Saturday, February 23, 2013

Elderly Widows Left Unnamed On Now-Deceased Hubbies' Home Loans That Subsequently Become Delinquent Face The Boot As Banksters Refuse To Negotiate Payment Modifications

In Bradenton, Florida, the Sarasota Herald Tribune reports:
  • Sandra Vance had her Cypress Bend home built with her physical limitations in mind. [...] Now 72, she expected to spend life's final chapter in the single-story home with tile floors and electric appliances — installed because gas fumes make her too dizzy to stand.

    But the nation's largest loan servicer now contends Vance must leave that all behind after a three-year foreclosure saga — one that her husband did not live through — revealed problems with the promissory note.

    Vance is not alone. Legal experts say similar paperwork mistakes are poised to evict hundreds, if not thousands, of elderly windows throughout Florida from their dream retirement homes.

    "It's just horrible," said Kathy Vance, Sandra's daughter. "I know my mother may lose this house. But we will not go without a fight."

    Like many recession-battered borrowers, Wells Fargo filed suit against Vance's late husband after the couple fell behind on their payments.

    When her husband, Merle, died, Vance lost the authority to assume the mortgage — even though she is listed as an owner on the property's deed.

    That is because her name was never on the promissory note tied to the home's loan — a strategy sometimes employed to obtain better financing rates by listing only her husband's income and credit history.

    But now, Vance cannot legally defend against the default. The bank says it will work with Vance to modify the debt, but only after $14,000 in delinquent payments are made current.

    The complication is common throughout Florida — the fallout from a high demographic of elderly homeowners, the state's boom-bust real estate cycle and a lingering recession that still grips retirement incomes.

    The result has left thousands of Sunshine State widows who are now behind on payments — and lacking a sufficient mortgage note — with no entitlement to their home.

    "I wish I could say these are the only people this has happened to, but I can point to 10 more in my office," said Susannah Savitsky, a Bradenton attorney who represents Vance.

Unanticipated Threat Of Deficiency Judgments Lingers Over Now-Foreclosed Ex-Homeowners When Sales Proceeds Fail To Cover Unpaid Mortgage Debt

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • Since the great recession took hold in Southwest Florida, thousands of mortgage borrowers have lost homes to grueling foreclosure fights that often take up to three years.

    But for many, losing their home is not the end of the financial hit they suffer. That's because many foreclosures come with an unanticipated hangover, in the form of thousands of dollars of additional penalties stemming from lenders' inability to sell properties at prices equal to the amount originally financed.

    Called deficiency judgments, they are permitted in Florida because the state permits "recourse," allowing banks to pursue defaulting customers for the difference between the amount owed on the original loan and current market value. Even more damaging to consumers, banks can seek to be repaid their attorney's fees and court costs.
  • Many homeowners assume, incorrectly, that when lenders foreclose on their properties and take control of them, their debt is forgiven. But for many, deficiency judgments add to the pain of foreclosure and sometimes years to the effort of buying another home. To get recourse, banks can dock borrowers' salaries and even seize money from personal checking accounts, experts note.

    The law is not new, but local foreclosure attorneys warn that most borrowers now navigating a foreclosure -- which are at record levels and growing, the result of re-filings that ramped up statewide toward the end of 2012 -- are unaware of those potentially costly consequences.

    Now that banks have clearer, and more streamlined, guidelines for repossessing homes -- the result of the $25 billion fraud settlement last spring -- many are becoming more aggressive in pursuing deficiency-related losses, real estate counselors say.
  • And while most large lenders do not go after customers' assets after a foreclosure, not all are willing to relinquish the debt they are entitled to by law. In particular, lenders have become more aggressive in pursuing deficiency judgments if they have reason to believe a borrower was using a home as an investment property instead of as their primary residence.
  • Florida is among 41 states, together with the District of Columbia, that permit lenders to sue borrowers for lingering mortgage debt left behind after a foreclosure.

    The statute of limitations [in Florida] for banks to file for a deficiency judgment is five years after the default, attorneys say. But that, too, could change. State lawmakers have pushed to reduce the time frame to one year.

$50M Lawsuit: Ex-Tenant/Jazz Club Operator Gutted Historic Harlem Nightclub Of Original Art Deco Fixtures, Iconic Decorative Elements, Signage, Etc. & Hired Thugs Posing As Cops To Prevent Landlord From Intervening

In New York City, the New York Post reports:
  • It could have been a scene from “American Gangster.”

    In the early-morning darkness of New Year’s Day, hired thugs posing as cops warned the landlord of Harlem’s historic Lenox Lounge not to intervene as the shuttered club’s former operator allegedly gutted it of its original art deco fixtures and iconic zebra-striped walls, a lawsuit alleges.

    Landlord Ricky Edmonds, 56, this week slapped former Lenox Lounge operator Alvin Reed, 73, with a $50 million Manhattan Supreme Court lawsuit for the Jan. 1 stunt.

    “The ‘police,’ who had some type of shield hanging from their necks, informed Mr. Edmonds that if he intervened, he would be arrested and carted off to jail,” the suit states.

    After Reed’s workers had carted away most of the goods, the lawsuit alleges, the “police” reportedly admitted they were actually security hired by Reed’s attorney, Tyreta Foster.

    Longtime Harlem resident Reed ran the jazz joint, which hosted greats like Billie Holiday and Miles Davis, for 30 years. He was forced out Jan. 1 when he couldn’t pay the rent, which had skyrocketed from $3,000 a month in 1996 to $10,000 a month in 2012.

    Reed, who took the goods a few blocks north to the site of his planned new club, is prevented from selling or otherwise altering the iconic items until the case is concluded, a Manhattan judge ruled at a hearing yesterday.

    In December, Page Six reported that Nobu guru Richie Notar plans to reopen the nightclub at Lenox Avenue and 125th Street this spring. It’s rumored Robert De Niro will be involved in the project.

    The lounge has been featured in films from the 2000 remake of “Shaft” to 2007’s “American Gangster,” where 1970s drug kingpin Frank Lucas, played by Denzel Washington, meets rival Nicky Barnes, played by Cuba Gooding Jr., in the famed Zebra Room.

    The 29-foot-by-6-foot bar “was sawn off from adjacent walls at each end,” four square yards of zebra wallpaper were “vandalized” and “165 dime-store ashtrays used as ceiling decorative elements,” were torn from their fixtures, according to court papers.

    “The once proud Lenox Lounge, for the first time since its founding in 1939, stood completely bare and empty,” Edmonds, who’s owned the property since 1983, says in the documents.

    The court fight revolves around the seemingly simple question: What’s a fixture? Edmonds asserts in the lawsuit that Reed stripped the haunt of a long list of etched mirrors, glass shelving, light covers, interior doors and red-metal paneling.

    Reed insists the property belongs to him.

    “My client actually owns most of the property inside the Lenox Lounge,” attorney Tyreta Foster told Judge Anil Singh in Manhattan Supreme Court yesterday. “The things that were affixed remain,” she insisted, claiming, “The bar was not a fixture. The bar was removable.”

    Judge Singh said the question would be settled in court. “It’s going to be an issue, what’s a fixture, what’s not a fixture,” he said. “That’s what it’s going to come down to.”

    The parties return next month.

Financially Strapped Real Estate Developer Facing Foreclosure Faces Charges In Wife's Slaying; Authorities: 'He Did It To Score Life Insurance Cash'

In San Mateo County, California, the Redwood City-WoodsidePatch reports:
  • A Woodside man will soon stand trial for allegedly murdering his wife for the insurance money.

    Pooroushasb "Peter" Parineh, 65, who worked as a real estate developer in Woodside, is accused of shooting his wife in the head multiple times in the bedroom of their Foxfire Drive mansion on April 13, 2010 "for financial gain," the San Mateo County District Attorney's Office said.

    The District Attorney's Office asserts that Parineh killed his wife because he was "in financial ruin," with the Foxfire mansion facing foreclosure, and having "no liquidity and enormous debt."

    The District Attorney's Office said Parineh tried to make her shooting death look like a suicide, but that investigators believe Parineh is the one who fired the gun, killing her, in hopes of collecting on the "large life insurance policy" he had in her name.

    Parineh's trial was scheduled to begin next week on Feb. 25, but on Monday when Parineh appeared in court with his defense attorney, Dek Ketchum, the date was postponed.

    The District Attorney's Office said Ketchum requested the postponement in order to allow authorities to "conduct further scientific testing" - reportedly, retesting of the gunshot residue tests authorities performed at the time of the crime.
Source: Woodside Man Accused of Murdering Wife for Insurance Money (The real estate developer's wife was found shot to death in their Woodside home).

Friday, February 22, 2013

6th Circuit: "[County] Clerks Have No Private Right Of Action" To Tag MERS In Suit Alleging Recording Fee Dodge, Failure To Record Mortgage Assignments; Says Property Owners, State AG May Make For More Appropriate Plaintiffs

In Louisville, Kentucky, The Associated Press reports:
  • A federal appeals court has rejected a lawsuit brought by two Kentucky county clerks alleging that a private company took part in a scheme to avoid paying mortgage registration fees.

    The U.S. 6th Circuit Court of Appeals on Tuesday upheld a decision to dismiss the suit brought by the clerks in Christian and Washington counties against MERSCORP Holdings Inc. and Mortgage Electronic Registration Systems Inc.

    The county clerks accused MERSCORP and others of not recording mortgage assignments with county clerks when mortgages were sold or transferred from one bank to another.

    Judge Helene White wrote that Kentucky law doesn't give the clerks legal grounds on which to sue the company.(1)

    The ruling lets stand a decision by U.S. District Judge Joseph McKinley in 2012.(2)
Source: Federal appeals court rejects lawsuit against mortgage company.

For the ruling, see Christian Cnty. Clerk v. Mortgage Elec. Registration Sys., Inc., No. 12-5237 (6th Cir. February 15, 2013).

(1) The court stated:
  • "The district court held that the Clerks have no private right of action against Defendants for their alleged violation of Ky. Rev. Stat. Ann. § 382.360(3), which requires that mortgage assignments be filed for recording with the county clerk’s office. We AFFIRM."
It may be that the Plaintiff county clerks in this case were simply the wrong parties to bring this lawsuit, and that the individual homeowners, and/or the State of Kentucky itself, through the state attorney general's office, may have been the proper parties to pursue this matter, as one might surmise by this observation buried deeper in the three-judge panel's opinion:
  • "Last, the Clerks surmise that property owners have no cause of action under the Kentucky statutes to enforce 382.360(3)’s requirement that mortgage assignments be recorded, and argue that the legislature could not have intended that the statutes could be violated with impunity.

    However, even if no express cause of action is provided under that provision, section 382.365(3) grants property owners a cause of action against lienholders who fail to record lien assignments in accordance with section 382.360.

    And nothing in our opinion forecloses property owners from bringing suit based on alleged statutory violations. Moreover, the Kentucky attorney general presumably hasthe power to act to enforce the state’s statutes.” Kentucky ex rel. Conway v. Thompson, 300 S.W.3d 152, 173 (Ky. 2009) (citation omitted)"

LPS Shareholder Hits Directors With Suit Alleging Their Failure To Hold Management Responsible For Robosigning Scandal Left Outfit On The Hook For Hefty Legal Expenses

In Wilmington, Delaware, Law 360 reports:
  • Lender Processing Services Inc. directors were hit with a shareholder derivative suit [] alleging their failure to go after higher-ups responsible for the “robosigning” of foreclosure documents and other faulty practices left the mortgage servicer on the hook for hefty legal expenses.
For more, see Mortgage Co. Execs Sued Over Robosigning Defense Fees (requires subscription).

Four Cop Guilty Pleas In DC-Area Property Title-Hijacking Conspiracy; Targeted Neglected, Tax-Delinquent R/E & Used Forged Docs, Straw Buyers In Attempt To Score $1M+ In Loot From Unwitting Owners, Heirs

From the Office of the U.S. Attorney (Alexandria, Virginia):
  • Four individuals – including two settlement agents in Annandale, Va. – have pleaded guilty to conspiring to fraudulently taking over the titles of homes in Washington, D.C., without the real property owners’ knowledge, selling those homes, and keeping the profit.
  • According to court records, Jamaul Roberts, 25, College Park, Md., conspired with others to visit the D.C. tax courts to identify properties with overdue property tax bills.

    They would use sources such as and the D.C. property tax database to locate vulnerable properties where they could take over the home’s title without the real owners’ knowledge. These homes included those left vacant, passed on to heirs after the owner’s death, or owned by the elderly in nursing homes who did not understand the transactions taking place.

    The fraudulent sales were facilitated by two settlement agents, Patricia Mantilla, 35, of Lorton, Va., and Melissa McWilliams, 35, Chantilly, Va., who worked at Ace Title & Escrow in Annandale. The agents knew the home sales were fraudulent and that the owners appearing at settlement were not the rightful owners. They also assisted the conspirators in hiding profits on the property sales from other parties involved in the sale through fictitious invoices to be paid at closing.

    The conspirators, including Michael Brown, 41, Hyattsville, Md., recruited straw sellers to sign documents and falsely represent themselves as the owners of the properties. Brown, for example, appointed himself the personal representative of the rightful owner of a property and prepared a fake death certificate for the owner, although the owner was still living. He attempted to sell the property to another member of the conspiracy for $350,000.

    During the course of the scheme, numerous properties were fraudulently sold, resulting in more than $1 million in actual and intended losses.

Thursday, February 21, 2013

Foreclosing Lender Left Holding The Bag, Unwittingly Screwing Itself By Forfeiting All Rights To Additional Loan Collateral When Credit-Bidding Full Amount Of Judgment In Forced Sale Of One Parcel

From a client alert from the law firm Barnes & Thornburg:
  • The Sixth Circuit Court of Appeals recently affirmed the decisions of the courts below and held in an unpublished opinion that a secured lender's credit bid at a Michigan foreclosure sale extinguished all of the Chapter 13 debtor's indebtedness to the lender, thereby precluding the lender from executing on a prepetition foreclosure judgment obtained against the debtor in Wisconsin. State Bank of Florence v. Miller (In re Miller), 2013 WL 425342 (6th Cir. Feb. 5, 2013).(1)

    The decision in Miller reminds lenders that foreclosure sales and credit bids in connection therewith require careful planning, especially where multiple parcels of property are at issue.(2)
For more details, see Lender’s Credit Bid Of Entire Debt At Foreclosure Sale Results In Forfeiture Of Rights To Additional Collateral.

(1) Initially, the United States Bankruptcy Court for the Western District of Michigan determined that the lender's credit bid for the total amount of the debt satisfied the entire debt. In re Miller, 442 B.R. 621, 628-37 (Bankr. W.D. Mich. 2011). The bankruptcy court lifted the automatic stay only to allow the lender to, among other things, dismiss the Wisconsin action with prejudice and turnover the Wisconsin property to the debtor free and clear of any mortgages and claims.

The lender appealed to the Sixth Circuit Bankruptcy Appellate Panel, but the BAP found that the bankruptcy court below got it right. State Bank of Florence v. Miller (In re Miller), 459 B.R. 657 (B.A.P. 6th Cir. 2011).

(2) The appeals court stated:
  • The rule is clear in both jurisdictions that a purchaser who overbids at a sheriff's sale based on a unilateral mistake must accept the consequences of that decision, unless the purchaser can show fraud or other improper inducement in the making the bid. Miller was not involved in the Michigan foreclosure by advertisement, and the Bank has not alleged that Miller or anyone else defrauded the Bank or induced it to overbid the price for the Michigan parcels.
The appeals court also pointed out that, under Wisconsin law, a distinction is to be made between a purchase overbid and a purchase underbid:
  • Where a purchaser underbids the price so as to shock the conscience of the court, the trial court may set aside the completed execution sale in order to protect the debtor, "who has little or no control over the amount bid, and to insure that the property being sold is not given away or sold to the prejudice of the debtor." Id. at 702.

    But "the test used for an underbid is inapplicable to an overbid." Id. at 703. Where the purchaser bids too much for the property, he acts at his own peril and will be held to the amount of his bid."

5th Circuit: Liens That Are Constitutionally Defective Under Texas Homestead Law Are Merely Voidable, Not Void Ab Initio; Kiboshes Homeowners' Effort To Invaildate Mortgage Brought After Expiration Of 4-Year Statute Of Limitations

From US Law:
  • Plaintiffs sued for a declaratory judgment that the lien on their homestead was void and that the mortgage holder was required to forfeit all principal and interest. Plaintiffs also sought damages for defamation.

    The court concluded that plaintiffs' claims were time-barred under Tex. Const. Art. XVI 50(a)(6);(1) because there was no evidence or allegation of defendants' attempting to conceal information, and because the facts that gave rise to any claims were obvious and not hidden, the doctrine of fraudulent concealment did not apply in this instance to estop the lenders' assertion of the limitations defense; because the loan was valid, and plaintiffs were delinquent, the statements at issue were true and no defamation occurred; the court rejected plaintiffs' claim that the statute of limitations barred only remedies; and the district court did not abuse its discretion in striking the amended complaints. Accordingly, the court affirmed the judgment.
Source: Opinion Summary: Priester, Jr., et al v. JP Morgan Chase Bank, N.A., et al.

For the court ruling, see Priester v. JP Morgan Chase Bank, N.A., No. 12-40032 (5th Cir. February 13, 2013).

(1) In addressing whether the a statute of limitations is generally applicable to claims of invalid liens on homestead property in Texas, the court stated:
  • We first address whether a limitations period applies to the Priesters' claims. Although the state constitution does not include a limitations period related to claims under Section 50(a)(6), "[e]very action for which there is no express limitations period, except an action for the recovery of real property, must be brought not later than four years after the day the cause of action accrues." TEX. CIV. PRAC. & REM. CODE § 16.051.

    The Texas Supreme Court has not addressed whether that residual limitations period applies to defects in homestead liens, but the two Texas courts of appeals that have addressed the issue have found that the residual statute applies.

    Addressing a Section 50(a)(6) defect, the court in Rivera v. Countrywide Home Loans, Inc., 262 S.W.3d 834, 839 (Tex. App.-Dallas 2008, no pet.), concluded that the "four-year statute of limitations applies to the constitutional and fraudulent lien causes of action" embodied in the Texas Constitution.

    The court in Schanzle v. JPMC Specialty Mortg. LLC, No. 03-09-00639-CV, 2011 WL 832170, at *4 (Tex. App.-Austin Mar. 11, 2011, no writ), adopted that position as well, noting that the "four-year statute of limitations has been applied to violations of the constitutional requirements for home equity loans, calculated from the date of closing on the loan."

1st Circuit: Borrower Has Standing To Challenge Mortgage Assignments When Invalid, Ineffective, Or Void; Transfers That Are Merely Voidable Are Immune From Protest

The National Law Journal reports:
  • In a case of first impression, the U.S. Court of Appeals for the First Circuit has ruled that a borrower has standing to challenge an assignment of her mortgage to a foreclosing bank. But the court found that the foreclosure itself was legal.

    A unanimous panel made the rulings on February 15, concluding that Aurora Loan Services' foreclosure on Oratai Culhane's property was legal. The court held that the framework of the Mortgage Electronic Registration Systems Inc. (MERS) "is faithful to the age-old tenets of mortgage law in Massachusetts."

    As part of a $548,000 mortgage refinancing Culhane undertook in April 2006, she signed a document making MERS mortgagee of record. MERS held legal title to the mortgaged property and could sell the mortgage as a so-called "nominee" for the lender.

    According to the opinion, "In an assignment dated April 7, 2009, MERS transferred the mortgage to Aurora."Aurora was thus the mortgagee of record when Culhane fell behind on her mortgage payments.

    Culhane first filed a temporary restraining order in Norfolk County Superior Court in Massachusetts in June 2011 to stop a foreclosure sale of the property, and Aurora quickly removed the case to federal court.

    In November 2011, Judge William Young of the District of Massachusetts issued a summary judgment ruling in favor of Aurora. He ruled that "equity requires that the holder of bare legal title to a mortgage have the capacity to assign it to the note holder or the note holder's loan servicer, so that a valid foreclosure may be effectuated. This analysis does not change because the mortgagee is MERS." Culhane appealed.

    Senior Judge Bruce Selya wrote the opinion in Culhane v. Aurora Loan Services, joined by Chief Judge Sandra Lynch and retired U.S. Supreme Court Justice David Souter, who heard the case by designation.

    Selya wrote that people with a Massachusetts mortgage have standing to challenge an assignment of the mortgage in comparable circumstances: "There is no principled basis for employing standing doctrine as a sword to deprive mortgagors of legal protection conferred upon them under state law. We hold, therefore, that a mortgagor has standing to challenge the assignment of a mortgage on her home to the extent that such a challenge is necessary to contest a foreclosing entity's status qua mortgagee."(1)

    But having found that Culhane had standing, Selya wrote, "there is no reason to doubt the legitimacy of the common arrangement whereby MERS holds bare legal title as mortgagee of record and the note holder alone enjoys the beneficial interest in the loan." He noted that "MERS was formed by a consortium of residential mortgage lenders and investors desiring to streamline the process of transferring ownership of mortgage loans in order to facilitate securitization."

    He added that the MERS framework "corresponds with longstanding common-law principles regarding mortgages."

    Culhane's lawyer, George Babcock of the Law Office of George E. Babcock in Pawtucket, R.I., said that the First Circuit's conclusion that a mortgagor has standing to challenge assignments is a "gigantic step that gives plaintiffs' attorneys something to sink their teeth into." "Anyone who takes a case like his has the opportunity to challenge assignments," he said.

    The problem with the Culhane case, he said, is that MERS was able to put certain documents into evidence at the trial level without objection.

    Rockwell Ludden of Ludden Kramer Law in Yarmouth Port, Mass. also represented Culhane.
For the story, see First Circuit: Borrower has standing to challenge mortgage assignment but still loses (requires free registration).

For the ruling, see Culhane v. Aurora Loan Services of Nebraska, No. 12-1285 (1st Cir. February 15, 2013).

(1) However, the three-judge panel continued by adding the following caveat:
  • We caution that our holding, narrow to begin with, is further circumscribed. We hold only that a mortgagor has standing to challenge a mortgage assignment as invalid, ineffective, or void (if, say, the assignor had nothing to assign or had no authority to make an assignment to a particular assignee).

    If successful, a challenge of this sort would be sufficient to refute an assignee's status qua mortgagee. See 6A C.J.S. Assignments § 132. Withal, a mortgagor does not have standing to challenge shortcomings in an assignment that render it merely voidable at the election of one party but otherwise effective to pass legal title. See, e.g., Serv. Mortg. Corp. v. Welson, 200 N.E. 278, 280 (Mass. 1936); Murphy v. Barnard, 38 N.E. 29, 31 (Mass. 1894); see also 6A C.J.S. Assignments § 132.
    In this case, the plaintiff's challenge to the assignment from MERS to Aurora is premised on the notion that MERS never properly held the mortgage and, thus, had no interest to assign. If this were so, the assignment would be void (not merely voidable). Consequently, the plaintiff has standing to challenge the validity of the assignment.
It then further added, in footnote 5 of the opinion, the following tidbit in connection with a February 12, 2013 ruling in a separate case:
  • We are confident that this holding is consistent with our recent decision in Juárez v. Select Portfolio Servicing, Inc., ___ F.3d ___, ___ (1st Cir. 2013) [No. 11-2431, slip op. at 14-15]. In all events, the standing determination in Juárez rested on the peculiar facts of that case.
In related posts, see;

Wednesday, February 20, 2013

NYC Feds Get Green Light On Civil Suit Tagging Wells With False Claims Act Violations In Connection With Peddling FHA-Insured Loans; Judge: Multistate Foreclosure Fraud Settlement Doesn't Immunize Bankster From Liability

American Banker reports:
  • A federal judge has ruled that the multistate mortgage settlement does not bar a lawsuit by the government against Wells Fargo over its lending practices before and after the financial crisis.

    The suit, filed in New York in October by the U.S. Attorney's office in Manhattan, may proceed, Judge Rosemary Collyer of the U.S. District Court in Washington ruled on Tuesday. The Justice Department charges the nation's fourth-biggest bank by assets with wrongdoing in connection with loans insured by the Federal Housing Administration over roughly a decade beginning in May 2001.

    Wells Fargo contended that a $25 billion pact the judge approved in April among Wells Fargo, Bank of America (BAC), Citigroup (NYSE:C), JPMorgan Chase (JPM), Ally Financial, the Justice Department and 49 states bars the lawsuit.

    As part of the settlement, Wells Fargo agreed to pay $5 billion and to take varied steps to help borrowers at risk of foreclosure in exchange for the government's releasing the company from certain liability.

    The settlement "wiped the slate clean for Wells Fargo in terms of facing any further liability to the United States (except in carefully crafted, narrow circumstances) for a wide range of Wells Fargo conduct relating to its FHA mortgage loan portfolio, among other areas," Wells' lawyers wrote in court papers filed with Collyer, who approved the settlement.

    According to Wells Fargo, the settlement barred the government from bringing additional cases against the bank based on the FHA program unless the government could show that an individual Wells underwriter certified falsely that a specific loan met FHA eligibility requirements,

    The company contended that the Justice Department's charges related to allegedly false certifications by the company and not to individual certifications.

    Collyer disagreed, interpreting the settlement as authorizing the government to sue Wells Fargo based on allegedly illegal conduct, including violations of FHA requirements, so long as the charges are not based solely on false annual certifications. "The plain language of the release governs and it does not have the meaning ascribed to it by Wells Fargo." Collyer wrote.
For the story, see Wells Fargo Suit Can Proceed Despite Mortgage Settlement.

See also Los Angeles Times: Government wins round in suit accusing Wells Fargo of FHA abuse:
  • The False Claims Act lawsuit, seeking "hundreds of millions of dollars," is one in a series of government attempts to recover losses related to the mortgage meltdown.

HOA Opts To Do Battle With Government Over Disabled Resident's Claim That Her Three-Wheeled Hand-Controlled Motorcycle Constitutes A "Reasonable Accomodation" Under Federal Fair Housing Act

In Hollywood, Florida, the South Florida South Sentinel reports:
  • Had things gone her way, Larraine Best's trike would be parked at her condo right now and she'd be living the relaxed life of a beachfront snowbird.

    Instead she's become embroiled in a federal case over a parking space.

    Best's fight isn't just another squabble between a retiree and her condo board. This one's being handled by Broward County's attorneys, paid for with public funds.

    Broward County civil rights investigators believe the disabled woman's rights were violated by Summit Towers in Hollywood, where management refused to let her park her three-wheeled, hand-controlled motorcycle – what she calls her "trike'' -- in her condo parking space. The condo doesn't allow motorcycles in its garage.
  • Summit Tower's attorneys, Rachel K. Beige and Ryan Fogg, who couldn't be reached for comment, said in communications to Broward County's human rights officials that Best is just using the disability claim as "an afterthought … to obtain her desire at any cost.''

    They said Best hasn't provided medical records to prove she's disabled or that she needs the motorcycle because of a disability. Her request to park the trike, they said, was "neither reasonable, nor necessary.''
  • County officials, handling the case on behalf of the U.S. Department of Housing and Urban Development, which provides most of the funding, said the federal Fair Housing Act gives Best the right to a "reasonable accommodation'' to the condo rules to allow her an "equal opportunity to use and enjoy'' her home.

    In a letter to Broward Equal Opportunity Officer Fay Outten, Summit's attorneys Beige and Fogg wrote in February 2012 that an investigative finding in favor of Best "would be nothing less than a clear abuse of the system and a mockery to the disabled individuals across this state who actual [sic] do suffer from discriminatory acts.''

    As a settlement offer, they said she could park her motorcyle at the condo "so long as she does not also park her vehicle on property.''

    The county rejected that and will file suit. County commissioners approved the litigation Tuesday.
For the story, see County sues to defend disabled woman's parking rights at Hollywood condo (Condo board sees no reason to exempt her from its ban on motorcycles).

Litigation Over Foreign Company's Common Carrier Status, Eminent Domain Rights Back In Front Of State Appeals Court As Texas Landowners Continue Battle To Keep Pipeline Outfit From Snatching Their Property On The Cheap

In Beaumont, Texas, The Southeast Texas Record reports:
  • In a few weeks, an appeals court will hear arguments on whether a Beaumont judge erred by granting a foreign company’s petition to condemn land for the construction of a crude oil pipeline.

    In June 2011, TransCanada Keystone Pipeline filed the petition for condemnation against Texas Rice Land Partners, James and David Holland and Mike and Walter Latta. TransCanada filed the petition seeking to build a pipeline to carry crude from Alberta to the Gulf Coast.

    On Sept. 24 Judge Tom Rugg, who was presiding over the Jefferson County Court at Law No. 1 at that time, ruled that the company has the right to seize land in Jefferson County for the pipeline.

    A month later, Texas Rice Land Partners filed a petition for a writ of mandamus, court records show. Justices seated on the Texas Ninth District Court of Appeals in Beaumont will hear oral arguments on March 7.

    In its appeal, Texas Rice Land Partners argues that the “trial court abused its discretion by refusing to require TransCanada to establish its authority as a common carrier before granting TransCanada possession of Texas rice property.”

    “TransCanada does not have the power of eminent domain because it is not a common carrier and the pipeline is not a common carrier pipeline.”

    Conversely, TransCanada argues in court papers that the pipeline is a common carrier pipeline available for public use and that the foreign company is a common carrier.

    During a Sept. 12 hearing, Terry Wood, the attorney for the rice farmers, attempted to link the TransCanda case to a ruling made by the Texas Supreme Court in August 2011 denying Denbury Green common carrier status in a pipeline project of its own.

    However, the Denbury pipeline would have carried CO2, not crude oil.

Tuesday, February 19, 2013

2nd Mortgage Loophole Allows Banksters To Satisfy Billion$ In Monetary Obligations Under Foreclosure Fraud Settlement With Worthless, Crappy Paper

Elizabeth M. Lynch, a lawyer at MFY Legal Services (a New York City organization that provides free civil legal aid) writes in The New York Times on one big loophole the banksters scored for themselves when picking the ostensibly asleep Feds' bones clean during the foreclosure fraud settlement negotiations, and that she describes as a "backdoor mechanism to continue foreclosures at the same pace as before":
  • The problem involves second mortgages, which millions of homeowners took out during the housing bubble. It’s estimated that as much as a quarter of all mortgage debt in the United States is in the form of second mortgages. Some of these loans were taken out to finance home improvements; others were part of a subprime product known as an “80/20 mortgage,” in which 80 percent of the purchase price was covered by a first, adjustable-rate mortgage, and the remainder by a second mortgage, often with a much higher interest rate.

    The second mortgages have given the banks a loophole: each dollar a bank forgives goes toward fulfilling its obligation under last year’s settlement. But many lenders have made it a point to almost exclusively modify secondary loans while all but ignoring the troubled, larger primary mortgages.

    It’s a real problem: when it comes to keeping your home, it’s the first mortgage that counts.

    Take Tiberio Toro, a Queens resident who took out an 80/20 mortgage in 2006 when he purchased his home, and who now owes far more to the bank than his house is currently worth. Recently, Wells Fargo told him that it completely forgave his second loan. But at the same time, it declined to modify his first mortgage — an adjustment Mr. Toro needs to get his monthly payment to a level he can afford.

    Why would a bank forgive a second mortgage completely but move forward with foreclosure on the first mortgage?

    Surprisingly, such a tactic often makes sense for banks. When a lender forecloses on a first mortgage, the house in question is typically sold at auction. If the house is worth less than the loan amount, the bank gets only part of its money back. But after the sale, of course, there’s no asset left to pay off any of the second loan. The holder of that second loan — which has lower priority than the holder of the first — gets nothing.

    So a lender can forgive a second mortgage — which in the event of foreclosure would be worthless anyway — and under the settlement claim credits for “modifying” the mortgage, while at the same time it or another bank forecloses on the first loan. The upshot, of course, is that the people the settlement was designed to protect keep losing their homes.

    The five banks covered under last year’s settlement are wiping out second mortgages in record numbers. In New York State, for example, during the first six months of the settlement period, three times as many homeowners received second-mortgage forgiveness (2,933) as received permanent modifications on first mortgages (967).

    In New York State, 36.2 percent of the banks’ credits under the settlement have been related to second loans, compared with only 18.2 percent for first mortgages.

    In 2011, the five banks that are subject to last year’s settlement sent 230,678 pre-foreclosure notices to New York State homeowners, according to data I obtained from the Finance Department through the Freedom of Information Law.

NJ Sale Leaseback Peddler Cops Guilty Plea In Racket That Used Straw Buyer Scam To Screw Financially Strapped Homeowners In Equity Stripping Ripoff

From the Office of the U.S. Attorney (Newark, New Jersey):
  • An Ocean County man [] admitted his role in a mortgage loan fraud scheme that succeeded in obtaining $4.4 million in mortgage loans while masquerading as a foreclosure rescue operation based in Holmdel, N.J., U.S. Attorney Paul J. Fishman announced.

    Vito C. Grippo, 58, of Jackson, N.J., the president of Morgan Financial Equity Shares and Vanick Holdings, LLC, pleaded guilty [] to an Indictment charging him with one count of conspiracy to commit wire fraud, two counts of filing a false tax return for the years 2006 and 2007, and one count of aiding and procuring the filing of a false tax return for the year 2008.

    According to documents filed in this case and statements made in court:

    Between January 2008 and February 2010, Vito Grippo held Morgan Financial out to the public as a company that could help homeowners who faced foreclosure on their homes through something Grippo called the “Equity Share Program.” As described by Grippo and his associates, the Equity Share Program involved creating a limited liability company (“LLC”) in the name of the homeowner’s house, in which the homeowner would supposedly own a 90 percent interest with the rest to be owned by one or two private investors.

    In reality, the so-called investors invested nothing and were instead straw buyers recruited by Vito Grippo or his son, Frederick “Freddie” Grippo, because they had good credit. The Grippos and their associates then applied for mortgages in the names of the “investors” for the purchase of the properties owned by the homeowners in distress. Freddie Grippo pleaded guilty to conspiracy to commit wire fraud before Judge McNulty on Nov. 28, 2013.

    A homeowner in distress would come to a closing in Vito Grippo’s office in Holmdel and be given a stack of documents to sign to prevent foreclosure. The homeowners frequently did not understand that they would be transferring title to their homes to theinvestor.”

    The so-called investor was in reality a straw buyer of the homeowner’s house. The new mortgage loan applications filled out by the Grippos or their associates in the name of one of the investors contained materially false information about the loan applicant’s monthly income, his assets and whether the residence to be bought would be applicant’s primary residence.

    Once the new loan application was filled out, it would be submitted to Worldwide Financial Resources for processing where Freddie Grippo, a loan officer at Worldwide, would see to it that the loan was approved. Once the loan was approved and the loan money was wired to the settlement agent for a given transaction, Vito Grippo would direct the settlement agent to forward a portion of those loan proceeds to bank accounts that Vito Grippo controlled.(1)

    Properties that lost money through the Equity Share Program were found throughout the metropolitan area, including homes in Rutherford, N.J., Monroe, N.J. and Brooklyn, N.Y.
For the U.S. Attorney press release, see President Of Bogus Foreclosure Rescue Company Involved In Mortgage Fraud Pleads Guilty.

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

Coral Gables Cops Waste No Time In Squatter Trespassing Probe; Conclude That Document Purportedly Giving Occupants Right Of Possession Was Forged, Promptly Give Them The Boot From $1M Home

In Coral Gables, Florida, The Miami Herald reports:
  • Damian Echauri finally got the keys to his million-dollar Coral Gables house Wednesday after police ordered a family of squatters to leave.

    Inside the five-bedroom home at 601 Sunset Dr., he found sinks missing, mattresses and box springs stacked on the floors and a poster of Scarface’s Tony Montana hanging in the dining room.

    “They thought they knew how to play the system,” Echauri said as detectives and uniformed officers walked in and out and motorists along the leafy street lined with luxury homes slowed to gawk. “But they’re trespassing.”

    Police cited Robert Ramos, 33, his wife Ana Alvarez, 52, and her son Jonathan, 27, for trespassing Wednesday after finding they had no valid lease to be in the home.

    After installing new locks, Echauri agreed to give the family until midnight to load up three U-Haul trucks, and tow away a broken down Range Rover that had been sitting in the driveway for months.

    The sprawling house sitting on a walled, 31,000-square-foot lot came under scrutiny earlier this month when city commissioners asked staffers to look into beefing up the city’s code on abandoned property.

    City officials had suspected since September that the family was squatting in the house around the corner from CocoPlum, but its ownership was complicated by a sketchy history that included a foreclosure suit and a mysterious deed that Echauri said was forged.

    Echauri and his wife bought the house in 1997, when it was first in foreclosure and fixed it up by installing new appliances, marble floors and a home theater system. When they divorced in 2008, Echauri said he gave his wife the majority of the house as part of a settlement. She was supposed to sell it so they could divide the proceeds, but when she couldn’t, she stopped paying the mortgage. J.P. Morgan Chase initiated foreclosure proceedings.

    In November, Echauri’s son spotted an ad on Craigslist advertising a room in the house for rent. Echauri confronted the family, but police were unable to determine the rightful owner and advised him to seek eviction.

    When city officials asked for proof that they were legally in the house, they turned over what officials said was a forged lease. Police opened an investigation and asked the tenants to come in with other proof, they refused.

    “Even after being told, you’re here illegally, they refused to leave,” said police spokesman Dean Wellingoff. “It’s a complex issue any time you deal with foreclosure.” On Wednesday, when police arrived, they found a young child living in the house, as well as a new tenant.

    Echauri, his parents and his son stood by Wednesday, along with police, waiting for the family to pack up several U-Haul trucks and leave. The family’s American Bulldog, secured in a crate, could be heard barking inside.

    At one point, two people could be heard arguing in Spanish. A woman yelled “I can't do it all alone, don’t you understand!”

    How the family managed to move into the home remains unanswered. On Wednesday, Echauri said he found that a back glass door had been replaced. He also discovered that the locks had been replaced.

    Echauri said three central air-conditioning units had been stolen and replaced with window units. And except for a dishwasher, the high-end appliances he installed had been removed and cheaper ones put in their place.

    “I don’t know if they’re victims or not, but I want to give them the benefit of the doubt,” said Echauri, who plans to stay in house overnight Wednesday. He said he will be moving back temporarily. Asked whether he would try to rescue it from foreclosure, he answered, “That’s going to be chapter three. We’re still working on chapter two.”

Monday, February 18, 2013

LPS To Fork Over $35M To Feds To Settle Criminal Charges For Its Role Surrounding Alleged 6-Year Scheme To Prepare, File 1M+ Bogus Mortgage Documents In Land Records Offices Nationwide

Reuters reports:
  • The mortgage servicing company Lender Processing Services Inc has agreed to pay $35 million to resolve a federal criminal investigation into foreclosure fraud, the U.S. Department of Justice said on Friday.

    The settlement resolves allegations over the Jacksonville, Florida-based company's involvement in what the government called a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage documents in property recorders' offices nationwide.

    It followed a guilty plea last November by Lorraine Brown, the former chief executive of LPS' DocX LLC unit, to a felony charge of conspiracy to commit mail and wire fraud over the scheme, which ran from 2003 to 2009.

    LPS entered into a two-year non-prosecution agreement that requires it to meet many conditions, including cooperating in federal probes, and alert the government to any abuses in mortgage or foreclosure documentation services at the company.

    The $35 million payment includes criminal penalties and forfeiture and must be made within 10 days to the U.S. Marshals Service and the U.S. Treasury, the Justice Department said.

Consumer Groups Give 'Bronx Cheer' To Federal Regulator That Nixed Plan To Tame Banksters' Force Placed Insurance Racket

From a press release from the Consumer Federation of America:
  • Advocates at the Consumer Federation of America, the National Consumer Law Center, the Center for Economic Justice, Consumer Watchdog, the Neighborhood Economic Development Advocacy Project and the Center for Responsible Lending strongly oppose the decision of the Federal Housing Finance Agency (FHFA) – the federal regulator that oversees Fannie Mae and Freddie Mac – to halt Fannie Mae’s recent efforts to reduce the cost of force-placed insurance (FPI) for taxpayers and borrowers by over $1 billion a year.

    Force-placed insurance is property insurance that mortgage servicers impose on homeowners whose insurance policies lapse or are cancelled. FPI policies typically cost at least twice as much as standard homeowners insurance, despite providing far less coverage.

    FPI premiums are excessive as demonstrated by very low benefit ratios – the ratio of claims paid to premiums received by the insurer – of only 21% over the period 2004 through 2011. This compares to a benefit ratio for standard homeowners insurance of 63% over the same period. With the economy in recession and slow recovery, the amount of FPI sold has skyrocketed over the past several years from less than $1 billion in 2004 to $3.5 billion in 2011.
  • Fannie Mae, consumer organizations and some state insurance regulators have criticized the structure of the force-placed insurance market because force-placed insurers pay substantial kickbacks to mortgage servicers– in the form of commissions, captive reinsurance schemes and below-cost services –often by overcharging homeowners who ultimately pay for the FPI charges.

    Fannie’s plan would benefit taxpayers and borrowers. Taxpayers would benefit because Fannie would pay far less than it currently does for FPI and would pass those savings on to taxpayers. Borrowers would benefit because they would pay a price for FPI more closely related to the cost of providing the product and not the current price often inflated by kickbacks from insurers to mortgage servicers.
  • “Fannie Mae has done the due diligence necessary to ensure that homeowners and taxpayers would benefit,” said Birny Birnbaum, executive director of the Center for Economic Justice and an expert on FPI. “The FHFA action maintains the status quo of massive overcharges to borrowers and taxpayers.”

    “Fannie Mae’s original decision would have helped homeowners, taxpayers, and investors avoid unreasonable over-charges for homeowners insurance,” added National Consumer Law Center attorney Andrew Pizor. “FHFA's decision harms nearly everyone while preserving unfair practices in the mortgage servicing and insurance industries.”

Feds Search For Help From Banksters To Carry Out Foreclosure Fraud Agreement An Implicit Acknowledgement Regulators Had Their Bones Picked Clean By Financial Industry In Settlement Negotiations

The New York Times reports:
  • Washington is seeking help from an unlikely group in its effort to distribute billions of dollars to struggling homeowners in foreclosure: the same banks accused of abusing homeowners with shoddy foreclosure practices.

    In doing so, the regulators are trying to speed the process after a flawed, independent foreclosure review delayed relief for millions of borrowers, according to people briefed on the matter. But housing advocates worry that the banks, eager to end the costly process, could take shortcuts as they comb through loan files for potential errors, in some cases diverting aid from the neediest homeowners.

    Regulators say they will check the work. And banks have already agreed to pay a fixed amount to troubled homeowners, creating another backstop.

    According to officials involved in the process, who spoke anonymously because the matter is not public, the regulators had few alternatives.

    Last month, the Office of the Comptroller of the Currency scuttled the foreclosure review by independent consultants because it was marred by delays and inefficiency. Instead, the regulator struck a multibillion-dollar settlement directly with the nation's largest banks, a deal that includes $3.6 billion in payments to aggrieved homeowners.

    To accelerate the payments, the comptroller's office decided to cut out the middlemen, the consultants, from the reviews. In a conference call last week, the government outlined a plan to use the lenders instead, according to people with direct knowledge of the discussion. Banks will now have to assess each loan for potential errors, which will help determine the size of the payments to homeowners.

    The decision to tap the banks for support is the latest twist in the review of more than four million foreclosures, a process that has incensed lawmakers and ensnared the nation's largest lenders. Regulators are eager to make the payments to homeowners, who have languished for more than a year.
  • By relying on the banks, regulators can part ways with the consultants.

    Despite billing for roughly $2 billion in fees in the 14-month review, consultants examined only a sliver of the 500,000 complaints filed by homeowners, people involved in the matter said. Their efforts were stymied, in part, because regulators urged consultants to first scrutinize a random sample of the four million foreclosures before digging into specific homeowner complaints, the people involved said. The decision, the people said, may have undercut the scope of the settlement and potentially deprived homeowners of additional relief.

    Consultants were also criticized for a faulty review process.

    Some consulting firms, including the Promontory Financial Group, farmed out much of the work to contract employees. Others faced questions about their objectivity. The consultants, critics note, were paid billions of dollars by the same banks they were expected to police.

    Some consultants say they sounded repeated alarms about the process. Last spring, a group of consulting firm executives met with comptroller officials in Washington to voice concerns that the reviews were too narrow, according to people with direct knowledge of the meetings.

    Other people close to the review say consultants were only partly to blame for the problem. The review process, with its narrow focus, was created by the comptroller's office in 2011, under previous leadership.

Sunday, February 17, 2013

Arkansas Law Turning Slow-Paying Tenants Into Criminals? Local Prosecutors Into Landlords' Personal Attorneys?

From a post from Human Rights Watch:
  • Hundreds of Arkansas tenants face criminal charges every year because they don’t pay their rent on time and then fail to vacate their homes quickly enough. The Arkansas state legislature should repeal the abusive law that allows for these prosecutions, which has no parallel in any other US state.

    The 44-page report, “Pay the Rent or Face Arrest: Abusive Impacts of Arkansas’s Criminal Evictions Law,” tells the stories of Arkansas tenants who were dragged into criminal court for transgressions that would not be a crime in any other US state.

    Other tenants who did not violate the law have faced charges because prosecutors acted on specious claims by landlords. Several of the tenants interviewed for this report were confronted at home or at work by police officers who had warrants for their arrest. One woman was berated in open court by a district judge, who compared her to a bank robber.

    “The Arkansas ‘failure-to-vacate’ law is unjust and tramples on the fundamental rights of tenants,” said Chris Albin-Lackey, business and human rights senior researcher at Human Rights Watch. “It also criminalizes severe economic hardships many tenants are already struggling to overcome.”

    Under Arkansas’s failure-to-vacate law, a landlord can demand that a tenant move out of a property within 10 days if the tenant does not pay the rent in full and on time. Any tenant who fails to do so is guilty of a misdemeanor. There is no way for tenants to present their side of the story in court without risking a criminal conviction.
  • “The failure-to-vacate law effectively coerces tenants into either quietly moving out or pleading guilty instead of exercising their right to defend against a criminal charge and having their day in court,” Albin-Lackey said. “Disturbingly, it does so by turning prosecutors into landlords’ personal attorneys – at taxpayer expense.”
For more, see Arkansas: Tenants Face Prosecution Over Rent Problems.

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

Pair Of Lowlife Lawyers Who Extracted $275K In Cash, Home, Etc. From Criminal Defense Client & Left Him Hung Out To Dry Now Face More Trouble For Thumbing Nose At Court Orders

In Miami, Florida, the South Florida Sun Sentinel reports:
  • Two lawyers who acted so despicably in a South Florida case that they were held in contempt of court and ordered to repay $275,800 in fees to a client, have managed to create more trouble for themselves and even could end up serving time in federal prison.

    By thumbing their noses at a federal judge, Peter Mayas, of Miramar and Plantation, and Emmanuel Roy, of New York and South Florida, are now in about as much of a legal mess as trained lawyers can get themselves into in a courtroom.

    In the latest twist, a judge found they have attempted to hide assets, lied to the court and tried to thwart him. The judge now recommends that Roy and Mayas face sanctions for their behavior and for wasting the court's time.

    The odyssey began when Roy and Mayas — who weren't authorized to practice law in federal court in South Florida — nonetheless represented a defendant, Patrick Coulton, in a criminal case in 2008.

    They managed to wring $275,800 worth of cash and property out of Coulton's family for a minimal amount of work they weren't qualified to do, the judge ruled.

    Roy even flew to England to personally remove a $23,000 wedding and engagement ring set from the finger of Coulton's wife, Pamela, during a breakfast meeting in London, according to court testimony. Roy gave the rings to his mother-in-law, witnesses testified.

    Paul Petruzzi, the Miami lawyer appointed by the court to take over Coulton's representation in August 2010 after Roy and Mayas abandoned him in prison, said the case wasn't about making money for him — it was about trying to ensure justice was done.

    "Guys like Roy and Mayas are the reason people hate lawyers," Petruzzi said, saying the case turned into a personal mission for him.

    Petruzzi said he doesn't plan to accept any payment for the 2 1/2 years of work he put into the case.

    "When Coulton's wife told me how it felt to be robbed by the lawyer she hired to represent her husband — to lose her home, her rings, her vehicle, only to have him abandoned in prison — that's when it stopped being about just getting the money back for her," Petruzzi said.

    When Roy and Mayas had extracted as many valuables as possible from the Coultonsincluding their Coconut Creek townhome, a Porsche Cayenne, more jewelry and tens of thousands of dollars in cash — they helped him plead guilty, handled his sentencing and then ditched him in prison, U.S. Magistrate Judge William C. Turnoff ruled in September 2011.

    The judge issued a scorching 33-page ruling, found Roy, 45, and Mayas, 48, in contempt of court and called their conduct "disgusting, abhorrent" and the "most outrageous" he'd seen in 25 years on the bench.

NY Appeals Court Gives Already-Suspended Attorney Bar Boot; Orders Him To Cough Up $166K+ To 51 Screwed-Over Ex-Clients

The New York Law Journal reports:
  • An appellate panel in Western New York has disbarred an already suspended Rochester attorney and ordered the lawyer to repay more than $166,984 to 51 former clients. The Appellate Division, Fourth Department, said Andrew J. Cohen, who was suspended in 2011 for misappropriating client funds had previously received eight letters of caution but had evinced "a total disregard for his fate as an attorney and his professional obligations to his former clients."(1)

    According to the order filed Feb. 8, Cohen loaned his wife, a full-time employee in his firm, money from his trust account that he knew belonged to a gravely ill client who died two months later. A loan document Cohen drafted required his spouse to repay the loan at a monthly rate of $1,720, but she did not make any payments, the court said.

    Additionally, the court said, Cohen represented both his wife and the client in connection with the loan, did not disclose the "inherent conflict of interest" and did not reveal several other relevant facts, such as: he was under investigation for converting $65,000 from an elderly client who was in ill-health; he and his spouse were subject to two federal tax liens, two state court judgments, owed tens of thousands of dollars in credit card debt and lived in a house under foreclosure.

    Cohen, who was admitted in the Second Department in 1978, was suspended by the Fourth Department on Oct. 7, 2011 (see Matter of Cohen, 89 AD3d 142) for misappropriating client funds and entering into improper loan arrangements with clients to conceal the misappropriation. Subsequently, the Fourth Department's grievance committee filed another petition accusing Cohen of additional misappropriations prior to his suspension and seeking restitution.

    Cohen was ordered to appear on Dec. 4, 2012 on a final order of discipline, but the day before the slated proceeding his wife contacted the court and said her husband was medically incapable of appearing.

    However, the court noted, Cohen did not contact the court directly, submit any proof of medical infirmity or request an extension of time. Consequently, the court concluded that Cohen admitted the allegations. Cohen could not be reached for comment.(2)
Source: Rochester Attorney Disbarred, Ordered to Pay Restitution.

(1) Matter of Cohen, 2013 NY Slip Op 00880 (App. Div. 4th Dept. February 8, 2013) (per curiam).

(2) The Lawyers’ Fund For Client Protection Of the State of New York, whose mission, according to their website, is "to protect legal consumers from dishonest conduct in the practice of law, to preserve the integrity of the bar, to safeguard the good name of lawyers for their honesty in handling client money, to promote public confidence in the administration of justice in the Empire State," may be a last resort for these victims to recover some or all of their ripped off loot.

For information on "attorney ripoff reimbursement funds" in other states and Canada, see: