Saturday, October 08, 2011

Title/Closing Attorney Enters Guilty Plea In $1M+ Escrow Funds Ripoff; Surrenders Law License, Ends 44-Year Career With Thud

In Henrico County, Virginia, the Richmond Times Dispatch reports:
  • A Henrico County lawyer pleaded guilty Wednesday to embezzling more than $1 million in Bank of America mortgage and foreclosure funds and will be sentenced in January.(1) In a brief hearing, William Orr Smith, 71, appeared in Henrico Circuit Court and pleaded guilty; Smith's lawyer has said for months that Smith would not contest the charges and that he has cooperated with authorities.

  • Smith also cooperated with Virginia State Bar investigators in a separate investigation and surrendered his law license in June.

  • Special Prosecutor Tracy Thorne-Begland said Wednesday that Smith's law practice and his Montbrook Title LLC grew rapidly five years ago during the housing boom, at one point swelling to as many as a dozen employees.

  • That growth found Smith with shortages of cash as the business grew, and Smith began using money from different accounts to make payments on immediate obligations, Thorne-Begland said. The scheme lasted about five years and began to collapse as the housing market collapsed.

  • Thorne-Begland said there is no evidence that Smith diverted embezzled funds into his private holdings or to embellish his lifestyle, but he said he will ask for a sentence above sentencing guidelines, which could come in under less than a year.

  • Smith, of [...] western Henrico, had practiced law for 44 years. Also charged is Donna M. Allen, 37, of Dinwiddie County, a secretary to Smith, who is accused of extorting about $20,000 from him by threatening to tell authorities about his scheme.

Source: Henrico lawyer pleads guilty to theft.

(1) The Virginia State Bar's Clients' Protection Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

Cop Pinched For Allegedly Selling Trailer Home He Didn't Own; Pocketed $8K From Unwitting Buyer Plus $1K In Unremitted Lot Rent

In West Palm Beach, Florida, The Palm Beach Post reports:
  • A Palm Beach County Sheriff's deputy was arrested and charged with three counts of grand theft [...] for allegedly selling a trailer home that didn't belong to him.

  • Sheriff's deputy Jose Antonio Claudio, 47, who was named Deputy of the Month in February 2010, is being held at the Palm Beach County Jail in lieu of $9,000 bond. He is charged one count of grand theft at a value of no more than $10,000 and two counts of grand theft at a value of no more than $5,000.


  • The investigation would later reveal that Claudio allegedly sold a trailer home [...] to Myra Longoria on Aug. 7, 2008 for $8,000 and kept the money even though he never held the title to it, the affidavit said.

  • Claudio allegedly bought the same property from Riverstone Communities for $6,000 a week after he sold it to Longoria, the affidavit stated. He also collected $525 rent for the lot twice without the company's authorization and did not give the checks to the company.

For the story, see Grand theft charges filed against Palm Beach County sheriff's deputy.

Ohio AG To Pursue Home Improvement Ripoffs As Criminal Prosecutions When Appropriate; Norm Has Been To Treat Cases As 'Civil Matters'

From the Office of the Ohio Attorney General:
  • A home-improvement scam prosecuted as a criminal offense led to a guilty plea by James Burchett of Amelia, Ohio, who was sentenced today in Hamilton County Court to 18 months in prison.

  • Such scams were normally handled as civil matters, but Ohio Attorney General Mike DeWine has made it a priority to treat these cases as criminal when appropriate.

  • "We have added additional people and resources to aid in the investigation and prosecution of these consumer protection cases," said Attorney General DeWine. "Working with local prosecutors' offices and law enforcement, we want to send the message to scammers that Ohio is not a good place for them to do business."

  • Burchett pled guilty to two counts each of theft and theft from the elderly. His crimes cost consumers $17,000 and included:

    1) Accepting almost $13,000 from an 87-year-old woman to install a fence. The job was partially done but the workmanship was shoddy.(1)

    2) Taking more than $1,000 for a concrete porch installation. The job was not done.

For the Ohio AG press release, see Home-Improvement Scammer Receives 18 Months in Prison.

(1) There seems to be a misconception among many cops, investigators and others in law enforcement that the only time you can prosecute a home improvement scam is if the scammer pockets the cash from the victim and does no work at all. The erroneous view is that if the scammer performs some work of value, the case falls outside the scope of criminality and the victims' only recourse is to go after scammers themselves by suing them in court.

The Ohio AG's action in this case is proof that such a view is erroneous, and is evidence that any cop or investigator who advises a victim that the case is a 'civil matter' is either clueless or someone who just doesn't feel like investigating the case.

Minimizing Impact Of 'Transfer Trauma' To Residents Of Nursing Homes Facing Closure Among Benefits Of New California Elderly Abuse Prevention Laws

In Sacramento, California, The Associated Press reports:
  • Gov. Jerry Brown signed a series of bills into law Friday designed to protect elderly people, including two that require care facilities to notify their residents of possible closures and another intended to expedite reporting of suspected elder abuse.

  • AB313 by Sen. Bill Monning, D-Santa Cruz, requires residential facilities to conspicuously post notices for at least 30 days and provide written notices to residents and their responsible parties if the facility's license is in jeopardy. The bill was introduced after a nursing home in Santa Cruz was ordered to close last year and residents were only given two weeks of notice.

  • "These protections will ensure residents have enough time to prepare for a move and minimize the impact of transfer trauma," Monning said.

  • A similar bill by Sen. Mark Leno, D-San Francisco, also requires such facilities to provide notices to residents of possible closures. SB897 would protect residents from abruptly have to relocate by requiring facilities to notify them in writing of possible foreclosure or severe financial distress.

  • Other legislation is aimed at protecting the elderly from financial theft or abuse. SB718 by Sen. Juan Vargas, D-San Diego, would establish a confidential Internet reporting system for elder abuse. The bill was written in response to budget cuts that decreased the number of personnel able to handle calls from mandated reporters or the general public about elder abuse.

  • The Internet system requires that people provide the same information they would over the phone but without having to wait to report abuse over the elder abuse phone line. "This effective reporting system will ensure that our seniors' voices are heard and abuses are not overlooked," Vargas said last month.

  • A bill by Bob Blumenfield, D-Van Nuys, protects elderly people during financial abuse trials. AB1293 would give courts the ability to seize and freeze a defendant's assets in cases where $100,000 or more is suspected of being stolen or embezzled from an elderly person's property.

  • Blumenfield says the bill will prevent people accused of stealing from seniors from using those assets to fund their own defense. It also ensures the seniors have the opportunity for receiving restitution.

  • A law passed in 2005 mandating that financial institutions, such as banks, report elder financial abuse has now been made permanent. SB33, by Sen. Joe Simitian D-Palo Alto, eliminates the 2013 sunset date of SB1018 and continues to require loan or credit employees to report financial abuses if they notice them in contracts involving a senior's financial matters.

  • The bills are among eight, some technical in nature, that Brown signed relating to elder abuse.

Source: Governor signs bills intended to protect elderly.

BofA To Consider Rebranding Effort? Possible Name Change Seen By Some To Be In Alignment With Recent Behaviors By Bankster Giant

In Harfold, Vermont, The reports:
  • Insiders in the banking industry confide that Bank of America is currently considering a name change to Bank Against America, a change which would certainly be in alignment with recent behaviors by the banking[ster] giant.

  • Bank of America announced [last] week that they would begin penalizing customers who left home without enough cash to pay for their purchases. Long seen as the wave of the future, the safe, responsible debit card now itself carries a price tag. A five-dollar fee will now be assessed to those account holders who dare to enter the 21st century.

  • "I guess we need to turn back the clock," said Harfold resident and Bank of America customer, Silvia Niell. "I guess everybody has carry around a wad of bills in their pockets like gas station attendants."

  • This press comes fresh on the heels of the arrests of two dozen protesters in Boston. Demonstrating against Bank of America's foreclosure practices at the bank'a offices, police obliged the hard-done-by citizens by throwing them into the slammer.

  • Bank of America spokesperson Crawford Tejay dismissed the protest as small potatoes. "Bank of America feels it's time America woke up. Gone are the days when your friendly, neighborhood banker was there to help you start a business or buy your first home. That same banker is there to make money for the bank. End of story."

Source: Bank of America to consider name change: Bank Against America (One insider claims that B. of A. will soon replace their ATM machines with rigged slot machines).

Friday, October 07, 2011

NYC Feds Squeeze Foreclosure Mill Sweatshop For $2M In Fines, Agreement To Revamp Practices In Probe Into Filing Of Allegedly Misleading Pleadings

In New York City, the New York Law Journal reports:
  • One of New York state's biggest foreclosure law firms will revamp its practices and pay a $2 million fine to settle a six-month probe by the Southern District U.S. Attorney's Office that found it had filed misleading pleadings, affidavits and mortgage assignments in state and federal courts.(1)

  • In a settlement agreement announced yesterday, the firm, Steven J. Baum, P.C., of Amherst, will implement a series of internal controls including a pledge not to bring foreclosure actions without reviewing the original promissory notes or reviewing a copy of the note from its client or custodian of the document.

  • The thrust of that condition is similar to an order issued almost a year ago by Chief Judge Jonathan Lippman directing lawyers for lenders to file an affirmation that they have taken reasonable steps to verify the accuracy of papers they file to support residential foreclosures (NYLJ, Oct. 21, 2010).

  • The 12-page agreement also prohibits the firm's employees from executing mortgage assignments as officials or representatives of MERS, an electronic mortgage registry system.

  • "In mortgage foreclosure proceedings, there are no excuses for sloppy practices that could lead to someone mistakenly losing their home," Southern District U.S. Attorney Preet Bharara said today in a statement. "Homeowners facing foreclosure cannot afford to have faulty paperwork or inadequate evidence submitted, and today's agreement will help minimize that risk."

For more, see Upstate Foreclosure Firm Fined $2 Million, Agrees to Overhaul Its Filing Practices.

For the U.S. Attorney press release, see Manhattan U.S. Attorney Announces Agreement With Mortgage Foreclosure Law Firm To Overhaul Its Practices And Pay $2 Million Fine.

(1) Apparently, not everyone's happy with the settlement. See New York Post: Critics: Feds went easy on NY's largest foreclosure mill.

Bay State AG Gives 'Thumbs Down' On 50-State AG Foreclosure Fraud Probe; Begins Preparing Troops, Loading Up Litigation Artillery

Bloomberg reports:
  • Massachusetts Attorney General Martha Coakley said she may sue major banks after she “lost confidence” that they will reach an adequate agreement to resolve disputes over foreclosure practices.


  • I have lost confidence that the banks will bring to the table an agreement that properly holds them accountable for wrongful foreclosures,” Coakley, 58, said in a statement today. “Because our office for some time has anticipated that result, we have begun preparing for litigation.”

  • California Attorney General Kamala Harris said last week that she was rejecting a proposed settlement with the banks and would pursue her own mortgage investigation, according to a letter she wrote to the U.S. Justice Department and Iowa Attorney General Tom Miller, who is leading talks for the states.

    State Probes

  • New York Attorney General Eric Schneiderman, Delaware Attorney General Beau Biden and Nevada Attorney General Catherine Cortez Masto are also conducting mortgage-related investigations as settlement talks with the banks continue.

For more, see Massachusetts Attorney General Cites ‘Lost Confidence’ in Banks, May Sue.

Developer Gets 9 Years For Loans Obtained On Unbuilt Homes, Fictional Addresses; Failure To Record Liens Led To Multiple 'Reselling' Of Properties

From the Office Of The U.S. Attorney (Brooklyn, New York):
  • [I]n U.S. District Court in Brooklyn, Thomas Kontogiannis, a New York real estate developer who led a mortgage fraud conspiracy resulting in more than $98 million in losses, was sentenced to 108 months of imprisonment for conspiracy to commit bank fraud. United States District Judge Kiyo A. Matsumoto imposed the sentence pursuant to Kontogiannis’s October 2010 guilty plea. Seven co-defendants previously pleaded guilty.


  • Kontogiannis defrauded Washington Mutual Bank (WAMU) and DLJ Mortgage Capital, Inc. (DLJ), a subsidiary of Credit Suisse, in connection with his development of two tracts of land in Brooklyn and Queens. He purchased and subdivided Loring Estates, located in East New York, Brooklyn, and Edgewater Development, located in College Point, Queens, and then staged sales of the properties financed by mortgage loans to straw buyers. Kontogiannis directed others to prepare false loan files to create the appearance that the straw buyers were creditworthy homeowners.

  • The mortgages were supported by fraudulent appraisals depicting finished homes, when the buildings had yet to be built or had fictional addresses, and the mortgage files contained fraudulent title abstract reports and other documentation designed to indicate that the seller, a Kontogiannis-controlled entity, had clear title to convey and that the lender’s interest was protected by title insurance.

  • The loans were financed by lenders controlled by Kontogiannis, including Interamerican Mortgage Corp., later known as CIP Mortgage Corp. and Coastal Capital Corp. After the loans were closed, Kontogiannis ensured that the mortgages and deeds were not recorded, thereby permitting him to “sell” the same property repeatedly. Eventually, Kontogiannis sold the loans to WAMU or DLJ.

  • In an effort to conceal the multiple sales of the same properties, Kontogiannis changed the addresses of properties located in East New York, Brooklyn, to addresses in neighboring Howard Beach, Queens. In addition, he directed others to make monthly payments on the mortgages, ensuring that none of the mortgages became delinquent. The payments ceased in 2007, with approximately $98 million in principal outstanding on the fraudulent mortgages.

For the U.S. Attorney press release, see Leader Of $98 Million Mortgage Fraud Sentenced To 108 Months.

Lack Of Government Oversight Of HAMP Program Allows Banksters To Go Unpunished For Mishandled Loan Mod Requests

ProPublica reports:
  • Why has the administration’s flagship foreclosure prevention program been so ineffective in helping struggling homeowners get loan modifications and stay in their homes? One reason: The government’s supervision of the program has apparently ranged from nonexistent to weak.

  • Documents obtained by ProPublica — government audit reports of GMAC, the country’s fifth-largest mortgage servicer — provide the first detailed look at the program’s oversight. They show that the company operated with almost no oversight for the program’s first eight months.

  • When auditors did finally conduct a major review more than a year into the program, they found that GMAC had seriously mishandled many loan modifications — miscalculating homeowner income in more than 80 percent of audited cases, for example. Yet, GMAC suffered no penalty. GMAC itself said it hasn’t reversed a single foreclosure as a result of a government audit.

  • The documents also reveal that government auditors signed off on GMAC loan-modification denials that appear to violate the program’s own rules, calling into question the rigor and competence of the reviews.

  • Some of the auditors’ mistakes are “appalling,” said Diane Thompson of the National Consumer Law Center, an advocacy group. “It suggests the government isn’t taking the auditing process seriously.”


  • The audits of GMAC, though revealing, give only a limited view into the program, because the Treasury has refused to release the documents for other servicers. For more than a year, through a Freedom of Information Act request, ProPublica has sought the audits of 10 of the largest program participants. The Treasury provided only GMAC’s audits, because the company consented to their release. ProPublica continues to seek all of the reports.

For more, see Secret Docs Show Foreclosure Watchdog Doesn’t Bark or Bite.

Trio Face Racketeering Charges In Alleged Vacant Foreclosed Home Hijacking Scam; Suspect: 'Nobody Told Me Snatching Empty Houses Was Illegal!'

In DeKalb County, Georgia, WSB-TV Channel 2 reports:
  • A DeKalb County grand jury has indicted three people on charges of racketeering, after a yearlong Channel 2 investigation exposed their alleged scheme to take over foreclosed homes. Decatur police arrested Susan Weidman, the woman at the center of the investigation, at a home on Champlain Street Tuesday morning.

