Saturday, February 04, 2012

Couple Gets Three Years Probation For Creating, Using Bogus Lease To Hijack Possession Of Vacant Home In Failed Attempt To Snag 'Affordable' Housing

In Newport Beach, California, The Orange County Register reports:
  • A husband and wife were sentenced to three years of informal probation after a guilty plea of illegally occupying vacant homes in foreclosure. Chris Wayne Duncan, 43, and Robin Ann Duncan, 37, both of Newport Beach, pleaded guilty to a court offer of one misdemeanor count of conspiracy to commit trespass and one misdemeanor count of trespass, according to a news release from the Orange County District Attorney's Office.

  • Prosecutors filed the conspiracy count as a felony, but the court reduced it to a misdemeanor, according to the news release. The couple will also have to pay restitution, the amount of which will be determined at a later date, the district attorney's office said.

  • In September 2010, prosecutors said, the Duncans drafted a fraudulent lease of 10 Hidden Pass – a foreclosed and vacant property in Newport Coast – and then broke in and illegally moved in.

  • The district attorney's office said the couple claimed to be renters of the property and had utilities turned on in their names to give the appearance of legitimate tenancy. In October, when an appraiser went to the property as part of the short-sale process, prosecutors said the Duncans changed the locks and kept the appraiser from entering the home.

  • The couple told the appraiser that they were legal renters and that the owner should contact the Duncans directly, prosecutors said. The owner then contacted the Newport Beach Police Department, which investigated the claim and arrested the Duncans.

Source: Husband, wife squatters get probation (The couple will also have to pay restitution, the amount of which will be determined at a later date, the Orange County District Attorney’s Office said).

Bar Ethics Opinion Fails To Set Off Nuclear Bomb Effect With Florida Foreclosure Lawyers & Their Bankster Clients

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • A year ago, the Florida Bar issued an ethics opinion that was a warning for every mortgage lawyer who helps lenders foreclose on Florida homes. It must have made many of them squirm a bit, but maybe not enough.

  • By then, everyone paying even a bit of attention knew huge numbers of foreclosure cases had been filed with iffy mortgage documents, most purporting to prove the plaintiff's right to foreclose.


  • Though it seemed a fiasco, lenders' lawyers kept using the created-documents tactic. Most often, it still worked; most homeowners didn't even fight the case. The Bar ethics decision a year ago seemed likely to change that.

  • It warned that lawyers could be suspended or disbarred if they knowingly filed iffy documents or, even in closed foreclosure cases, failed to tell judges about it now. Some predicted a nuclear bomb effect, all but wiping out the ability to foreclose.

  • With all lawyers on notice, how could lawyers for lenders dare to keep glutting the courts with so many cases even if they were winning most without a fight?

  • Well, there have been some effects. Lawyers are being more cautious, it seems. But that's about it. Sarasota County Circuit Judge Lee Haworth, a leader in helping courts handle the masses of such cases, says he hasn't heard of any lawyers coming forward to confess anything.

For more, see Lyons: Bar's ethics opinion little chill to foreclosures.

Dilapidated Buildings In F'closure Continue Driving Tenants Into Streets; Deteoriating Conditions Force Fire Chief To Give Residents The Boot

In Swissvale, Pennsylvania, WTAE-TV Channel 4 reports:
  • Residents at a Swissvale apartment building are being forced out because officials said the landlord has been ignoring citations for the past five years. "He's not doing what he's supposed to be doing," said 83-year-old tenant Sarah Kandor of her landlord, Michael Sturdivant.

  • Sturdivant is facing a foreclosure lawsuit on the apartment building. He also owes more than $40,000 in back taxes.

  • "We've had window sashes that have rotted to the point where windows have fallen out. We've had a ceiling collapse on a tenant in there. We had to go over and render medical aid and transfer her to the hospital for injuries from that," said Swissvale Fire Chief Clyde Wilhelm.


  • [The landlord's] tenants are asking for more time to move out but Wilhelm said he knows granting it could cost them everything. "It's getting to the point where it's not if something's going to happen, it's probably when it's going to happen -- and we don't want that to occur," Wilhelm said. [...] The Salvation Army said tenants will be able to get help with moving expenses.

For the story, see Residents Forced From Home After Landlord Ignores Citations (Swissvale Residents Looking For New Homes).

See also, State Assisting Tenants Being Forced Out Of Apartments (Officials Say Swissvale Landlord Has Ignored Citations For 5 Years).

Financially-Strapped Multi-Unit NYC Residential Apartment Houses Sap Value From Neighboring Rental Buildings

In New York City, Crain's New York Business reports:
  • Overleveraged residential buildings, properties that are not generating enough rental income to cover their mortgage payments and overall maintenance costs, as well as multi-family buildings that have gone through foreclosure are having a negative impact on neighboring properties, according to a new study released Thursday.

  • Buildings within a 500-foot radius of overleveraged properties face a higher risk of physical deterioration and an increase in building code violations, said the study by the Citizens Housing and Planning Council and Enterprise Community Partners.

  • The study, called "The Impact of Multifamily Foreclosures and Over-Mortgaging in Neighborhoods in New York City" looked at more than 1,100 multi-family buildings in Brooklyn, Bronx, Manhattan and Queens that were within 250 to 500 feet of overleveraged properties.

