Saturday, July 21, 2012

Arizona Appeals Court: Homeowners' Post-Foreclosure Rights Under State Anti-Deficiency Statute Applies To Forced Sale Of Time-Share Vacation Homes

In Phoenix, Arizona, The Associated Press reports:
  • A new state court ruling says Arizonans with partial ownerships of time-share vacation homes are entitled to the same post-foreclosure rights as owners of year-round homes.

    A mortgage company had sued a couple for the balance still owed on their mortgage for a Sedona condo after a foreclosure of the couple's one-tenth share of the property.

    However, the Court of Appeals rejected the company's argument that the vacation condo isn't a single-family dwelling covered by the state law prohibiting so-called deficiency judgments.

    The court says the purpose of that law is to protect consumers from financial ruin. It says the law places the risk of inadequate security on lenders rather than borrowers.

Michigan Trial Court: No Right Of Redemption When Realty Sold By Court-Appointed Receiver; Rights Typically Associated With Foreclosures Not Available

From a news alert from the law firm Warner Norcross & Judd, LLP:
  • In a victory for banks and other mortgagees, a Michigan circuit court recently held that a sale by a court-appointed receiver does not trigger a right of redemption.

    In First Financial Bank, N.A. v. Scott T. Bosgraaf, a court-appointed receiver sought court approval to sell mortgaged real estate and other property. The mortgagor objected, arguing that the proposed sale would “deprive” the mortgagor of its statutory right to redeem the property.

    The Ottawa County Circuit Court disagreed, concluding that a receiver sale is not a statutory foreclosure, and that the rights that accompany foreclosure, in particular the right of redemption, is "a creature of statute" that is not available following a sale by a receiver.

    The Circuit Court observed that this conclusion should not be surprising since the Michigan Supreme Court has held that a receiver succeeds to all property rights and interest of a debtor, including the debtor's right of redemption.

    It bears noting that the Bosgraaf ruling is an order of a Circuit Court and has no binding effect. It remains to be seen if other courts will follow suit.

    However, if the principle takes hold that a mortgagor has no right to redeem property sold by a court-appointed receiver, banks and mortgage lenders can be expected to turn to receivership sales as a strategy to avoid statutory redemption rights.
  • [I]n a substantial number of these cases, mortgagors will object to a receiver's motion to sell real estate free and clear of their redemption rights, arguing that such a sale is a disguised mortgage foreclosure sale for the sole benefit of the first mortgagee or that it is a "judicial sale" that is subject to the mortgagor's redemption rights.

Elderly Couple Include RICO Charges In Lawsuit Alleging They Were Duped Into Signing Over Their Home As Collateral For Loan

In Los Angeles, California, Courthouse News Service reports:
  • An elderly couple claim in court that real estate agents bilked them into using their home as collateral for a new church.

    Erma and James Marshall and the Mt. Zion Missionary Baptist Church of San Bernardino sued Dan Bochner and Rolando DeArmas (also referred to as DeArmis in the complaint) and Bochner's foreclosure agent Reliable Trust Deed Services, in a federal RICO complaint.

    The Marshalls, with "ages exceeding 74 years," claim that in 2005 DeArmas tricked them into signing over their home as collateral for the purchase of a movie theater in San Bernardino, which the couple intended to use as a church. After the property was purchased, mortgage payments fell into arrears and the Marshalls' home was entered into a foreclosure sale, the couple says.
  • "DeArmas knew that plaintiffs, Marshalls, were an elderly couple who were unfamiliar with real estate transactions and could easily be tricked and convinced into signing documents for their residence to be used as collateral for the Del Rosa church property," the complaint states.
  • The Marshalls seek cancellation of instrument and damages for RICO fraud, negligent misrepresentation, usury, and elder abuse.
For the lawsuit, see Marshall v. Bochner, et al.
For some California case law on one legal approach to undoing a scam like the one alleged here, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.

Florida Man Gets 60 Months For Duping Victims Into Borrowing Against Their Home Equity In $2M Ripoff

From the Office of the U.S. Attorney (Albany, New York):
  • United States Attorney Richard S. Hartunian and [another] announced that ARTHUR STRASNICK, age 64, of New Smyrna Beach, Florida, was sentenced [...] following his guilty pleas on two counts of mail fraud and one count of identity theft.

    STRASNICK was sentenced to 60 months of imprisonment to be followed by three years of supervised release. STRASNICK was also ordered to pay $1,994,620.32 in restitution.

    STRASNICK’s fraudulent activities in the Northern District of New York began in early 2003 when he lured a Saratoga Springs woman into investing money with STRASNICK’s firm, Backstreet Associates, Inc. Investors in Backstreet Associates, Inc. were “guaranteed” high fixed annual rates of returns ranging from 12.0% to 20.0% interest.

    STRASNICK’s investors were paid purported interest and principal payments, when in reality, the investors were receiving monies obtained from the same investor or other investors.

    In the Fall of 2006, STRASNICK also operated a mortgage fraud scheme in which he tricked other individuals, including the aforementioned Saratoga Springs woman, into providing him money representing equity in their homes.

    The mortgages were obtained after STRASNICK either made false representations to the homeowners or forged the signatures of the actual homeowners.
For the U.S. Attorney press release, see Florida Man Sentenced In Fraudulent Investment And Mortgage Schemes (Defendant Who Orchestrated a Ponzi-type Investment Scheme and Who Fraudulently Obtained Mortgage Proceeds Sentenced to 60 Months of Imprisonment and Ordered to Pay $1,994,620.32 in Restitution).

Head Federal Number Crunchers: Regulators Fall Short In Oversight Of Compliance By Banksters w/ Law Protecting Servicemembers From Being Screwed Over

MortgageOrb reports:
  • The Government Accountability Office (GAO) has issued a report warning that regulatory oversight of compliance relating to the Servicemembers Civil Relief Act (SCRA) has been "limited."

    "At least 15,000 instances of financial institutions failing to properly reduce servicemembers' mortgage interest rates and over 300 improper foreclosures have been identified by federal investigations and financial institutions in recent years," says the GAO.
  • The GAO notes that although the U.S. Department of Justice has explicit SCRA enforcement authority, the department has only brought three cases against mortgage servicers for SCRA violations during the past five years.

    The GAO also observes that the U.S. Department of Veterans Affairs (VA), the Federal Housing Administration and the Federal Housing Finance Agency respectively obtain SCRA compliance data, but do not share this information among themselves or with the regulatory agencies.

Lack Of Bankster Oversight When Contracting w/ Property M'gment Firms Problematic As Lawsuits Alleging Thug-Like Break-Ins Of Occupied Homes Pile Up

The Huffington Post reports:
  • A review of court records by The Huffington Post turned up more than 50 homeowner lawsuits against banks and the two largest property management contractors in the U.S., Safeguard Properties and Lender Processing Services, stemming from break-ins of occupied homes.

    The allegations follow five years of generally woeful management of the foreclosure industry by all involved, as the inspector general for the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, is raising red flags about the lack of contractor oversight by the government-backed mortgage giants.

    A June report by the inspector general cited deficiencies "in key [foreclosed home] contractor management controls" at Fannie and Freddie, which own or guarantee more than half of all home loans in the United States. Kristine Belisle, a spokeswoman for the inspector general, said she could not comment on whether the potential misconduct described in the report includes instances of wrongful contractor break-ins.
  • It isn't clear how often contractors are breaking into lived-in homes, but consumer lawyers say these legal complaints represent just a small sample of what is happening in communities across the country, as overzealous contractors whose earnings are pegged to the amount of work they do on a home are entering occupied houses, slapping new locks on doors and sometimes walking away with family possessions.
  • Many of the problems with property inspections appear to stem from a lack of oversight and accountability. There are typically four layers of control between companies that own the loans, and the local contractors who actually do the work.
  • Typically, a bank that services or collects the payments on a home loan will send an electronic notice to an independent contractor when a borrower is in default. The contracting company, in turn, will ask a local subcontractor in its network to conduct a "drive-by inspection." Abandoned homes are then supposed to be secured against the elements, vandalism or other types of damage.
  • The decision about whether to enter a private home is up to a local contractor. That disturbs Pamela Campbell, a circuit court judge for Pinellas and Pasco counties in Florida. Campbell said banks should have to obtain a court order before one of their contractors can enter a home.

    "There should be due process," Campbell said. "When people borrow money to buy a house, they don't anticipate that someone may one day drive by their home and make a determination on their own about whether it is vacant or not, and then possibly change their locks and go through their stuff. That is a scary proposition to me."

Friday, July 20, 2012

MERS Takes Big Hit In Oregon; State Appeals Court Says Outfit's Method Of Handling Non-Judicial F'closures Is Bogus; Expect State Supreme Court Review

In Salem, Oregon, The Oregonian reports:
  • The Oregon Court of Appeals struck a blow to the mortgage industry in Oregon Wednesday, ruling that its controversial document-registry system could not be used to skirt state recording law in out-of-court foreclosures.

    In a decision with implications beyond the Mortgage Electronic Registration Systems Inc., the state's second-highest court also held Wednesday that a lender must ensure a complete ownership history of the mortgage is filed in county records before it can foreclose outside a courtroom.

    MERS was created by the mortgage industry to bundle and sell loans to investors without having to record every assignment with county clerks. It is involved in most mortgages across the country.

    But the court found that the Oregon Trust Deed Act requires the party that receives loan payments to publicly record all changes in mortgage ownership before starting a so-called nonjudicial foreclosure.

    MERS does not take loan payments and does not qualify as a “beneficiary” of a trust deed, so the digital registry cannot be used to avoid the recording requirement, the court ruled.

    A beneficiary that uses MERS to avoid publicly recording assignments of a trust deed cannot avail itself of a nonjudicial foreclosure process that requires that very thing--publicly recorded assignments," the court ruled. Judge Lynn Nakamoto wrote the decision.

    The ruling won't be the final say on the matter. In a statement, MERS said it disagreed with the ruling and would appeal it to the Oregon Supreme Court. "
    MERS validity as beneficiary has been affirmed in 48 prior Oregon rulings, including 30 since this case was filed," MERS spokeswoman Janis Smith said in the statement.

    But other judges have ruled against MERS. The state Supreme Court was asked earlier this year by Chief U.S. District Court Judge Ann Aiken in Portland to resolve the differing opinions. Stephen Armitage, a spokesman for the court, said he did not know when the justices would address the matter. A third Oregon case is on appeal before the 9th U.S. Circuit Court of Appeals.
  • For the time being, lower state courts will likely have to follow Wednesday's ruling, said Kelly Harpster, a Lake Oswego attorney who represents homeowners. "Right now, it is the first and last word in Oregon," said Phil Querin, a real estate attorney in Portland. "The [state] Supreme Court will have to make the final decision."

    Smith of MERS noted that the ruling does not affect judicial foreclosures filed in court and does not overturn any completed foreclosures. But attorneys representing homeowners speculated that it might compel some homeowners to try to overturn previous foreclosures where assignments aren't completely recorded.
For the court ruling, see Niday v. GMAC Mortgage, LLC, A147430 (Ore. App. July 18, 2012).

Suspended S. Florida Mayor Accused Of Duping Unwitting Bankster Into Approving Short Sale By Getting Relative To Pretend To Buy His Underwater Condo

In Boynton Beach, Florida, The Palm Beach Post reports:
  • Suspended Mayor Jose Rodriguez — already facing corruption charges that led to his suspension from office — has been hit with three new felonies alleging he defrauded a bank by short selling a Palm Beach condominium to a relative.

    He also allegedly falsified an affidavit in October saying the condo had been his primary residence for four years, even though he was renting it out at the time and living miles away at his Boynton Beach home, and had been mayor for nearly 18 months.
  • According to a probable cause affidavit released Monday, Rodriguez had applied on Oct. 10, 2009, to Chase Bank for a loan modification, saying he had only $2,000 in the bank. Investigators later determined that he had more than $250,000 in an American Express Bank account.

    The bank declined the modification, saying Rodriguez didn’t qualify. Less than a year later, on Aug. 27, 2010, foreclosure proceedings began.

    Then, in August, an attorney for Rodriguez asked JP Morgan Chase Bank to approve a short sale for $74,000 in cash to Eric Molares of Royal Palm Beach. Prosecutors don’t detail Molares’ relationship to Rodriguez. The bank agreed and the deal was struck Oct. 18.

    Rodriguez and Molares each signed anaffidavit of arm’s length transaction,” in which Rodriguez said he was neither a relative nor business associate of Molares and they shared no business interests.

    Investigators later discovered that on Sept. 8 Rodrigu­ez deposited $75,000 in one of his accounts, then wrote a check for $74,000 to Molares. Molares then gave a cashier’s check to cover the short sale. Molares told investigators Thursday that Rodriguez gave him $75,000 to pretend to buy the unit.

    The condo’s tenant later told investigators she’d received an email pur­portedly sent from Molares, saying he was the new owner and landlord, telling her Rodriguez would be managing the property and directing her where to send the $950-a-month rent.

    Molares told investigators he did not give Rodriguez permission to create an email account impersonating him. He said Rod­riguez later admitted creating a bank account for the rent.

U.S. Bank A Major Slumlord Conducting Illegal Foreclosure Evictions, Says City Of Los Angeles In Lawsuit

In Los Angeles, California, the Los Angeles Times reports:
  • For Mary Sanchez, the vacant, foreclosed home across from hers on Abner Street in El Sereno was an assault on the senses and her piece of mind.

    Gang members and squatters used it as a stash house. The place stank of dead animals. Mice made constant incursions from across the way onto her property, prompting her to get cats to head them off. Weeds in the yard reached as high as her chest.

    "It was embarrassing," she said. "When people would come over I would say 'look for the ugly house with all the stuff in the lawn. I live next to that.' "

    On Monday, Los Angeles officials accused US Bank of illegally allowing the Abner Street home and many others to deteriorate into slums. The civil allegations found problems in the way US Bank handled 1,500 home foreclosures and cited more than 150 homes that had fallen into disrepair. The city is demanding that the bank clean up vacant properties and improve conditions for families living in others.

    The lawsuit marks the second time the city has accused a major bank of being a slumlord, part of an aggressive attempt to deal with the urban decay caused by the housing crash.
  • The lawsuit follows an 18-month investigation by the city and accuses US Bank of fostering poor conditions in some neighborhoods that contribute to crime and blight. The bank was also responsible for illegally evicting some tenants and forcing others to live in dangerous conditions, according to the complaint.

    The city is seeking an injunction and potentially millions of dollars in penalties and restitution from the Minneapolis-based financial institution, whose logo crowns the top of the West Coast's tallest building in downtown L.A.

    "U.S. Bank National Assn. disregarded virtually every one of its legal duties and responsibilities as owner, resulting in the creation and maintenance of an alarming number of vacant nuisance properties," the complaint alleges. It also said the bank was "repeatedly advised" over the course of years to fix the problems, but "made no efforts … to comply with the law."

    Last year's complaint targeted Deutsche Bank, the fourth largest bank in the world, for its actions related to more than 2,000 foreclosures in Los Angeles.
For more, see L.A. sues US Bank over blighted, abandoned homes (The city attorney accuses the bank of being a slumlord and demands that it clean up properties it foreclosed on).
For the Los Angeles City Attorney press release, see City Attorney's Office Files Law Enforcement Action Against U.S. Bank For Failure To Maintain Foreclosed Properties And For Illegal Evictions (National Bank Faces Hundreds of Millions of Dollars in Potential Liability and Injunction to Clean Up Foreclosed Properties and Stop Illegal Evictions).

Thursday, July 19, 2012

Bankster Accuses Local County Clerk Of 'Un-Recording' Home Loan Docs & Removing Them From Land Indexes; Missing Paperwork Needed To Start Foreclosure

In Jefferson County, Texas, The Southeast Texas Record reports:
  • A bank claims it is having difficulty foreclosing on a property due to missing paperwork in the county clerk's office. Bank of America filed a lawsuit June 20 in Jefferson County District Court against Allen K. Marble, Shannon Marble, Shawn A. Jurek and Carolyn D. Jurek.

    In its complaint, Bank of America claims its predecessor, Countrywide, issued a mortgage to the Jureks for $177,300 to help them buy property in 2007 from the Marbles at 1028 North 22nd St. in Nederland. The Jureks secured their loan with a Deed of Trust, according to the complaint.

    Bank of America has since discovered that the Power of Attorney, the Warranty Deed and the Deed of Trust can no longer be found in the real property records in Jefferson County, the suit states. However, when the Jureks first purchased the property, the required paperwork was filed in the correct place, the complaint says.

    "At some subsequent date, the County Clerk 'un-recorded' those instruments and removed them from the indexes," the suit states. "Plaintiff was not told of this 'un-recording' at the time in occurred."

    As a result, Bank of America claims it has been impossible to foreclose on the Jureks' property. The bank seeks a declaratory judgment that validates the Power of Attorney, the Warranty Deed and the Deed of Trust originally signed with the Jureks. It also seeks equitable relief in the form of a foreclosure, plus attorney's fees and general relief.

Houston-Area Man Faces Aggrevated Theft Charge For Pocketing $50K By Unloading Home In F'closure Onto Unwitting Buyer Without Disclosing Mortgage Lien

In Harris County, Texas, The Atascocita Observer reports:
  • An Atascocita man faces a felony charge of aggregate theft for allegedly attempting to sell his home with the knowledge that it was under foreclosure proceedings. Harris County court records show Matthew Louis Seiffert, 60, is accused of fraudulently accepting payments from a non-profit organization called “Hands Across the Equator Peru” for the sale of his residence located in the 19600 block of Atasca Oaks Dr.

    [The complainant] stated he paid Seiffert a total of $50,000 toward the residence,” Harris County District Attorney’s Office investigator Dustin Deutsch states in a probable cause statement [...].

    Deutsch says a general warranty deed was subsequently filed with the Harris County Clerk’s Office in Sept. 2010, promising to transfer the residence into the ownership of “Hands Across the Equator Peru” and its local agent, board member Douglas Ashworth.

    Months later, as the buyer of the home continued to pay installments on the home purchase, Ashworth was reportedly notified by the district attorney’s office that the bank had foreclosed on the property.
    Ashworth stated he was never refunded the $50,000 he had paid to Seiffert for the residence,” Deutsch says.

    Investigators learned that Seiffert was allegedly in default of his loan agreement on the residence for “failure to provide proof of insurance, failure to pay taxes, and failure to notify First Bank of a bankruptcy judgment entered against him.” Seiffert, court records say, was also behind on loan payments.

    Seiffert, investigators allege, entered into a sales contract for his residence on Atasca Oaks Dr. just after he reportedly received notice of the foreclosure proceedings in March 2010.
    [I] determined that Matt L. Seiffert executed a warranty deed purporting to convey the foreclosed property when he had no legal authority to do so due to First Bank being the primary lien holder on the property and having foreclosed the property,” Deutsch said.

    Seiffert was taken into custody July 12 and is being held in Harris County Jail without bond.

Las Vegas Homeowner Dies Before 'Under-Aged' Wife Turns 62; Now Wells Fargo Moves To Boot Widow By Foreclosing On Deceased Hubby's Reverse Mortgage

In Las Vegas, Nevada, KTNV-TV Channel 13 reports:
  • [I]n 2006, Linda and Tom [Brumfield] got a reverse mortgage from Wells Fargo. In a regular mortgage, you make monthly payments to the lender. But in a "reverse" mortgage, you get money from the lender and generally don't have to pay it back for as long as you live in your home.

    It's a way for people 62 and older to convert home equity into cash for things like medical bills, which is what Linda and Tom needed it for. "Wells Fargo gave us $80,000 for the house and they said we could both live here until we died, which I believed."

    But she says Wells Fargo didn't keep their word. [...] Tom -- a World War II veteran -- was 62 long before Linda, so only he could qualify for the reverse mortgage loan at the time. But Linda says the bank made them a promise.

    "They said that if we put the house in his name, then as soon as I turned 62 they'd just include my name on it for a service fee." But Tom passed away suddenly in 2008, shortly before Linda turned 62.

    "And when my husband died, everything changed. They wouldn't call me or anything, didn't get any response." What she did get were foreclosure notices posted on her door even though they sent her a letter in 2009 saying she was eligible for the reverse mortgage.
  • "It's a real, real tragedy," says Attorney Matthew Callister, who's filed multiple lawsuits over reverse mortgage loans like Linda's. "Typically, and from what I've seen here, the cost of that loan is horrific. There's not just lots and lots of hidden fees and costs built into the loan..." There's also lots he says banks don't tell borrowers.

    "Invariably it's fraud in the inducement, fraud in the making of the loan," Callister says. Linda's name isn't on the reverse mortgage loan, but Wells Fargo wants her to pay it off. And even though her name is on the title of the house in a living trust, they won't put it on the mortgage. "Not unless I pay $330,000, whereas a stranger off the street could come and buy it at the auction for $90,000."

    And don't think she hasn't considered being that stranger. But she says Wells Fargo warned her neither she nor any of her family members could buy the home at auction. "I think they were very deceitful and they tricked us into this reverse mortgage. I do believe that."
  • Callister will be working to help Linda fight to keep her home, "Because we recognize that this is a potentially predatory lending situation that's going on involving a senior citizen, that can very well constitute elder abuse."

Lender Admits Illegal Foreclosure, Rescinds Sale, Then Continues To Refuse Loan Modification Payments & Begins Foreclosure Process Again

In Lansing, Michigan, WLNS-TV Channel 6 reports:
  • One local woman says banks have tried to foreclose on her twice in one year, despite having a loan modification and making payments on time.

    After partnering with Ingham County Register of Deeds Curtis Hertel Jr. and Legal Services of South Central Michigan, the homeowner was able to stay in her home following the first foreclosure attempt.

    "The bank admitted they had illegally foreclosed on my home," says the woman, who does not want to be identified.

    "They admitted in a sworn statement that they filed with the register of deeds that they were wrong, that she had a loan modification," says Perry Thompson, lawyer with Legal Services of South Central Michigan. "They rescinded the sheriff's sale. Nothing has changed. She still has the loan modification, they still won't take payments and they're foreclosing again."

    So far, Thompson has been able to get a temporary restraining order against the company trying to force the homeowner from her home. They will return to court in late July to try and make the restraining order permanent.

Wednesday, July 18, 2012

80+ Year Old Sisters Victimized By Loan Servicer; Find Themselves In F'closure After Being Duped Into Missing Mortgage Payment To Qualify For Loan Mod

In Sand Springs, Oklahoma, Tulsa World reports:
  • At 82, Joyce Jackson is the spry younger sibling who takes care of her older sister and teaches cooking and gardening.

    Her sister, Doreen Wood, suffers memory loss and lingering health issues at age 84 after a serious illness several years ago. Jackson is glad to take care of her older sister's finances and health because Wood can't drive or live alone.

    But both women say they feel victimized by Wood's mortgage service company, CitiMortgage. They say they were told to stop making payments in 2010 on the Sand Springs home, where Wood previously lived for decades, to qualify for a payment modification program.

    CitiMortgage refused to give them a timely response about whether they qualified for the program and began foreclosure proceedings in early 2011 without their knowledge, the sisters say.
  • "I feel so frustrated," Jackson said. "Out of one side of their mouth, they were talking to us about modification, all while beginning the foreclosure process. That's incredibly dishonest. They had no intention of helping."

BofA Loan Modification Jerkaround Stories Continue To Pile Up; Payments Made Too Early, 35 Cent Short Land Befuddled Homeowner In Trouble

In Philadelphia, Pennsylvania, The Philadelphia Inquirer reports:
  • It might make financial sense for Lisa Fiorilli to just walk away from her home in Manayunk — a tidy, three-story rowhouse on one of the neighborhood's familiar, hilly streets that rise up from Main Street and the canal.

    But Fiorilli, facing foreclosure after a two-year bureaucratic tangle with Bank of America over a mortgage modification, would rather stay and fight — even if her home is now worth less, as she says bank officials have suggested, than what she owes on it.

    Fiorilli's saga — backed up by a thick file of documents and call logs — is a story of a mortgage accommodation dangled and apparently snatched away for flimsy reasons, such as a phone payment that came in 35 cents short, and another payment that came in two weeks early. That's no misprint: early, not late.
  • So what went wrong? Fiorilli has gotten multiple answers.

    She says she dutifully made her monthly [loan modification] payments starting in March 2010, paying by phone to ensure she knew the right amount. When she got a letter denying her a permanent modification six months later, it said she failed because of "trial plan default."

    Baffled, she finally got a bank rep to compare the bank's records against her own statements, revealing the 35-cent shortfall. Fiorilli says he encouraged an appeal.

    Every time she called, she says, she got a different answer. Sometimes she was told she'd finally been approved. Others times, she was told she'd been declined. Her pleas to speak with an executive with actual decision-making authority were ignored.

    Then, this spring, she got another denial letter. This one said that her initial appeal was valid, but that now she didn't qualify because of the financial formula.

    When she called this time around to question the decision, asking pointedly whether "anybody should lose their house over 35 cents," a new bank rep denied that the tiny shortfall was the reason for the initial denial.

    Instead, she blamed it on the fact that Fiorilli's first payment came in March 2010, before her modification was due to begin April 1. Funny, since Fiorilli has two Bank of America letters dated in early March 2010 urging her to make her first payment immediately.

Title Insurer Sends Out Alert On Short Sale Racket Involving Use Of Phony Paperwork Simulating Authentic BofA Short Sale Approval Letters

The South Florida Sun Sentinel reports:
  • Local homeowners and title insurance companies are being warned about possible mortgage fraud that involves bogus short sale approval letters from Bank of America.

    Attorneys' Title Fund Services, one of the largest title insurance underwriters in Florida, sent an alert last week, saying scammers are mimicking the lending giant's approval letters, including similar language and the bank's logo. In response, Bank of America is asking those who receive letters to verify their authenticity by calling 866-880-1232, option 1.

    Three California men were arrested last month in connection with a series of schemes targeting homes in some stage of foreclosure, authorities said.

    "In some cases, the defendants used short sale approval letters that had been entirely fabricated to carry out their schemes," the U.S. Attorney's Office in Los Angeles said in a statement. "As a result, homebuyers and investors purchased homes they thought had a clear title but were actually devalued and subject to hundreds of thousands of dollars worth of liens."

    In other instances, defendants assumed identities of homeowners or claimed to be working with bank employees, who would approve short sales for less than fair market value, federal law enforcement officials said in the statement. The scams allegedly resulted in more than $10 million in losses.

    One of the men, Ahmed Tariq Asghari, 32, of Sherman Oaks, Calif., was arrested in Miami Beach. It's not clear whether other banks were affected or if any of the schemes occurred in Florida, though mortgage fraud is a major problem in the Sunshine State.

    In a short sale, a seller has the lender's permission to unload the home for less than what's owed on the mortgage.
For more, see Scams on short sale approvals (Bogus letters result in $10 million in losses).

Tuesday, July 17, 2012

Trio Bagged For Allegedly Duping Dying 81-Year Old Into $50K Refinance Ripoff That Led To Her Loss Of Home To Foreclosure

In Cleveland, Ohio, NewsChannel 5 reports:
  • Eighty-one year old Evelyn Chudzinski only owed $14,000 on her Cleveland home, but Cuyahoga County Prosecutors have charged three suspects with tapping into her home equity, and playing a role in the loss of her property.

    Richard While Jr., Sharon Stucco, and Gary Thomas appeared in Cuyahoga County court to face multiple felony counts of identity fraud. Assistant Prosecutor Frankie Goldberg told NewsChannel5 exclusively that While was the leader of the alleged plot.

    Goldberg said the trio of suspects befriended Chudzinski in May 2008, allegedly telling her they needed her personal information to help her refinance her Finn Avenue home.

    "They received $50,000, Chudzinski had no idea what she was signing," said Goldberg. "They refinanced the home she was living in for 20 years, and used her identity to allegedly buy an investment property on Dakota Avenue."

    Chudzinski later her lost her home to foreclosure, and months later passed away, before charges where brought against the suspects. While, Stucco and Thomas all pleaded not guilty, the case has been assigned to Judge Eileen T. Gallagher, and is set to start on July 17.

    Meanwhile, Prosecutor Goldberg praised the Ohio Legislature with recently increasing the statute of limitations on crimes against the elderly to five years. "People need to be accountable for these crimes, they are absolutely egregious, they're despicable, and we really need to send a message, we need to be vigilant in protecting our senior population," said Goldberg.

    If convicted, While could be sentenced to up to 21 years in jail, Stucco 15 years and Thomas 3 years.
Source: Trio charged with defrauding thousands from dying 81-year-old Cleveland woman (Prosecutors alledge trio opened 50K equity loan).

Family Who Paid $5K To 'Adverse Possession Deed' Peddler Gets The Boot As Homeowner Permitted To Recover Possession Of Temporarily Vacated Home

In Littleton, Colorado, CBS4 reports:
  • A judge in Arapahoe County gave a Littleton family permission to move back in to their home after squatters took possession and lived there for eight months.

    The illegal occupants of the home were given 48 hours to leave the premises after their claim to occupy the home by “adverse possession” was shot down in court.

    After 12 years living on Mabre Court in Littleton, Troy Donovan got a job with a racing team in Indiana. Donovan left Colorado in March, 2011, his wife Dayna and their two children followed a few months later in August. After months of trying to sell the house, the Donovan’s winterized their home, turned off the utilities, and left for Indiana.

    The Donovans say their plan was always to return to Colorado. But that turned out to be quite difficult. While still in Indiana, the Donovan’s former neighbors on Mabre Court told them people were living in their house.

    Donovan recalls asking the occupants to leave when they returned to Littleton. “We show up at the house and we say ‘Look, I’m Troy Donovan, this is my wife Dayna, we own this home,’ ” he told CBS4. The people inside wouldn’t budge, so the Donovans were forced to move into a relative’s basement in Greeley.

    The people living inside, Veronica Fernandez-Beleta and Jose Rafael Leyva-Caraveo, claimed they bought the home. They told Littleton police they paid a man named Alfonso Carillo $5,000 for some legal paperwork called a deed ofadverse possession.”

    Carillo is a former realtor whose license has been revoked. Carillo also faces criminal charges in Denver and has been connected to a string of homes occupied by squatters up and down the Front Range. The homes vary in size and price, but all have connections to Carillo through various court documents CBS4 has obtained.

    After seeing previous CBS4 stories on stolen homes, the Donovans confronted the people living in their home. “I told her ‘What you’re doing is wrong, it’s illegal. I would really like you to move out of the home or we will take legal action against you,’ ” said Dayna Donovan.

    On Thursday a judge ordered that the Donovans get their home back. Fernandez-Beleta told CBS4 in Spanish, “I am sad and confused and distressed.” The Donovans say they are thankful they can finally return home.

    We get to get out of the basement, get a full home to live in,” Dayna said. “A home we created and worked very hard in as well.”

Feds Pinch Group Running Alleged Foreclosure Rescue Racket That Manufactured & Sent Phony Military Orders To Lenders To Stall Repo Process Under SCRA

From the Office of the U.S. Attorney (Plano, Texas):
  • Five individuals have been indicted have been indicted for their roles in a combination foreclosure rescue/drug distribution scheme in the Eastern District of Texas, announced U.S. Attorney John M. Bales today.

    Charles Williams, 37, of McKinney, Texas; Jarrod Williams, 33, of McKinney, Texas; Julius Williams, 41, of McKinney, Texas; Jemilat Williams, 33, of Missouri City, Texas; and Christopher Carter, 33, of Leicester, England, have been indicted by a federal grand jury on July 11, 2012 and charged with multiple violations.

    According to counts one through 17 of the indictment, Charles Williams, Jarrod Williams, Julius Williams, and Jemilat Williams controlled and operated Applied Investment Strategies Inc., which marketed itself as a foreclosure rescue service that would assist homeowners who were at risk of foreclosure.

    However, once retained by their customers, AIS fraudulently used their customers’ personal identification information to prepare and send false military orders to lending institutions in order to claim relief from foreclosure efforts under the Servicemember’s Civil Relief Act.

    AIS then leased out the homes and collected the rental payments for its benefit. The scheme involved approximately 38 homes and also extended to efforts to forestall repossession of cars. According to count 18 of the indictment, after at least one of the fraudulently acquired properties was vacated, Charles Williams, Jarrod Williams, Julius Williams, and Christopher Carter turned it into a marijuana grow operation that housed in excess of 1,000 marijuana plants.
For the U.S. Attorney press release, see Five Indicted in Combination Foreclosure Rescue/Drug Distribution Scheme (Subjects Used False Military Orders to Forestall Foreclosures Before Converting Home into Marijuana Grow Operation).

Monday, July 16, 2012

Georgia Appeals Court: Failure To Include Name Of Actual Owner Of Mortgage Loan Sinks Foreclosure; Ruling Could Affect Tens Of Thousands Of Cases

In Cobb County, Georgia, The Atlanta Journal Constitution reports:
  • An appeals court ruling this week in favor of a Cobb County couple could leave mortgage companies liable for damages for not following state law in an unknown number of Georgia foreclosures.

    The 4-3 ruling probably won't undo the result of past foreclosures, lawyers say, but could open another avenue for borrowers to sue mortgage firms.

    "This could breathe new life into the challenges of foreclosures that took place in late 2008 and throughout 2009," said Frank Alexander, a real estate law professor at Emory University. The number of cases where the ruling might be applicable was not immediately clear, but could be in the tens of thousands.

    The issue involves the many lenders who sell their loans to other parties such as investment trusts, but serve as stand-ins handling the paperwork in the foreclosure process and act as if they still own the loans.

    The Georgia Court of Appeals held Thursday that the name of the actual owner of a mortgage must be present in foreclosure filings and notices sent to delinquent borrowers.

    State law was modified in 2008 to require that foreclosure notices and legal advertisements include the name and contact information of the mortgage owner and of organizations that could negotiate a modification, short sale or other relief on lender's behalf.

    "A debtor has a right to know which entity has the authority to foreclose, and there should be no confusion about the identity of that entity. The practical ramifications are troubling if it were otherwise," the court majority agreed in its opinion.(1)

    The court said that if a debtor knows a mortgage servicer no longer holds the loan, for instance, he could be "misled or confused, or simply disregard, a notice of foreclosure" that doesn't correctly identify the loan's proper owner.

    David Ates, an attorney for plaintiffs Izell and Raven Reese, said mortgage servicers, stand-ins for investors who buy mortgages the original lenders have sold, often have an incentive to foreclose because of potential fee revenue.
  • Alexander said the ruling is significant as an affirmation of the 2008 amendment to Georgia's foreclosure statutes. In addition to helping borrowers under threat of foreclosure know where to turn for help, the principle of the 2008 amendment was to help ensure that the true holder of the mortgage was foreclosing.

    "Even a dog in Georgia has a right to know who's kicking them," Alexander said. "Before you lose your home you have a right to know who's taking it from you."
For the court ruling, see Reese v. Provident Funding Associates, LLC., A12A0619 (Ga. App. July 12, 2012).

(1) The state court of appeals made these, among other, observations in reaching its conclusion:
  • A persuasive discussion of the legislature's intent is set out by the Northern District of Georgia in Stubbs v. Bank of America, No. 1:11-CV-1367-AT, 2012 WL 516972, at *1, 5 (N.D. Ga. Feb. 16, 2012) (originally filed in state court and removed to the Northern District of Georgia based on diversity jurisdiction), which held as follows:

    While it may be of no consequence who actually sends the notice, and that task may properly be delegated to a servicing agent (or, as is often the case, an attorney), the amendments of sections [OCGA § 44-14-]162 and [OCGA § 44-14-]162.2 in 2008 make clear that the identity of the secured creditor conducting the sale is a material element of that notice.


    The Northern District's analysis in Stubbs is compelling, and although not controlling, is persuasive authority in analyzing the very same Georgia statute that we interpret in this case. Notably, the circumstances in this case are nearly identical to those presented in Stubbs, where

    the actual "secured creditor" did not provide notice of the foreclosure sale as required by OCGA § 44-14-162.2. Nor did the servicer, acting as agent for the secured creditor, send a foreclosure notice that properly identified the secured creditor. Rather, the loan servicer sent a notice of foreclosure identifying itself as the secured creditor when it was not.

    (Punctuation omitted.) Id. at *4. Like the notice in Stubbs, the notice in this case was sent by the loan servicer, rather than the secured creditor. While a loan servicer may be permitted to send the notice on behalf of the secured creditor,[6] Provident's fatal mistake was in sending a notice that failed to properly identify the secured creditor. Although the notice disclosed that Provident had the "authority to negotiate, amend and modify all terms of the Note and Security Deed[,]" such "is materially different from disclosing that [the loan servicer] has full authority to modify on behalf of a creditor, . . . within whatever guidelines that creditor may have imposed." (Citations and punctuation omitted.) Id. at *5. This is especially so when the notice fails to ever identify the true secured creditor. The notice in this case contained material misrepresentations, and we agree with the federal court's sentiment that "[s]ending a foreclosure notice that misidentifies the secured creditor violates the spirit and intent of OCGA § 44-14-162.2." (Punctuation and emphasis omitted.) Id.[7]

    Indeed, a debtor has a right to know which entity has the authority to foreclose, and there should be no confusion about the identity of that entity. The practical ramifications are troubling if it were otherwise. For example, in a case such as the instant one, where the debtor knows that the loan servicer is no longer the holder of the note or the security deed, it is certainly conceivable that the debtor could be misled or confused by, or simply disregard, a notice of foreclosure which is sent by an entity different from the secured creditor, and which fails to properly identify the secured creditor. The misrepresentation in this case illustrates how transparency can be obfuscated in the Georgia foreclosure process.

    Finally, a notice that discloses the true identity of the secured creditor is a simple requirement, and one that does not impose an undue burden upon the banks or other entities authorized to send the notice of foreclosure sale.

Fed Appeals Court: Loan Servicer's Failure To Respond To Homeowner's Request To Modify Loan Payments Does Not Violate TILA Where It Originated M'tgage

In Las Vegas, Nevada, the Las Vegas Review Journal reports:
  • A federal appeals court has foreclosed on one avenue for financially distressed homeowners to challenge lenders.

    Banquet server Richard Gale defaulted on his home loan payments four years ago when paychecks from his various Strip employers started to shrink. He sent letters to First Franklin Loan Services asking it to rework the terms of his $250,000 mortgage and to find out which entity owned the loan at that point but never heard back.

    In its ruling on Thursday, the Ninth U.S. Circuit Court of Appeals denied Gale's bid to sue First Franklin, a subsidiary of Bank of America, under the Truth in Lending Act. Under its intricate interpretation of the act, the court excused First Franklin because it was the original lender and kept the servicing rights even though the loan was later resold. Many banks continue the collection work as a source of steady income even if they want certain loans off the books.

    However, if a servicer attained the position through a legal assignment from another company, then it must tell homeowners who holds the loan.

    The court designated the case as a published opinion, meaning that it sets a precedent for the lower courts to follow.

    "We are not unsympathetic to the frustration that resulted from Franklin's failure to respond to Gale's inquiry regarding his home," according to the opinion by the three-judge panel. "The service is often the only entity that the consumer is in contact with after the loan issues - unless the servicer is forthcoming, the homeowner may not know with whom to negotiate to stave off foreclosure ... ."
For the court ruling, see Gale v. First Franklin Loan Services, No. 09-16498 (9th Cir. July 12, 2012).

Feds, Wells Fargo Reach $125M Deal To Settle 'Ghetto Loan' Peddling Allegations

From the U.S. Department of Justice:
  • The Department of Justice [] filed the second largest fair lending settlement in the department’s history to resolve allegations that Wells Fargo Bank, the largest residential home mortgage originator in the United States, engaged in a pattern or practice of discrimination against qualified African-American and Hispanic borrowers in its mortgage lending from 2004 through 2009.

    The settlement provides $125 million in compensation for wholesale borrowers who were steered into subprime mortgages or who paid higher fees and rates than white borrowers because of their race or national origin. Wells Fargo will also provide $50 million in direct down payment assistance to borrowers in communities around the country where the department identified large numbers of discrimination victims and which were hard hit by the housing crisis.
For the Justice Department press release, see Justice Department Reaches Settlement with Wells Fargo Resulting in More Than $175 Million in Relief for Homeowners to Resolve Fair Lending Claims (African-American and Hispanic Borrowers Who Qualified for Loans and Were Charged Higher Fees or Rates or Were Improperly Placed into Subprime Loans Are Eligible for Compensation).
Go here for the consent order.

Sunday, July 15, 2012

Wisconsin AG, Local DA Bag Closing Agent For Allegedly Pocketing Approximately $1M In Loan Proceeds Intended For Existing Mortgage Payoffs

From the Office of the Wisconsin Attorney General:
  • Attorney General J.B. Van Hollen and Marathon County District Attorney Kenneth J. Heimerman announced the filing of a complaint [], charging Jay Fischer with racketeering, embezzlement, fraud, and tax crimes. The complaint filed in Marathon County included twenty-one felony and four misdemeanor counts.

    According to the complaint, Fischer operated a business, known as Valley Title, previously located on 17th Street in Wausau. Valley Title served as a closing agent for real estate transactions. Homeowners utilized Valley Title as a title agent when refinancing a mortgage or purchasing a house.

    According to the complaint, Fischer received more than one million dollars from ten real estate transactions in 2009 and 2010. Fischer reportedly failed to pay off the old mortgages resulting in dual active mortgages on the homes. Fischer later satisfied two of the mortgages after the homeowners discovered dual mortgages on their properties. The complaint alleges that Fischer kept approximately one million dollars from the remaining eight mortgages.

    The charge of racketeering alleges that Fischer used his business, Valley Title, to embezzle money and obtain signatures on the closing documents by fraud. The complaint also charges Fischer with failing to file individual and corporate tax returns in 2009 and 2010. Fischer no longer actively operates Valley Title, according to the investigation.

Ex-Chapter 7 Trustee Gets 18 Months For Ripping Off Bankruptcy Estates He Oversaw

From the Office of the U.S. Attorney (New Haven, Connecticut):
  • David B. Fein, United States Attorney for the District of Connecticut, announced that Michael J. Daly, 55, of West Simsbury, was sentenced [] by Chief United States District Judge Alvin W. Thompson in Hartford to 18 months of imprisonment, followed by three years of supervised release, for stealing from several bankruptcy estates that he oversaw as a trustee. Daly also was fined $15,000.
  • On July 12, 2011, Daly pleaded guilty to one count of embezzlement by a court officer, a charge that stemmed from his embezzlement of $11,100 from the bankruptcy estate of Lehman Brothers Inc., a Connecticut-based print shop.

    According to court documents and statements made in court, on May 13, 2004, a voluntary Chapter 11 bankruptcy petition was filed on behalf of Lehman Brothers. On December 5, 2008, the Lehman Brothers bankruptcy was converted from a Chapter 11 to a Chapter 7 case, and the U.S. Bankruptcy Court for the District of Connecticut appointed Daly trustee of the estate. As trustee, Daly was responsible for closing the company’s “Debtor-in-Possession” account, or “DIP,” as soon as possible.

    Daly left Lehman Brothers’ DIP account open for more than six months, until June 29, 2009. During that period, the account received $11,584.31 in customer deposits for previously completed print jobs. Daly made a series of withdrawals from the account, totaling $11,100, which he deposited into his business account or converted to cash. Daly then transferred the stolen money to his private bank account and spent it on personal expenses.

    The FBI’s investigation of this matter further revealed that, while serving as a bankruptcy trustee, Daly embezzled $16,500 from two other estates, stole approximately $22,100 in jewelry from another estate, and attempted to submit approximately $73,650 in false time records in association with his work on behalf of another estate.

    Daly has surrendered his license to practice law and resigned as a panel trustee in the bankruptcy court.

(1) To the extent the any victims can't collect any money from this attorney, they might consider pursuing a claim with the Connecticut Client Security Fund, which is a fund established by the rules of the Connecticut Superior Court to provide reimbursement to individuals who have lost money or property as a result of the dishonest conduct of an attorney practicing law in the State of Connecticut, in the course of the attorney-client relationship. The fund provides a remedy for clients who are unable to obtain reimbursement for their loss from any other source. Go here to obtain a copy of form JD-GC-15 - "Application for Reimbursement - Client Security Fund" (PDF).

For similar "attorney ripoff reimbursement funds" that 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.

Victimized Shareholders Get Judicial Green Light To Pursue Suit Against BofA, MERS For Allegedly Duping Them About Exposure To Crappy Mortgages

In New York City, Reuters reports:
  • A federal judge refused to dismiss a lawsuit accusing Bank of America Corp of misleading shareholders about its exposure to risky mortgage securities and its dependence on an electronic mortgage registry known as MERS.

    U.S. District Judge William Pauley in Manhattan said shareholders led by a Pennsylvania school pension fund may pursue securities fraud claims against the second-largest U.S. bank to recover billions of dollars of alleged losses.

    Pauley said the allegations raised a "strong inference" that Bank of America intended to mislead about its reliance on the registry, vulnerability to mortgage buyback claims, internal controls and compliance with accounting and securities rules.

    But the judge dismissed a variety of claims against current and former Bank of America executives and directors, including current Chief Executive Brian Moynihan and his predecessor, Kenneth Lewis, and dozens of underwriters.