  • A Channel 2 investigation in May revealed a bogus court document Weidman is accused of filing, claiming the home was abandoned and that she now owns it. It's actually a foreclosure owned by Chase Bank.


  • The indictment alleges Weidman recruited Ian Greye to pose as a renter at the home. Prosecutors said Greye and Weidman used a fake lease between them to keep law enforcement from forcing them out of the home for several months.

  • "When law enforcement would question why they were there, they would present the bogus lease and say, ‘Well, we have right to be here,’” DeKalb County District Attorney Robert James said.

  • He said Weidman ran the same scheme in Forsyth County. Matthew Lowery was charged as the alleged “renter” of a home on Shade Tree Way in Cumming. Another Channel 2 investigation exposed that portion of the story just last week, including questions as to whether Chase Bank wanted to pursue criminal action against Weidman for that case.

  • Chase Bank ultimately decided to allow DeKalb County to prosecute both cases together, along with a third property on Spalding Hills Drive in Sandy Springs. The racketeering indictment cites burglary, theft by taking, and mail fraud, among other charges. "That enterprise was for the purpose of taking homes. It's complicated, but it's simple," added James.


  • Even as officers led her away in handcuffs, Weidman insisted she thought what was she was doing was legal. "I feel a little bit entrapped, that if this was illegal, why didn't they put something in writing and explain that to me?” she told Fleischer.

For more, see Subject of Ch. 2 house-stealing investigation indicted on racketeering charges.

Fannie Continues Using Unnamed Florida Foreclosure Mill Sweatshop Despite It Being Fired By Freddie Earlier In Year; Says Files Transfer Too Costly

The Palm Beach Post reports:
  • Federal mortgage backer Freddie Mac fired a Florida law firm this year for "foreclosure processing abuses," but sister company Fannie Mae continues to use the firm because it's too expensive to transfer files to new attorneys.

  • A Federal Housing Finance Agency Inspector General report released Tuesday criticized the two entities for, among other things, a lack of communication about problems within law firms used to take people's homes.

  • But, even when Freddie Mac told Fannie Mae why it was firing the Florida firm, Fannie decided to retain the law firm's services, noting that the cost of moving cases "would be substantial."

  • According to the report, Fannie Mae is expecting a $5.5 million bill for transferring files from the Law Offices of David J. Stern to new attorneys. Both Fannie and Freddie fired the Plantation-based Stern firm in November.

  • The firm Freddie fired but Fannie retained handled 43 percent of Fannie Mae's foreclosure cases in Florida, the report notes. While the firm is not identified in the report, Freddie Mac cut ties with the Fort Lauderdale-based Law Offices of Marshall C. Watson in early March. The Watson firm remains on Fannie Mae's retained attorney network list.

For more, see Fannie Mae sticking with fired Florida law firm.

Thursday, October 06, 2011

NY Judge Orders Halt Of City Of Buffalo Garbage Fee Foreclosures; Homeowners Still On Hook For Administrative Fees

In Buffalo, New York, WIVB-TV Channel 4 reports:
  • Hundreds of Buffalo homeowners who hadn't paid their garbage or sewer fees had their homes saved from auction by a judge on Monday. A judge's intervention has spared hundreds of Buffalo residents from losing their homes, but they're still stuck paying hundreds of dollars in foreclosure fees. All of this, over $50 or $100 in back-owed sewer or garbage bills.

  • Half of the houses that were supposed to be part of this year's foreclosure auction in the city of Buffalo belong to people whose only crime was being late to pay garbage fees or sewer taxes.

  • WNY Law Center supervising attorney Lauren Breen said, "Out of the, I think it was 5,600 properties on the list in January, 52 percent of those properties -- or more than 2,900 of those properties -- were on the list for just owing the garbage fee."

  • In some cases, the residents owed the city less than $50. Erie County Judge Thomas Franczyk yanked the properties off the foreclosure list, after the WNY Law Center filed a class-action lawsuit on behalf of the homeowners last Wednesday.

For more, see Foreclosures over garbage fees halted.

See also, Judge Makes Dramatic Ruling on Buffalo’s Tax Foreclosures.

Federal Agency Inspector General: Fannie, Freddie Knew Of Dubious Foreclosure Mill Sweatshop Practices & Dragged Feet In Taking Appropriate Action

Housing Wire reports:
  • A Fannie Mae shareholder sounded the alarm on foreclosure abuses at law firms handling foreclosures for the government-sponsored enterprises back in 2003, but it took regulators seven years to aggressively tackle the problem, the Federal Housing Finance Agency Office of Inspector General said in a report.

  • The report highlights concerns industry insiders had for years about the practices of default servicing firms in a network of firms handling Fannie Mae and Freddie Mac foreclosures.


  • One of the major cases breaking last year involved the Law Offices of David J. Stern, a Florida firm that ended up under investigation for its foreclosure practices. The inspector general's report said, "There were indicators prior to August 2010 that could have led FHFA to identify the heightened risk posed by foreclosure processing within Fannie Mae’s attorney network. These indicators included significant increases in foreclosures, which accompanied the deterioration of the housing market; consumer complaints alleging improper foreclosures; contemporaneous media reports about foreclosure abuses by Fannie Mae’s law firms; and public court filings in Florida and elsewhere highlighting such abuses."

For more, see GSEs knew of foreclosure attorney abuses in 2003: FHFA-OIG.

For the OIG's reports, see FHFA’s Oversight of Fannie Mae’s Default-Related Legal Services (AUD-2011-004, September 30, 2011).

Financially Strapped Homeowner Victimized By Sewer Service In Foreclosure Action Involving Once-Prominent Florida Law Firm Sweatshop Operator?

In Cape Coral, Florida, The News Press reports:
  • Paula Dobberstein's story starts out like so many others who are in foreclosure. And unfortunately, it looks like it's ending up like many others, too - with attorneys for the banks and mortgage companies using falsified documents and fabrications to deny homeowners' rights.

  • "This is the most horrible thing I've been through in my life," she said. In 2007 Dobberstein took out a $544,000 loan to refinance her Cape Coral home. The interest rate on the loan was 8.375 percent and her monthly mortgage payment was $2,149.46.

  • Soon after, Dobberstein, a registered nurse, took a $10-an-hour pay cut, she said. She can rattle off all the loan modifications and foreclosure prevention programs she tried but failed to get. She would submit documents for months, believing things were working out, and then would learn she wasn't approved. This went on for more than three years.

  • While Dobberstein was working things out, the David J. Stern law firm in Plantation was stealthily foreclosing on her home.

  • Dobberstein wasn't served notice of the foreclosure. The law firm told the court it tried to serve her, but her home was unoccupied. The firm said she didn't have a phone number or a driver's license. In an affidavit that was not properly notarized, an attorney swore he was, "(u)nable to determine if Defendant(s) IS living or dead."

  • Public records show Dobberstein very much alive and living in Cape Coral since 1989. LexisNexis, a subscription database of public information, lists her home phone number. The Department of Highway Safety and Motor Vehicles records show Dobberstein has had a Florida license and renewed it twice at the same Cape Coral address the law firm said was an unoccupied home.

  • Stern's law firm has closed. Florida's attorney general's office is investigating the firm because it, "Appears to be fabricating and/or presenting false and misleading documents in foreclosure cases," the website states.

For more, see Woman in Cape faces loan nightmare.

Homeowner Scores Foreclosure Win Against HOA Over Unpaid $4.70 Charge That Ballooned To $3K

In Melbourne, Florida, Florida Today reports:
  • For Geeta Ramcharitar, the ordeal began with a past due balance of $4.70 owed to her condominium association in Melbourne’s Venetian Village — and ballooned from there. The threatened end: foreclosure on her two-bedroom condo.

  • The 56-year-old grandmother got lucky. County Court Judge William McLuan tossed out the foreclosure case brought by her condo association, ordering each side to pay their own attorney’s fees.

  • But while Ramcharitar’s situation sounds extreme — a foreclosure case that began over what initially was such a paltry sum — she’s hardly alone. [...] Marlene Kirtland, the attorney representing Becker & Poliakoff, the law firm representing the condo association, also declined to comment.

  • The exact origins of Ramcharitar’s dispute are unclear, but records show she owed a past due balance of $4.70 to the association in August 2009 and became subject to monthly late fees.

  • By November of that year, certified letters sent by Becker & Poliakoff said the association intended to foreclose for nonpayment of dues. At the time, her total outstanding fees were $1,248.89. Of that total, $760 were for attorney fees. By the middle of 2010, the attorney fees for all the paperwork sent to her had ballooned to about $3,000.

  • An effort at mediation failed. That led to a non- jury foreclosure trial this summer. “This was completely unnecessary,” said Ramcharitar’s lawyer, Ken Weaver, who disputed the charges against her.

  • Primarily a criminal defense lawyer, he had never defended a foreclosure case, but “I was compelled by a sense of justice, this woman needed a defense.”

  • Weaver said he’s grateful the case was tossed out, and complained that the practice that started the problem is predatory. He said: “She is relieved that the court was able to understand the issue and apply the rules so that this lady could keep her house.”

For the story, see Grandmother nearly loses condo to foreclosure after $4.70 fee balloons to nearly $3,000.

Wednesday, October 05, 2011

Law School Consumer Protection Clinic Moves To Strike Robosigner-Tainted Affidavits In Bill Collection Suits Filed By National 'Zombie Debt' Buyer

In Baltimore, Maryland, The Baltimore Sun reports:
  • The University of Maryland School of Law's consumer-protection clinic is trying to get key documents stricken from potentially hundreds of debt-collection cases over an issue more commonly thought of as a foreclosure problem — robo-signing.

  • Midland Funding, which buys old consumer debts and sues to collect, filed affidavits signed by representatives who swore they had personal knowledge of the debts even though they did not, a federal court in Ohio found as part of an August class-action settlement.

  • Midland employees daily signed 200 to 400 of such "false and misleading" affidavits for years, according to an order by U.S. District Judge David A. Katz. Though it insisted the facts in the affidavits were accurate, Midland agreed as part of the settlement to change its practices.

  • But the University of Maryland consumer-protection clinic says the company and affiliate Midland Credit Management have more than 400 active cases in Maryland that rely on affidavits filed during the period covered by the class-action settlement — January 2005 through mid-March of this year.

  • Some of the cases have not been ruled on by a judge, while others are still active because Midland was awarded a judgment that hasn't been fully paid off. Midland's parent, the publicly traded Encore Capital Group, said it would stand by its affidavits in Maryland.


  • Industry critics say the companies typically purchase scant information about the debts and are sometimes several purchasers removed from the credit-card company or other creditor that originally sold it.

  • "A fifth-generation purchaser of debt cannot possibly have personal knowledge of what happened when the account was created and what happened with each prior generation of debt buyer," said Peter A. Holland, an attorney who runs the University of Maryland clinic.

  • Last week the clinic began filing motions in several Midland cases to get the affidavits stricken from the record in those lawsuits. The clinic also asked the District Court to take note of "fraudulent, robo-signed" affidavits in all of Midland's 2005 through mid-March cases in Maryland.


  • Lindsay Warnes, a staff attorney for Maryland Legal Aid, which represents low-income Marylanders, said she has been seeing debt-buyer affidavits that seem to dance around the lack-of-knowledge problem.

  • "Some of them say, 'I have been told … that this piece of information is accurate,' and then they swear," she said. "They're trying to get more creative in the way they write them. But there's still no personal knowledge whatsoever."

For the story, see Consumer advocates want affidavits pulled in Md. debt-collection cases (Ohio class-action settlement has implications for Maryland consumers, attorneys say).

New Yorkers Continue Getting Screwed In Court Over Baseless Foreclosure, Debt Collection Lawsuits Due To Inability Afford Adequate Defense: State AG

In Albany, New York, the Albany Times Union reports:
  • Scores of low-income New Yorkers have unjustly lost court battles -- and their homes -- because they could not afford lawyers to fight often baseless legal actions, a top aide to Attorney General Eric Schneiderman told a special panel Monday.

  • "The lack of individual representation in foreclosure actions is one reason we have seen systemic abuses of the legal system by lenders and debt collectors," Martin J. Mack, the state's executive deputy attorney general, testified to the Task Force to Expand Access to Civil Legal Services, headed by Chief Judge Jonathan Lippman.

  • The top judge created the panel to aid the estimated 2.3 million and growing number of low-income New Yorkers who have no legal representation in civil cases ranging from child custody matters to home foreclosures. Monday's testimony, heard in the state Court of Appeals, was the third of four hearings the panel is holding across the state.

  • Mack noted that even with a surge in pro bono representation -- lawyers working free of charge -- more than 44 percent of New Yorkers facing foreclosure have had no lawyers.

  • "We've all heard harrowing tales of abuses, including foreclosure actions brought against homeowners who are actually up to date on their mortgage payments," Mack testified. "For every abusive case uncovered, there are dozens upon dozens of homeowners and, sad to say, former homeowners who have been steamrolled because they did not have adequate representation."

  • Abuses such as improper legal documentation "only happen because lenders and debt collectors are able to assume that the overwhelming majority of homeowners won't have attorneys to fight back."

For more, see Abused for lack of a lawyer (Top AG aide says low-income New Yorkers have suffered due to lack of representation).

State Racketeering Law Invoked By Multiple Homeowners In Suit Alleging Chase Illegally Foreclosed On Mortgage Loans Once Held By WaMu

In West Palm Beach, Florida, the Daily Business Review reports:
  • Most lawyers who represent homeowners in foreclosures use defensive strategies in their efforts to hold off the lender, but not W. Jeffrey Barnes. The Boca Raton lawyer has launched an offensive against JPMorgan Chase using state racketeering law.

  • Barnes filed a state civil RICO action in Palm Beach Circuit Court against Chase claiming the lender engaged in a national pattern of "fraudulent foreclosure proceedings based on false and fraudulent misrepresentations."


  • The latest lawsuit, Linda Zimmerman et al v. J.P. Morgan Chase and Chase Home Finance, represents his alliance with the Washington Mutual Homeowners Support Group, a grassroots organization of former WaMu mortgage customers.

  • The lawsuit is not intended to save anyone's home, Barnes explained. It is a counter-punch intended to hurt the bank by exposing its alleged fraud. "This was never intended to be arm-twisting to get the bank to do loan modifications," he said. "These are damages claims."

    Foreclosure Rights

    The alliance had its genesis in how Chase claimed the right to foreclose on the defunct WaMu's home loans. When WaMu failed in 2008, the Federal Deposit Insurance Corp. sold certain assets to Chase. But in filings submitted in Deutsche Bank v. FDIC and Chase, Chase said it "did not become WaMu's successor in interest," Barnes cited in the lawsuit.

  • Despite that admission, Barnes said Chase — through its servicer Chase Home Finance — instituted foreclosure proceedings nationally on WaMu mortgages, listing itself as successor in interest to carry forward WaMu's ownership interests.

  • The lawsuit claims Chase and Chase Home used the electronic clearinghouse Mortgage Electronic Registration Systems and bogus assignments to improperly pursue foreclosures. The bank also allegedly ignored state laws, such as required certifications in New Jersey and mandatory good faith pre-foreclosure resolution efforts in California.

  • "This pattern of filing false declarations ... and failure to provide proof of legal ownership in Florida and other jurisdictions is consistent with Chase's pattern of falsely misrepresenting the legal scope of the FDIC affidavit," Barnes said. Chase has received a 30-day filing extension, delaying its answer to the Palm Beach Circuit lawsuit, Barnes said. Chase representatives did not respond to calls for comment by deadline.