  • Our study suggests that proximity to an over-mortgaged building increases the likelihood of increased code violations, with New York City's Department of Housing Preservation and Development stepping in to carry out additional emergency repairs,” said Harold Shultz, senior fellow of Citizens Housing and Planning Council, in a statement. “As a result, the city should continue its efforts to closely monitor and prevent deterioration in those communities troubled by over-mortgaged multifamily buildings.”

  • Buildings within a 500-foot radius of overleveraged building spend almost twice as much money on emergency repair expenditures conducted by the city, compared to buildings beyond that distance. In 2010, the study estimates that a building that neighbors a distressed property has roughly $1.9 million more in emergency repair charges than those beyond a 500-foot radius.

  • Meanwhile, buildings within 250 feet of troubled properties had a tendency to have major housing code violations compared to buildings further away. These properties had a 13.7% increase in Class C, considered the most hazardous, code violations from 2008 and 2010.(1)

Source: Distressed buildings bring down their neighbors (A new study reveals buildings located 500 feet away from overleveraged and foreclosed properties face risk of deterioration and increased costs to maintain them).

(1) See also:

  • The Real Deal: Foreclosures are contagious in NYC apartment buildings, too,
  • The Wall Street Journal: City Feels Foreclosure Affects:

    "In single-family neighborhoods, you see empty homes and swimming pools filled with algae, in a way that you don't see them in multifamily neighborhoods," said Harold Shultz, a senior fellow at the housing and planning council.

    Instead, the parallel effect on neighboring apartment buildings can be measured in landlords making fewer repairs and a corresponding increase in housing-code violations, according to Mr. Shultz.

    The problem in New York City is widespread, but concentrated in northern Manhattan, the central and west Bronx and central Brooklyn, according to the report.

Law School Snags Local Vacant Firehouse; Will Be Future Home Of Institution's 10 Legal Aid Clinics

In Detroit, Michigan, the Detroit Free Press reports:
  • The University of Detroit Mercy School of Law has purchased a vacant former Detroit firehouse downtown for use as the future home of its public legal aid clinics.


  • The two-story facility will provide more than 6,000 square feet of space for the school's 10 legal aid clinics. Last year, UDM provided assistance for more than 1,450 people in its various clinics, including urban law, immigration and asylum, mediation, consumer defense and mortgage foreclosure. The school plans to open the new facility in December.

  • The firehouse was built in the early 1900s and served as the home for the Detroit Fire Department's Engine 2 for many years. The building was used for other purposes after it was sold by DFD, but it retains much of its historic character including spiral staircases, exterior red fire doors and a lookout tower. UDM Law will keep the historic look in its redesign, the school said.

For the story, see UDM Law School buys former firehouse for legal aid clinics.

Friday, February 03, 2012

'Zombie Debt' Buyer Accused Of Tricking Consumers Into Paying On Stale Debts To Restart Clock On Statute Of Limitations Squeezed By Feds Out Of $2.5M

The New York Times reports:
  • The Federal Trade Commission signaled on Monday that it would continue to crack down on debt collectors who harass consumers for money they may not even be legally obligated to pay.

  • In the second-largest penalty ever levied on a debt collector, the F.T.C. said that Asset Acceptance, one of the nation’s largest debt collection companies, had agreed to pay a $2.5 million civil penalty to settle charges that the company deceived consumers when trying to collect old debts.(1)


  • Asset Acceptance, based in Warren, Mich., was charged with a variety of complaints, including failing to tell consumers that they could no longer be sued for failing to pay some debts because the debts were too old. The company’s collectors also failed to inform consumers that paying even a small portion of the amount owed would revive the debt — in other words, making a payment would extend the amount of time the collector could legally sue.

  • Debt collectors have only a certain number of years to sue consumers. The statute of limitations varies by state, but typically ranges from two to 15 years, Mr. Dolan said, beginning when a consumer fails to make a payment. But borrowers often do not realize that making a payment on the old debt may restart the clock.(2)

For more, see F.T.C. Fines a Collector of Debt $2.5 Million.

For the Federal Trade Commission press release, see Under FTC Settlement, Debt Buyer Agrees to Pay $2.5 Million for Alleged Consumer Deception (Firm Also Will Notify Consumers with "Time-Barred" Debt That It Will Not Sue to Collect).

Go here for more on zombie debts.

(1) For some of the relevant court documents in this matter, see:

(2) For more from the FTC on zombie debts, see:

Utah App. Court: Photocopy Of Promissory Note In Lieu Of Original OK In F'closure Where Borrower Fails To Establish Basis For Questioning Authenticity

Lexology reports:
  • In a victory for lenders, a Utah appellate court has ruled that a photocopy of a note is ordinarily acceptable in court, and that a borrower who demands the original note must establish a basis for questioning the authenticity of the copy.

  • In Howard v. PNC Mortgage, the Utah Court of Appeals rejected a plaintiff’s argument that PNC Mortgage should have been required to produce the original note—not just a photocopy—to support its claim that it is now the holder of the note.

For more, see Lender’s use of photocopied note ok’d by Utah court (may require subscription; if no subscription, TRY HERE; or GO HERE - then click appropriate link for the story).

For the ruling, see Howard v. PNC Mortgage, 2012 UT App 19 (Ut. App. January 20, 2012)

North Texas Adverse Possession-Claiming Vacant Home Hijacker Faces The Boot As Foreclosing Lender Initiates Eviction Action

In Flower Mound, Texas, WFAA-TV Channel 8 reports:
  • The man who made international headlines by claiming an abandoned $340,000 Flower Mound home with a $16 piece of paper now faces eviction in Denton County. Kenneth Robinson filed an affidavit for adverse possession in July, and his story on News 8 set off a frenzy of filings across North Texas.

  • In court papers, Bank of America says it now owns the property in question and is asking for Robinson to be evicted. The bank says it took ownership through foreclosure on January 3. Papers say Robinson moved in when the previous owner walked out on his mortgage, and Robinson never had permission to be there. Bank of America says it asked Robinson to leave, but he did not vacate the property. News 8 e-mailed Robinson and stopped by the house. He would not comment about the case.

  • If the court sides with the bank, Robinson will be the latest squatter to get the boot. At least eight people who sought his advice and claimed homes in Tarrant County have been evicted and charged with theft or burglary. Robinson was there when three of them appeared in court.

  • Flower Mound neighbors say Robinson has been seen scouting out other potential homes for adverse possession. They are now counting the days until Robinson leaves town.

  • Robinson tried to maximize his adverse possession claim with a speech at SMU's law school and in on-line seminars. He charged hundreds of dollars for sessions about how to file the paperwork.

  • But when Tarrant County started making arrests, Robinson told News 8 that the others did not follow his advice to the letter. He said his case was different because he fully intended to pay property taxes and live in the house until he had clear title.

  • Robinson is scheduled for a hearing in Denton County on February 6. If he fails to appear, he will forfeit his claim to the house.

Source: Original Flower Mound squatter gets eviction notice.

Thursday, February 02, 2012

Title Hijacker Gets Five Years For Snatching, Selling Homes Belonging To Others; One Victim Discovers Occupant In House Recently-Inherited From Parent

From the Office of the U.S. Attorney (Birmingham, Alabama):
  • A federal judge [...] sentenced a Birmingham man to five years in prison for a mortgage fraud scheme in which he sold three houses that he did not own, announced U.S. Attorney Joyce White Vance, [and others].

  • U.S. District Judge Sharon Lovelace Blackburn sentenced DARRYL COBB, 54, on two counts of mail fraud in connection to the scheme. Cobb pleaded guilty to the charges in August. The judge also ordered Cobb to pay restitution of $262,861 and to forfeit $262,861 to the government as proceeds of his illegal activity.


  • According to Cobb’s plea agreement with the government, his scheme was uncovered after the owner of a home in the 7900 block of 4th Avenue South complained to Birmingham police that someone was living in the house, which should have been vacant. The owner had gotten the house in a will from a deceased parent.

  • The person living in the house said they had bought it from Cobb. Further investigation showed Cobb had filed false documents in Jefferson County court and with a mortgage company claiming to be the rightful owner of the property, according to the plea agreement.

  • Records searches determined Cobb had conducted two other fraudulent transactions using identical methods to obtain control over two other properties, which he then sold under the false pretense that he was the rightful owner and seller.

For the U.S. Attorney press release, see Federal Judge Sentences Birmingham Man to Five Years in Prison for Mortgage Fraud Scheme.

Suit: Loan Servicers/Trustees Failed To Register With Nevada Regulator As Out-Of-State Debt Collectors, Resulting In Illegally-Conducted Foreclosures

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:
  • More than 20,000 Nevadans were foreclosed on by companies that are accused of doing business illegally in the state. That's according to a new class action lawsuit filed in Las Vegas. The class action lawsuit is against five companies hired by banks to collect debts and begin the eviction process. This lawsuit is one of the first of it's kind in the country.

  • The suit alleges a number of foreclosure servicing firms failed to register as out of state collection agencies with the Nevada Financial Institutions Division. The suit was started by 16 Nevada homeowners who recently had their homes foreclosed.

  • "These companies not being licensed and didn't have the ability to legally do the things that they did. Send notices out, foreclose on them, get them out of the house, move for eviction," attorney Shawn Christopher said.

  • The lawsuit targets: Quality Loan Service, MTC Financial, Meridian Trust Deed Service, National Default Servicing and California Reconveyance company. Only one of those companies, Quality Loan Service, returned 8 News NOW's phone call Monday. They said they do not comment on pending litigation.

Source: I-Team: Nevada Homeowners File Class Action Lawsuit After Foreclosures.

Prosecutors: Wife Torched Family Home To Conceal Pending Eviction From Unwitting Family; F'closure Stemmed From Loans Obtained By Forging Hubby's Name

In Alameda County, California, the Contra Costa Times reports:
  • A mountain of debt cloaked in years of forged spousal signatures and a pending foreclosure were the motive for a Pleasanton woman to burn down her home in a 2008 fire, according to arguments given by prosecutors before the Alameda County grand jury. Deonna Zuffa, 43, was critically injured in the fire that she is accused of setting.

  • During the grand jury proceedings, which ended with an indictment of Zuffa on Dec. 20, prosecutors presented testimony from witnesses who said Zuffa used gasoline throughout her east Pleasanton home to ignite it the morning of Dec. 8, 2008, three days before her unsuspecting family was to be evicted due to foreclosure.


  • In the transcripts, Alameda County senior deputy district attorney William Denny describes Zuffa as a master of keeping things bottled up. Testimony and evidence presented showed Zuffa was able to hide bankruptcy, foreclosure and deep financial debt incurred over the years from her husband and two sons.


  • Witnesses told the jury Zuffa kept track of the finances and had the only keys to the family's two P.O. boxes, helping to conceal the debt.

  • Keith Zuffa testified that he didn't know his wife of 17 years had taken out loans against the house, which was in his name, and that as far back as 2001, she had been forging his signature. He knew nothing about the failed bankruptcy attempt he said, or an eviction notice delivered Dec. 4, 2008, four days before the fire.

  • According to the transcripts, Keith Zuffa told the grand jury that his wife had kept secret that she borrowed money from his 401k, took a second loan on the home and forged his signature to give herself power of attorney, giving her authority to sign all loan documents. The deceit was revealed by investigators to Keith Zuffa in the days after the fire. He has since divorced his wife.

  • "It was unbelievable to me that (Keith Zuffa) didn't know what was going on," Keith Batt, a Pleasanton police detective, told the grand jury. "But all the evidence showed he didn't know this was happening."

For more, see Grand jury testimony points finger at Pleasanton woman accused of arson.

Wednesday, February 01, 2012

Failure To Give Pennsylvania Homeowner Notice Of Right To Have Face-To-Face Meeting With Lender Within 30 Days Sinks Subsequent Foreclosure Sale

The Pennsylvania Superior Court recently affirmed a trial court order setting aside a foreclosure sale where the foreclosing lender failed to satisfy certain requirements to provide notice to the homeowner.

In the trial court, the homeowner contended that the trial court lacked subject matter jurisdiction over the matter because the lender failed to comply with the notice requirements of the Homeowner's Emergency Mortgage Act, 35 P.S. §§ 1680.401c et seq. ("Act 91").

According to the appeals court:
  • More specifically, Appellee [homeowner] maintained that the Act 91 notice she received from Appellant [foreclosing lender] failed to inform her that she had thirty days to have a face-to-face meeting with Appellant.

    After holding a hearing, the trial court agreed with Appellee that the Act 91 notice was deficient. The court issued an order setting aside the sheriff's sale and the judgment; the order also dismissed Appellant's complaint without prejudice.

For the reasons set forth in the three-judge Superior Court panel's ruling, the trial court's order was affirmed.

For the ruling, see Beneficial Consumer Discount Company v. Vukman, 2012 PA Super 18 (Pa. Super. January 30, 2012).

Suit: Woman Holds Ex-Hubby's Home Hostage, Refusing To Release Lien Held Against His House Despite Receiving Full Payment Of Debt Owed To Her

In Galveston, Texas, The Southeast Texas Record reports:
  • A divorced Galveston County couple is at odds over certain funds stemming from the sale of local property, recent court documents say.

  • Richard See has filed suit against his ex-spouse Glenda G. Gordon, claiming she refuses to release the lien on the property despite receiving $20,000 from him. The suit filed Jan. 12 in Galveston County District Court states the property was awarded to See in the final decree of divorce three years ago. According to the suit, the lien prevented the release of $30,000 in proceeds to the plaintiff.

  • According to the suit, co-respondent Alamo Title Co. held the money in question while Gordon maintained the lien. See says he paid the $20,000 owed to his former wife with the payments remitted to her attorney of record and fellow defendant, Elaine Michael, but the lien was still in place.

  • Alamo provided alternative methods to free the lien while the plaintiff made repeated yet unsuccessful attempts to reach Gordon, according to the suit. The suit says See also provided Michael a copy of the affidavit essential to the lien's release, but the attorney refused to sign it notwithstanding the plaintiff's repeated requests.

Source: Divorced couple in dispute over property.

Ex-Paralegal Gets 100 Months For I.D. Theft, Forgeries In Connection With Ripoffs Of Employer/Law Firm, Clients' Trust Accounts

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):
  • Bonnie Sweeten, 40, of Pennsylvania, was sentenced [] to 100 months in prison for fraud schemes in which she stole in excess of $600,000 from her employer and family members. Sweeten pleaded guilty June 21, 2011 to wire fraud and aggravated identity theft. In addition to the prison term, U.S. District Court Judge William H. Yohn, Jr., ordered Sweeten to pay restitution in the amount of $1,091,831 and a special assessment of $200. Sweeten remains in federal custody.

  • Sweeten stole funds from family members, from the law office where she had been employed, and from the law firm’s clients. She used the identity of another person and posed as another person while using false identification and forging signatures on various documents including a property settlement.

  • Additionally, Sweeten stole the identity of a friend and fellow employee and used the identity to facilitate her flight from the jurisdiction. She also forged a signature of a judge on a court order for the purpose of fraudulently withdrawing client funds from a bank. As part of her scheme to defraud, Sweeten concocted an elaborate hoax that she and her daughter had been kidnaped in order to deceive family members and law enforcement as toher whereabouts.

For the U.S. Attorney press release, see Bonnie Sweeten Sentenced For Fraud Schemes.

For an earlier post, see Philly Feds Probe Alleged Rogue Paralegal For Fraud, Theft; Six-Figure Sums Stolen From Law Clients; Bad Acts Lead To Boss' Disbarment: Attorney.

Tuesday, January 31, 2012

Missouri Homeowners Tire From Banksters' Sleazy Practices; Begin Mounting Challenges To State Foreclosure System

In St. Louis, Missouri, the St. Louis Post Dispatch reports:
  • John Kevin Kennedy was an engineer at Anheuser Busch for 30 years. Then came the sale to InBev, and the big downsizing at the brewery left Kennedy out on the street along with much of his department.

  • With no job, he asked his mortgage lender for a lower payment on his home in Barnhart. What happened next set in motion a lawsuit challenging the way foreclosures are done in Missouri. By raising questions about which lender actually owns the mortgages, the suit claims certain foreclosures weren't properly done and it asks the courts to give "hundreds, even thousands" of Missourians their foreclosed homes back.

  • Kennedy's is part of a broader legal movement nationwide challenging the foreclosure process, which debtors say is slanted against them.


  • In Missouri, lenders can foreclose without a judge's order. Unless the homeowner files suit to stop it, the house can be sold at a foreclosure sale on the mortgage holder's word alone. People who can't pay their mortgages usually can't afford lawyers, so foreclosures almost always go unchallenged. In Illinois, court approval is required before a foreclosure.

  • But Kennedy, 62, had something that most troubled homeowners don't - money in a 401(k) retirement plan. He used it to hire lawyer Greg White, who specializes in fighting foreclosures.

  • White teamed up with three other law firms to file a lawsuit challenging the state's foreclosure system. They hope to convert the case into a class-action suit.

For more, see Suits challenge Missouri foreclosure law.

Colorado Lawmaker Moves To Tighten Up State Foreclosure Procedures, Minimize Sleazy Conduct From Banksters, Lawyer-Sweatshops

In Denver, Colorado, The Denver Post reports:
  • A years-old practice allowing foreclosure attorneys simply to attest with a signature that a bank has the right to take someone's home rather than produce the actual mortgage documents is the target of new legislation.

  • The bill, introduced last week by Rep. Beth McCann, D-Boulder, aims to ensure thousands of Colorado homeowners facing foreclosure each year know that whomever is trying to take their house is legally entitled to do so.

  • The foreclosure process has come into question nationwide because banks and lenders for years have bought, sold and traded mortgages as securities, but rarely recorded those transfers in property records. As a result, homeowners are often left wondering how a bank they'd never done business with could possibly be foreclosing without paperwork proving they had that right.

  • "To me it's the integrity of the process we're trying to protect," McCann said. "This bill prevents a lawyer from saying a bank can foreclose simply on their say-so. That's a huge presumption."


  • Currently, judges near-automatically approve the auctions during a process called a Rule 120 hearing. Their job is only to determine a homeowner is in default and that they're not currently serving in the military.

  • Consumers once had the right to challenge a bank's standing to foreclose, thanks to a 1989 Colorado Supreme Court decision. But that disappeared following 2006 legislation that let lawyers proceed with a foreclosure based only on their signature rather than actual mortgage documents.

  • Homeowners could still file a lawsuit to challenge a foreclosure, but most were already in too much of a financial bind to afford an attorney. If filed, the lawsuits might not yield a result until long after a house is auctioned.

  • "They say people are in default anyway, so what's the big deal," McCann said of foreclosing lawyers. "But a homeowner is entitled to know it's all being done properly and legally."


  • With the 2006 change to state law — written largely by the attorneys who handle the highest volume of foreclosures in the state and quietly slipped into a broader piece of legislation — Colorado became a state in which it took little more than a lawyer's signature to take someone's home.

For more, see Colorado bill targets foreclosures based only on a lawyer's OK.

Federal Judge OKs Banksters' Sleazy, Illegal Conduct During F'closure Litigation Where Homeowners Fail To Immediately Raise Issues During Proceedings

In Greenbelt, Maryland, The Baltimore Sun reports:
  • A class-action lawsuit over alleged foreclosure "robo-signing" was thrown out of federal court in Greenbelt last week when a judge ruled that the plaintiffs could have raised those complaints during their foreclosure cases.


  • The class-action suit was filed after a former paralegal at the defendant Shapiro & Burson, a law firm based in Virginia that has handled many Maryland foreclosure cases in recent years, complained to regulators and prosecutors, alleging that robo-signing there was routine.

  • An attorney for Shapiro & Burson suggested that the ruling could be a blow for other suits seeking damages for alleged foreclosure misconduct. The decision by U.S. District Court Judge J. Frederick Motz said homeowners could have raised the issue during their foreclosure cases and thus are barred from bringing it up in a later suit.


  • The law firm of JR Howell & Associates, which represented the plaintiffs, alleged in the April suit that robo-signing at Shapiro & Burson meant the firm's legal fees and other charges were "fraudulently obtained" and improperly passed on to the homeowners.

  • The homeowners argued that allegations of robo-signing at Shapiro & Burson weren't made until after their foreclosures were complete, so they couldn't have raised the issue earlier.

  • But Motz dismissed that argument in his written decision Thursday, pointing to the so-called "doctrine of claims preclusion" in Maryland law. "The fact that plaintiffs may not have been aware of the existence of their claims during the litigation of the previous action does not render the doctrine of claims preclusion from being applicable 'where the means of obtaining such knowledge existed and the knowledge could have been obtained with ordinary diligence,'" Motz wrote, citing a 1978 case.(1)

For more, see Md. 'robo-signing' case thrown out of federal court (Complaints should have been raised in the earlier foreclosure cases, judge says).

(1) Singer v. Steven Kokes, Inc., 39 Md. App. 180, 384 A. 2d 463 (1978).

Monday, January 30, 2012

Elderly Woman Faces The Boot From Home Of 40+ Years After Unwittingly Signing Over Premises To Convicted R/E Scam Artist Assisted By Then-L.A. Cop

In Los Angeles, California, NBC Los Angeles reports:
  • A tangled web of fraud allegedly involving an ex-LAPD officer and a self-proclaimed Bishop has ensnared an 89-year-old woman who is losing to foreclosure the Lynwood home she paid off more than two decades ago, police say.

  • Vistula Graham bought the three-bedroom ranch house more than 40 years ago, and owned it free and clear after paying off the mortgage in the late nighties, said her daughter, Keta Davis, who grew up there. Now the house is scheduled to be auctioned off. “I want the foreclosure to stop because we’re not at fault,” Davis said.

  • The story begins with Leroy Dowd, a 74-year-old, self-proclaimed, charismatic leader of a now-defunct South LA church called Triumph Church of God. “Bishop Dowd is a con artist," Davis said. "Bishop Dowd preyed on my mom.”

  • Dowd conned Graham into giving him money and unknowingly sign over the house, Davis said. “He called himself a bishop he called himself a prophet,” she said. Profit off her mother is more like it, she said.

  • Her mother "didn’t know what she was signing,” Davis said. Davis claims the Bishop opened a $150,000 credit line with Bank of America using her mother’s information and the house as collateral. Checks signed with her mother’s name were forged, Davis said.

  • Dowd also added his name to a Wells Fargo account. Wells Fargo and BofA both determined it was fraud and canceled those loans. But the last loan Dowd allegedly obtained, through IndyMac Bank, for $410,000 is the one in foreclosure.

  • Two years ago, Dowd pleaded guilty to one count of grand theft for forging a grant deed and stealing another church member’s house. That victim was 87.

  • Mr. Dowd is a smooth con artist,” said Claremont Detective David DeMetz who has a thick file on Leroy Dowd, from that case. The victim “had no idea what she was signing or that she gave her house away to Mr. Dowd.”

  • Sound familiar? Dowd was sentenced to 3 years in prison on that case, but in the case of Vistula Graham, the Los Angeles District Attorney didn’t press charges because the primary witness, Graham, can no longer talk. Davis has offered to testify on behalf of her mother.

  • But the story doesn’t end there. Sheriff’s investigators say Leroy Dowd could not have been working alone. Detectives suspect he was working with Darcy Greenfield, who was an LAPD officer at the time and had a real estate business on the side.

  • Deed records on the Lynwood house show that in 2007 the house was put in Greenfield’s company name: Greenfield and McCall. Documents show Greenfield and McCall were named beneficiaries of the IndyMac Bank loan, and a received a payout of more than $261,000.

  • Keta Davis says the loan is clearly “fraudulent.”(1)I’d never heard of them,” she said. Davis was stunned to learn that not only did a stranger own her family house, but that the stranger was an LAPD officer. Greenfield was never charged in Graham’s case, but the former LAPD officer was charged last May in a San Bernardino fraud case.

  • Greenfield has been charged with ten felony counts all pertaining to real estate fraud, said San Bernardino deputy district attorney Vance Welch who specializes in real estate fraud. Greenfield has pleaded not guilty, and her attorney Grover Porter has not returned numerous calls to his office.

  • Greenfield’s connection to Dowd is the subject of a broader investigation by the LAPD and FBI.

For the story, see Elderly Woman Falls Victim to Con, Loses House to Foreclosure (Elderly woman loses home in tangled web involving an ex-LAPD officer and self-proclaimed Bishop).

(1) Unwinding or undoing a scam like this requires the filing of a civil suit in which, among other things, a determination is sought as to whether the deed signed by the unwitting victim is void, or is merely voidable. See Schiavon v. Arnaudo Bros., 84 Cal. App. 4th 374; Cal.Rptr.2d 801 (Cal. App 6th Dist. 2000), for California case law that references the propositions that:

  • A deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing. (Erickson v. Bohne, supra, "130 Cal.App.2d at pp. 555-556.)

    A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations. (Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106 [215 Cal.Rptr. 748].) The same rules apply to the reconveyance of the property interest under a deed of trust as to the conveyance of property by grant deed. (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 43 [198 Cal.Rptr. 418] (Wutzke).)

If the deed is found to be void, a subsequent bona fide purchaser for value is not protected by the state recording statutes, in which case his/her interest is a nullity. If the deed is found to be voidable, a subsequent conveyance to a bona fide purchaser will be recognized as valid. Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103 [215 Cal.Rptr. 748]:

  • A deed obtained as a result of fraud committed against the grantor or by use of undue influence by the grantee may be rescinded by the grantor. (Rogers v. Warden (1942) 20 Cal.2d 286 [125 P.2d 7].) If a grantor is aware that the instrument he is executing is a deed and that it will convey his title, but is induced to sign and deliver by fraudulent misrepresentations or undue influence, the deed is voidable and can be relied upon and enforced by a bona fide purchaser. (Peterson v. Peterson (1946) 74 Cal.App.2d 312 [168 P.2d 474]; Conklin v. Benson (1911) 159 Cal. 785 [116 P. 34].)

  • In Conn. Life Ins. Co. v. McCormick (1873) 45 Cal. 580, the Supreme Court held a deed voidable, not void, if obtained as a result of undue influence or compulsion. Such a deed "stands on the same footing as a deed procured by fraud." The court concluded that a deed or mortgage procured by duress cannot be set aside as against a party purchasing in ignorance of the facts constituting the duress, that is to say as against a purchaser for a valuable consideration and without notice of the duress. Until a voidable deed is declared void it is fully operative. (Frink v. Roe (1886) 70 Cal. 296 [11 P. 820].) Civil Code section 1107 provides: "Every grant of an estate in real property is conclusive against the grantor, also against everyone subsequently claiming under him, except a purchaser or incumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded."

For more, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.

Go here for more on void and voidable deeds.

Sale Leaseback Peddler Squeezed By Norfolk Feds 'Scores' 54 Month Stay In Federal Prison After Copping Plea For Running Home Equity Stripping Racket

From the Office of the U.S. Attorney (Norfolk, Virginia):
  • Kathleen Harps, 51, of Chesapeake, VA, was sentenced [] in Norfolk federal court to 54 months in prison for operating a foreclosure rescue mortgage fraud scheme. [...] Harps previously pled guilty on August 23, 2011.

  • According to court documents, during 2006 Harps owned and operated the now defunct Hampton Roads businesses, New Beginnings Group, LLC, and IMAK Group, LLC, which specialized in “foreclosure rescue.”

  • Through these businesses, Harps and others solicited homeowners in financial distress and facing foreclosure, to agree to sell their homes to Harps or straw buyers working with her.

  • Harps promised the homeowners that, during a one year period after the sale, they could remain in their homes without having to pay the mortgage, while simultaneously putting their financial affairs back in order, so that they could buy back their homes at the end of the year.

  • This, however, failed to occur. Instead, court records show that Harps and her straw buyers made assorted false statements to fraudulently obtain mortgage loans, upon which they later defaulted.

  • As a result, foreclosures soon followed and the homeowners lost both their homes and substantial sums of homeowner equity, which was siphoned out of the closing transactions and paid to Harps’ businesses.

For the U.S. Attorney press release, see Business Owner Sentenced to Prison for Foreclosure Rescue Scheme.

(1) For more on this type of foreclosure rescue ripoff, see:

Minneapolis Feds Pinch Two In Alleged Sale Leaseback Rescue Peddling Scheme, Stripping Home Equity From Dozens Of Homeowners Seeking Financial Help

In Minneapolis, Minnesota, the Star Tribune reports:
  • Two Bloomington residents were arraigned Thursday in Minneapolis on charges that they ran an $8 million equity-stripping scheme under the guise of a nonprofit that claimed to help troubled homeowners avoid foreclosure.

  • Richard Scott Spady, 38, and Michele Denise Sengstock, 48, were each charged Jan. 19 in a sealed indictment with conspiracy, fraud and money laundering involving transactions that took place from 2005 through October 2007.

  • Spady owned and operated Unified Home Solutions, which he promoted as a nonprofit but ran as a for-profit entity, the indictment says. He also owned and operated American Mortgage Lenders, a mortgage brokerage that facilitated the transactions. And Sengstock owned and operated a company called MLAA Holdings, which also played a role, the government says.

  • According to the indictment, Spady told homeowners facing foreclosure that Unified Home Solutions offered a rescue program backed by investors who would buy their homes and sell them back after they'd regained their financial footing in a year or two.

  • The homeowners could live in the homes and pay rent and upkeep in the meantime. Some homeowners only learned that their homes were being sold when they attended the closing.(1)

  • The indictment says mortgages were obtained with fraudulent financial information, a common pattern in such schemes. Investors collected a "risk fee," generally 3 percent of the purchase price, but most of the equity in the home went to Unified Home Solutions and American Mortgage Lenders in the form of "undisclosed kickbacks," according to an affidavit filed in the case by IRS criminal investigator Angela Johnson. She said Spady and his companies facilitated the sale of about 79 properties; fewer than five avoided foreclosure.

  • Spady closed the two companies in 2008 and opened new firms that he's believed to be operating, Johnson said. They include New Start Homes, Start to Finish Realty, RVenture Inc. and RInvestment I. None of those firms was mentioned in the indictment, however.

For the story, see Bloomington duo accused of mortgage fraud (Indictment says they preyed on homeowners facing foreclosure and stripped away the remaining equity).

For the U.S. Attorney press release, see Two Bloomington residents indicted in mortgage fraud scam.

For the indictment, see U.S. v. Spady, et ano.

(1) For more on this type of foreclosure rescue ripoff, see:

Sunday, January 29, 2012

Sacramento Feds Squeeze Another Guilty Plea Out Of Real Estate Investors Suspected Of Bid Rigging At Foreclosure Sale Public Auctions

From the Office of the U.S. Attorney (Sacramento, California):
  • [K]enneth A. Swanger, 41, of Woodland, pleaded guilty to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County.(1) The primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at noncompetitive prices, the department said in court papers.

  • According to the court documents, after the conspirators’ designated bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay.

  • The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the price at the public auction and that at the second auction was the group’s illicit profit. The illicit profit was divided among the conspirators in payoffs. According to his plea agreement, Swanger participated in the scheme beginning in or about June 2009 until in or about October 2009.

  • To date, nine individuals, including Swanger, have pleaded guilty in U.S. District Court for the Eastern District of California in connection with the investigation. They are: Anthony B. Ghio; John R. Vanzetti; Theodore B. Hutz; Richard W. Northcutt; Yama Marifat; Gregory L. Jackson; Walter Daniel Olmstead; and Robert Rose. In addition, four other investors, Wiley C. Chandler, Andrew B. Katakis, Donald M. Parker and Anthony B. Joachim, and one auctioneer, W. Theodore Longley, were indicted by a federal grand jury in Sacramento on Dec. 7, 2011.

For the U.S. Attorney press release, see Woodland Man Pleads Guilty To Bid Rigging And Fraud At San Joaquin County Public Auctions.

(1) Swanger pleaded guilty to bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either of those amounts is greater than the statutory maximum fine. Swanger also pleaded guilty to conspiracy to commit mail fraud, which carries a maximum sentence of 30 years in prison and a $1 million fine.

Lack Of Standing Sinks Effort To Squeeze Cash Out Of Consumer; 'Show Me State' High Court: Collector Failed To Show Proper Evidence Of Debt Assignment

Lexology reports:
  • A recent Missouri decision in a credit card collection case illustrates the kind of documentation attacks that are increasingly being lodged against the non-mortgage consumer lending industry.

  • In its January 17, 2012, opinion in Cach, LLC v. Askew, the Missouri Supreme Court ruled that a debt collector was not entitled to judgment in its favor because the collector had not properly established that it had been assigned the debt in question. Following the card issuer’s acquisition by another bank, the consumer’s credit card account was assigned to a purchaser that subsequently assigned the account to the debt collector.

  • At trial, the collector submitted a document purporting to be a bill of sale transferring the account from the acquirer bank to the purchaser.

  • The Missouri Supreme Court held that the trial court erred by admitting the bill of sale into evidence based on testimony of the debt collector’s records custodian. More specifically, the court found that the custodian was not a “qualified witness” to lay the foundation for the document to qualify for the business records exception to the hearsay rule.

  • According to the court, the custodian failed to show that she had any personal knowledge of how or when the bill of sale was prepared. Without the bill of sale, the debt collector had no competent evidence of the first assignment and therefore failed to show it had standing to bring the collection action, the court found.

For the story, see Missouri High Court scuttles credit card collection action due to problem documentation (may require subscription; if no subscription, TRY HERE - then click appropriate link for the story).

For the ruling, see Cach, LLC v. Askew, No. SC 91780 (Mo. January 17, 2012) (en banc).

Reluctant Banksters Refuse To Correct Loan Servicing Abuses, Resulting In Continued Harrassment Of Homeowners With Foreclosure Threats

An excerpt from a recent story from The Center for Public Integrity's iWatch News:
  • Since 2007, nearly 9 million homes have been lost to foreclosure, according to data from RealtyTrac. About 4 million are currently in default on or in some stage of foreclosure. Some of these homeowners saw their payments skyrocket, some lost their jobs, and some bought a more expensive home than they could afford.

  • But many, [...], say that their foreclosures or defaults were triggered by an error made by the mortgage servicing company. Common errors include late fees generated through questionable accounting and imposed without notice, excessive charges for property inspections and maintenance, and inflated or unnecessary attorneys’ fees.

  • Many homeowners who have tried to correct what seem to be simple accounting mistakes say that the servicers — often, an arm of a major bank — are unable or unwilling to help them resolve even the most basic problems.

  • Every time I would call I’d get a different person,” said William Allen, a retiree near Baltimore who is fighting a Bank of America foreclosure. “I worked on it nearly a year and it didn’t do me any good.”

  • Most banks and independent loan servicers now say that they have cleared the decks on systemic problems that led to the errors and that they now make it much easier for homeowners to easily resolve their problems with bank representatives.


  • But veterans of the foreclosure wars tell a different story. More than four years after reports of these kinds of errors began bubbling to the surface, homeowners are still fighting to fix servicer mistake that threaten their homes, they say.

  • Almost all loans in default have something wrong with them,” said Tara Twomey, a lawyer at the National Consumer Law Center who recently completed a study of the servicing industry.


  • So why are things such a mess? Much of the blame can be directed at a foreclosure machine created during the housing boom to deal with the mad rush of mortgage applications. The automated system prizes efficiency over customer service, makes frequent errors in the administration of troubled home loans, and, according to one study, pays servicers more for foreclosures than loan modifications.

  • They don’t want to spend enough money to not make mistakes,” said Kurt Eggert, a law professor at Chapman University, who testified about servicing errors at a Senate hearing in 2010 and has written extensively about the industry.


  • [R]ather than hire and train enough employees to personally manage troubled loans in a way that minimizes foreclosures and encourages loan modifications, servicers entrusted management of troubled loans to old computer software that legal experts say isn’t up to the task.

  • The end result is a system with little accountability and a whole lot of angry homeowners. It is impossible to know how many loans have been subject to wrongful fees and accounting errors, but foreclosure war veterans say the number is high.

  • Jay Patterson, a forensic accountant who has examined hundreds of mortgage loans in bankruptcy or foreclosure, said that “95 percent of these loans contain some kind of mistake,” from an unnecessary $15 late fee to thousands of dollars in fees and charges stemming from a single mistake that snowballs into a wrongful foreclosure.

For more, see Raging against the foreclosure machine.

Dangers Of Buying Or Selling Real Estate With Land Contracts, Lease/Options

  • It happens innocently enough: A seller wants to sell real property and a buyer wants to buy it, only the buyer does not have the ability to obtain traditional financing. So, the parties make an arrangement.

  • Perhaps the seller “leases” the property to the buyer for a period of time with the buyer having an “option” to purchase the property at some time in the future.

  • Perhaps the parties agree to an installment land contract (ILC) whereby the buyer makes payments over time and the seller agrees to deliver a deed when the purchase price is paid. What can go wrong? It turns out a lot.

For more, see Mountain Law: Dangers of leases with purchase options (And installment land contracts).