

For more, see Owners escape tax debt by rebuying foreclosed homes.

(1) Use of this and other so-called 'foreclosure redemption schemes' is not unheard of. For more on foreclosure redemption schemes used by clever property owners and real estate operators in attempts to 'squeeze out' lien-holding creditors, see:

Wednesday, September 07, 2011

Ohio Non-Profit Legal Advocates Weigh In With Amicus Brief In Effort To Hold Banksters Accountable For Inability To Prove Foreclosure Rights

In Athens, Ohio, The Athens NEWS reports:
  • An attorney with a local legal aid agency has signed onto a "friend of the court" brief filed with the Ohio Supreme Court in a case that could have a big impact on home foreclosures in the state.

  • The brief, in U.S. Bank National Association v. Antoine Duvall, was submitted Aug. 16 by Peggy P. Lee of Southeastern Ohio Legal Services, along with representatives of many other legal aid agencies and activist groups around Ohio.(1)

  • SEOLS and others who signed onto the amicus curiae brief have been involved in the Save the Dream Ohio project, a statewide foreclosure intervention initiative, and they report that since 2008, they collectively have represented more than 12,000 homeowners in various foreclosure-related actions.

  • The Duvall case is complex, but essentially addresses a growing legal issue that could seriously impact home foreclosures in Ohio: the issue of whether a foreclosing bank can actually prove that it owns the mortgage.


  • Lee of SEOLS said in foreclosure cases, the strategy of demanding that the foreclosing party produce the actual mortgage documents has been catching on among homeowners, which has led to a number of cases around Ohio in which appellate courts have come to different conclusions on whether you have to have the mortgage documents in hand to take a foreclosure to court.

  • "There's been a lot of different opinions from a lot of different appellate districts," she said, which is why the state Supreme Court has been asked to review the question.

For more, see SEO Legal Services weighs in on big anti-foreclosure lawsuit.

For the Ohio appeals court ruling at the center of this litigation, see U.S. Bank Nat'l. Assn. v. Duvall, 2010 Ohio 6478 (Ohio App. 8th Dist. Cuyahoga County, December 30, 2010).

(1) Go here for the amicus brief filed jointly by the following nine non-profit law firms throughout Ohio in this case:

  • Advocates for Basic Legal Equality, Inc.,
  • Community Legal Aid Services, Inc.,
  • Legal Aid of Western Ohio,
  • Legal Aid Society of Cleveland,
  • Legal Aid Society of Columbus,
  • Legal Aid Society of Southwest Ohio, LLC,
  • Ohio Poverty Law Center, LLC,
  • Pro Seniors,
  • Southeastern Ohio Legal Services.

Go here for links to all the briefs filed with the Ohio Supreme Court in this case.

Another Utah State Court Foreclosure Case Gets Booted Over To Federal Court

In St. George, Utah, KCSG-TV reports:
  • ReconTrust Company, the foreclosure arm of Bank of America [], accused of illegal foreclosures against Utah homeowners, moved a state court eviction case to federal court Friday claiming exemption to State law. (Case 11-00801)

  • Utah homeowner, Alexis K. De Azevedo II, represented by St. George attorney John Christian Barlow, said in the counter claim and complaint that the Bank of America through ReconTrust Company knowingly conducted a non-judicial foreclosure sale of the property in Washington, Utah, and recorded a Trust Deed in favor of the Federal National Mortgage Association (Fannie Mae) adverse to De Azevedo.

  • The complaint asserts that ReconTrust knew the Trustee's Sale was fraudulent since it's neither a member of the Utah Bar Association or a title insurance company required by Utah law.

  • Fannie Mae is attempting to evict De Azevedo from a home in which they have no interest because of the bogus Trustee Sale conducted by ReconTrust, according to the counter claim.

  • The defendant (De Azevedo) seeks injunctive relief enjoining Fannie Mae from eviction pending a resolution of ownership issue. The counter claim asks for actual, special and statutory damages to be determined by trial.


  • Meanwhile, the Utah Attorney is said to be negotiating a settlement with the Bank of America for its illegal foreclosure activity against Utah homeowners as a result of a May 19, 2011 letter from the Attorney General) in which the bank is accused of using ReconTrust Company, in violation of Utah law as set forth in Utah Code Sections 57-1-21 and 57-1-23, which outlines the requirements for lawful non-judicial foreclosures.

  • The attorney general cited legal precedent for the position in a recent 10th Circuit case, Shurtleff v. Kleinsmith in which Utah Code Sections 51-1-21 and 57-1-12 were found to be constitutional.(1)

  • Shurtleff said, that ReconTrust is in violation of the National Bank Act, which does not allow national banks to operate in contravention of State and local law. Shurtleff said that ReconTrust's exercise of fiduciary powers in the State of Utah is not only a violation of State law, but also applicable federal law.

For more, see St. George Homeowner Eviction Case Moved to Federal Court.

(1) Kleinsmith v. Shurtleff, 571 F. 3d 1033 (10th. Cir. 2009).

Lien Stripping In Chapter 13 Bankruptcy - Primary vs. Non-Primary Residence

The following excerpt in a recent article on the lien stripping process in a Chapter 13 bankruptcy proceeding highlights the unique rules applicable to a primary residence and the distinction between how the rules apply to a primary residence vs. a non-primary residence:
  • Lien Stripping in Chapter 13 Bankruptcy

    In a process called lien stripping, a secured debt like a second mortgage or car loan may be reduced to the value of the collateral backing the loan and divided into portions of secured and unsecured debt.

    Under sections 506(a) and 506(d) of the U.S. Bankruptcy Code, through Chapter 13 lien stripping, a loan is secured up to the amount of the fair market value of the collateral, and the remaining balance of the loan is classified as unsecured debt. For example, if a car loan was for $10,000 but the current fair market value of the vehicle is only $7,000, through lien stripping the car loan will remain as secured debt for only $7,000 and the remaining $3,000 of debt will be converted into unsecured debt.

    Unique Rules for Primary Residences

    Importantly, different rules apply for loans secured by primary residences. A second mortgage on a home can be stripped only if the current fair market value of the home does not exceed the value of the first mortgage.

    For example, assume the current value of a primary residence is $400,000, the first mortgage was for $500,000 and a second mortgage was taken for $150,000. Because there is no equity remaining in the home after accounting for the first mortgage, the second mortgage can be converted to an unsecured loan and stripped.

    However, if the current value of the primary residence is $600,000, the second mortgage cannot be stripped. This is because, after $500,000 is secured for the first mortgage, $100,000 in equity is available to secure the second mortgage. If the second loan was not secured by a primary residence, $100,000 would be secured debt and the remaining $50,000 would be converted to unsecured debt through lien stripping.

    But, the unique rules for loans on primary residences say that, as long as there is equity remaining for the second mortgage on a primary residence, the second mortgage cannot be divided into secured and unsecured debt and stripped. In the second example, then, the entire $150,000 second mortgage would remain secured debt because it was secured by a primary residence.

Source: Lien Stripping in Chapter 13 Bankruptcy (Individuals with second mortgages and underwater mortgages may benefit from changing the character of their second-mortgage debt from secured to unsecured debt through Chapter 13 lien stripping).

(1) In this situation, I wonder if it would be viable if the homeowner, shortly before filing the Chapter 13 petition, converted the home from a primary to a non-primary residence by moving out and renting out the premises to a tenant, in an attempt to position himself for a subsequent lien-strip of the undersecured portion of the 2nd mortgage when the bankruptcy petition is eventually filed?

Tuesday, September 06, 2011

BofA To Unload Or Shutdown Countrywide Unit That Buys 'Bucket Shop-Generated' Crappy Home Loans

In Los Angeles, California, the Los Angeles Times reports:
  • Bank of America Corp. plans to jettison another piece of the troubled Countrywide mortgage empire — a lending arm that buys home loans from smaller institutions to then package into mortgage-backed securities on Wall Street.

  • The beleaguered banking giant has shopped the business around and is in serious talks with one potential acquirer, according to spokesman Dan Frahm. If it can't strike a deal, Bank of America would shut down the business, jeopardizing 1,400 jobs, including 700 in Westlake Village and Thousand Oaks.


  • With this, Bank of America has decided to get out of correspondent lending, a low-margin business that buys loans made by smaller institutions. Though these loans accounted for more than half of BofA's mortgage volume, the bank now wants to concentrate on those made directly with consumers.

  • Analysts believe that BofA might be hard-pressed to sell the business, which is usually composed of riskier loans than those that the Charlotte-based bank would have made directly with customers. During the boom years, such purchased loans were a huge source of raw [sewage] material for the mortgage-related securities that later proved toxic.

  • "Correspondent systems tend to be bucket shops that generate rotten loans," said Rochdale Securities analyst Richard X. Bove. "It is unlikely that there would be many buyers for this system."


  • One of the stated reasons behind BofA's acquisition of Countrywide was the superior systems the Calabasas company was said to have developed for all aspects of the home lending business, including correspondent lending. But after recording tens of billions in losses related to Countrywide, Bank of America has wound up selling or shutting down many mortgage operations.

  • The bank previously exited wholesale mortgage lending, which is making loans through brokers; and the reverse mortgage business, which allows older people to remain in their homes while drawing down the home equity to live on.

  • It also sold Balboa Insurance, a legacy Countrywide unit. Balboa provides insurance policies that are forced upon homeowners who let their own fire insurance lapse, often because they are headed for foreclosure.

For more, see Bank of America puts Countrywide lending unit up for sale (Bank of America is looking to rid itself of a low-margin Countrywide unit that buys loans from smaller mortgage companies. Hundreds of jobs could be at stake).

Closing Agent Gets 42 Months After Copping Plea To Using Real Estate Escrow Account As Personal Piggy Bank Ending In $900K+ Swindle Of Entrusted Funds

From the Office of the U.S. Attorney (Minneapolis, Minnesota):
  • [A] former Freeborn County Commissioner who operated a real estate closing company was sentenced for converting funds from escrow accounts for her personal use. United States District Court Judge David S. Doty sentenced Linda Kae Tuttle-Olson, age 60, of Albert Lea, to 42 months in prison on one count of wire fraud in connection to the crime.

  • Tuttle-Olson was charged on January 10, 2011, and pleaded guilty on April 26, 2011. In her plea agreement, Tuttle-Olson admitted that from January through June of 2010, she stole at least $920,000 from the escrow accounts of others and used the money for her own personal gain.

  • From 2003 through 2010, Tuttle-Olson was the president of Freeborn County Abstract Co., also known as Albert Lea Abstract Company (“ALAC”). ALAC conducted real estate closings, held funds in escrow to be disbursed pursuant to closing instructions, and distributed loan proceeds as directed by lenders.

  • As the company’s president, Tuttle-Olson received fiduciary and escrow funds from clients, which then were deposited into ALAC bank accounts. Tuttle-Olson admitted transferring funds from those accounts into other ALAC accounts. Then she wrote numerous checks to cash and herself from those accounts.

  • In order to cover the funds she had stolen, Tuttle-Olson sent checks from one bank to another to produce artificial balances.

For the U.S. Attorney press release, see Former Freeborn County Commissioner sentenced for stealing approximately $1 million from escrow accounts.

Sleazy Tactic By Notorious F'closure Mill, Ostensibly Snoozing Trial Judge Headline Latest Florida Appellate Reversal Of Homeowner-Unfavorable Ruling

The latest reversal of a Florida trial judge's (Charlotte County Circuit Court Judge George C. Richards) foreclosure ruling unfavorable to a homeowner was issued by the state's 2nd District Court of Appeal.
  1. The case involved a motion to set aside a default judgment granting foreclosure against an elderly homeowner (a Mrs. Joan B. Paul) who suffered from multiple physical and mental ailments who failed to respond to the foreclosure lawsuit.

  2. The homeowner's nephew, who held a durable power of attorney authorizing him to act on his aunt's behalf, lived in Missouri and did not learn of the foreclosure lawsuit until it was late in the proceedings.

  3. When he learned of the lawsuit, he came to Florida promptly, and assisted his aunt in retaining attorney Barbara Goolsby of Florida Rural Legal Services to file an emergency motion to set aside the final judgment and cancel the scheduled sale.

  4. The foreclosure mill outfit representing the bankster involved, Wells Fargo (possibly known to some as the "Stagecoach to Hell"), refused to cancel the foreclosure sale to first allow a hearing on the motion. It went forward, foreclosed, and took title to the premises while the homeowner waited for her motion to be heard.

  5. Thereafter, the trial court heard the frail, elderly homeowner's motion to set aside the judgment, which the trial judge denied. According to the appeals court, "[the trial court] felt compelled to let the foreclosure stand because the property was already sold and Mrs. Paul did not act when she should have."

  6. The appeals court ruling then describes what happened next with regard to the apparently sleazy conduct by the foreclosure mill attorney and the response by an ostensibly snoozing trial judge:

    The trial court directed Wells Fargo's counsel to prepare an order denying the motion. Counsel stated that he would show the proposed order to Ms. Goolsby before submitting it to the court.

    Instead, counsel sent the proposed order directly to the trial court without notice to Ms. Goolsby. The trial court signed the proposed order.

    The service list attached to the order included Mrs. Paul, but not Ms. Goolsby. Ms. Goolsby was not served with a copy of the order, despite having filed numerous documents as Mrs. Paul's counsel.

    Within a couple of weeks, Ms. Goolsby discovered that the trial court had issued its order. She filed a motion for relief. As previously directed by the trial court, Ms. Goolsby submitted case law to allay the trial court's concern about its jurisdiction. See Sterling Factors Corp. v. U.S. Bank Nat'l Assoc.,
    968 So.2d 658, 665 (Fla. 2d DCA 2007) (holding circuit court has jurisdiction to set aside or reconsider foreclosure judgment upon proper motion after foreclosure sale).

    Ms. Goolsby asked the trial court to vacate the earlier order and grant relief from the default foreclosure judgment. Ms. Goolsby requested that if the trial court declined to set aside the default judgment, the trial court allow Mrs. Paul an opportunity to appeal

  7. The trial court denied the motion, and this appeal ensued.

  8. In reversing the lower court ruling, the appeals court resolved these four points in the homeowner's favor:

    a) The foreclosure mill's failure to provide notice to homeowner's attorney (Ms. Goolsby) warranted judicial relief,(1)

    b) Contrary to his mistaken belief, the trial judge had jurisdiction to grant relief, even after the foreclosure sale had already taken place,(2)

    (c) The homeowner successfully established the "excusable neglect" necessary to warrant setting aside a default judgment,(3)

    (d) The appeals court rejected Wells Fargo's suggestion that Mrs. Paul's second motion to vacate was an improper second attempt to relitigate issues settled by a previous order denying relief'.(4)
Congratulations to attorneys Barbara Goolsby and Angela Thompson of Florida Rural Legal Services,(5) Fort Myers, on their efforts in pursuing this appeal and overcoming the apparently sleazy tactic (ie. failure to give proper notice after saying it would do so) by her adversary (Florida Default Law Group) and the sub-par efforts of a trial judge who possibly was so overworked that he may not have been thinking straight when deciding this case (after all, we all have a bad day from time to time). This type of case is tough enough to defend to begin with without also having to deal with a possibly ethically-challenged adversary and a 'tired' judge.

For the appeals court's 13-page ruling, see Paul v. Wells Fargo Bank, N.A., Case No. 2D10-3889 (Fla. App. 2d DCA September 2, 2011).

(1) From the appeals court ruling:
  • The trial court stated that it found no notice of appearance by Ms. Goolsby that would require copying her with the order denying relief from judgment. Ms. Goolsby, however, was not required to file a notice of appearance.

    Florida Rule of Judicial Administration 2.505(e)(1) provides that an attorney may appear in a proceeding by "serving and filing, on behalf of a party, the party's first pleading or paper in the proceeding."

    Florida Rule of Civil Procedure 1.080(b) provides that "[w]hen service is required or permitted to be made upon a party represented by an attorney, service shall be made upon the attorney unless service upon the party is ordered by the court." Boosinger v. Davis, 46 So.3d 152, 154 n.1 (Fla. 2d DCA 2010) (reversing order denying motion for relief where counsel received no notice because court clerk failed to update service list, remanding for reinstatement of cause of action).

    The trial court's failure to provide Ms. Goolsby with the order denying the motion to set aside the default foreclosure judgment warrants Florida Rule of Civil Procedure 1.540(b) relief, even if for no other purpose than to reenter the order with a fresh date to preserve the right to appeal or to file a motion for rehearing. See Hall v. Dep't of Health & Rehabilitative Servs., 487 So.2d 1147 (Fla. 1st DCA 1986); see also, e.g., Smith v. Garst, 289 So.2d 774, 775-76 (Fla. 2d DCA 1974) (remanding case to trial court pursuant to rule 1.540 for reentry of order where counsel for incompetent petitioner not advised of order entry until after appeal deadline); Kanecke v. Lennar Homes, Inc., 543 So.2d 784, 785 (Fla. 3d DCA 1989) (holding where appellant did not receive notice of entry of order until after time for appeal expired, trial court as matter of law must grant rule 1.540(b) relief request to vacate and reenter it to restart time for appeal); Woldarsky v. Woldarsky, 243 So.2d 629, 630 (Fla. 1st DCA 1971) (upholding trial court's setting aside of final judgment pursuant to rule 1.540(b) and reentering it to allow appellant not timely served with copy of order time to appeal) (citing Rogers v. First Nat'l Bank at Winter Park, 232 So.2d 377 (Fla. 1970)).

(2) From the appeals court ruling:

  • Mrs. Paul advised the trial court of Sterling Factors, 968 So.2d 658, in support of her position that the trial court had jurisdiction to grant relief even after a sale. Wells Fargo did not respond, and the trial court did not further question its jurisdiction after the sale. The trial court continued under the impression that, as a matter of law, it could not vacate the judgment.

    Sterling Factors instructs otherwise.

(3) From the appeals court ruling:

  • The cases upon which Wells Fargo relies are inapposite. All address proceedings to foreclose where the mortgagor's health or ill fortune resulted in nonpayment of a mortgage.

    Here, Mrs. Paul argued that the trial court could grant rule 1.540 relief from a default foreclosure based on her excusable neglect in failing to respond to the complaint. See Am. Network Transp. Mgmt., Inc. v. A Super-Limo Co., 857 So.2d 313, 314-15 (Fla. 2d DCA 2003) (holding defendant's failure to respond to complaint because of kidney stones was excusable neglect); Rosenblatt v. Rosenblatt, 528 So.2d 74, 75 (Fla. 4th DCA 1988) (holding trial court has discretion to set aside default judgment for excusable neglect where husband did not answer complaint because he was shot and hospitalized); Leinberger v. Leinberger, 455 So.2d 1140, 1141 (Fla. 2d DCA 1984) (holding evidence that defendant suffered from psychosis was a sufficient ground to vacate default for excusable neglect); Jasson D. Radding, Inc. v. Coulter, 138 So.2d 380, 383 (Fla. 2d DCA 1962) (holding no abuse of discretion to set aside default judgment for excusable neglect based on defendant's affidavit that he failed to answer complaint due to illness); Jax Sani Serva Sys., Inc. v. Burkett, 509 So.2d 1251, 1252 (Fla. 1st DCA 1987) (holding default judgment could be set aside for excusable neglect where defendant was illiterate and wife was emotionally ill when served with process) (citing Leinberger).

    We stress, however, that as we understand them Mrs. Paul's ailments do not constitute a meritorious defense to nonpayment should the trial court set aside the default judgment and reopen the litigation. See Home Owners' Loan Corp., 178 So. at 163.

    Wells Fargo also relies on John Crescent, Inc. v. Schwartz, 382 So.2d 383, 385-86 (Fla. 4th DCA 1980), as precedent for its position that the trial court had no discretion to find excusable neglect. Such reliance is misguided. As illustrated above, our own cases hold that illness or psychological condition can be a valid ground for finding excusable neglect.

    We agree with the First District's decision in Jax Sani Serva System declining to follow Crescent's rationale. 509 So. 2d at 1252. Moreover, Crescent may be an anomaly because subsequently in Rosenblatt, 528 So. 2d at 75, the Fourth District held that the defendant's medical condition could constitute excusable neglect.

(4) From the appeals court ruling:

  • Wells Fargo suggests on appeal that Mrs. Paul's second motion to vacate was an improper second attempt to obtain relief from the final judgment. We disagree.

    Steeprow Enterprises, Inc. v. Lennar Homes, Inc., 590 So.2d 21 (Fla. 4th DCA 1991), cited by Wells Fargo, holds that a second motion is improper if it tries to relitigate issues settled by a previous order denying relief. Id. at 23; see also Crocker Invs., Inc. v. Statesman Life Ins. Co., 515 So.2d 1305, 1306 (Fla. 3d DCA 1987). This rule provides a rationale against successive motions but is not an absolute bar; it should be ignored "where its strict application would work an injustice." Id. at 1307.

    For example, the Third District in Crocker affirmed a trial court's order granting a second motion that raised additional legal grounds revealing that the default judgment was erroneously entered. Id. at 1308; see also Dep't of Transp. v. Bailey, 603 So.2d 1384 (Fla. 1st DCA 1992) (holding that denial of first motion for relief from judgment, where jurisdictional argument was raised but not actually adjudicated, did not preclude review of second motion, which reasserted movant's position more clearly).

    Here, the issues had not been settled at the first hearing; the trial court advised Ms. Goolsby that it was sympathetic to Mrs. Paul's plight and would be inclined to set aside the foreclosure if she set another hearing and presented additional legal grounds that allowed him to intervene.

    At the subsequent hearing, Wells Fargo did not object that the motion was successive. Additionally, an order entered under rule 1.540, like the one appealed here, is itself subject to relief under that same rule. See Intercontinental Props., Inc. v. U.S. Sec. Servs., Inc., 515 So.2d 321, 322 (Fla. 3d DCA 1987); Nichols v. Hepworth, 604 So.2d 574, 575-76 (Fla. 4th DCA 1992).

(5) Florida Rural Legal Services is a non-profit law firm dedicated to providing quality civil legal advice, representation and education for low income people and communities, and provides free civil legal assistance to indigent families and low-income elderly people in thirteen counties in South Central Florida. FRLS also provides legal assistance to migrant workers throughout the state of Florida.

Monday, September 05, 2011

Unanswered Questions On MERS' Role In Washington State Foreclosures To Be Decided By State High Court; Fed. Judge Referral Shortcuts Drawn Out Process

In Washington State, The Oregonian reports:
  • Washington state's highest court is set to determine whether thousands of pending foreclosures can proceed out of court, potentially averting months of conflicting and murky rulings. The court will hear arguments over whether lenders can file foreclosures in the name of MERS, a private company that owns a computerized mortgage registry system.

  • Big lenders, including Fannie Mae, Freddie Mac and several large U.S. banks, created MERS in 1995 to get around cumbersome laws that required paperwork to be filed with county clerks when a mortgage changed hands.


  • If the court rules against MERS, it could force thousands of foreclosures into court that would otherwise have been handled without ever going before a judge. And any decision could bring some order to a hodgepodge of state and federal rulings in wrongful foreclosure complaints -- at least, in Washington. Elsewhere, including Oregon, similar cases continue their long slog toward Supreme Court resolution, a legislative fix or a different tack by lenders.

  • At issue is whether MERS meets the definition of a beneficiary under Washington law, and therefore whether it can legally file a foreclosure on a lender's behalf. "MERS cannot meet that definition because MERS is never a note holder," said Melissa Huelsman, an attorney representing Kristin Bain, one of the homeowners in the case. "They are simply a name on a piece of paper sitting there for the purposes of record keeping."


  • In Washington, the questions went to the Supreme Court at the order of U.S. District Judge John C. Coughenour.(1) That expedites a case that could have taken years to reach the Supreme Court, Huelsman said. "This is absolutely a shortcut to get it there," she said.

For more, see Washington Supreme Court to weigh legality of MERS foreclosures.

(1) See Bain v. OneWest Bank, Case No. C09-0149-JCC (W.D. Wash. March 15, 2011) for Judge Coughenour's order deferring on ruling on this issue of state substantive law until the Washington State Supreme Court decides the issue.

In refusing get sucked into the foreclosure fraud muck and add to the nationwide confusion as to whether MERS can or can't 'soil' foreclosure proceedings with its involvement, Judge Coughenour made these comments in deciding to defer to the Supreme Court of Washington (the court most qualified to decide questions of state substantive law in Washington state) until it rules as to whether MERS has any business playing a role in foreclosures under the law of the state of Washington (bold text is my emphasis; [alteration added] to adjust an apparent judicial/administrative oversight in transcribing the text):

  • This Court does [not] need to add even more pages to the legal discourse discussing whether MERS may serve as a beneficiary in deeds of trust generally. Compare, e.g., Silvas v. GMAC Mortg., LLC, No. CV-09-265-PHX-GMS, 2009 WL 4573234 (D. Ariz. 2009) (favoring MERS); Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1188-89 (N.D. Cal. 2009) (favoring MERS), with, e.g., Mortg. Elec. Registration Sys., Inc. v. Sw. Homes of Ark., 301 S.W.3d 1 (Ark. 2009) (favoring borrower); In re Agard, No. 810-77338-reg (E.D.N.Y. Bankr. Feb. 10, 2011) (favoring borrower). See also Christopher L. Peterson, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System, 78 U. Cin. L. Rev. 1359 (2010).

    Nor will the Court discern, more narrowly, whether MERS may serve as a beneficiary under Washington's Deed of Trust Act. That answer remains patently unclear. See Certification Order, Vinluan v. Fidelity National Title & Escrow Co., No. 10-2-27688-2 SEA (King Cnty. Superior Ct. Jan. 18, 2011). Because a state circuit court has recently certified this very question to the Washington Supreme Court, this Court declines to decide the issue before the Washington Supreme Court evaluates it.


  • Plaintiff admits that she has been delinquent in her mortgage payments. A ruling favorable to Plaintiff in this case and others like it cannot and should not create a windfall for all homeowners to avoid upholding their end of the mortgage bargain—paying for their homes. But a homeowner's failure to make payments cannot grant lenders, trustees, and so-called beneficiaries like MERS license to ignore state law and foreclose using any means necessary. Whether these and similar defendants complied with Washington state law remains unclear.


  • The Court STAYS this action pending the Washington Supreme Court's decision in Vinluan v. Fidelity National Title & Escrow Co., No. 10-2-27688-2 SEA. Counsel for the parties shall notify the Court when the Washington Supreme Court decides whether to accept certification and, if so, when it renders an opinion.


Note: Judge Coughenour deserves to be commended for:

  • making it clear that a homeowner's mere failure to make house payments does not "grant" the banksters "license" to trample over the rule of law when carrying out foreclosure proceedings (a point that seems to fall outside the intellectual grasp of the banksters, and their enablers and apologists),

  • taking this position, notwithstanding any personal feelings he may have against attempts by homeowners to score, as he put it, "a windfall" by dodging their responsibility for paying for what they bought (regrettably, many trial judges find great difficulty in setting aside their personal feelings in this regard while seemingly ignoring the fraudulent conduct by the banksters and their foreclosure mill conspirators - a point evidenced by the growing number of lower court rulings being challenged and reversed on appeal).

50-State AG Foreclosure Fraud Probe Chief: Our Settlement Won't Release Banksters From 'All' Civil Liability Or 'Any' Criminal Liability

Bloomberg reports:
  • The 50-state attorney general group investigating mortgage foreclosure practices won’t release banks from all civil, or any criminal, liability in a settlement, Iowa Attorney General Tom Miller said.

  • Miller said criticism of the multistate case was based on the “false notion” that its organizers were prepared to release the banks from all liability, including criminal liability. New York Attorney General Eric Schneiderman has been portrayed as resisting that position, Miller wrote in a letter to New York lawmakers who complained about Schneiderman’s removal from an executive committee working on the agreement.

For more, see Iowa Says State AG Accord Won’t Release Banks From Liability.

Federal Reserve, NYS Bank Regulator Announce Robosigner Settlements With Goldman, Loan Servicers

The Wall Street Journal reports:
  • The Federal Reserve announced an enforcement action against Goldman Sachs Group Inc., saying the company's mortgage-servicing unit had engaged in "a pattern of misconduct and negligence" in its handling of home-mortgage loans.

  • The Fed's action on Thursday seeks changes in mortgage-servicing practices and unspecified monetary damages. It came as Goldman reached an agreement with New York state banking regulators over wrongful foreclosures,(1) allowing it to complete the Sept. 1 sale of its Litton Loan Servicing unit to Ocwen Financial Corp. A spokesman for Goldman Sachs declined to comment.

  • The Fed action is the latest response by government officials investigating mortgage-servicing irregularities including "robo-signing," in which bank employees signed foreclosure documents without reviewing case files as required by law. Federal and state officials continue to pursue a settlement with the nation's largest mortgage companies over allegations they mishandled home loans.

For more, see Fed Hits Goldman With Mortgage Order (may require paid subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link).

(1) See Superintendent Lawsky Announces Agreement with Goldman Sachs, Ocwen, Litton on Groundbreaking New Mortgage Practices (Sale of Goldman’s Subsidiary, Litton, Conditioned on New Servicing Practices; Goldman to Significantly Reduce Loan Amounts for Those Hit by Financial Crisis).

Sunday, September 04, 2011

Federal Regulator Suit: Banksters Made False Claims Regarding Compliance w/ Sound Underwriting Guidelines When Making, Peddling Securitized Home Loans

Reuters reports:
  • A U.S. regulator sued a number of major banks on Friday over losses on more than $41 billion in subprime mortgage bonds, which may hamper a broader government mortgage settlement with banks.

  • The lawsuits by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, came as a surprise to the market and weighed on bank shares. The lawsuits could add billions of dollars to the banks' potential costs at perhaps the worst possible time for the industry.

  • The FHFA accused major banks, including Bank of America Corp, its Merrill Lynch unit, Barclays Plc, Citigroup Inc and Nomura Holdings Inc of selling bonds backed by mortgages that should have never been packaged into securities.


  • While the ultimate amount FHFA will seek is still unclear, [an unnamed mole reportedly familiar with the matter] said it could top the $20 billion being discussed by the banks and the state attorneys general.

  • "Defendants falsely represented that the underlying mortgage loans complied with certain underwriting standards and guidelines, including representations that significantly overstated the ability of the borrowers to repay their mortgage loans. These representations were material to the GSEs, as reasonable investors, and their falsity violates (the law) and constitutes negligent misrepresentation, common law fraud, and aiding and abetting fraud," the FHFA said in the suit against Merrill Lynch.

For more, see U.S. regulator sues major banks over mortgages.

See also, The New York Times: U.S. Is Set to Sue a Dozen Big Banks Over Mortgages:

  • The Federal Housing Finance Agency suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter.

AP Report: Banksters' Dubious Docs Dating Back To 1990s Threaten Land Recording System Across U.S.; Title To Tens Of Thousands Of Properties Infected?

The Associated Press reports:
  • Counties across the United States are discovering that illegal or questionable mortgage paperwork is far more widespread than thought, tainting the deeds of tens of thousands of homes dating to the late 1990s. The suspect documents could create legal trouble for homeowners for years.(1)

  • Already, mortgage papers are being invalidated by courts, insurers are hesitant to write policies, and judges are blocking banks from foreclosing on homes. The findings by various county registers of deeds have also hindered a settlement between the 50 state attorneys general who are investigating big banks and other mortgage lenders over controversial mortgage practices.


  • But now, as county officials review years' worth of mortgage paperwork, in some cases combing through one page at a time, they are finding suspect signatures — either signed with the same name by dozens of different people, improperly notarized or signed without a review of the facts in the paperwork — on all sorts of mortgage documents, dating as far back as 1998, The Associated Press has found.

  • "Because of these bad titles, property owners can't prove they own the properties they think they bought, and banks can't prove they had the right to sell them," says Jeff Thigpen, the registrar of deeds in Guilford County, N.C. In Guilford County, where Greensboro is located, a sample of 6,100 mortgage documents filed since 2006 turned up 74 percent with questionable signatures.


  • Widespread robo-signing that stretches back a decade or more could create problems for homeowners. Regulators have so far not asked lenders to clean up the potentially millions of suspect documents filed in the past decade or earlier. That troubles some banking experts, including Sheila Bair, who until early July was chairwoman of the Federal Deposit Insurance Corp.

  • "We do not yet really know the full extent of the problem," Bair said in written remarks to the Senate Banking Committee. She and others have called for a comprehensive study on the extent of the fraudulent signatures in mortgage documents.

  • If documents with robo-signed signatures are challenged in court, judges could question the ownership of the properties, says Katherine Porter, a professor at University of California Irvine School of Law and an expert on consumer credit law. The consequences extend to homeowners in good standing when they try to sell.

  • If invalid documents are discovered in the chain of ownership, it could delay the sale or make it difficult for buyers to get a mortgage because title insurers won't write a policy for the property, says Justin Ailes, vice president of government affairs of the American Land Title Association, a trade association representing the title insurance industry. Banks and other mortgage lenders won't write a home loan without title insurance.


  • "The banks are playing with the integrity of the land record system," says John O'Brien, the recorder of deeds from Salem, Mass. [...] O'Brien, the recorder of deeds from Massachusetts, says he's only responsible for one county out of more than 3,000 in the U.S. "Federal regulators with a lot more authority than me have to step up to the plate and help correct this," he says.(2)

For more, see Robo-signed mortgage docs date back to late 1990s (if link expires, TRY HERE).

(1) For additional background on the 'chain of title' problem arising by reason of robosigning, see:

(2) See Home Preservation Network: John O'Brien Calls On CEOs and AGs to Come to Salem:

  • John O’Brien, Southern Essex County Register in Salem, Massachusetts has been leading the national effort to hold lenders accountable, and has refused to record robo-signed documents has invited the CEO’s of the nation’s largest banks and all of the state’s attorneys generals to come to the Salem Registry and view first-hand the damage that has been caused to thousands of Essex County homeowners’ chains of title.

  • It's like a tornado came through here,” said Register John O'Brien, referring to the financial havoc and damage done to property records at the Registry of Deeds. “Following any disaster, the powers that be generally show up to assess the damage. That is what I would like these major lenders and the Attorneys General to do – sooner than later,” O’Brien said.

Deed Recording Head Invites Banksters, State AGs To Survey Robosigner-Induced Wreckage To Local Land Records; "It's Like A Tornado Came Through Here!"

The Home Preservation Network reports:
  • John O’Brien, Southern Essex County Register in Salem, Massachusetts has been leading the national effort to hold lenders accountable, and has refused to record robo-signed documents has invited the CEO’s of the nation’s largest banks and all of the state’s attorneys generals to come to the Salem Registry and view first-hand the damage that has been caused to thousands of Essex County homeowners’ chains of title.(1)

  • It's like a tornado came through here,” said Register John O'Brien, referring to the financial havoc and damage done to property records at the Registry of Deeds. “Following any disaster, the powers that be generally show up to assess the damage. That is what I would like these major lenders and the Attorneys General to do – sooner than later,” O’Brien said.

  • O’Brien believes that a sweetheart deal, in the form of a settlement to grant lenders immunity from prosecution, is in the works.

For more, see John O'Brien Calls On CEOs and AGs to Come to Salem.

(1) For additional background on the 'chain of title' problem arising by reason of rob0signing, see:

Media Coverage Raises The Heat On Foreclosure Probe, Shining Light On Evidence Of Continuing Sloppy, Fraudulent Bankster Practices

From the Columbia Journalism Review's The Audit blog:
  • It’s clear that the banks aren’t much chastened by the foreclosure scandal that erupted last fall and which threatens to cost them tens of billions of dollars.

  • An American Banker investigation [] shows shows that several banks are still fraudulently backdating documents to foreclose on homeowners.(1) And it’s not the first to show this. Last month, an outstanding Reuters probe by Scot Paltrow showed similar behavior [...].(2)

  • These stories raise serious questions for the Obama administration and states attorneys general led by Iowa’s Tom Miller who have been rushing to settle and release the banks from liability for fraud. How can you release folks who’ve repeatedly shown that they’ll ignore the law and even recent settlements promising they’ll obey it?

For more, see The Foreclosure Scandal Continues (American Banker and Reuters show banks thumbing their nose at the law).

(1) American Banker: Robo-Signing Redux: Servicers Still Fabricating Foreclosure Documents:

  • Some of the largest mortgage servicers are still fabricating documents that should have been signed years ago and submitting them as evidence to foreclose on homeowners.

(2) Reuters: Special report: Banks still robo-signing.

See also: