Saturday, August 11, 2012

Senior Duped Into Belief She Obtained Reverse Mortgage Now Faces F'closure; Originator Accused Of Pocketing Loan Proceeds, Making Lulling Payments

In Louisville, Kentucky, WATE-TV Channel 6 reports:
  • A Louisville widow is due to lose her home to foreclosure in less than two weeks. She's a victim of an alleged investment fraud scheme that has possibly cost hundreds of people millions of dollars.
  • Joy [Joines] and her late husband, Kenneth, built a small home in Louisville on waterfront property in a picturesque inlet 25 years ago. Before Kenneth died of cancer in 2005, he wanted financial security for his wife. So he took out a reverse mortgage, believing it would give her income for life, along with $900 a month she receives from another retirement fund.

    For seven years, Joy received a $500 monthly payment based on the equity from her home. But this March, PNC Mortgage wrote saying Joy was behind in her mortgage payments. "I have never done anything to hurt anyone, never in my life," she said.

    She is one of many investors who lost their retirement savings, as documented in court records. It was part of an alleged investment fraud involving Knoxville-based Benchmark Capital and Louisville accounting firm J. Allen and associates. A federal indictment named Joyce Allen and an associate as part of the scheme.

    "The bank bought the contract out, but she had taken a balloon payment and stuck it in her pocket," Joy said. According to the court documents, there's no evidence that any funds sent to Benchmark were ever invested in a legitimate annuity. [...] In July, Joyce Allen pleaded not guilty to six counts of counterfeit securities and conspiracy to commit money laundering.

    Foreclosure is scheduled on Thursday, August 16 for the home Joy has been fighting to keep. She says it's inevitable she's going to lose it. "I've never cried so much, and I don't want to cry anymore. I just don't," Joy said.

Return Of Stolen Muscle Car Taken By Foreclosure Vendor Brings More Heat On BofA For Lack Of Oversight In Hiring Process

In Worcester, Massachusetts, the Worcester Telegram & Gazette reports:
  • On Tuesday afternoon, a garage door rolled up at the Manchester Police Department in New Hampshire, and Sims Dahrooge laid eyes on a familiar rear spoiler and dual exhaust pipes bristling from the back of a vintage purple muscle car.

    That’s all I had to see, and I couldn’t help it. I just started to burst into tears,” he said yesterday, back in the city with the 1973 Dodge Challenger he restored with his father, Aaron Dahrooge.

    As the Dahrooges towed the car back to Worcester on a trailer, on account of a blown transmission and rear tires scorched smooth from untold burnouts, two Manchester men were being held on Massachusetts warrants for receiving stolen property.

    The classic American muscle car had been taken from the Burncoat home of Aaron Dahrooge’s deceased mother in March, a day after a Bank of America contractor had gone to the home to winterize and secure it.

    Bank of America is foreclosing on the vacant Uncatena Avenue home, which is in Mr. Dahrooge’s control in the meantime as executor of his mother’s estate. He stored the Challenger in the home’s garage during the winter as he did when his mother was alive, he said.

    A neighbor told Mr. Dahrooge that the same crew that had winterized the home and padlocked the garage door in March returned the next day, used a key to open the garage lock and towed away the distinctive purple car, which has dual four-barrel carburetors and a chrome air scoop sticking up through the hood.

    Mr. Dahrooge, who immediately reported the car stolen, said his attempts to get information about the winterization crew from Bank of America were met with months of stonewalling, a characterization disputed by the bank.
  • The Dahrooges said investigators told them the two New Hampshire men arrested have criminal records, one of them extensive. They maintain the bank should be liable for the damage to the car.

    The biggest thing for me is Bank of America hired criminals. Don’t they do background checks? This is supposed to be a professional bank,” Sims Dahrooge alleged.

    His father’s lawyer, Thomas J. Scannell of the Worcester firm Fusaro, Altomare & Ermilio, said he’s looking into whether the Dahrooges have legal grounds to sue the bank for damages.

    In the meantime, Patrick Peryer, 22, and Kurtis Lavigne, 27, both of Manchester, N.H., are fighting rendition to Worcester on charges of receiving stolen property. They were arraigned Tuesday as fugitives from justice on the charges in New Hampshire.
For more, see Missing muscle car back home in Worcester amid foreclosure battle (No explanation of how it was taken, but charges against NH men).

For story update, see Car stolen from foreclosed house causes bank, vendor freeze:
  • Local muscle car enthusiast Aaron Dahrooge's successful battle to get his stolen 1973 Dodge Challenger back has prompted one of the world's largest financial institutions to temporarily stop doing business with a major foreclosure vendor in Massachusetts and to require the vendor to verify that all of its employees and subcontractors have up-to-date background checks.

Central Florida Man Faces More Charges In Alleged Scam That Duped Homeowners In Foreclosure To Deed Over Their Homes To Him

In Brooksville, Florida, the Tampa Bay Times reports:
  • A Brooksville man accused of trying to sell foreclosed properties he never legally owned to unsuspecting buyers is facing more charges. Three more victims in Hernando County have come forward since Gaetano Antonelli was arrested June 27 and charged with three counts of organized fraud, the Hernando Sheriff's Office said Tuesday.

    Antonelli, 62, faces three more fraud charges here. The case has also crossed county lines.

    According to the Sheriff's Office, Antonelli targeted home owners facing foreclosure, telling them he could relieve them of their mortgages by suing their mortgage company. Antonelli told them they could walk away and maybe even get money back if they signed their deeds over to him by a power of attorney agreement, said Hernando sheriff's Detective Dustin Mormando.

    Then, authorities say, Antonelli would list the houses for sale on Craigslist without the knowledge of the homeowners.

Indictments Filed Against Pair Accused Of Duping Homeowners Into Giving Up Control Of Homes To Avoid F'closure, Illegally Snatching Vacant Homes

In Denver, Colorado, The Denver Post reports:
  • The Denver Grand Jury has indicted two men in connection with a series of real-estate scams targeting homeowners facing foreclosure and Spanish-speaking would-be homebuyers.

    Alfonso Carrillo, 50, and his associate Rudy Breda, 53, are charged with violating the Colorado Organized Crime Control Act and face multiple counts of theft, burglary and criminal trespass. Carrillo is charged with 18 counts and Breda with 10 counts.

    The indictment, filed in Denver District Court [], alleges that Carrillo found homeowners facing foreclosure and, for a nominal fee, persuaded them to give him control of the properties. He misrepresented it as a way to avoid foreclosure. Carrillo and Breda would then allegedly sell the properties using phony documents.

    The charges also allege that the duo would illegally gain access to empty homes, taking thousands of dollars in payments from unsuspecting buyers. Once the buyers were discovered by mortgage lenders or the actual property owners, they were forced to vacate the properties. Carrillo and Breda allegedly targeted Spanish-speaking homebuyers who were often undocumented, according to the indictment.

    Arrest warrants have been issued for both men, with bail set at $750,000 for Carrillo and $20,000 for Breda. Carrillo already faces multiple felony counts of theft and forgery, but the earlier charges will be dismissed. The next court date for Carrillo and Breda has not been set.

    The indictment also alleges Jose Caraveo, 39, and Veronica Fernandez-Beleta, 40, broke into a home and remained there unlawfully from April 2011 to this month. They are charged with first-degree criminal trespass and second-degree burglary.

Albuquerque Cops, Feds 'Sting' Suspect Accused Of Hijacking Possession Of Vacant Homes In Foreclosure & Renting Them Out To Unwitting Renters

In Albuquerque, New Mexico, the Albuquerque Journal reports:
  • Stephen Jay Bonner, 43, was arrested Wednesday for allegedly entering homes that were vacant and in the process of foreclosure, then renting the houses as if they were his own, according to an Albuquerque Police Department news advisory.

    APD detectives and agents of the U.S. Secret Service conducted a joint operation in which a resident of one of the properties used an undercover officer to make a fraudulent rent payment to Bonner, according to APD Officer Robert Gibbs.

    The undercover officer observed the transaction, and Bonner was taken into custody without incident by uniformed officers from the Northwest Area Command in a traffic stop, the advisory said.

    Bonner allegedly admitted breaking into houses on three different occasions and committed fraud in the rental scam, according to Gibbs.

    He was booked into the Metropolitan Detention Center [...] and was being held on a $20,000 cash or surety bond, facing three counts of residential burglary and one count of fraud over $2,500 and under $20,000, according to online MDC records.

Fair Housing Lawsuit Accuses Rural Connecticut Town Of Using Illegal Residency Requirements To Remain "Lily White"

In Bridgeport, Connecticut, Courthouse News Service reports:
  • The rural town of Winchester "systematically and unlawfully" discriminates against minorities in its Section 8 housing voucher program to keep the town's black population at statistically zero percent, The Connecticut Fair Housing Center claims in Federal Court.

    The Hartford-based Fair Housing Center is joined as a plaintiff by Crystal Carter, who is black, in the lawsuit against The Town of Winchester Housing Authority.

    Winchester, pop. 11,000, in rural Litchfield County in northwest Connecticut, is 94.4 percent white, according to Its estimated median household income of $56,260 is 16 percent below the state median of $67,036, according to city-data.

    The Winchester Housing Authority is in charge of the Section 8 housing voucher program for Winchester and 16 neighboring communities in a "Rental Assistance Alliance."

    The federal complaint claims that "according to the 2010 American Community Survey 5-year estimates, 94.5 percent of housing units in Winchester are occupied by white, non-Hispanic households, while only 4.5 percent are Hispanic. The number of housing units occupied by African-American households is so low that it does not register above 0 percent."

    This population trend holds for the other towns in the Rental Assistance Alliance, where in "the percentage of units occupied by white, non-Hispanics is greater than 91 percent," according to the complaint. Carter and the Housing Alliance claim Winchester remains lily white through illegal "residency requirements."

    They say in the complaint that admission to Section 8 programs cannot be based on "where the family lives before admission to the program. These requirements are unlawful because in communities with populations that are disproportionately white and/or non-Hispanic they perpetuate segregation by excluding minority applicants who live outside those communities from obtaining housing there."

    Carter lived Hartford when she applied for a housing voucher through the Winchester Housing Authority (WHA). She claims that "although WHA's waiting list was open to applicants, WHA refused even to send Ms. Carter an application, telling her that she was ineligible because she did not live within the Rental Assistance Alliance. WHA also told Carter that Winchester was not on a 'bus line,' there were no real jobs there, and it was in the 'woods.' WHA recommended that Ms. Carter apply to the housing programs in Bridgeport, New Haven, or Torrington, all communities with considerably larger African-American and Hispanic populations than the towns in the Rental Assistance Alliance."

    Carter and the Fair Housing Center seek declaratory judgment that the WHA is violating the Fair Housing Act, an injunction, and punitive damages.

L.I. Housing Official Pinched For Allegedly Creating Fictitious Landlord With No Actual Tenant To Illegally Pocket $120K In Section 8 Rental Benefits

From the Office of the U.S. Attorney (Central Islip, New York):
  • Federal law enforcement agents [] arrested Louis Abate, the former Fiscal Director for the Nassau County Office of Housing and Community Development (from 2004 to 2012), in connection with a scheme to steal federal housing benefits intended for low-income Long Islanders in need of housing financial assistance.
  • As charged in the complaint, between May 2009 and August 2011 Abate stole more than $120,000 in federal Section 8 rental subsidies from a Section 8 program he oversaw that serviced individuals residing in Island Park, New York.

    Abate allegedly created a fictitious landlord with no associated tenant, and for more than two years diverted federal Section 8 benefits for this supposed landlord to a bank account Abate personally controlled.

    As further set forth in the complaint, during this period Abate was successful in illegally paying himself approximately $5,000 per month – more than three times the monthly amount of federal Section 8 subsidies received by any single participating landlord in the Island Park area.
For the U.S. Attorney press release, see Former Nassau County Housing Official Arrested for Theft Of Government Funds (Louis Abate Allegedly Stole More Than $120,000 in Federal Section 8 Housing Benefits Earmarked for Low-Income Long Islanders).

Friday, August 10, 2012

How One Foreclosure Defense Attorney Stumbled Into The Dubious World Of Force Placed Insurance

From a recent story in American Banker:
  • [W]hen attorney Jeffrey Golant took on his first forced-placement case, he thought he was looking at an administrative mistake.

    A solo practitioner in Pompano Beach, Fla., Golant splits his time between foreclosure defense and insurance cases. He had been referred his first forced-placement case by his mother, Margery Golant — also a longtime foreclosure defense attorney — in May of 2008 when the dispute veered into insurance territory.

    The problems should have been quick to sort out, Golant recalls. His client was current on her mortgage and claimed the lapse of insurance coverage on her home was the result of her previous insurer's error. Much of the new policy's coverage was redundant, Golant said, duplicating flood and wind policies that had remained in place. Moreover, billing her for expensive retroactive hurricane protection, for a year when there had been no significant storms, struck Golant as inherently ridiculous.

    "I really thought they'd added an extra digit," he said.

    But the servicer that had requested the policy — nominally Zions Bancorp., though like many regional banks, the company outsources its servicing and does not involve itself in loan-level decisions — wouldn't back down. The backdating was appropriate because "Had there been damage to your property during the uninsured time … you would have benefited significantly," the servicer said in one letter.

    The Mortgage Bankers Association told American Banker that retroactive coverage is necessary to prevent gaps in insurance. But asked for an opinion on backdating a policy by nine months, the National Association of Insurance Commissioners told American Banker that insurance is "prospective in nature." Therefore, policies "should not be back-dated to collect premiums for a time period that has already passed," the trade group for state insurance regulators said.

    The case got stranger when Golant's client visited the address listed for the insurer in an unsuccessful attempt to sort things out, he said. While the people there claimed to represent the servicer, they were operating out of an office belonging to a force-placed policy insurer since acquired by QBE Insurance Group.

    Golant didn't understand why the insurer would be speaking on behalf of the servicer. But shortly after he began asking questions about the relationship between servicer and insurer, the case settled. Confidentially. At the insurer's request.

    With the matter resolved, it would have made sense for a Florida solo practitioner who handles as many as 50 cases at any one time to move on. Golant, however, started investigating the connections between multibillion-dollar banks and specialty insurers.

    "Frankly, it was their speed and willingness to settle that made me think they were not at all confident about the arrangement," Golant said. "I was still in the dark. But I got curious."
For more, see Ties to Insurers Could Land Mortgage Servicers in More Trouble.

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

Some Banksters Use Threat Of Force Placed Insurance To Soak Homeowners Into Coughing Up Cash For Unnecessary Flood Coverage

In Lindstrom, Minnesota, the Star Tribune reports:
  • Thousands of homeowners in Minnesota and across the country are being pressured to buy flood insurance by their mortgage lenders, despite evidence showing that many of these homes are well outside danger zones.

    Though the federal government's new flood maps are more accurate than ever, state and local officials say lenders and their agents are making obvious mistakes in their interpretation of flood risk.

    Chisago County officials said they have intervened this year on behalf of 20 property owners who were wrongly classified as living in high-risk zones where flood insurance would be mandatory. Officials in Stearns and Washington counties also have taken steps to correct the record for dozens of homeowners who face minimal, if any, risk of flooding.

    "We're seeing too many problems," said Ceil Strauss, Minnesota's floodplain coordinator.

    In many cases, lenders are giving homeowners just 45 days to buy flood insurance or threatening to obtain it for them, often at exorbitant prices. Some homeowners have been told their premiums could run as high as $6,400 a year.
  • Under government pressure, banks stepped up their oversight. Legally, lenders could send borrowers in high-risk zones to the federal government's flood insurance program, where premiums are heavily discounted. Instead, banks began steering thousands of customers to private insurance companies where rates are usually two to three times higher, according to regulators.

    The deals are fraught with conflicts of interest, critics say. Not only are many lenders charging hefty commissions for these transactions, they often have ties to the insurance companies that issue the policies.
For more, see Lenders' mistakes cost homeowners on flood insurance (Mortgage lenders are misinterpreting new FEMA maps to require homeowners to buy expensive, unwanted coverage).

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

Impositon Of Constructive Trust Upheld, Allowing Elderly Homeowner To Get $37K In Proceeds On Home Allegedly Sold Out From Under Her By Grandaughter

In Beaumont, Texas, The Southeast Texas Record reports:
  • The Ninth Court of Appeals of Texas upheld a jury verdict in favor of plaintiff Lenora Fawcett on Thursday, allowing her to keep the award of more than $37,000 in home sale proceeds that had been withheld by her granddaughter.

    Last July, defendants Stephen Young and Kimberly Young, Fawcett's granddaughter, filed a notice of appeal, seeking to reverse the jury's ruling and the subsequent judgment entered by the court.

    Fawcett sued the Youngs in January 2010, claiming they sold her home without consent and gave her only $6,000 from the $148,000 transaction. The trial began March 7, 2011, and ended the following day, with jurors finding that the Youngs failed to comply with their fiduciary duty to Fawcett. The jury awarded Fawcett $37,162 in damages, according to the charge of the jury.

    "While recovering (from an illness, Fawcett's) belongings were removed from her house without her knowledge or consent and placed in a storage POD," the original complaint states.

    "The real property, along with Plaintiff's house, was sold by Stephen and Kimberly Young. The deed was filed May 13, 2009, and conveyed the property for cash and a note of $148,453."

    On appeal, the Youngs argued that no fiduciary relationship existed, that they never held or administered property owned by Fawcett, and that the trial court could not impose a constructive trust in Fawcett's favor.

    The Ninth Court's opinion, authored by Justice David Gaultney, found that a court may impose a constructive trust on property obtained as a result of a breach of fiduciary duty.(1)

    "Under the circumstances, we cannot say the trial court erred in imposing a constructive trust," states the court's July 26 opinion.(2) "We overrule appellants' issues and affirm the trial court's judgment." However, Justice Charles Kreger wrote a dissenting opinion, stating "there is no evidence of a fiduciary relationship" between the parties.
Source: Granddaughter loses appeal of $37K award over home sale proceeds.

For the ruling, see Young v. Fawcett, 376 S.W.3d 209 (Tex. App.-Beaumont [9th Dist.] 2012).

See , generally, The Confidential Relationship Theory of Constructive Trusts - An Exception to the Statute of Frauds, 29 Fordham L. Rev. 561 (1961) (contains discussion on distinction between the confidential relationship and the fiduciary relationship).
(1) The analysis of the court's majority in concluding that the jury decision on the existence of a fiduciary relationship should remain undisturbed follows:
  • Kimberly and Stephen contend that no fiduciary relationship existed, that they never held or administered property owned by Lenora, and that the trial court could not impose a constructive trust in Lenora's favor. The Youngs do not challenge the phrasing of the jury questions or the amount ($37,162) of the damages the jury awarded.

    "The term `fiduciary' refers to a person owing a duty of integrity and fidelity, and `it applies to any person who occupies a position of peculiar confidence towards another.'" Hasson, 286 S.W.3d at 14 (quoting Kinzbach Tool Co. v. Corbett-Wallace Corp., 160 S.W.2d 509, 512 (Tex. 1942)). The Supreme Court has explained that the term "contemplates fair dealing and good faith, rather than legal obligation, as the basis of the transaction." Tex. Bank & Trust Co. v. Moore, 595 S.W.2d 502, 507 (Tex. 1980).

    A fiduciary duty may arise from an informal relationship `"where one person trusts in and relies upon another, whether the relation is a moral, social, domestic, or purely personal one."` Fitz-Gerald v. Hull, 237 S.W.2d 256, 261 (Tex. 1951) (quoting "Sec. 225, 54 Am. Jur., `Trusts', p. 173.").

    Specifically, family relationships — where a person trusts in and relies upon a close member of her core family unit — may give rise to a fiduciary duty when equity requires. See Mills v. Gray, 210 S.W.2d 985, 986-89 (Tex. 1948) (mother-son fiduciary relationship). "When the societal relationship is one of loving family members or close personal friends, the justification for and reasonableness of reposing trust one in the other is readily understandable." Roy Ryden Anderson, The Wolf at the Campfire: Understanding Confidential Relationships, 53 SMU L. Rev. 315, 366 (2000).

    Courts generally refer to the informal fiduciary relationship as a "confidential relationship." Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 287-88 (Tex. 1998); see also Chapman Children's Trust v. Porter & Hedges, L.L.P., 32 S.W.3d 429, 439 (Tex. App.-Houston [14th Dist.] 2000, pet. denied). Subjective trust alone is not sufficient to establish a confidential relationship. Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1962).

    Because not every relationship involving a high degree of trust and confidence rises to the stature of a formal fiduciary relationship, the law recognizes the existence of confidential relationships in those cases "`in which influence has been acquired and abused, in which confidence has been reposed and betrayed. . . .'" Tex. Bank & Trust Co., 595 S.W.2d at 507 (quoting Higgins v. Chicago Title & Trust Co., 143 N.E. 482, 484 (Ill. 1924)).

    Whether a confidential relationship exists is "determined from the actualities of the relationship between the persons involved." Thigpen, 363 S.W.2d at 253.

    The question is ordinarily for the jury in a jury trial where the material facts are disputed. See Crim Truck & Tractor Co. v. Navistar Int'l Transp. Corp., 823 S.W.2d 591, 594 (Tex. 1992). "The problem is one of equity" and the circumstances giving rise to the confidential relationship "are not subject to hard and fast lines." Tex. Bank & Trust Co., 595 S.W.2d at 508.

    Factors include whether the plaintiff relied on the defendant for support, the plaintiff's advanced age and poor health, and evidence of the plaintiff's trust. Trostle v. Trostle, 77 S.W.3d 908, 915 (Tex. App.-Amarillo 2002, no pet.); see also Hasson, 286 S.W.3d at 14-16; Hatton v. Turner, 622 S.W.2d 450, 458 (Tex. Civ. App.-Tyler 1981, no writ); Holland v. Lesesne, 350 S.W.2d 859, 862 (Tex. Civ. App.-San Antonio 1961, writ ref'd n.r.e.). The trust must be justifiable. See Thigpen, 363 S.W.2d at 253.

    The record contains evidence of objective manifestations of Lenora's confidence and trust in Kimberly and Stephen, the closeness of their long-standing relationship, acquiescence in and support of the housing agreement, and conduct and affirmations that would justify Lenora's trust. Lenora's agreement with her daughter and son-in-law was known to Kimberly and Stephen, and their conduct, promise, tendered check, and letter indicate an agreement. Essentially, the trial court's judgment requires Kimberly and Stephen to honor their promise to give Lenora money for her house when they sold the property.

    "[F]iduciary relationships are not lightly created." Hasson, 286 S.W.3d at 19. Relatives assist people of advanced years or those who have health problems, and acts of kindness do not ordinarily give rise to fiduciary duties. The extraordinary facts of this case, including Kimberly's letter to Lenora and the Youngs' tender of the dishonored $6,000 check, indicate the parties' recognition of a confidential relationship and the fiduciary duty imposed. The tendered, though dishonored, check indicates Stephen and Kimberly knew that they should pay Lenora from the sale proceeds.

    The jury found that a fiduciary relationship existed. Reasonable and fair-minded jurors may differ with an appellate court on that conclusion, but on this record of disputed facts, the "jurors must be allowed to do so." See City of Keller, 168 S.W.3d at 822. "Jury trials are essential to our constitutionally provided method for resolving disputes when parties themselves are unable to do so." In re Columbia Med. Ctr. of Las Colinas, 290 S.W.3d 204, 211 (Tex. 2009). Fair-minded jurors could reasonably conclude that a confidential relationship existed, and that the confidence was betrayed. We cannot say the jury's findings are contrary to the overwhelming weight of the evidence and clearly wrong and unjust. We hold the evidence is legally and factually sufficient to support the jury findings challenged on appeal.
(2) In allowing the trial court's imposition of a constructive trust to remain undisturbed, the majority made these statements:
  • The trial court's judgment imposes a constructive trust on the property which Kimberly and Stephen purchased in part with money from the sale of the house Lenora built. A constructive trust is an available remedy imposed to redress wrong or prevent unjust enrichment under the circumstances. See generally Meadows v. Bierschwale, 516 S.W.2d 125, 131 (Tex. 1974) (constructive trust); Lesikar v. Rappeport, 33 S.W.3d 282, 303 (Tex. App.-Texarkana 2000, pet. denied) (A constructive trust is "a device equity uses to right a wrong.").

    In Mills v. Gray, a mother's property had been conveyed to a son. Mills, 210 S.W.2d at 986. The property was sold, and another house was purchased. The mother believed that the second house was to be taken in her name. Instead, the son took the property in his name. The mother sought at trial to prove the understanding of the parties at the time of the original conveyance to her son. Id. at 986-87. The trial court excluded the evidence. In the appeal, the Texas Supreme Court cited authority that "[a] parent and child, grandparent and child, or brother and sister relationship is not intrinsically one of confidence," but under certain circumstances may involve a confidential relationship, the abuse of which gives rise to a constructive trust in accordance with the terms of a promise. Id. at 988 (quoting "54 Am. Jur. 178, Sec. 233").

    The Court held the evidence should have been admitted in that case because "if the purported agreement and family arrangement had been established as true, a constructive trust would have arisen by reason of the confidential relation between the parties which would not fall within the prohibition of the Statute of Frauds or the Texas Trust Act." Id. at 989.

    In this case, the jury found a breach of fiduciary duty and determined the amount of damages. We need not decide whether the damage award is reasonable, because the Youngs do not challenge the amount of the damage award or the jury charge on appeal. Because a confidential relationship existed, Kimberly and Stephen had the burden of showing the fairness of the transaction. See Tex. Bank & Trust Co., 595 S.W.2d at 508-09.

    A court may impose a constructive trust on property obtained as a result of a breach of fiduciary duty. Omohundro v. Matthews, 341 S.W.2d 401, 404-05 (Tex. 1960). Under the circumstances, we cannot say the trial court erred in imposing a constructive trust. We overrule appellants' issues and affirm the trial court's judgment.
Editor's Note: Typically, in a civil lawsuit brought by one claiming to have been victimized in a real estate transaction alleging a home equity ripoff, the burden of proof in establishing that the transaction was, in fact, an unfair deceptive ripoff is on the alleged victim.

However (and this case serves as a reminder), if the alleged victim can satisfactorily establish that a confidential relationship existed with the alleged scammer, the burden is shifted to the alleged scammer (ie. the beneficiary of the transaction) to prove the transaction fair and free from fraud and undue influence. Further, such a case can usually be established by parol evidence since such a situation typically falls outside the applicable Statute of Frauds. See, for example:

Fla. Probe Into F'closure Fraud Winds Down With A Wimper; State AG's Office To Walk Away w/ Tail Between Its Legs While State Bar Continues To Snooze

In West Palm Beach, Florida, The Palm Beach Post reports:
  • The news conference was called. A five-paragraph statement issued. It was Aug. 10, 2010, and then Florida Attorney General Bill McCollum, a candidate for governor, was making his move against three of the state’s largest and most feared foreclosure law firms — ones he suspected of illegally speeding cases through the courts with forged and fraudulent documents. Thousands of final judgments of foreclosure may have been the result of illegal activities, the news release said.

    Two years later, one firm has inked a settlement with the state. The Law Offices of Marshall C. Watson in March 2011 agreed to pay $2 million, but admitted no wrongdoing.

    The other law firm investigations, which came to total six by last summer, are “winding down,” Attorney General Pam Bondi’s office said Friday.

    A February court decision barring the state from issuing subpoenas to the firms means any enforcement action is “up to the discretion of the Florida Bar,” Bondi press secretary John Lucas said.

    The legal limbo has left homeowner advocates incensed and law firms befuddled. With no closure, the firms remain implicated in the public eye and on the state’s website, which lists them as under active civil investigations. With no closure and no one held accountable, there is no justice, anti-foreclosure activists say.
  • Some have now turned their ire on the Florida Bar, which says it has power only to investigate individual attorneys, not law firms. Despite hundreds of foreclosure-related complaints against attorneys, not a single Florida lawyer who represents banks in foreclosure cases has been disciplined for foreclosure fraud by the Florida Bar.

    And all of the major players, including leaders of the Law Offices of David J. Stern and Boca Raton-based Shapiro & Fishman, remain members in good standing with the Bar.
For more, see Two years after foreclosure probe launched, investigation winds down (Blocked by legal decision, attorney general says any enforcement action is up to the Florida Bar).

Thursday, August 09, 2012

Five Hawaii Suits Charge Banksters, Foreclosure Mills Of Illegally Depressing Prices At Foreclosure Sales

In Honolulu, Hawaii, the Honolulu Star Advertiser reports:
  • Hundreds of Hawaii residents should have received higher prices for their properties sold through nonjudicial foreclosure auctions during the past four years, according to lawsuits recently filed on behalf of borrowers who allege unfair and deceptive practices by four major banks.

    A fifth lawsuit alleges that a Washington law firm, Routh Crabtree Olsen (RCO), and others that assisted in the auctions committed multiple violations of the state nonjudicial foreclosure laws during those years and interfered with the residents getting the highest price for their properties.
  • The amount of losses for the residents in the five suits totals in the millions of dollars, their lawyers said. The lawsuits are fallouts from the state nonjudicial foreclosure system aimed at allowing lenders a quicker, less costly alternative to foreclosures handled by state courts.

    The suits against the banks, however, allege a widespread practice that they advertised and conducted nonjudicial foreclosure auctions for quitclaim deeds but provided the winning bidders more valuable limited warranty deeds.

    The banks allegedly advertised auctions for quitclaim deeds, which means the properties are sold "as is" and clear title is not guaranteed. The winning bidders, however, received limited warranty deeds, which are considered more valuable and help ensure fee-simple title, according to the suits.

    The practice of advertising quitclaim auctions discouraged bidders, lowered the amount of winning bids and left the borrowers with higher deficits, the suits said.

    "Shame on them," said Barabara-Ann Delizo-Lima, whose Pearl City high-rise apartment went through a nonjudicial foreclosure auction in 2009. "We could have been in a better place if they did their job." Her lawyers estimate she and her husband would have gotten at least $50,000 more if the sale had been for a limited warranty deed. "It's like they came to my house and took money away from my wallet," husband Lionel Lima Jr. said.

    The couple are the named plaintiffs in a lawsuit against Deutsche Bank National Trust Co. It seeks certification as a class action suit to represent hundreds of other borrowers whose property went through nonjudicial foreclosure by the bank.

    Three similar lawsuits were filed against Bank of America, U.S. Bank N.A. and Wells Fargo Bank N.A. The fifth suit alleges RCO and other plaintiffs who assisted in the auctions also violated the unfair and deceptive practices law as well as the nonjudicial foreclosure law.
  • The five lawsuits are limited to nonjudicial foreclosure sales dating four years from the filing of the complaints from May to July because of the four-year statute of limitations.

    The five suits seek millions of dollars in damages, which, if the residents prevail, would be tripled under the state's unfair and deceptive practices law.
For more, see Borrowers lost out to banks, suits say (Homeowners should have seen their properties sold for higher prices, according to the plaintiffs' court filings).

Two Bank Managers Cop Guilty Pleas For Billing Homeowners In Foreclosure For 'Phantom' Fees, Then Pocketing Cash Reimbursements

In St. Thomas, U.S. Virgin Islands, the Virgin Islands Daily News reports:
  • Daniel Rogers [] became the second former Scotiabank manager in the span of a week to plead guilty to charges of bank fraud, wire fraud and money laundering. Rogers, 39, entered a plea deal with the U.S. Attorney's Office admitting to two counts of bank fraud, one count of wire fraud and a single count of money laundering.

    The charges stem from a scheme executed between August 2009 and October 2011, when Rogers was a manager in the bank's centralized retail collection unit, which is responsible for managing foreclosed-upon properties, according to court records.

    During that time, Rogers fraudulently added charges to customers' loan and mortgage accounts for forced place insurance, legal fees and property taxes. The charges essentially are additional loans granted to bank customers to allow them to repay loan-related costs over an agreed payment period.

    The properties Rogers targeted had been foreclosed on or were close to foreclosure, so "the customers didn't pay attention to the additional costs," according to the plea agreement.

    Rogers then converted the add-on payments to his own use by cashing checks that he created, made payable to other customers of the bank. He used the bank's "endorsement waived" stamp to endorse and cash the checks.
  • In total, he took $216,000, according to the [plea] agreement. He agreed to forfeit a 2003 Acura MDX, a 1998 Toyota Tundra, interest in a Skyline Drive Village condominium, two savings accounts at Scotiabank and an unspecified T. Rowe Price investment account.
  • As [U.S. District Judge Curtis] Gomez noted in court [], the case bears striking similarities to that of Steve Gardner, an ex-Scotiabank branch manager who pleaded guilty last week in the same court to the same four charges. Gardner admitted to bilking $331,000 from the bank dating back to 2009. He told prosecutors he stole the money under the guise of paying charges on delinquent customer accounts.

California Sets Record For Number Of R/E License Revocations; Foreclosure Rescue, Short Sale Scams Played Big Role In Increase In Disciplinary Actions

From the California State Department of Real Estate:
  • The California State Department of Real Estate (DRE), which is responsible for licensing and regulating the activities of real estate brokers and salespersons, reported [] that it revoked a record number of real estate licenses in the last fiscal year.

    The DRE also accepted a record number of license surrenders from licensees facing disciplinary action. All told, a record 1,109 licenses were suspended, surrendered and revoked in Fiscal Year 2011/12, which ended June 30, 2012.
  • The collapse of the real estate market clearly contributed to the record number of disciplinary actions. With the large number of financially stressed homeowners, the table has been set for scammers involved in foreclosure rescue and short sale scams.

    With respect to foreclosure rescue scams, since 2010 the DRE has filed nearly 500 accusations and Desist and Refrain Orders against nearly 1,400 respondents who were involved specifically in illegal foreclosure rescue and short sale scams.
For more, see California DRE Revokes Record Number of Real Estate Licenses (Education is stressed as key to preventing falling victim to scams).

Wednesday, August 08, 2012

Foreclosure Rescue Operator Who Used Stolen IDs To File Serial Bankruptcy Filings To Cough Up $5M Fine To Settle Feds' Civil Suit

From the Office of the U.S. Attorney (Riverside, California):
  • A federal judge has ordered a Seal Beach man to pay $5 million in civil penalties in connection with allegations of a massive fraud targeting homeowners, renters and lenders.

    Terrill “Terry” Meisinger agreed to the $5 million penalty as part of a settlement agreement to resolve a lawsuit filed by the United States Attorney’s Office in June 2011. United States District Judge Virginia A. Phillips on Tuesday signed an order concluding the case against Terry Meisinger and prohibiting him from participating in the home finance or real estate industries for a period of 10 years.
  • The complaint alleged that Meisinger contacted individuals who were facing imminent foreclosure and promised that he could help them avoid foreclosure and save their credit.

    Meisinger allegedly told distressed homeowners that if they deeded their houses to him and immediately moved out, they would receive a small cash payment, typically from $500 to $1,000, with the promise that Meisinger would bring their mortgage payments current and pay them an additional $5,000 to $10,000 when he eventually sold their properties.

    According to the lawsuit, instead of taking action to bring the mortgage payments current, Meisinger immediately transferred the properties into the names of unknowing third parties whose identities he had stolen, and then fraudulently filed sequential bankruptcy petitions in these names.(1)

    The court filings triggered successive automatic stays that prevented lenders from foreclosing. As alleged in the complaint, these fraudulent tactics in Bankruptcy Court allowed Meisinger to rent the properties for extended periods – up to three years on some properties – by repeating this fraudulent transfer and bankruptcy scheme with scores of stolen identities.

    Authorities believe that between 2000 and 2004, Meisinger collected more than $1.5 million in illicit rents from renters in more than 100 properties, most of which were in the Inland Empire, and never made any payments on the mortgages.

    During this five-year period, authorities estimate that Meisinger caused more than 300 bogus bankruptcy petitions to be filed in the names of numerous individuals who had no knowledge their identity was being used.

    When lenders were finally able to secure dismissal of these fraudulent bankruptcy petitions and complete foreclosure, the renters lost their deposits and rent payments and, in some cases, were evicted and left homeless.

(1) See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a discussion of the various foreclosure rescue scams involving the fraudulent use of the Federal bankruptcy process.

Deed Recorded For Only 73 Minutes Before Being 'Erased' By Clerk Enough To Provide Constructive Notice; Subsequent Buyer, Lender Left Holding The Bag

In Tallahassee, Florida, The Associated Press reports:
  • A Florida appellate court on Thursday said electronic property records are official once they are filed even if later erased by mistake.

    A three-judge panel of the 1st District Court of Appeal upheld the foreclosure by First City Bank of Florida on a Walton County lot that had been sold to two different buyers by Bluewater Real Estate Investments LLC.

    The panel unanimously rejected an appeal by Michael and Bonnie Mayfield and Branch Banking and Trust Co. The Mayfields bought the lot in 2009 through a mortgage from BB&T.

    They were unaware the lot had been purchased three years earlier by another buyer, Wright and Associates of Northwest Florida, which obtained a mortgage from First City.

    The couple didn't know about the first sale because the county court clerk's office removed the record to fix an error but failed to re-record the corrected version. First City foreclosed when the first buyer defaulted.

    District Judge Clayton Roberts wrote that the panel recognized "the harshness of the result" because the Mayfields and BB&T are "innocent parties."

    Roberts though noted courts have consistently ruled that Florida law says once a document is filed that serves as "constructive notice" to all parties although this is the first case of its kind involving electronic rather than paper public records.

    The document on the 2006 sale was in the electronic record for only 73 minutes on July 6, 2006. That was the only time a member of the general public could have discovered it, but that makes no difference, the court ruled.

    Roberts concluded the opinion by writing the only remedy for the Mayfields and BB&T may be to sue the clerk who made the mistake.(1)
For the ruling, see Mayfield v. First City Bank of Florida, Case No. 1D11-3681 (Fla. 1st DCA, August 2, 2012).

(1) Presumably, the Mayfields and BB&T each had title insurance policy protection, in which case it's the title insurer that issued the policies that's left holding the bag by having to indemnify each party for their loss, as well as having already provided and paid for the legal battle in court (ie. attorneys fees, etc.).

Contract For Deed Ends In Tug-Of-War For Title To Premises; Seller Refuses To Hand Over Title To Dead Buyer's Estate, Pockets $35K+ In Overpays: Suit

In Jefferson County, Texas, The Southeast Texas Record reports:
  • An area resident is accusing a Beaumont couple of failing to hand over the deed to a property that was paid for by the man's benefactor.

    Glen Brantley, as executor of the estate of Earl Brantley Jr., filed suit against Cristeto and Canlas Polvorosa on July 24 in Jefferson County District Court, seeking to take possession of the property of question.

    According to the lawsuit, Earl Brantley Jr. entered into a contract for deed agreement with the defendants. All payments required were made, including an overpayment of $35,225.85.

    However, the defendants refuse to provide the plaintiff with the deed to the property, racking up $682,500 in statutory penalties.

    The suit accuses the defendants of breach of contract, violating the Texas Property Code and promissory estoppel. The plaintiff is suing for actual damages, a refund of the overpayment and declaration that plaintiff is the legal titleholder of the property.

Tuesday, August 07, 2012

CFPB Files First Civil Enforcement Action, Tagging Law Firm With Upfront Fee Loan Modification Ripoff Allegations

In Los Angeles, California, The Blog of Legal Times reports:
  • The Consumer Financial Protection Bureau has filed its first ever civil enforcement action in federal court, charging a Los Angeles law firm of duping distressed homeowners into paying high upfront fees with false promises of a loan modification.

    The complaint (PDF), which was filed July 18 and unsealed July 23 in U.S. District Court for the Central District of California, accuses Chance Gordon and his firm, The Gordon Law Firm, of charging thousands of dollars in advance fees and then doing "little or nothing to assist consumers." The agency secured an ex parte temporary restraining order against the firm at the time it filed the complaint.

Hawaii Regulator Scores Injunction Halting Business For Operating Suspected Loan Modification Racket

In Honolulu, Hawaii, Big Island Now reports:
  • The State is reminding homeowners to beware of foreclosure prevention scams after it received an injunction against a Keaau-based company for violations of Hawaii’s Mortgage Rescue Fraud Prevention Act and other consumer protection laws.

    The Department of Commerce and Consumer Affairs’ Office of Consumer Protection obtained a preliminary injunction on July 25 against Francha Services, LLC and its owner Edna A. Franco.
  • According to a statement released [], the DCCA stated that Franco and her business targeted consumers on Maui, Oahu and the Big Island, offering to save their homes from foreclosure. The homeowners had to pay Franco in advance before she would help them and then she did little if anything to complete any of the services she promised.
  • Violations of Hawai`’s Mortgage Rescue Fraud Prevention Act and the laws prohibiting unfair and deceptive trade practices subject offending parties to fines ranging from $500 to $10,000 per violation.

    Act 183, signed into law by Gov. Neil Abercrombie on June 28, now makes violations of the Mortgage Rescue Fraud Prevention Act a class C felony with a mandatory $10,000 fine.

Mo. AG Suit Claims Loan Mod Operator Illegally Clipped Homeowners w/ Upfront Fees, Failed To Provide Services, Give Refunds, Mandated Notifications

From the Office of the Missouri Attorney General:
  • Attorney General Chris Koster filed a lawsuit today against William James Ray, III, a Florida resident offering mortgage loan modification services to Missouri consumers through his inactive Florida company, Ameristar Foreclosure Solutions, LLC.

    The lawsuit alleges that Ray and Ameristar Foreclosure Solutions engaged in the following illegal activities in the state of Missouri:

    a) Receiving advance payment for loan modification services;
    b) Failing to provide loan modification services paid for by consumers through those advance fees;
    c) Failing to refund consumers for loan modification services not provided;
    d) Failing to include legally required notifications of homeowners’ rights in contracts between defendants and those homeowners.
  • Koster is asking those who have contracted with William James Ray, III, or Ameristar Foreclosure Solutions, LLC, for loan modification services and failed to receive the promised services to contact the Attorney General’s Consumer Protection Hotline at 800-392-8222 or to file a complaint online at

Florida Bar Loan Mod Probe Ends In Disbarment For Attorney Who Essentially Rented His Law License To Non-Lawyers To Run Upfront Fee-Clipping Scam

In West Palm Beach, Florida, The Palm Beach Post reports:
  • An attorney who operated a Boca Raton-based mortgage modification and foreclosure defense firm was disbarred this week for splitting fees with non-lawyers, improperly soliciting clients and not providing promised services.

    William Timothy O’Toole, who was a founder of the Summit Legal Group, was previously placed on emergency suspension. His disbarment is effective immediately and shall last for a period of at least five years. He has been a member of the Florida Bar since 1992.

    The non-lawyer staff misled clients to believe that (O’Toole) would represent them in their foreclosure defense cases in their states even though respondent could not provide those services because he was only licensed in Florida,” a Florida Bar report said. “Clients paid Summit Legal Group fees in varying amounts for services that were not rendered or completed.”
  • In a deposition, O’Toole admitted that he gave almost exclusive control of Summit Legal Group to the non-lawyers who controlled all the contact with clients, from the initial call to advising the client of the outcome of their case.

Investigator For City Attorney's Office Used Exclusively For Probes Into Local Loan Modification Rackets

In San Diego, California, the San Diego Union Tribune reports:
  • San Diego city has hired a new investigator who digs into businesses who take up-front fees before a modification is completed -- something that's illegal yet prevalent in California.

    Mike Hurley worked in the San Diego Police Department for 30 years before taking on his new role as loan-mod scams investigator in mid-June. During his career, Hurley has investigated homicides, narcotics crimes and economic offenses. Before retiring, his last role in the department was a supervisor overseeing ID theft and forgery cases.

    A $56,846 grant from the state paid for the new half-time position, which falls under the city attorney's office. San Diego was one of 14 agencies in California to receive money from a fund that helps cities and counties fight mortgage and foreclosure scams.

    "Why is (this position) important?" said Assistant City Attorney Tricia Pummill. "Because of the recent events that happened in the real estate financial markets. So many people ending up with loans that are really burdensome and that affected (their ability) to pay these loans. ...We really saw an increase in the need for us to get involved to protect consumers."
For more, including a Q&A with Detective Hurley, see Q&A with a loan-mod scams investigator.

Monday, August 06, 2012

Jury Convicts South Florida Pair Accused Of Running Sale Leaseback, Equity Stripping Foreclosure Rescue Racket That Swindled Distressed Homeowners

From the U.S. Department of Justice (Washington, D.C.):
  • The Department of Justice [] convicted two defendants for their roles in a South Florida mortgage fraud scheme that took advantage of homeowners on the brink of foreclosure and left many without their homes.

    Cathy Saffer of Pompano Beach, Fla., and Barrington Coombs, a certified public accountant of Weston, Fla., were convicted [] by a jury in West Palm Beach, Fla. on conspiracy and fraud charges in connection with a so-called “foreclosure rescue scheme,” in which the defendants promised to help distressed homeowners but instead swindled them out of the remaining equity in their houses.(1)

    The jury convicted Saffer of one count of conspiracy, three counts of mail fraud and two counts of wire fraud. Coombs was convicted of one count of conspiracy and one count of wire fraud. Lisa Wright of Pompano Beach, Fla., pleaded guilty to her participation in the same foreclosure rescue scheme in March 2012.(2)

    At trial, evidence revealed that Saffer and Wright operated a business called Foreclosure Solution Specialists (FSS) from 2006 to 2009. Through FSS, Wright and Saffer targeted homeowners facing foreclosure, advertising that FSS could assist those homeowners in remaining in their homes.

    When contacted by distressed homeowners seeking assistance, Wright and Saffer misrepresented to those homeowners that their homes would be sold to investors.

    According to witnesses at trial, Wright and Saffer also claimed that customers could remain in their homes after the sales and promised them an opportunity to repurchase the homes at a later date. Rather than selling the homes to legitimate investors, Wright and Saffer designed sham sales to straw purchasers whom they paid to participate in the scheme.
  • These sham sales drew equity out of the homes, which Wright and Saffer pocketed for their own purposes. After doing so, Wright and Saffer allowed the loans to go into foreclosure. Homeowners ultimately lost all of the equity in their homes, and most of the victims were forced to move out of their homes.
For the Justice Department press release, see Two Individuals Convicted in Florida in Foresclosure Rescue Scheme.

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

(2) Presumably, part of the 'prize' Wright hopes to get by 'winning the race to the prosecutor's office' and agreeing to plead guilty instead of going to trial on her charges includes softening the hammering she'll likely get at sentencing for throwing her co-conspirators under the bus:

  • "When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed." United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring).

Outfit Accused Of Foreclosure Sewer Service To Cough Up $925K To Settle Fla. AG Suit; Admits No Wrongdoing, Promises Never To Do It Again

In West Palm Beach, Florida, The Palm Beach Post reports:
  • A Tampa-based company responsible for serving foreclosure notices on homeowners will pay $462,500 to a Florida Bar foreclosure defense program under a settlement reached with the state attorney general’s office.

    The office began a civil investigation of the company ProVest in the fall of 2010 following allegations of shoddy paperwork and incomplete service that may have left homeowners unaware that they were being foreclosed on.

    ProVest did not admit to any wrongdoing in the agreement, called an “assurance of voluntary compliance.” But it will pay an additional $462,500 to the attorney general’s office for investigative and attorney’s fees.
  • This is the second foreclosure-related settlement obtained by the attorney general’s office since the housing bust. In March 2011, the Fort Lauderdale-based Law Offices of Marshall C. Watson agreed to pay a $2 million settlement to end its civil investigation.

    Serving foreclosure summonses became big business after the real estate crash as banks began to repossess hundreds of thousands of homes. But foreclosure defense attorneys and some homeowners complained that the service was often sloppy.

    In a 2010 case, a Miami appeals court sided with a homeowner in a foreclosure suit because the judge ruled the summons handled by a ProVest sub-contractor was not properly served. The person serving the summons swore he personally handed it to the homeowner at her residence.

    But the server’s own notes on the file showed he left the documents at the door after seeing curtains move and assuming someone was home. The homeowner later said she had no knowledge of the foreclosure until a final judgment was entered against her.
For more, see Foreclosure server settles with state (Tampa-based ProVest admits to no wrongdoing but will pay a total of $925,000).

Missouri AG Drops Criminal Charges Against Alleged Robosigning Outfit; LPS To Cough Up $2M, Agrees To Throw DocX Founder/Ex-Prez Under The Bus

In Columbia, Missouri, The Columbia Daily Tribune reports:
  • A company indicted by a Boone County grand jury in February on criminal charges that it fraudulently prepared mortgage documents for its lender clients has reached a settlement with the Missouri attorney general.

    Attorney General Chris Koster's office announced [] it had agreed to drop charges against DocX. In return, DocX's parent company, Jacksonville, Fla.-based Lender Processing Services, agreed to pay a $2 million fine and cooperate in ongoing criminal proceedings against DocX founder and former President Lorraine Brown.(1)

    The February indictments accused Brown and DocX of forging signatures on documents used to evict people who had fallen behind on their mortgages, a practice commonly known as "robo-signing."

    The charges accuse Brown and the company of submitting 68 deeds of release to Boone County Recorder of Deeds Bettie Johnson notarized by Linda Green, a DocX employee acting as designated vice president for large banks. However, the charges said, Green was not the person who actually signed the documents.

    Numerous instances of questionably prepared mortgage and foreclosure documents have emerged around the country in the wake of the "robo-signing" scandal of 2010.

    The Boone County charges are significant not only because they originated locally but because they are one of the few instances where criminal rather than civil charges have been filed against companies involved in preparing questionable documents.

(1) By obtaining LPS' agreement to cooperate in the ongoing criminal probe against Brown, the Missouri AG's office presumably is operating under the expectation that LPS will throw her under the bus'. How helpful their cooperation turns out to be remains to be seen. As noted by one learned Federal judge in referring to the not-uncommon 'race to the prosecutor's office' that breaks out among participants in an 'about-to-fall-apart' criminal conspiracy:

  • "When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed." United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring).

Borrower's TILA Rescission Suit Need Not Allege Ability To Repay Loan; Signing Over Collateral To Lender Doesn't Necessarily Meet Debtor's TILA Duty

For certain mortgage loans covered by the Truth-in-Lending Act (TILA), a timely written notice of rescission triggers the creditor’s duty to release its security interest and refund any finance charges. Once the creditor satisfies this duty, the borrower must return the loan proceeds. Until the creditor satisfies this duty, the borrower may keep the loan proceeds.

Because this TILA rescission duty often imposes an unfair risk on creditors: it requires the creditor to release its security interest without assurance that the consumer stands ready to honor his or her own rescission obligations,
several Federal circuit courts of appeal allow lower courts to equitably condition the creditor’s duty on the borrower’s ability to repay the loan proceeds.

In a recent court ruling, the
10th Circuit Court of Appeals was asked to address whether a lower court can mandate that a borrower allege it its TILA lawsuit that he/she has an ability to repay the loan proceeds as a requisite for allowing the case to continue. The suit was brought by a homeowner/couple who failed to allege an ability to repay the proceeds. Because of such failure, the lower court dismissed the borrowers' suit.

In a nutshell, the 10th Circuit ruled that the lower court overstepped its bounds by requiring the borrower to allege its ability to repay the loan proceeds it the lawsuit for the following reasons:
  1. it adds a condition to the remedy not found in the statute or the regulation: it
    requires consumers to allege that they can repay the loan proceeds
    , and

  2. the imposition of such a mandate at a point in the litigation where the equities in the case have yet to be determined is premature. It said that the lower court’s pleading rule would give all creditors the benefit of the more burdensome pleading rule without requiring them to first show a need for equitable relief.
However, it went on to say that although the rescinding consumer need not plead an ability to repay the proceeds of the loan, the lower court may nevertheless, in an appropriate case, use its equitable powers to protect a creditor’s interests during the TILA rescission process, leaving open the possibility that, once the case is more fully developed and equities determined, the lower court can equitably condition a consumer's loan rescission on an ability to repay the loan.

Because the court found that the pleadings did not establish whether this was an appropriate case, it reversed the lower court's ruling.

In addition, because the issue may arise on remand, the appeals court also
considered whether the consumers can satisfy their rescission obligations by tendering their home. For the reasons set forth in its ruling, the court concluded the tender of the home does not necessarily meet their tender obligations under TILA.

For the ruling, see
Sanders v. Mountain America Federal Credit Union, No. 11-4008 (10th Cir. July 30, 2012).
Thanks to Deontos for the heads-up on the court ruling.

Sunday, August 05, 2012

Head Of N. Jersey Sale Leaseback Equity Stripping Scam Gets 46 Months, Employee Gets 18 Months; Created Phony Liens To Divert Cash To Themselves

In Newark, New Jersey, reports:
  • A Piscataway man who owned and operated multiple foreclosure rescue companies was sentenced Tuesday to 46 months in prison for his role in a mortgage fraud scheme that defrauded numerous mortgage lenders of more than $10 million, authorities said.

    Ronald Harris Jr., 42, formerly of West Orange, previously pleaded guilty to a sworn, written indictment charging him with one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering.

    A former employee of Harris’ — Sterling Bruce, 38, of Newark — was also sentenced Tuesday, to 18 months in prison. Bruce previously pleaded guilty to one count of wire fraud conspiracy. U.S. District Judge Faith S. Hochberg imposed the sentences in Newark federal court.

    According to documents filed in this case and statements made in court, Harris owned and operated Harris Capital and Skyline Capital Group, both of which held themselves out as foreclosure rescue companies and operated out of offices in Newark and Maplewood.

    Harris admitted that he and other individuals, including Harris Capital employee Bruce, fraudulently promised to help homeowners avoid foreclosure, keep their homes, and repair their damaged credit. They directed the homeowners to allow the title to their homes to be put in the names of third-party purchasers, or straw buyers, for six months to a year.

    Harris told the homeowners that during that time period, he and others would help them obtain more favorable mortgages and improve their credit ratings. The homeowners were told the titles to their homes would be returned to them.(1)

    After the homeowners were signed up, Harris, Bruce and others recruited individuals with good credit scores to act as straw buyers of the distressed properties. The straw buyers were told that they were helping someone save his or her home and that they would make money when they sold the property back to the current owner.

    Once the distressed homeowners and straw buyers were in place, Harris, Bruce and Pia Perkinson, 40, of Parlin — a mortgage loan officer at a number of different mortgage loan companies — and others caused loan applications to be sent in the straw buyers’ names to mortgage lenders.

    Prior to the closings of these fraudulent transactions, Harris and Bruce regularly filed fraudulent liens for tens of thousands of dollars on the properties. At the closings of the transactions, the liens would be paid off with the proceeds of the fraudulently obtained loans.

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