  • The lawsuit seeks an injunction to stop to all Chase foreclosure activity in eight states: California, Florida, Massachusetts, New Jersey, New York, Tennessee, Washington and Wisconsin. They are home to the 32 homeowners suing Chase individually, not as a class. "We expect that there are going to be more," Barnes said.

  • One of the reasons the suit was filed in Florida is the operations of the servicer, Chase Home Finance, he said. "I termed it nationalized mail fraud in the lawsuit because of the generation of documents out of (Chase Home's) nerve center in Jacksonville," he said.

For more, see Boca lawyer goes on offensive against Chase.

Tuesday, October 04, 2011

N. California Man Gets 70 Months For Running R/E Ponzi Scam, Foreclosure Rescue Ripoff Involving Fraudulent Bankruptcy Filings To Stall Legal Process

From the Office of the U.S. Attorney (Sacramento, California):
  • United States Attorney Benjamin B. Wagner announced that Royce Lee Newcomb, 49, of Roseville, was sentenced [...] to five years and 10 months in prison, to be followed by three years of supervised release for a real estate fraud scheme. The amount of restitution will be determined at a future hearing. Newcomb pleaded guilty to the charges on May 12, 2011.


  • [In addition to running a real estate Ponzi scheme investment racket that clipped 22 investors], Newcomb also violated Title 11 of the United States Code with respect to filing of bankruptcy cases.

  • Newcomb marketed himself as offering foreclosure “rescue” services through Paradigm Foreclosure Specialists, which Newcomb registered by using his middle name as his surname.

  • Newcomb solicited individuals to pay him between $1300 and $3800 to avoid or delay the foreclosure process by filing serial bankruptcy petitions without supporting documentation.

  • In one case, Newcomb accepted a woman's wedding ring, valued at $5000, in lieu of payment. Newcomb, through associates and friends, filed the bankruptcy petitions on behalf of individuals, on occasion without the knowledge of the individual.

  • Newcomb had previously been sanctioned by the United States Trustee for similar abuse of the bankruptcy process. Thus, he was aware that the filings were insufficient and in violation of bankruptcy law.(1)

For the U.S. Attorney press release, see Roseville Man Sentenced In $2.9 Million Real Estate Ponzi Scheme.

(1) See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a description of various foreclosure rescue rackets involving the abuse of the bankruptcy courts.

Elderly, Infirm St. Paul Couple Faces The Boot From Home Of 35 Years; Accuse Once-Trusted Grandson Of Duping Them In $300K+ Quit-Claim Deed Ripoff

In St. Paul, Minnesota, the Pioneer Press reports:
  • Joseph Hernandez, all of 93, is a decorated World War II combat veteran with two Purple Hearts and a nasty scar on his head from a bullet. His bride of 66 years, Stella Hernandez, 83, was a Rosie the Riveter during the war, over at St. Paul's Holman Field, and owns more colorful hats than Imelda Marcos owned shoes.

  • They are lifelong St. Paul residents who once lived on the West Side river flats and helped put a son and grandson through college. But neither their service and sacrifice nor their love for each other will save them from eviction this month from their St. Paul home of nearly 35 years.

  • Come Oct. 31, they will be evicted from their 91-year-old Tudor-style home, a holy water's sprinkle from the Cathedral of St. Paul. The foreclosed home's new owners, actually U.S. taxpayers through Freddie Mac, will then put it up for sale.


  • How this happened also serves as a cautionary tale. The couple maintain that their predicament stems from trusting a grandson who had them unknowingly sign a quitclaim deed and allegedly forged their signatures on power-of-attorney documents.

  • The paperwork was then used to obtain - without the couple's knowledge - more than $300,000 in loans that were never repaid.(1)

For more, see Aging St. Paul couple losing home to alleged family deceit.

(1) More from the story:

  • The couple approached the University of St. Thomas School of Law's Elder Law Practice Group for legal help on the alleged forgeries. Using certified law students, the program provides legal aid to elderly clients in long-term care and financial-abuse situations. They requested that the Minnesota Department of Commerce investigate the notaries public who stamped the power-of-attorney forms. The results were surprising.

  • The DOC investigators found there had never been a valid commission issued to one of the notaries. They located and interviewed the other, a court reporter.

  • "She has stated she has never notarized a signature for someone she does not personally know and did not notarize these documents," the agency stated in a 2009 letter sent to Jennifer Wright, then the supervising attorney at the elder law program and an associate professor at the law school.

  • The couple filed a civil complaint that same year against the grandson, as well as Freddie Mac, now the owner of the mortgages from the General Mills Federal Credit Union.

  • Citing the alleged forgeries and the contested quitclaim deed, the lawsuit sought to invalidate the mortgage security interests on the property and also reclaim title. An additional $100,000 loan Hernandez obtained from a private individual - who attached a lien to the property - was not part of the suit.

  • At the time of the suit, the defaulted loans had an outstanding balance of $310,928.14. Through attorneys, Michael Hernandez denied the allegations, as did Freddie Mac. But this is where Stella and Joseph Hernandez erred. They failed to appear for numerous pretrial conferences and refused to take part in court-ordered mediation.

  • As a result, the elder law group pulled out. Because of the lack of cooperation, Ramsey County District Judge Gregg Johnson dismissed the suit with prejudice, meaning that lawyers could go after the couple for attorneys' fees. Still, Johnson confirmed this week that the ruling did not go to the merits of the allegations raised by the couple.

  • Ditto the St. Paul police complaint. Officers interviewed the couple but closed the case months later because they did not receive documentation they requested. Stella cited medical reasons for not following through. [the couple's concerned niece Vicki] Giller believes the couple's age and lack of knowledge about court procedures and the anguish of it all also played roles.


  • Freddie Mac bought the home for $257,297.63 at a sheriff's sale Jan. 28. Eviction proceedings were launched last month after the grandson made no apparent attempt to pay off the loans during the six-month redemption period that follows a sale.

  • Wright, citing attorney-client privilege, would not discuss specifics of the suit the elder law program filed on behalf of the couple. But generally speaking, the allegation that a family member has committed fraud "has become a big part of our caseload," she said.

  • "Senior clients have lost titles to homes or life savings to someone they know or trusted, and often sign stuff they should not sign because they trusted and grew up in a more trusting age."

  • Stella said the couple is estranged from both the grandson and the man's father, who is their only child - a doctor who lives in Ohio. "We have not spoken to him (the grandson) in years, and we don't even know where he lives," Stella Hernandez said.

Florida Lower Court Ruling Reversals In Foreclosure Cases Continue; Appellate Court Review Appears Necessary As Trial Judges Continue Getting It Wrong

A Florida appeals court recently reversed another lower court screw-up in a foreclosure case. The guilty judge in this case, Marion County Circuit Court Judge Frances King:
  • Here, the record does not contain the original Mortgage. To prove its ownership, U.S. Bank filed a copy of the Mortgage as well as two assignments. The first assignment transferred the Mortgage from Advent Mortgage, the original mortgagee, to Option One. The second assignment purported to transfer the mortgage from American Home, as successor in interest of Option One, to U.S. Bank. However, and significant to our consideration, U.S. Bank provided nothing to demonstrate how American Home came to be the successor in interest to Option One.2

    Incredibly, U.S. Bank argues that "[i]t would be inequitable for [Ms. Gee] to avoid foreclosure based on the absence of an endorsement to [it]." But that argument flies in the face of well-established precedent requiring the party seeking foreclosure to present evidence that it owns and holds the note and mortgage in question in order to proceed with a foreclosure action. See Verizzo, 28 So. 3d at 978; Philogene v. ABN Amro Mortg. Group Inc., 948 So.2d 45, 46 (Fla. 4th DCA 2006). When Ms. Gee denied that U.S. Bank had an interest in the Mortgage, ownership became an issue that U.S. Bank, as the plaintiff, was required to prove. See Lizio, 36 So. 3d at 929; Carapezza v. Pate, 143 So.2d 346, 347 (Fla. 3d DCA 1962).

    As U.S. Bank failed to offer any proof of American Home's authority to assign the Mortgage, we conclude that it failed to establish its standing to bring the foreclosure action as a matter of law.
    3 See Servedio v. U.S. Bank Nat'l Ass'n, 46 So.3d 1105, 1107 (Fla. 4th DCA 2010) (explaining that plaintiff may submit evidence of assignment from payee to plaintiff or affidavit of ownership to prove its status as holder of note); see also Khan v. Bank of Am., N.A., 58 So.3d 927, 928 (Fla. 5th DCA 2011) (holding that bank failed to establish it had standing to foreclose mortgage as matter of law where copy of note attached to amended complaint bore endorsement assigning note to another bank); Verizzo, 28 So. 3d at 977 (finding genuine issue of fact as to whether bank owned and held note where record did not reflect assignment or endorsement of note to bank). Cf. Isaac v. Deutsche Bank Nat'l Trust Co., 36 Fla. L. Weekly D727 (Fla. 4th DCA Apr. 6, 2011) (holding that assignee of promissory note and mortgage adequately established its ownership of note and mortgage, as necessary to confer standing to bring foreclosure action, where assignee filed original note and mortgage, along with allonge payable to bearer, and affidavit from representative of successor in interest to previous assignee); Taylor v. Deutsche Bank Nat'l Trust Co., 44 So.3d 618 (Fla. 5th DCA 2010) (holding that written assignment of promissory note and mortgage from nominee of original lender to bank was sufficient to confer upon bank authority to foreclose mortgage, even though nominee had no beneficial interest in note and note was not endorsed by original lender; mortgage gave nominee explicit power to enforce note by foreclosing note and nominee assigned that right to bank).

    Ms. Gee also asserts that the trial court improperly entered summary judgment on the reestablishment and reformation claims when these claims were not raised in U.S. Bank's summary judgment motion.

    We agree. A motion for summary judgment must "state with particularity the grounds upon which it is based and the substantial matters of law to be argued . . . ." Fla. R. Civ. P. 1.510(c). The burden to conclusively establish the nonexistence of a disputed issue of material fact and entitlement to judgment as a matter of law rests squarely with the movant. See Holl v. Talcott,
    191 So.2d 40, 43-44 (Fla. 1966); Bloch v. Berkshire Ins. Co., 585 So.2d 1137, 1138 (Fla. 3d DCA 1991). The purpose of this rule is "to prevent `ambush' by allowing the nonmoving party to be prepared for the issues that will be argued at the summary judgment hearing." City of Cooper City v. Sunshine Wireless Co., 654 So.2d 283, 284 (Fla. 4th DCA 1995). "It is reversible error to enter summary judgment on a ground not raised with particularity in the motion." Williams v. Bank of Am. Corp., 927 So.2d 1091, 1093 (Fla. 4th DCA 2006).

    As Ms. Gee contends, U.S. Bank's summary judgment motion made no mention of its claim to reestablish the lost Mortgage and identified no evidence to support its claim that these documents were lost. Instead, the motion declared the opposite—that "[t]he original promissory note, mortgage and assignment of mortgage will be filed on or before the hearing."

    Yet, the court considered a lost documents affidavit at the summary judgment hearing and reestablished the Mortgage in the final judgment. Similarly, the summary judgment motion made no mention of U.S. Bank's claim to reform the legal description in the deed and mortgage, nor was the issue discussed at the summary judgment hearing. Still, the court reformed the original mortgage and deed, and modified the legal description.

    Because U.S. Bank's motion did not address any facts or law pertaining to its entitlement to summary judgment on its claims to reestablish the lost instruments and reform the deed and mortgage, the trial court erred in entering summary judgment on these grounds. By failing to state with particularity the grounds upon which its summary judgment motion was based, U.S. Bank failed to provide Ms. Gee with proper notice of the separate issues to be resolved and why U.S. Bank was entitled to summary judgment.
    4 See Locke v. State Farm Fire & Cas. Co., 509 So.2d 1375, 1376-77 (Fla. 1st DCA 1987) (holding that summary judgment motion was insufficient to place non-moving party on notice of issues to be argued at hearing as motion merely stated that no material issues existed and movant was entitled to judgment); see also State Farm Mut. Auto. Ins. Co. v. Mashburn, 15 So.3d 701, 706 (Fla. 1st DCA 2009) (reversing summary judgment entered against insurer based on notice issue, which was not raised with particularity in summary judgment motion; raising issue in attached affidavits was insufficient); Deluxe Motel, Inc. v. Patel, 727 So.2d 299, 301 (Fla. 5th DCA 1999) (reversing summary judgment that was based on arguments made at hearing but not in motion); Sunshine Wireless Co., 654 So. 2d at 284 (reversing summary judgment for insufficient notice of issues to be addressed and noting that particularity rule was designed to prevent "ambush" by allowing nonmoving party to be prepared for issues that will be argued at summary judgment hearing); Boucher v. First Cmty. Bank of Orange City, 626 So.2d 979, 982 (Fla. 5th DCA 1993) (reiterating that on summary judgment, court is limited to grounds raised in motion).

    For these reasons, we reverse the final summary judgment of foreclosure entered in favor of U.S. Bank, and remand for further proceedings

For the ruling, see Gee v. U.S. Bank National Association, Case No. 5D10-1687 (Fla. App. 5th DCA, September 30, 2011).

Representing the homeowner in this case was Enrique Nieves, III, of Ice Legal, P.A., Royal Palm Beach, Florida.

Monday, October 03, 2011

Feds Slam Pair Who Impersonated Cops, Lawyers, Judges In Bill Collection Racket That Targeted Victims From Illegally-Obtained List Of Former Debtors

From the Office of the U.S. Attorney (Buffalo, New York):
  • U.S. Attorney William J. Hochul, Jr. announced [] that Timothy E. Arent, 39, of Clarence, New York, and Neil G. Wieczkowski, 43, of Buffalo, New York, who were convicted of mail fraud and tax evasion, were sentenced [...] for their roles in a debt collection scheme.

  • Arent was sentenced to 12 ½ years in prison and ordered to pay $780,000 to the IRS. Wieczkowski was sentenced to six years in prison and was ordered to pay $60,000 to the IRS. Both Arent and Wieczkowski were ordered to pay $3.6 million in restitution to the victims of their scheme.

  • Assistant U.S. Attorney MaryEllen Kresse, who handled the case, stated that from October 2006 through October 2009, Arent and Wieczkowski engaged in a fraudulent debt collection scheme. The two illegally purchased debtor information from two former employees of a Buffalo debt collection business and used the information to coerce the victims into paying fictitious debt. These former employees, Thomas Rice and Andrew Jon Pytlewski, pleaded guilty to stealing the debtor information and were sentenced to probation earlier this year.

  • The Government’s evidence revealed that as part of the scheme to defraud, the defendants impersonated law enforcement officers, attorneys, judges, paralegals, and legal assistants in an attempt to coerce victims into making payments on the fictitious debt. For instance, Arent, posing as a law enforcement officer, threatened to arrest victims if they did not immediately make a payment.(1)

For the U.S. Attorney press release, see Debt Collectors Sentenced To Prison For Mail Fraud And Tax Evasion.

(1)This case is a good example of the commitment of my office to prosecute those who attempt to take advantage upon the vulnerable of our society," said U.S. Attorney Hochul.

"In this case, the defendants targeted those who had at one time accumulated financial debt which had since been repaid. The defendants thereafter looked for an additional vulnerability that they could exploit such as a medical condition.

By preying upon the legitimate concerns any such person would have, the defendants convinced the victims that they had to pay additional, wholly concocted financial obligations or be arrested.

Angry Investors Left Holding Crappy Paper Continue Attack Against Bankster/Peddlers Of Mortgage-Related Investments

Bloomberg reports:
  • Bank of America Corp.’s Countrywide unit was sued by Sealink Funding Ltd. in New York over $1.6 billion of residential mortgage-backed securities the fund purchased between 2005 and 2007.(1)

  • Sealink filed the suit against Countrywide in New York State Supreme Court [last week] , seeking unspecified compensatory, rescissory and punitive damages. Sealink is a fund created to manage Landesbank Sachsen AG’s riskiest assets after the German lender almost collapsed.

  • Countrywide was an entity driven by only one purpose --to originate and securitize as many mortgage loans as possible into” mortgage-backed securities “to generate profits for the Countrywide defendants, without regard to the investors that relied on the critical, false information provided to them with respect to the related certificates,” lawyers for Sealink said in the lawsuit.

  • Sealink filed a similar suit [last week] in the same court against JPMorgan Chase & Co. over $2.4 billion worth of residential mortgage-backed securities purchased between 2005 and 2007.(2)


  • In separate lawsuits filed yesterday in New York state court, JPMorgan Chase and Barclays Capital Inc. were also sued by investors, accused of misrepresenting the quality of the loans underlying their securities.

  • Barclays was sued over the sale of $123 million in mortgage-backed securities to HSH Nordbank AG, a German lender.

  • JPMorgan was sued by LBBW, which purchased more than $500 million worth of mortgage bonds, according to the complaint. Lawyers for HSH Nordbank said in the suit that the bank’s current damages are at least $40 million.

For more, see Bank of America, JPMorgan Units Sued in Mortgage-Backed Securities Cases.

(1) Sealink Funding Ltd. vs. Countrywide Financial Corp., 652679/2011, New York State Supreme Court, New York County.

(2) Sealink Funding Ltd. vs. Bear Stearns & Co. Inc., 652681/2011, New York State Supreme Court, New York County.

Investor Interest In Buying Up Debt Deficiencies Left Unpaid After Foreclosure Continues Ramping Up

The Wall Street Journal reports:
  • [F]orty-one states and the District of Columbia permit lenders to sue borrowers for mortgage debt still left after a foreclosure sale. The economics of today's battered housing market mean that lenders are doing so more and more.

  • Foreclosed homes seldom fetch enough to cover the outstanding loan amount, both because buyers financed so much of the purchase price—up to 100% of it during the housing boom—and because today's foreclosures take place following a four-year decline in values.


  • Lenders still sue for loan shortfalls in only a small minority of cases where they legally could. Public relations is a limiting factor, some debt-buyers believe. Banks are reluctant to discuss their strategies, but some lenders say they are more likely to seek a deficiency judgment if they perceive the borrower to be a "strategic defaulter" who chose to stop paying because the property lost so much value.


  • Some close observers of the housing scene are convinced this is just the beginning of a surge in deficiency judgments. Sharon Bock, clerk and comptroller of Palm Beach County, Fla., expects "a massive wave of these cases as banks start selling the judgments to debt collectors."


  • The increase in deficiency judgments has sparked a growing secondary market. Sophisticated investors are "ravenous for this debt and ramping up their purchases," says Jeffrey Shachat, a managing director at Arca Capital Partners LLC, a Palo Alto, Calif., firm that finances distressed-debt deals. He says deficiency judgments will eventually be bundled into packages that resemble mortgage-backed securities.

  • Because most targets have scant savings, the judgments sell for only about two cents on the dollar, versus seven cents for credit-card debt, according to debt-industry brokers.

  • Silverleaf Advisors LLC, a Miami private-equity firm, is one investor in battered mortgage debt. Instead of buying ready-made deficiency judgments, it buys banks' soured mortgages and goes to court itself to get judgments for debt that remains after foreclosure sales.

  • Silverleaf says its collection efforts are limited. "We are waiting for the economy to somewhat heal so that it's a better time to go after people," says Douglas Hannah, managing director of Silverleaf.

  • Investors know that most states allow up to 20 years to try to collect the debts, ample time for the borrowers to get back on their feet. Meanwhile, the debts grow at about an 8% interest rate, depending on the state.

  • Mr. Hannah expects the market to expand as banks "aggressively unload" their distressed mortgages in the next year, driving up the number of deficiency judgments being sought.

For more, see House Is Gone but Debt Lives On.

Rhode Island AG Shuts Down Two Loan Modification Rackets Accused Of Stiffing Homeowners Out Of Promised Services After Clipping Them With Upfront Fees

From the Office of the Rhode Island Attorney General:
  • Attorney General Peter F. Kilmartin announced the Office of Attorney General prevailed in shutting down two fraudulent mortgage modification consultants and securing $5,500 in restitution for three consumers.


  • As a result of consumer complaints received in 2010 the Office of Attorney General conducted an investigation into two individuals holding themselves out as representing Mortgage Modification Center, IMOD Corporation and Latin Service International, which all claimed to provide mortgage modification and foreclosure services.(1)

For the Rhode Island AG press release, see Attorney General Kilmartin Shuts Down Fraudulent Mortgage Modification Consultants and Secures Restitution for Homeowners.

(1) According to the press release:

  • The investigation discovered that the individuals, David Conti and Lucy Ruiz, were advertising and soliciting consumers in violation of several laws including the Deceptive Trade Practices Act and the Mortgage Foreclosure Consultant Regulation Act.

    The Attorney General alleged that since at least April 2009, Conti and Ruiz advertised, marketed and sold purported mortgage loan modification and foreclosure rescue services, with a focus on targeting the Hispanic community.

    Conti and Ruiz also engaged in a scheme to swindle distressed homeowners by enticing them with promises of negotiating loan modifications with lenders, representing that they could secure lower, fixed interest rates, principal reductions, lower monthly payments and forgiveness of arrearages.

    Conti and Ruiz required homeowners to pay an upfront fee ranging from $1,000 to $3,000 in advance of providing services. It is further alleged that, Conti and Ruiz refused to refund homeowners’ money despite not performing the services for they were contracted.

Sunday, October 02, 2011

Suspects In N. Calif. F'closure Sale Bid Rigging Conspiracies Continue Falling Like Dominoes As 'Antitrust Feds' Ready To Notch Two More Guilty Pleas

From the U.S. Department of Justice:
  • Two California real estate investors have agreed to plead guilty [] for their roles in a conspiracy to rig bids and to commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

  • Charges were filed [Friday] in U.S. District Court for the Northern District of California in Oakland, Calif., against Eric Larsen of San Leandro, Calif., and Timothy Powers of Alamo, Calif., for their participation in bid-rigging and mail-fraud conspiracies at public real estate foreclosure auctions in Contra Costa and Alameda counties, Calif.(1)


  • According to court documents, Larsen and Powers conspired with others not to bid against one another, but instead designate a winning bidder to obtain the title to selected real estate offered at public real estate foreclosure auctions in Contra Costa and Alameda counties.

  • Larsen and Powers also were charged with conspiracies to use the mail to carry out a fraudulent scheme to divert money to co-conspirators away from mortgage holders and others by holding private auctions open only to members of the conspiracy and awarding the selected real estate to the conspirators who submitted the highest bids.

  • These private auctions took place at or near the courthouse steps where the public auctions were held. The department said that Larsen and Powers also took steps to conceal the payoffs to conspirators for not bidding competitively and caused false and misleading statements to be made on records of public auctions regarding the total purchase price of the selected real estate.

  • Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.(2)

For the U.S. Justice Department press release, see Two California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (Investigation Has Yielded Charges Against 10 Individuals to Date).

Go here for other posts & links on bid rigging at foreclosure and other real estate-related auctions.

Go here for links to more from the U.S. Justice Department on bid-rigging prosecutions.

(1) The investigation into fraud and bid rigging at certain real estate foreclosure auctions in Northern California is being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660, visit or call the FBI tip line at 415-553-7400.

(2) As has been pointed out here in an earlier post, suspects who have been pinched on bid-rigging charges and are considering copping guilty pleas should first consider whether their alleged unlawful bid rigging racket was really nothing more than an innocent, lawful joint bidding endeavor. See Illegal Bid Rigging Racket? Or Mere Innocent 'Joint Bidding' Arrangement?

California AG On Proposed Foreclosure Fraud Agreement With Banksters: 'This Deal Stinks, So I'm Takin' A Hike! I'm Goin' Solo & I'll Do My Own Probe!"

Bloomberg reports:
  • A proposed nationwide settlement with banks including Bank of America Corp. and JPMorgan Chase & Co. is being rejected by California Attorney General Kamala Harris, who will pursue her own mortgage investigation in the state that had the second-highest foreclosure rate in August.

  • The proposed agreement is “inadequate” and would allow too few California homeowners to stay in their homes, Harris said in a letter yesterday obtained by Bloomberg News.

  • After much consideration, I have concluded that this is not the deal California homeowners have been waiting for,” Harris, a Democrat who took office in January, said in the letter to the U.S. Justice Department and the Iowa attorney general, who is leading talks for the states.


  • I am committed to doing as thorough an investigation as is needed -- and to taking the time that is necessary -- to set the stage for achieving appropriate accountability for misconduct,” she wrote in the letter.

For more, see BofA, JPMorgan Proposed Accord Rejected by California’s Harris.

See also, The Wall Street Journal: California Pulls Out of Foreclosure Talks (Move Is Serious Blow to Federal and State Effort to Reach $25 Billion Deal With Banks Over Questionable Practices) (may require paid subscription; if no subscription, GO HERE; or TRY HERE - then click appropriate link for the story).

Philly Foreclosure Mill Sweatshop Does Quick Name Change In Effort To Save Firm, 'Rebrand' Soiled Reputation After Accusations In Robosigner Suit

In Philadelphia, Pennsylvania, the Philadelphia Business Journal reports:
  • Goldbeck McCafferty & McKeever, the Philadelphia law firm that represents lenders in residential foreclosure disputes, has changed its name to KML Law Group in a major restructuring effort.

  • The change reflects the departure of firm president Gary McCafferty and an interest in rebranding in the wake of a lawsuit filed against the firm late last year.

  • The firm was sued last November in Allegheny County Common Pleas Court for allegedly using paralegals instead of lawyers to sign legal papers related to foreclosures and accused of the unauthorized practice of law.

  • McCafferty resigned from the firm after the suit was filed.

Source: Facing legal issues, Goldbeck McCafferty becomes KML.

Insufficiently Authenticated Mortgage Assignment Sinks Foreclosure Judgment, Says Wisconsin Appeals Court In Reversing Lower Court Ruling

Another trial judge screw-up in granting a bankster a judgment against a homeowner in foreclosure was recently reversed, this time by a three-judge Wisconsin appeals court panel.

The focus of the case was the bankster's failure to make a prima facie case that it was in fact the current holder of the promissory note as a result of failing to propery authenticate the assignment of mortgage.(1)

For the ruling, see BAC Home Loan Servicing, L.P. v. Williams, No. 2010AP2334 (Wis. App., District IV, September 29, 2011).

(1) From the ruling:

  • ¶ 10 A records custodian seeking to authenticate a record must be qualified to testify both that the record at issue was made by a person with knowledge or from information transmitted by a person with knowledge, and that this was done in the course of a regularly conducted activity. Palisades Collection LLC v. Kalal, 2010 WI App 38, ¶20, 324 Wis.2d 180, 781 N.W.2d 503.

    Being qualified means that the custodian possesses sufficient personal knowledge to testify about such things as who recorded or transmitted the information and the contemporaneousness of the record in relation to the events it purports to document. See id., ¶16.

    ¶ 11 We first note that the copy of the mortgage assignment form included in the summary judgment materials here was not certified, and therefore would not be admissible as a self-authenticated public record, even if it were recorded. Next, we question whether a form assigning a mortgage or promissory note from one party to another based upon consideration, constitutes "a memorandum, report, record, or data compilation" so as to qualify as a record of regularly conducted activity, subject to the self-authentication rule.

    ¶ 12 Even assuming for the sake of argument only that such a signed, notarized, and recorded instrument could be considered a "record" of regularly conducted activity, we are not persuaded that the BAC employee's affidavit established that she was qualified to authenticate the assignment form here. The employee's affidavit makes conclusory assertions parroting the statutory language that she has personal knowledge that the records in her custody are prepared in the ordinary course of business at or near the time of the transaction or event by a person with knowledge of the underlying transactions.

    However, it does not include any specific assertions to explain where the copy of the assignment form attached to her affidavit came from—for instance, whether it was made from the original, and if so, by whom. The fact that the employee may have been in a position to know how BAC prepared its account statements, which we would agree qualify as ordinary business records, does not mean that she was in a position to authenticate an uncertified copy of an instrument that she did not see executed.

    ¶ 13 Because the copy of the document purportedly assigning to BAC Williams' mortgage—and by reference, the promissory note—was not properly authenticated, it did not meet the standard of admissible evidence required for summary judgment materials under Wis. Stat. § 802.08(3).

    Therefore, BAC failed to make a prima facie case that it had standing to foreclose based upon Williams' failure to pay according to the terms of the promissory note. In light of BAC's failure, we do not need to address whether any of the affirmative defenses asserted in Williams' answer would also have created material disputes for the circuit court.

    Accordingly, we reverse the circuit court's summary judgment decision and remand with directions that the matter proceed with discovery and trial on BAC's foreclosure claim.

More On HOAs Putting Squeeze On Banksters That Avoid Coughing Up Condo Fees By Foot-Dragging Foreclosure Actions On Delinquent Unit Owners

Lexology reports:
  • [Foreclosure] delays, certainly due in part to efforts by lenders and government agencies to keep delinquent borrowers in their homes, can negatively impact homeowner groups, which rely on homeowner dues to operate. Where the delinquent homeowner lives in a residence with a condo or homeowner association, a delay in foreclosure allows the homeowner to stay in his home or condo for a sometimes lengthy period of time, frequently without paying his monthly dues.

  • Facing insolvency, homeowner groups are taking banks to court to try to speed up the process. They pressure the lender to accelerate home seizures and take over payment of the monthly fees. Complaints filed against banks allege that the banks abandoned their interest and either need to accept responsibility for the title or walk away.

  • Commonly, the bank defendant is a trustee for the loan that was sold into a mortgage-backed security, and as a result the party responsible for the mortgage is often unclear.

  • Some of these banks choose to not challenge lawsuits filed against them by homeowner groups because they are not the servicers of the delinquent loans. In one such case, a bank forfeited its right to a unit in Florida with a $149,300 mortgage.

  • Homeowner associations’ rights vary by state. In Nevada, for example, they can collect up to nine months of back dues plus costs when a residence sells, even after a foreclosure. In Florida, homeowner groups are limited to collecting 12 months of back dues or 1 percent of the outstanding mortgage, whichever is less, but the cap is often found to not apply to banks.

  • As a result, in one case involving a Miami Beach condo, the plaintiff (LM Funding, a Florida company that advances cash to condo associations in exchange for the lien rights on past-due accounts) collected $52,000 – including late fees, 18 percent interest, and collection costs – as opposed to the $3,000 the bank would have paid had the state limit applied.

  • There are extreme cases where the lender is forced to give up its rights to the property altogether. For example, members of a condo association in Miami Beach sued a lender in February in an attempt to take over the property. In June, the court found that the lender had lost its claim to the mortgage, and the association hopes to avoid insolvency with the proceeds from the sale and monthly dues from a new owner.

Source: Homeower associations are suing banks to force foreclosures (may require subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link for the story).

See also, Bloomberg: Homeowner Associations in Need of Cash Sue Lenders to Force Foreclosures.