Saturday, May 25, 2013

Bay State Supremes Slam City Of Worcester Over Screwball Attempt To Invoke State Lodging House Act To Impose Fine$, Contempt Citations On Landlords Who Rented Apartments In 2- & 3-Family Homes To Groups Of Four Unrelated Adult College Students

From a Opinion Summary:
  • Defendants owned two-family and three-family rental properties in the City of Worcester. Defendants leased dwelling units in these properties to groups of four unrelated adult college students.

    The City determined that, where such a dwelling unit is occupied by four or more unrelated adults not within the second degree of kindred to each other, the dwelling unit is a "lodging" for purposes of the Lodging House Act, and Defendants were therefore operating a lodging house without a license.

    The trial court found Defendants in contempt and imposed monetary fines.(1)

    The appeals court affirmed.

    The Supreme Court reversed, holding that the dwelling units did not meet the definition of "lodgings" under the Act, and accordingly, the properties were not lodging houses under the Act.(2)
Source: Opinion Summary: City of Worcester v. College Hill Props., LLC.

For the Massachusetts high court ruling, see City of Worcester v. College Hill Props., LLC, No. SJC-11166 (May 15, 2013).

(1) According to the court, at the time the shameless City of Worcester filed its complaints for civil contempt, "[t]he students, some of whom were seniors, were preparing for final examinations and graduation[.] ... [a]nd they would not leave voluntarily in response to notices to quit ... ."

(2) In reversing the earlier ruling of the trial judge, which was subsequently affirmed by the state appeals court (see City of Worcester v. College Hill Props., LLC, 80 Mass.App.Ct. 757 (2011)), the state Supreme Judicial Court made the following analysis of the seemingly idiotic position taken by the City of Worcester in this case (Editor's Note: to be fair to the City of Worcester, they were able to get both a trial judge and the state's intermediate appeals court to go along with its position):
  • Construing "lodgings" as the city suggests would lead to absurd results and selective enforcement.

    The city argued during a hearing before the Housing Court judge, as it did before us, that a building with three dwelling units could contain some units that are "lodgings" and others that are apartments.

    Under the city's view, a three-unit building with four unrelated students in the first-floor apartment, five siblings of the lessor in the second-floor apartment, and seven children of the lessor in the third-floor apartment, would contain "lodgings" requiring a "lodging house" license only as to the first-floor dwelling unit, the unit housing the fewest occupants.

    If the four students moved out, and a family of three moved in, the first-floor dwelling unit would transform from "lodgings" to a dwelling unit no longer subject to the lodging house act.

    This is an absurd result.

    "[B]y-laws must be construed reasonably. . . . [They] should not be so interpreted as to cause absurd or unreasonable results when the language is susceptible of a sensible meaning." (Citations omitted.) North Shore Realty Trust v. Commonwealth, 434 Mass. 109, 112 (2001), quoting Green v. Board of Appeal of Norwood, 358 Mass. 253, 258 (1970). See Lexington v. Bedford, 378 Mass. 562, 570 (1979).

    Moreover, during argument before us, the city acknowledged that, under its interpretation of "lodgings," the lodging house act would apply to a family of seven renting an apartment from an unrelated landlord, and would apply if a new baby were added to a family of three, but asserted that the city would not enforce the statutory provisions in those circumstances.

    We will not adopt an interpretation of a statute which relies upon selective enforcement of the statutory provisions. Cf. Commonwealth v. Lora, 451 Mass. 425, 439-440 & n. 27 (2008); Cote-Whitacre v. Department of Pub. Health, 446 Mass. 350, 376-377 (2006) (Spina, J. concurring).

Big Apple Environmental Control Board Invokes Local 'Hotel Law' To Belt Tenant With $2400 Fine For 3-Day 'Sub-Rental' To Another; Controversy Grows Over Private Individuals Using Popular Listing Service To Peddle Short-Stays In Their Homes To Tourists, Others Seeking Temporary Accomodations That Undercut Hotel Rate$

In New York City, reports:
  • New York officials have determined that a man who rented out part of his apartment on Airbnb(1) should pay $2,400 for violating the city's illegal hotel law, despite Airbnb stepping in on the host's behalf.

    The city initially asked host Nigel Warren to pay $7,000 total in fees for violating a law that makes it illegal for property owners to rent out homes temporarily -- essentially mimicking hotel stays -- and for unrelated issues with building and zoning codes, according to the decision and order issued by the board.

    The city argued that the apartment "may only be used as private residences and may not be rented for transient, hotel, or motel purposes."

    As Airbnb continues to shake things up for the hotel industry, it's increasingly running into issues with the law, particularly in areas where the law is not clear cut. It's not just in New York -- officials in the company's hometown of San Francisco are concerned about property owners potentially using its service to get around local tenant protections and land use codes.

    The New York case is centered around a 2011 law that makes it illegal for New York residents to rent out a property for less than 29 days. It was originally aimed at landlords who bought up residential properties and turned them into hotels. Airbnb has been lobbying legislators to change the law so it clearly protects hosts, like Warren, who are not trying to turn their homes into hotels.

    For Warren's case, Administrative Law Judge Clive Morrick dismissed the building and zoning code violations but agreed that Warren did violate the illegal hotel law. He lowered the fee total to $2,400.

    "While breech of the condominium rules is not of itself a ground for sustaining this (notice), respondent was in breach (through Warren's acts) and the existence of the rule against rental for transient, hotel, or motel purposes is evidence that the unit owners were to restrict their use to permanent occupation," Morrick wrote.

    Airbnb issued a statement to CNET, saying it was disappointed in Morrick's decision:

    This decision runs contrary to the stated intention and the plain text of New York law, so obviously we are disappointed. But more importantly, this decision makes it even more critical that New York law be clarified to make sure regular New Yorkers can occasionally rent out their own homes.

    There is universal agreement that occasional hosts like Nigel Warren were not the target of the 2010 law, but that agreement provides little comfort to the handful of people, like Nigel, who find themselves targeted by overzealous enforcement officials.

    It is time to fix this law and protect hosts who occasionally rent out their own homes. Eighty-seven percent of Airbnb hosts in New York list just a home they live in -- they are average New Yorkers trying to make ends meet, not illegal hotels that should be subject to the 2010 law

    Warren's landlord has 30 days from May 14, the date the decision was mailed, to appeal the decision, according to the Environmental Control Board, which oversaw the case. The board reviews cases related to regulations that "protect the city's health, safety, and clean environment."
  • The case started in September when Warren rented his condo to a woman for a three-day stay. His housemate was also living at the apartment at the time, according to the hearing testimony, outlined in the document. He's used Airbnb for rentals twice before.

    Airbnb stepped in at Warren's hearing on May 9 to argue that his case should be an exception to the New York law. Airbnb argued that "allowing such transient use supports the city's desire to preserve living accommodations because it allows tenant the ability to bolster their income and pay rent."
  • Now, this doesn't necessarily mean New York will crack down on all Airbnb hosts. The city enforces this regulation when a complaint is filed. It's not clear why officials zeroed in on Warren's situation. But this has to have Airbnb worried about concerned customers, particularly because the company can't formally do anything about Warren's case. Airbnb's only recourse is to change the law.
For the story, see NY official: Airbnb stay illegal; host fined $2,400 (An administrative law judge decides that a man leasing a condo broke New York's laws after he rented out part of his home on Airbnb).

See also WNYC Radio 93.9 FM and AM 820: NYC Tells Airbnb Hosts: Don’t Get Too Cozy.

For the NYC Environmental Control Board ruling and order, see In re Abe Carrey (May 9, 2013).

(1) Airbnb is an online service that provides a platform for individuals referred to as “hosts”, generally private parties, to rent unoccupied living space and other short-term lodging to guests. I think I'm somewhat reliably informed that this outfit was first known as Air Bed and Breakfast (; the name subsequently being shortened to Airbnb (pronounced 'Air B-N-B').

Once-Single Rochester Renter Gets Probation, 'Pay-Back' Order For Failing To Report Change In Marital Status, New-Hubby's Income To HUD To Fraudulently Score $22K+ In Federal 'Section 8' Housing Subsidies

From the Office of the U.S. Attorney (Rochester, New York):
  • U.S. Attorney William J. Hochul, Jr. announced [] that Debra Belcer, 58, of Rochester, N.Y., who was convicted of stealing government funds, was sentenced to three years probation and ordered to pay restitution in the amount of $22,609 by U.S. District Judge David G. Larimer.

    Assistant U.S. Attorney Marisa J. Miller, who handled the case, stated between July 2009 and July 2011, the defendant received Department of Housing and Urban Development (“HUD”) Section 8 rent subsidy benefits.

    To continue receiving the benefits each year, Belcer certified to HUD that she was the only adult living in her home and was the only individual in the household earning income.

    The government’s investigation in fact determined that the defendant had gotten married, that her husband was earning income, and that the defendant was not reporting all of her own earned income to HUD.
For the U.S. Attorney press release, see Rochester Woman Sentenced For HUD Fraud.

Central Florida Woman Accused Of Falsely Claiming To Be Active Duty Servicemember While Delinquent On House Payments To Stall Foreclosure Cops Mortgage Fraud Plea

In Pensacola, Florida, the Orlando Sentinel reports:
  • No lie was too big to tell for an Orlando woman who wanted a new home in Pensacola, but didn't want to pay the mortgage for her Orlando home, federal officials said.

    Chantal M. Lanton, 37, of Orlando is accused of falsely claiming to be an officer in the United States Air Force who was being deployed to Germany when she let her home loan go into default in February 2011.

    She did so in an attempt to receive foreclosure-protection benefits that are available for service members, federal officials said.

    Lanton never served in the Air Force or any other branch of the U.S. military, officials said.

    Lanton pleaded guilty [] to two counts of making false statements to a bank while applying for a residential loan and mortgage, the U.S. Department of Justice said.

Jurist's Retirement Could Mean End To "Russian Roulette" System Of Loss Mitigation Options For Relief-Petitioning Home Borrowers In Downstate NY Bankruptcy Court

In Brooklyn, New York, the reports:
  • On Friday May 17, 2013 the United Sates Bankruptcy Court in the Eastern District of New York announced a “Ceremony in Honor of the Retirement of the Honorable Jerome Feller” and “On Tuesday, June 11, 2013 at 4:30 p.m. there will be a celebration.”

    One could hear the imaginary cheer across the district from homeowners and their advocates who have suffered the fate of losing their homes at the hands of Judge Feller. Nobody will celebrate Judge Feller’s retirement more than homeowners and their advocates who spin the wheel of hope when filing a bankruptcy and cringe when the judge is assigned to their case.

    In the Eastern District of New York whether or not a homeowner gets relief is based on which Judge gets assigned to their bankruptcy case. Indeed, some debtors or creditors may be given access to loss mitigation simply due to the judge who is randomly assigned to their case.

    The Court adopted General Order 582 and the Loss Mitigation Program Procedures and the order states” “and shall apply in all individual cases assigned under Chapter 7, 11, 12, or 13 of the Bankruptcy Code, to Chief Judge Carla E. Craig, Judge Dorothy T. Eisenberg, and Judge Elizabeth S. Stong, and Judge Joel B. Rosenthal, and any other Judge of this Court who may elect to participate in the Loss Mitigation Program.”

    The aim of the Program is for debtors and creditors to reach a consensual loss mitigation / mortgage loan modification resolution when a debtor’s principal residence is at risk of foreclosure.

    In Judge Feller’s courtroom, debtors and creditors have unfortunately lacked a remedy that similarly situated debtors and creditors in the same exact Courtroom enjoy in front of different Judges because he elected not to participate in the program which allowed homeowners and lenders an opportunity to work together.

    In what could be described as divine intervention or a simple stroke of luck, Judge Feller’s retirement could finally mean an end to the “Russian roulette” system of loss mitigation options available in the Eastern District Bankruptcy Court in Brooklyn.

    For those homeowners who have recently filed for bankruptcy and had the unfortunate break of getting Judge Feller, this announcement is a godsend and amounts to a second chance to keep their home

    In the Eastern District attorneys have had to adapt their advice to include a warning to clients when explaining bankruptcy and the loss mitigation program.

    We could help to save your home in the loss mitigation program – unless we draw Judge Feller.”

Scammer Gets 16 Months In $635K+ Home Improvement Ripoff; Suspect Accused Of Pocketing Cash, Beginning Preliminary Work Before Abandoning Projects, Using License Numbers From Unwitting Legitimate Contractors, Stiffing Subs, Moving Across Country To Dodge Cops

From the Office of the Orange County, California District Attorney:
  • An unlicensed contractor was sentenced [] to 16 months in jail for defrauding over $635,000 from a Huntington Beach homeowner and a Yorba Linda family by stealing each of their payments and failing to complete construction projects.

    Alec Damos, 52, Pawley’s Island, SC, pleaded guilty Feb. 20, 2013, to one felony count of unlicensed contracting for emergency residential repairs in a disaster area, one felony count of fraudulent use of a contractor’s license, and one misdemeanor count of contracting for home improvement without a state license. In addition to his jail sentence, Damos was ordered to pay over $635,000 in restitution.

    In 2008, the Triangle Complex Fire burned over 30,000 acres and destroyed more than 200 homes in Orange County, making it the fourth largest fire in Orange County history.

    Between November 2008 and April 2009, Damos unlawfully posed as a licensed contractor in Yorba Linda fraudulently using contractor license numbers belonging to legitimate operators without their knowledge or consent. Damos approached one family and initially helped clear rubble and debris in the days following the fire and was then contracted to rebuild their entire home for over $729,000.

    Damos collected more than $147,000 in advances from the victims, began some preliminary work, and then abandoned the project, leaving it incomplete.

    Damos moved out of state with the proceeds without paying various subcontractors scheduled for the project. Damos paid himself over $61,000 and spent more than $72,000 to pay for his own family’s living expenses including monthly bills, personal shopping trips, restaurants, and travel.

    In 2009, the victims notified the Brea Police Department, who worked with the Contractor State License Board and the Orange County District Attorney’s Office and discovered that, in a separate case, Damos had defrauded another homeowner in Huntington Beach of over $488,000 in construction deposits in 2006.

    Damos was similarly unlicensed and abandoned the home improvement work which resulted in substandard conditions and unpaid creditor lines which indirectly caused the homeowners to later lose their home due to foreclosure.

    In 2011, Brea Police detectives located Damos living in South Carolina and extradited him back to Orange County.

Downtown NYC Butt-Kicking Condo Votes To Ban Smoking In Residential Units, Public Areas; Current Unit-Owning Puffers Granted 3-Year 'Grandfather' Waiver; Advocate: 'We're Protecting, Promoting Nonsmokers’ Air Rights In Their Homes'

In New York City, the New York Post reports:
  • A towering 650-unit condominium complex in Manhattan has become the largest smoke-free residential building in the country, homeowners said yesterday.

    “I can finally breathe,” said Deloris Seiler, 82, a resident of Union Square’s 29-story Zeckendorf Towers, which passed a historic smoke-free ban that covers both residential units and the building’s public areas.

    “People are not stupid,” Seiler said. “People realize smoking is dangerous even if you are not a smoker.”

    While several new condominiums in New York City have prohibited smoking upon opening, Zeckendorf Towers is one of only a handful of condos whose unit owners have voted to transition their buildings to smoke-free complexes.

    The April 30 vote came on the heels of a recent Quinnipiac University poll revealing that 59 percent of New Yorkers would prefer to live in a smoke-free building, yet a majority would also prefer that the restriction not be dictated by the city.

    The building’s board first began to explore going smoke-free in 2010, after numerous complaints from residents about cigarette smoke.

    After confirming that they could legally prohibit smoking by amending the building’s bylaws, the board teamed up with the city Department of Health and the NYC Coalition for a Smoke-Free City.

    “This is a growing movement,” said Maria Pico, borough manager for the Manhattan Smoke Free Partnership. “We are protecting and promoting nonsmokers’ air rights in their homes. There is no way to isolate secondhand smoke from coming into your apartment. Sixty-five percent of all air is shared.”

    Residents said 85 percent of the owners voted on the policy.

    Of those unit owners casting ballots, nearly 84 percent voted in favor of the amendment to prohibit smoking in both residential units and public areas for all new residents.

    They also adopted a grandfather clause granting existing owners who smoke a three-year waiver before their units are subject to the smoke-free policy.

    “I am thrilled that such a large majority of my neighbors voted to make our building a healthier, safer, and more pleasant place to live,” said homeowner Andrea York.

    “It feels great to know that I can sit in my living room and sleep in my bedroom with clean air again.”
For the story, see Building kicks butt (Condo votes no smoking).

Friday, May 24, 2013

HUD Fair Housing Complaints For 2012

From the Fair Housing Defense blog:
  • HUD is out with its most recent data concerning the number of discrimination complaints filed under our federal Fair Housing Act (FHA). In 2012, HUD investigated 1,817 cases while its partner entities investigated just under 7,000 cases. Those numbers are down a little from 2011 and 2010. When added to the number of complaints investigated by private fair housing groups, however, the total number of fair housing complaints filed is up to over 28,000.
  • For what it is worth, claims alleging discrimination against those with a disability make up the largest percentage of cases (in 2012 over 55%). Race is second at over 25% of the complaints, with national origin coming in third at just under 23% of the cases.
  • [W]hile the federal FHA contains the seven familiar protected classes, you need to know that:

    21 states (plus DC) include sexual orientation as an additional protected class: California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington, and Wisconsin.

    12 states (again plus DC) include source of income as a protected class in their fair housing laws: California, Connecticut, Maine, Massachusetts, Minnesota, New Jersey, North Dakota, Oklahoma, Oregon, Utah, Vermont, and Wisconsin.

    What does all this mean? HUD and its partner entities are out there looking to file discrimination complaints. You must know the laws where you operate properties. And remember there are also city and county anti-discrimination laws that you must follow.(1)
Source: Just How Many Fair Housing Complaints Were Filed in 2012 The Number Will Surprise You.

(1) For example, in New York City, the city's Human Rights Law enumerates 12 protected classes and three additional protections (based on one's lawful occupation, family status, and lawful source of income) against whom discrimination in the sale, rental or lease of a housing accommodation or in the provision of services and facilities is prohibited. See Protected Classes Under The NYC Human Rights Law.

Pair Cop Pleas To Interfering With Housing Rights Of Black Residents; Duo Charged With Engaging In Racially-Motivated Intimidation, Vandalism On Their Homes

From the U.S. Department of Justice (Washington, D.C.):
  • Two Spring Hill, Tenn., men pleaded guilty in federal court [] for their involvement in a racially-motivated conspiracy to interfere with the housing rights of African-American residents of the Spring Lake subdivision of Spring Hill, the Justice Department announced. Dakota James Calderhead, 20, and Kristian Chancellor Mathis, 19, each pleaded guilty in U.S. District Court in Nashville, Tenn., to one count of conspiracy to deprive a person of his civil rights.

    According to their plea agreements, on or about December 30, 2011, Calderhead and Mathis conspired to vandalize homes in the Spring Lake subdivision. Mathis admitted to spray painting a swastika and racial slurs on the driveway of an African-American family’s residence.

    Calderhead admitted that he fashioned a noose which Mathis hung from a tree outside of the residence. Calderhead also admitted to hanging a second noose from the driver’s side rearview mirror of the school bus located in front of another African-American family’s residence.

    Both defendants further admitted that their acts of vandalism were intimidating, and motivated, in part, by the race, color, or ethnicity of the victims.

Fair Housing Feds Score $2.5M+ In Suit Settlement Accusing Louisiana Municipality Of Engaging In Discriminatory Zoning Practices To Keep Out Black Renters In Aftermath Of Hurricane Katrina

From the U.S. Department of Justice (Washington, D.C.):
  • The Justice Department announced [] that St. Bernard Parish, La., has agreed to a settlement valued at more than $2.5 million to resolve separate lawsuits by the United States and private plaintiffs alleging that the parish sought to restrict rental housing to African Americans in the aftermath of Hurricane Katrina.

    The United States’ lawsuit alleged, among other things, that the parish: (1) passed a law, known as the permissive use permit ordinance, that prevented homeowners from renting single-family homes in residential zones without first obtaining a permit from the parish; (2) revised its zoning code to reduce dramatically the amount of land available for multi-family apartments; and (3) interfered with individuals’ housing rights.

    The lawsuit further alleged that these actions were done to limit or deny rental housing to African-Americans in violation of the Fair Housing Act. These actions came on the heels of the parish’s other efforts after Hurricane Katrina to restrict rental housing opportunities, including halting the re-establishment or redevelopment of rental housing and enacting a permit requirement for single-family rentals but exempting renters who were “related by blood” to the homeowners. The parish later rescinded these restrictions.

    “The Fair Housing Act is clear that local governments cannot use their zoning and land-use laws to discriminate on the basis of race,” said Eric Halperin, Senior Counsel and Special Counsel for Fair Lending in the Civil Rights Division. “People should have the freedom to choose where they live, without regard to race, and this innovative settlement will create greater housing opportunities in the New Orleans area.”
  • Under the settlement, which still must be approved by the U.S. District Court for the Eastern District of Louisiana, the parish must pay $275,000 to eight aggrieved persons identified by the United States and $15,000 to the United States as a civil penalty, establish a new Office of Fair Housing and hire a fair housing coordinator with a gross annual salary of at least $40,000, spend $25,000 each year in a marketing and advertising campaign to attract renters and developers of multi-family rental housing to the parish, and establish a rental land grant program through which the parish will transfer lands in its possession, free of cost, to qualified persons or entities who are willing to create or rehabilitate housing for rental purposes.

    The land grant program, which requires the parish to offer lands worth up to $83,000 each year, will last for five years; other programmatic features will last for three. Parish officials must also undergo fair-housing training and provide periodic reports to the United States.

    In a separate agreement, the parish agreed to pay $1.65 million in compensation, costs and attorneys’ fees to two sets of private plaintiffs.

Feds Settle Fair Housing Suit Against Developer Accused Of Building Housing With Features Making It Inaccessible To Those With Disabilities; Action Against Design, Engineering Professionals Continues

From the U.S. Department of Justice (Washington, D.C.):
  • The Justice Department announced [] that Oregon developer David Montagne and others affiliated with him have agreed to pay $80,000 and remove accessibility barriers at Gateway Village, a 275 unit apartment complex in Salem, Oregon, to settle a lawsuit alleging that they had violated the Fair Housing Act by building the complex with steps and other features that made it inaccessible to persons with disabilities.

    Under the terms of the parties’ agreement, Montagne and the other developers, Montagne Development Company, Gateway II LLC, Dav II Investment Group LLC and William Jones, must take extensive actions to make the complex accessible to persons with disabilities.

    These corrective actions include removing steps from sidewalks, widening interior doorways, reducing threshold heights, replacing excessively sloped portions of sidewalks, and installing properly sloped curb ramps to allow persons with disabilities to access the sidewalks from the parking areas.

    In addition, these defendants will pay $48,000 to the Fair Housing Council of Oregon,(1) whose investigation revealed the violations and which intervened in the United States’ lawsuit,(2) and $32,000 to establish a settlement fund for the purpose of compensating disabled individuals impacted by the accessibility violations.

    This settlement does not resolve the entire lawsuit. The case continues against the defendant that provided design and engineering services for Gateway Village, Multi/Tech Engineering.
For the Justice Department press release, see Justice Department Announces Fair Housing Settlement with Oregon Developer.

(1)The Fair Housing Council of Oregon is a nonprofit civil rights organization whose mission is to eliminate illegal housing discrimination through enforcement and education across Oregon and southwest Washington..

(2) See Fair Housing Defense blog: Standing and Fair Housing Testers for a brief introduction to the subject of outfits that employ investigators, testers, etc. to conduct private probes into alleged housing discrimination and their legal standing to file, or intervene in, Fair Housing lawsuits.

'Anti-Discrimination' Feds Settle Suit With Architects, Engineers Involved In Design, Construction Of 800+ Housing Units That Allegedly Failed To Meet Fair Housing Act's Accessibility Requirements

From the U.S. Department of Justice (Washington, D.C.):
  • The Justice Department [] announced a settlement with the architects and civil engineers involved in the design and construction of multifamily housing complexes located in Mississippi, Louisiana and Tennessee.

    The department’s lawsuit alleges that nine multifamily housing complexes with more than 800 units covered by the Fair Housing Act’s accessibility requirements were designed and built without required accessible features.

    No settlement has been reached with the developer, builder or former owners of these properties, who are alleged to have violated not only the Fair Housing Act, but also the Americans with Disabilities Act.

    Under the settlement, which was approved today by the U.S. District Court for the Southern District of Mississippi [...], nine architects and civil engineers will pay a total of $865,000 to make the complexes for which they were responsible accessible to persons with disabilities.

    They will also pay $60,000 to compensate aggrieved persons harmed by the inaccessible housing alleged in the government’s lawsuit. The settlement requires these defendants to undergo training on the Fair Housing Act and to provide periodic reports to the government.

Porn Peddler Accuses Chase Of Discrimination Over Failure To Refinance Home Loan; Suit: Bankster Asserted Moral Reasons, Reputational Risk As Reasons To Stiff Long-Time Customer

In Los Angeles, California, Courthouse News Service reports:
  • A millionaire soft-core porn king claims in court that JPMorgan Chase violated the law and its own policies by refusing to underwrite a loan, for "moral reasons."

    Marc L. Greenberg - the producer behind the soft-core porn series "Co-Ed Confidential" and "The Best Sex Ever," among others - claims that Chase advertises its commitment to fair lending and non-discriminatory business. So when a JPMorgan Securities vice president approached him about refinancing one of his properties in Marina Del Ray, Greenberg says, he expected to be treated fairly - regardless of his profession.

    He sued JPMorgan Chase & Co. in Superior Court.

    "As a current JPMorgan securities customer and home loan lendee, plaintiff had previously researched and was familiar with JPMorgan's representations and promises of commitment to fair lending, diversity and non-discriminatory practices. Based on these representations and fair lending policies, plaintiff decided to obtain a home loan refinance service from JP Morgan," Greenberg says in his complaint.

    Greenberg says he expected a quick approval, given his established relationship with Chase, an annual income of more than $500,000 and a net worth of more than $10 million. But Greenberg claims Chase gave him the runaround for four months, telling him he needed to speak to a credit specialist because of questions "regarding income."
  • [Greenberg continues:]  "In rejecting plaintiff's application, JPMorgan asserted that its superior moral position prevented it from loaning plaintiff money because one of plaintiff's sources of income did not meet JPMorgan's 'morality standards' and that the 'reputational risk' of loaning plaintiff money threatened JPMorgan's public image. JPMorgan's hypocrisy would be laughable except plaintiff was in fact illegally discriminated against and denied a loan by JPMorgan."
  • Greenberg claims he was "highly offended" by Chase's rejection of his application, noting that the bank has held the first deed of trust on his home for years and never said a word about his line of work.

    "The rejection simply made no sense to plaintiff. Was JPMorgan, a bank whose multiple illegal dealings were under investigation by no fewer than eight different federal agencies (including the FBI, FDIC, SEC, the Commodity Futures Trading Commission, the Office of Controller of the Currency and federal prosecutors in Manhattan) really so ashamed of sex and nudity that they refused to consider plaintiff's loan application? It seemed impossible. Plaintiff was humiliated to be rejected by a bank as unscrupulous as JPMorgan because, according to JPMorgan, plaintiff was 'immoral' and presented a 'reputation risk' to JPMorgan," Greenberg says in his complaint.

    Greenberg suggests that his purveyance of skin flicks on late night cable may not be the only reason for Chase's rejection of his loan application.

    "Additionally, plaintiff believes that JPMorgan may have discriminated against him for other reasons including, but not limited to, his Jewish ethnic heritage and religious beliefs, his status as a Hollywood producer, or the loan officer's arbitrary and irrational jealousy of plaintiff's success. Plaintiff believes discovery will show additional reasons for JPMorgan's illegal discrimination against him," the complaint states.
  • Greenberg seeks an injunction and damages for violations of the federal Fair Employment and Housing Act, the Unruh Civil Rights Act and California's consumer protection and fair business laws. [...] Greenberg never identifies himself in the complaint as a soft-core pornographer. He refers to himself throughout as a maker of films "that dealt with the subject of human sexuality."(1)
For the story, see Look Who's Talking, Porn Mogul Tells Bank.

(1) It would be interesting to see if discrimination based on one's lawful occupation or one's lawful source of income is prohibited in connection with home lending. In at least one place (believe it or not), discrimination in the sale, rental or lease of a housing accommodation or in the provision of services (ie. home lending?) and facilities is prohibited. See Protected Classes Under The NYC Human Rights Law.

    Thursday, May 23, 2013

    Father-Son Duo Object To Getting 20 Months For Roles In Alabama Foreclosure Sale Bid Rigging Racket; Prosecutor: 'Perps Won Race To The Courthouse - They Got The Best Deal!' Ex-Homeowner/Victim: 'I Was Sick & Had No Insurance - I Could Have Used The Extra Cash From A Larger Surplus Check!'

    In Mobile, Alabama, the Press Register reports:
    • A federal judge Monday ordered almost two years in prison for a father-son investment team, the first area defendants in a long-running antitrust investigation to face incarceration for rigging foreclosure auctions.

      In addition to the prison terms, a year and eight months, U.S. District Judge Ginnie Granade ordered defendants Jason R. Brannon and Robert M. Brannon to pay $23,173 to homeowners who received less money from foreclosure sales than they would have gotten from a fair and open property auction.

      Deana Timberlake-Wiley, a trial attorney in the Justice Department’s Antitrust Division said her office calculated the figure using a formula it has applied to foreclosure-rigging cases across the country. The Department of Justice website lists some 45 defendants in active cases.

      “The formula that we use is very conservative,” she said.
    • Defense attorneys Arthur Madden and Bradley Murray argued that their clients had cooperated completely and deserved leniency.

      “From the moment word of an FBI investigation got out … the Brannons stopped their activities,” said Madden, who represents Jason Brannon. “It’s a crime. They did wrong. They admit it.”
    • Prosecutors have said the conspiracy operated like this: The investors would decide among themselves who would bid on a particular property put up for sale after the homeowner could not make mortgage payments. The collusion would artificially suppress the prices that the properties would fetch.

      The investors would hold a second, secret auction among themselves, writing their bids on a piece of paper. The highest bidder would get the property, and the others received payouts according to a formula based on their offers.
    • Under state law, money from a foreclosure auction is used to pay off the outstanding mortgage to make the mortgage holder whole. Any money beyond that goes to the homeowner who lost the house. The rigged auctions reduced the money that those homeowners received.

      Prosecutors put on testimony from four area residents who lost homes in foreclosure. Deborah Adkinson testified that she, herself, had bought a Theodore home at a foreclosure sale 15 years earlier but fell behind in her mortgage payments when she developed Crohn’s disease and lost her job of 18 years.

      She said she was barely well enough to get out of bed when someone came to her house and told her she no longer owned it and would have to get out. She testified that no one informed her that she had a right to buy the house back even after the foreclosure sale. She said she believed she had to move out right away.

      “I honestly thought that’s how it worked,” she said.

      Adkinson testified that she would have benefited from a larger surplus check after the winning bidder won the auction. “I could have got medical help,” she said. “I had no insurance.”
    • Madden argued that the Brannons were bit players in the conspiracy compared to some of the other investors, including ones given sweetheart deals by the Justice Department.

      “The major players have either been granted immunity or not been charged,” he said.

      Said [federal prosecutor] Timberlake-Wiley: “They were the earliest cooperators. They got the best deal.”(1)

      The prosecutor faulted the defendants for failing to take responsibility. “They’ve never shown any remorse,” she said. “They’ve always acted like this was just the cost of doing business.”
    For the story, see Judge orders prison for father-son investment team in Mobile property auction rigging case.

    For the U.S. Department Of Justice press release, see Two Alabama Real Estate Investors and Their Company Sentenced for Their Roles in Bid-Rigging and Mail Fraud Conspiracies Involving Real Estate Purchased at Public Foreclosure Auctions.

    (1) See United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) for one Federal judge's observations on the so-called "race to the courthouse/prosecutor's office" that frequently takes place during the early stages of these "multi-target" criminal probes and conspiracy prosecutions:
    • 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.

    Antitrust Feds Settle Civil Suit Against Energy Outfits Alleging That Operators' Purported 'Joint Bidding' Arrangement Was Illegal Conspiracy Not To Compete For Gov't Mineral Rights Leases

    From a client alert from the law firm McDermott Will & Emery:
    • On Monday, April 22, 2013, after rejecting the initial settlement agreement, Judge Richard Matsch (D. Colo.) approved a revised settlement of a suit brought by the U.S. Department of Justice (DOJ) against two energy companies for conspiring not to compete for mineral rights leases.

      Gunnison Energy Corp. (GEC) and SG Interests I Ltd. and SG Interests VII Ltd. (collectively "SGI") will each pay a fine of $275,000 to the DOJ to settle allegations of agreeing not to bid against each other in violation of antitrust law for natural gas leases on government land in western Colorado.

      These fines are in addition to those related to alleged False Claims Act violations, for which SGI and GEC paid government fines of $206,250 and $245,000 respectively. The new settlement is twice the amount of the fines in the original settlement.

      McDermott Will & Emery wrote an article in February 2012 analyzing the DOJ's initial complaint against the parties, and the competitive implications of joint bidding. At the time, the parties had agreed to pay a total of $550,000 in fines. The court rejected the settlement in December 2012 finding that it was not in the public interest. "There is no basis for saying that the approval of these settlements would act as a deterrence to these defendants and others in the industry, particularly as GEC considers 'joint bidding' to be common in the industry."

      Further, the settlement amount was "nothing more than the nuisance value of [the] litigation." Additionally, as reflected in the newly approved deal, the court wanted the alleged Sherman Act violations and False Claims Act violations settled separately, with a payment for the Sherman Act claims separate from, and in addition to, any amount due under the False Claims Act. At heart, it appears Judge Matsch wanted any settlement he approved to be meaningful enough to have a deterrent effect on future agreements.

      This was the DOJ's first challenge to an anti-competitive bidding agreement for mineral rights leases, but it is just one of the recent cases in which joint bidding activities have become the focus of antitrust scrutiny.

      In Summer 2012, the DOJ opened an investigation into Chesapeake Energy's acquisition of oil and gas properties in Michigan and the possibility that Chesapeake conspired with Encana Corp. to allocate bids on those properties. In 2006, the DOJ began investigating the joint bidding practices of private equity firms in connection with leveraged buyouts. That investigation led to class action suits against private equity firms. One of those suits survived a motion for summary judgment last month.

      It is important to note that the DOJ is paying attention to joint bidding practices and taking action. As noted in the SGI/GEC matter, while joint bidding may in fact be common practice in the energy field, it is not necessarily lawful.(1)  Each arrangement should be evaluated for potential anticompetitive effects.(2)
    Source: Natural Gas Companies Settle Antitrust Suit Stemming From Joint Bidding.
      (1) See Illegal Bid Rigging Racket? Or Mere Innocent 'Joint Bidding' Arrangement? for some background on what distinguishes a lawful joint bidding activity from an illegal racket designed to suppress competition and artificially depress prices in violation of the Sherman Antitrust Act in the context of competitive bidding activities.

      (2) See DOJ Finds Antitrust Violation in Joint Bid for Oil & Gas Leases:
      • [J]oint bidders increase their risk profile if the arrangement prevents them from bidding for assets that, absent the joint bid arrangement, they would have bid for separately.

        Joint bidding is typically pro-competitive when two companies that would otherwise be unable to bid individually work together to submit a bid. For example, if two energy companies would not individually bid on a lease because of their size or risk profile, they may choose to pool their resources and bid jointly. Joint bidding of this type should make the market more competitive, creating a bid the seller would not otherwise have received.

        On the other hand, parties incur risk if their intent in entering into the agreement is to purchase property at artificially depressed prices and to divide the savings among those competitors who refrained from bidding. From a practical perspective, if there are many firms likely to bid on an asset, a joint bid is less likely to lead to an anti-competitive outcome.

      California Supremes Reverse Foreclosure Sale Where $200K Error In Announcing Credit Bid Attributable To Trustee's Mistake, Not Lender's Negligence; Winning Bidder Loses Out On Big Windfall, Parties Entitled To A 'Do-Over'

      From a Opinion Summary:
      • Plaintiff filed an action to quiet title to a parcel of real property, alleging he owned the property because he had been the highest bidder at a trustee's sale.

        After Plaintiff gave the auctioneer his cashier's check at the sale, the trustee told Plaintiff the sale was void. The trustee based its refusal on its discovery that it had mistakenly communicated to the auctioneer an incorrect opening bid by the lender that was less than ten percent of the actual amount of the bid.

        After the trustee refused to tender the deed to Plaintiff, Plaintiff filed this action.

        The trustee moved for summary judgment on the ground that it had properly set aside the foreclosure sale due to a significant procedural irregularity in the statutory foreclosure process coupled with an inadequate sales price.

        The trial court ultimately granted the motion. The court of appeals reversed, holding that the trustee's error was not a procedural irregularity in the statutory foreclosure process and that the trustee therefore had no discretionary authority to void the foreclosure sale.

        The Supreme Court reversed, holding that, under the circumstances here, the trustee acted within its discretion authority in declaring the sale void.(1)
      Source: Opinion Summary - Biancalana v. T.D. Serv. Co..

      For the ruling, see Biancalana v. T.D. Service Company, S198562 (Calif. May 16, 2013).

      (1) For those who make a living or otherwise buy real estate at foreclosure sales in California, this court ruling, as well as the cases cited therein, make for must reading in understanding when a screw-up involving a foreclosure sale auction resulting in a windfall for a foreclosure investor may call for the sale to be voided and when it won't.

      In a nutshell, whether or not a California court should exercise its discretion and void a foreclosure sale infected with some type of mistake will depend in large part on the following issues:
      • Was the mistake attributable to the trustee and/or auctioneer conducting the sale while carrying out its statutory-definined duties (probably allowed to void the sale), or
      • Was the mistake wholly under the control of the beneficiary/lender seeking foreclosure and arose solely from the beneficiary/lender's own negligence, thereby falling outside the procedural requirements for foreclosure sales described in the statutory scheme (probably not allowed to void the sale)?
      If the mistake was attributable to the trustee and/or auctioneer conducting the sale while carrying out its statutory-defined duties, a further question must be addressed:
      • Was the mistake caught before or after the trustee issued the deed to the winning bidder and did the error result in a grossly inadequate purchase price?
      In this regard, the California Supreme Court made the following observation:
      • Our holding is premised on the trustee discovering its mistake before it issues the deed.

        After the deed is issued, a bona fide purchaser is entitled to conclusively presume that the sale was conducted regularly and properly. (Moeller, supra, 25 Cal.App.4th at pp. 831–832.) The trustee thus has an incentive to exercise diligence in promptly reviewing the sale and identifying any irregularity before issuing the deed.

        In the present case, the trustee discovered its error within two days of the auction, and the error resulted in a grossly inadequate purchase price.

        Under such circumstances, we do not think the balance of public policy objectives weighs in favor of allowing the buyer to enjoy a substantial windfall while leaving the beneficiary to collect whatever remedy it can from the trustee. The more efficient course is to permit the trustee to quickly correct its mistake and hold a proper sale.

      Lender Refuses To Accept Underwater-Home Title Surrender, Won't Foreclose, Won't Release Lien; Forceful Negotiation Or An Improper Coercion In Violation Of Bankruptcy Discharge Injunction??? 'It Depends,' Says Federal Appeals Court

      • After filing a chapter 7 bankruptcy, the debtors tried to surrender their residence to the mortgage lender. After the bankruptcy the lender refused to accept a surrender, refused to foreclose and refused to release its lien.

        The debtors brought an adversary proceeding claiming that, among other things, this refusal constituted a violation of the discharge injunction they received in bankruptcy. The bankruptcy court found no violation; the Bankruptcy Appellate Panel agreed; and on appeal the 1st Circuit affirmed – but with some cautionary comments.(1)
      For more, see Discharge Injunction Violation Can a Lender Refuse to Foreclose, Release Its Lien, or Accept Surrender of a Property.

      For the ruling, see Canning v. Beneficial Maine, Inc. (In re Canning), 706 F.3d 64 (1st Cir. 2013).

      (1) The court closed with these cautionary comments:
      • A coda is necessary before we conclude. Today, where both lenders and homeowners strive to recuperate from hard economic times, this opinion should not be relied upon to leverage a way out of the bargaining table.

        It is one thing to insist upon state-law rights in refusing a recalcitrant “foreclosure or release” demand by a debtor, and completely another to refuse negotiating with a debtor willing to compromise.

        Put differently, while this case may provide some guidance on the dos and don’ts applicable to the bargaining dynamics between secured creditors and bankruptcy debtors, our remarks in Pratt still control: “the line between forceful negotiation and improper coercion is not always easy to delineate, and each case must therefore be assessed in the context of its particular facts.” 462 F.3d at 19.

      Homeowner: Dubious Real Estate Operator Swindled Me Out Of $440K Home Sale Proceeds; Accused Perpetrator Has $1M+ In Unrelated Court Judgments, Was Recently Described By Judge As A "Scoundrel" & Slammed For $15K For Renting Out Vacant Recently-Foreclosed REO Without Authorization

      In Calgary, Alberta, CBC News reports:
      • A Calgary homeowner says he was swindled out of his own property by a realtor he thought was trying to help him.

        Seyfeddin Mohammed and his wife sold their home to a company offering a deal without legal or realtor fees. Now, Mohammed says that the property was transferred out of his name without him receiving any of the $440,000 purchase price.

        "There is some fraud going on," said Cass Lintott, Mohammed's lawyer. "That's our position and it will be Mr. Mohammed's position, and it's just a question of taking it in chunks, so first get title back into his name, make things right with his lender and then deal with the people who have done this to him."

        The company Mohammed sold to,, is controlled by Derek Johnson.

        Johnson was recently fined by the Real Estate Council of Alberta for trading in real estate without authorization.(1)

        Court documents also show that Johnson has more than $1-million in judgements against him. All of the judgements are from separate matters and are not related to Mohammed.

        In one judgement unrelated to Mohammed's complaint, a Court of Queen's Bench judge described Johnson as "a scoundrel" who has appeared in court on several foreclosure proceedings.

        "Mr. Johnson ... has repeatedly and consistently argued the same nonsense to the detriment of his victims," Master Keith Laycock wrote. "These defendants have been victimized by him and his numbered company. He may even have committed fraud obtaining title to their residence."

        Recovering costs could be difficult

        Now, Mohammed is fighting to get his property back. He says that because he wasn't paid, the conditions of the sale were not completed. Mohammed also alleges that his signatures on the land transfer agreement were forged.

        "I got stress," Mohammed says, "not easy, during all life in this country, working everything for down payment for house and if I lost everything, I have no money, no house."

        In an email to the CBC, Johnson said that he has done nothing wrong. He wrote that the Mohammeds consented to the sale, including the transfer of title to Johnson's company.

        Despite going public and hiring a lawyer, Mohammed's lawyer says that recovering his costs could be difficult.

        Johnson says he's locked in a court battle against the mortgage company and that's why no funds have been paid out. He says that he will pay Mohammed once the court battle with the mortgage company is settled.
      For more, see Homeowner says he was swindled out of his own property (Homeowner says he never received any of the $440,000 purchase price).

      (1) See Calgary man fined $15K for posing as realtor (Real Estate Council of Alberta levies fine against man):
      • The council says in schemes like this people obtain lists of foreclosed properties and then try to rent or sell them.

        "We find it's for nefarious purposes, and that is that they want to generate cash flow," said Charles Stevenson of the Real Estate Council of Alberta. "If at all possible they'll find a way to steal identity, perpetrate mortgage fraud and move the people on through without their knowledge."

        Calgary police would not say whether they will be investigating the Real Estate Council of Alberta information, but it is against the Real Estate Act to deal property without a licence in the province.

      Wednesday, May 22, 2013

      Bankster Accused Of Running Florida Force-Placed Insurance Racket Settles Class Action Suit, Dodges Stiff Penalties; Agrees To Cash/Credit Refunds Of 25% Of Premiums; Refuses To Admit Wrongdoing, But Promises It Won't Gouge Florida Borrowers In The Same Way Again

      In Miami, Florida, The Palm Beach Post reports:
      • Wells Fargo Bank and insurer QBE have agreed to pay an estimated $19.25 million to more than 24,000 Florida homeowners under a proposed settlement that plaintiff attorneys call “unprecedented.”

        Without admitting wrongdoing, the firms would settle claims they inflated premiums — often to five or six times above normal rates — for “force-placed” insurance. Lenders may impose such insurance in cases where a homeowner falls behind on payments or lets coverage lapse, but attorneys for homeowners have argued such charges have often been abusive and loaded with kickbacks for banks.

        The proposal filed in U.S. District Court in Miami May 13 is subject to a judge’s approval, which the parties are seeking within 60 days.

        Plaintiffs attorney Adam Moskowitz of Coral Gables said the settlement’s cash and credit refunds of 25 percent of premiums represent the highest percentage of any case involving force-placed insurance, to his knowledge.

        “It’s going to have a real impact on people’s lives,” Moskowitz said.

        This case represents a significant settlement in Florida, the biggest market for force-placed insurance, but his firm and others are also pursuing national cases involving Chase, Bank of America, Citi, HSBC and Wells Fargo, he said.

        The plaintiffs filed suit in 2011. U.S. District Judge Robert N. Scola Jr. in Miami ruled the case could proceed as a class-action suit last year.

        After the filing, Wells Fargo said it would no longer take an 11 percent commission on force-placed insurance for Florida borrowers, according to the settlement documents. Insurer QBE Speciality announced it would phase out certain lines of business while affiliate Praetorian Insurance would operate under an 18.8 percent rate cut approved earlier this year by state regulators.

        “We are pleased that we were able to resolve this particular matter,” said Wells Fargo spokeswoman Vickee Adams. “We continue to support programs like our lender-placed insurance services which provide continuous hazard insurance protection for real property owned by our customers.”

      Renter-Family Given 5 Minutes Notice Before Getting 'Screw-Up Triggered' Foreclosure Boot From Home Landlord Bought For All Cash From Foreclosing Bankster Several Years Earlier; Fear Of Arrest Keeps Victims Out Of Improperly-Seized Premises

      In Charlotte, North Carolina, WSOC-TV Channel 9 reports:
      • Frank Cole was shocked to get a call from his wife in tears Thursday. She explained that sheriff's deputies were at their rented home in west Charlotte and were forcing them to get out.

        "The sheriff was giving her five minutes to pack some things and leave and apparently, we've been evicted," Cole said. "They left all kinds of embarrassing kinds of papers all over the door and windows and stuff."

        Since the homeowner, Allison Brown, had paid cash for the home several years ago, this seemed impossible to both her and the Cole family.

        The Cole family had been receiving letters about foreclosure proceedings threatening eviction, but they were addressed to Arthur and Kim Felder, the previous homeowners, who lost the home to foreclosure years ago. The Cole family did what most would in the incident in receiving wrongly addressed mail and sent the letters back.

        Channel 9 obtained the eviction order and it has the Felders' names on it and not the Cole family. Brown, an Asheville resident, bought the home after the bank foreclosed on it.

        Similar to the Cole family, Brown is upset about this unexpected eviction and the manner in which it was handled.

        "So get this, I am not allowed on property. They threatened my property manager to get off. My tenants are in a motel, and I can't seem to get any answers," Brown said.

        Several calls were made to the Hunover Law firm, who Eyewitness News was told ordered the eviction, but no contact was made. Cole said he has called them too, and wants answers and his family back in his home.

        Until then, going back to their home is out of the question.

        "Because it is a court order, it still stands and until that order is rescinded, we cannot go into the house or we risk being arrested," Cole said.(1)
      Source: Family says they were erroneously evicted from home.

      (1) For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:
      For examples of filed lawsuits involving illegal bank break-in, "trash-out" lockout cases, see:

      Banksters Continue Assault On Aggrieved Homeowners With Slow-Paying Habits

      From Public Citizen's Consumer Law & Policy blog:

      [Washington Post business reporter] Danielle Douglas reports that it's taking a long time for the money to be paid out. Here's an excerpt:
      • Banks have paid less than half the $5.7 billion in cash owed to troubled homeowners under nearly 30 settlements brokered by the government since 2008, delaying help to the millions of victims of discrimination and shoddy lending that epitomized the housing crisis, according to a Washington Post analysis of government data.

        When the settlements were announced, with great fanfare, government officials hailed them as the long-promised reckoning with the financial industry. Regulators found that some banks had saddled borrowers with unaffordable mortgages or assigned higher rates to minorities even when they qualified for a better deal. Some banks were accused of having employees “robo-sign” foreclosure documents without reading them or having proper documentation. ...

        In 2011, Wells Fargo agreed to compensate up to 10,000 borrowers after the Federal Reserve found the bank was steering them into subprime loans even though they qualified for better mortgages. But no borrowers have received money yet.

        Last year, Bank of America agreed to pay some borrowers between $1,000 and $5,000 for what the Justice Department called lending discrimination. The agency said the bank illegally asked some would-be home buyers who relied on disability income to provide a doctor’s letter verifying the severity of their ailment. But it’s still unclear how many people will ultimately be paid. There isn’t a full list of the victims.

      Maine Woman Sues State For Allegedly Using Brother's Mental Incapacity To Wrestle Away Legal Control Of Decades-Family-Owned Oceanfront Real Estate & Selling It At Public Auction For Significantly Under Fair Market Value

      In Liberty, Maine, Maine Public Broadcasting Network reports:
      • A Liberty woman has filed suit against the Maine Department of Health and Human Services and the Key Trust Company National Association over what she says was a breach of fiduciary duty, violation of her due process rights and the improper sale of some family property for substantially less than fair market value.

        The case arose after a member of the woman's family became incapacitated. DHHS then allegedly took over his assets, secretly sold them and had his cat euthanized without his knowledge.

      Sovereign Citizen Gets 34 Years For Creating, Using Bogus Land Documents To Swindle Unwitting Potential Homebuyers

      From the Office of the Indiana Secretary of State:
      • Secretary of State Connie Lawson is warning potential homebuyers about scam artists who use authentications from the Secretary of State’s office to swindle Hoosiers into fraudulent real estate transactions. The scam artists are domestic terrorists who refer to themselves as sovereign citizens and believe the government is illegitimate. They are using authentications from the Secretary of State’s office to create the illusion they own vacant property to trick Hoosiers into illegitimate home sales.

        “Today, a judge sentenced Shela Amos of Indianapolis to 34 years for defrauding victims using the vacant home sale scheme,” said Secretary Lawson. “While this will stop Amos, unfortunately, others are waiting to pick up where she left off. Hoosiers should use extreme caution when dealing with sovereign citizens. They have no regard for the law and are master manipulators.”

        The vacant home sale scheme is popular among sovereign citizens. At first, they identify abandoned homes and create documents claiming they own the property. Then they have a notary sign the document. They bring the signed document to the Secretary of State’s office and request an apostille, a gold seal for overseas authentications, to certify the notary’s signature is authentic.

        After the document has an apostille, they file it with the county recorder’s office. Once the document has the seal and is on file with the recorder’s office, the scam artists bring prospective home buyers to the recorder’s office to show them the document they created as proof they own the real estate they are selling.

      Tuesday, May 21, 2013

      Bankruptcy Receiver Tags S. Florida Lawyers In Suit To Recover Money Allegedly Ripped Off In Foreclosure Rescue Racket

      In Fort Lauderdale, Florida, the South Florida Business Journal reports:
      • New lawsuits are being filed against South Florida attorneys over allegations they received money connected to Prime Legal Plans, a $21 million foreclosure rescue fraud closed by the Federal Trade Commission in September.

        On Thursday, receiver Charles Lichtman of Berger Singerman filed suit against the Litvin Law Firm, Litvin Torrens & Associates and attorneys Gennady Litvin and Luis Torrens. The firms have offices in New York and Fort Lauderdale, while Torrens is from Miami Lakes.

        Lichtman also handles work in the Chapter 11 wind-down of Rothstein Rosenfeldt Adler.

        According to the FTC, Prime Legal Plans was one of several foreclosure rescue scams that promised relief from mortgage defaults in exchange for monthly payments; but little actual legal work was usually performed.

        The suit seeks to recover more than $4 million from the Litvin parties. Their attorney, Joe Gormley, noted in an email that the FTC didn't bring charges against his clients. "We feel... that the receiver's attempt to reverse the Federal Trade Commission's decision is inappropriate, and that ultimately the courts will agree."(1)

        “Prime Legal Plans used a network of attorneys who were allegedly going to provide excellent defenses, supposedly for a fixed fees. Unfortunately most of the victims here were flat broke and needed every penny they could make,” Lichtman said.

        He said he may sue other attorneys but the Litvin firm was a clearinghouse for other referrals.
      Source: Receiver in $21M Prime Legal Plans fraud sues attorneys.

      (1) It's understandable that private lawsuits are necessary to squeeze money out of scammers. The FTC, while having a track record of obtaining significant money judgments against scammers, are notorious for failing to actually collect on said judgments, except for the occasional paltry payments that sometimes trickle into their coffers.

      Homeowners' Lawsuit: Now-Disbarred Lawyer Ran Illegal Upfront Fee Loan Modification Ripoff

      In Los Angeles, California, Courthouse News Service reports:
      • A disbarred attorney helped a dozen people and six businesses defraud people of "thousands of dollars" in a mortgage assistance scam, eight homeowners claim in court.

        Lead plaintiff Marcia Baker sued nine businesses and 13 people in Superior Court. The lead defendant is Platinum Law Group; also sued are Platinum Law Center and former attorney Jerry Stevenson.

        The plaintiffs claim the defendants took thousands of dollars by promising financially distressed homeowners services they didn't provide.

        "Preying on plaintiffs' few remaining hopes, defendants used deceptive and misleading marketing tactics to lure plaintiffs into sham contracts under which plaintiffs paid thousands of dollars in illegal up-front fees for loan modification services," the complaint states. "Simultaneously, defendants also advised plaintiffs to stop paying their mortgages and to stop communicating with their mortgage providers, claiming this would accelerate and facilitate the loan modification process."
      • The plaintiffs claim defendant Jerry Stevenson roped people into the scam by mailing them "unsolicited and misleading" ads.

        Stevenson was disbarred after he received two disciplinary actions related to the scam, the complaint states.

        Hundreds of lawsuits have been filed across the country, alleging similar scams by other defendants.
        The plaintiffs seek at least $16,000 in damages per person, exemplary damages, an injunction and restitution for fraud, unfair competition, false advertising and consumer law violations.

      Suspect Who Used Bible Verses On Phony Deeds To Dupe Prospective Renters Cops Plea To Two Felonies As Prosecutors Drop Eleven Counts

      In San Bernardino, California, The Press Enterprise reports:
      • A man who persuaded potential renters to trust him by writing Bible verses on fake grant deeds has pleaded guilty in San Bernardino County court to two felony charges.

        Bob Frierson, 42, pleaded guilty May 8 to two counts of recording a false document. As part of the plea bargain, 11 counts were dropped: four of recording a false document, six of forgery and one of residential burglary.

        Frierson, who is in custody, is scheduled to be sentenced July 10.

        Ed Nyberg, a senior investigator with the San Bernardino County district attorney’s office, said in an interview that Frierson drove around north Fontana, Rancho Cucamonga and Victorville the past three years to find vacant homes that were in foreclosure.

        Frierson would then forge grant deeds and show them to unsuspecting renters as proof that he owned the properties, Nyberg said.

        The Bible verses, which Nyberg said he saw on seven fake grant deeds, were often two or three sentences and contained themes of personal rights of staying on a property or giving property to other people.

        Frierson would collect rent until the properties were foreclosed on, and the banks would then evict the renters, who would lose their deposits, Nyberg said.

      Squatters' Use Of Phony Lease Gets Trio Pinched For Burglary, Possession Of Forged Instrument In Connection With Attempted Possession-Hijacking Of Vacant Foreclosure

      In Richmond, Kentucky, WKYT-TV Channel 27 reports:
      • For nearly two years, neighbors say this house on Bowerwood Drive has been empty after it went into foreclosure. Then, about three weeks ago, things changed.

        "We noticed some young folks kind of milling around the house. Before we knew it, they had moved in and claimed they were renting the house. We were kind of suspicious from day one," said Kelly Harmon.

        Another neighbor went over to say hi. He said the man living inside showed him a lease agreement. Even then, the neighbors weren't convinced. "We knew, more than likely, foreclosed houses don't get rented out," said Harmon. Then, they said things got stranger.

        "We never saw furniture moved in, they were in and out sporadically, different cars. It was suspicious from day one," said Harmon.

        Police said another neighbor called them and they looked into it. On May 3, they arrested Dylan Cartwright, Brittany Coovert, and Tiffany Templin. They said the three had created a fictitious lease agreement and charged them with burglary and possession of a forged instrument. Kelly Harmon said he'd be keeping a close eye on his neighborhood.

      Monday, May 20, 2013

      Underwater Homeowner's Bankruptcy Maneuver Leaves Another 'Stripped-Off" Mortgage-Holding Bankster Holding 'Unsecured' Bag; Federal Appeals Court: "We Find Nothing In The Act To Suggest That Congress Intended To Bar Lien-Stripping Of Worthless Liens In Chapter 20 Proceedings!"

      From a Opinion Summary:
      • Debtors filed a Chapter 7 bankruptcy petition and sought to discharge their unsecured debt, strip down liens on their primary residence and a rental property, and obtain a loan modification to address mortgage arrears on the properties.

        The Trustee subsequently challenged confirmation orders entered by the bankruptcy court and affirmed by the district court, stripping off junior liens against debtors' residences.

        The Trustee argued that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 created a per se rule barring lien-stripping in so-called "Chapter 20" cases.(1) The Act, however, did not bar the orders entered by the bankruptcy court, and the stripping off of valueless liens - liens secured by collateral without a single penny of value to support it - was otherwise consistent with the Bankruptcy Code.(2) Accordingly, the court affirmed the judgment.
      Source: Opinion Summary: Branigan v. Davis.

      For the ruling, see Branigan v. Davis, No. 12-1184 (4th Cir. May 10, 2013).

      (1) In actuality, there is no such thing as a "Chapter 20" bankruptcy (the U.S. Bankruptcy Code, as currently constituted, only has 15 chapters).The appeals court addresses "Chapter 20" in footnote one of its majority opinion:
      • "Chapter 20" is a colloquial reference to a Chapter 13 bankruptcy filed within four years of a Chapter 7 bankruptcy that concluded with a discharge.
      (2) The majority ruling sums up its analysis of the relevant law and its application with the following comments:
      • In sum, although BAPCPA clearly tipped the bankruptcy scales back in the direction of creditors, we find nothing in the Act to suggest that Congress intended to bar lien-stripping of worthless liens in Chapter 20 proceedings.

        This, we conclude, is the most sensible reading of a complex statutory scheme that admittedly "abounds with arbitrary distinctions." Lane, 280 F.3d at 669. We therefore affirm the judgment of the district court.

      Ohio Court Upholds Validity Of Defectively-Notarized Oil & Gas Lease; Exploration/Production Outfit Dodges Flood Of Landowners Challenging Improperly-Acknowledged Instruments Conveying Mineral Rights

      From a client alert from the law firm McGuireWoods:
      • On April 15, 2013, U.S. District Judge John R. Adams of the Northern District of Ohio dismissed Ohio landowners’ claim that oil and gas leases not properly notarized are invalid, in Cole v. EV Properties, L.P.

        In this class action lawsuit, the landowner plaintiffs admitted to signing an oil and gas lease, but contended that the lease should be declared invalid because they did not acknowledge their signatures on the lease before a notary, as required by Ohio law. The landowners’ argument rested on their allegation that oil and gas leases are akin to standard leases of surface property, and not the conveyance of a greater interest in property.

        The court rejected the landowners’ argument, explaining that oil and gas leases are inherently different from standard leases of property and convey a fee simple interest in the rights contained therein.

        Based on this finding, the court agreed with the gas producer defendants that it should follow the ruling in Citizens National Bank v. Denison, in which the Supreme Court of Ohio held that “[a] defectively executed conveyance of an interest in land is valid as between the parties thereto, in the absence of fraud.”

        This result followed a similar result in the Trumbull County, Ohio, Court of Common Pleas, on Feb. 25, 2013, in Tomko v. Cobra Leasing, LLC, when the court granted the gas producer defendants’ motion to dismiss in its entirety, dismissing the landowner plaintiffs’ claim to invalidate their oil and gas lease due to defective notarization.

        Cole and Tomko were the first favorable rulings by Ohio federal and state courts on this issue for an exploration and production company. To be sure, a decision in the landowners’ favor on this issue would have prompted countless Ohio landowners to flood the court system with challenges to the validity of the landowners’ oil and gas leases.

      Alabama Man Who Lost Real Estate In Tax Foreclosure Scores Windfall As State Appeals Court Kiboshes Mortgage Lienholder's Attempt To Snatch Surplus Proceeds To Satisfy Loan

      From a Real Estate Finance Newsletter from the law firm Bradley Arant Boult Cummings LLP:
      • In Alabama, when a property owner fails to pay his ad valorem property taxes, his property may be sold at a public auction to the highest bidder (the “tax purchaser”). Statutory law in Alabama provides that the owner of the property who failed to pay the taxes, and certain other parties, such as a lender holding a mortgage on the property, have the subsequent right to redeem the property by paying the back taxes, the accrued interest and any excess bid paid by the tax purchaser at the tax sale.

        However, the Alabama Court of Civil Appeals recently addressed the rights of redemption by various parties and reached a decision that not only penalizes a lender for redeeming property in order to protect its interest but also provides a windfall to a property owner who failed to pay his property taxes and allowed his property to be sold at a tax sale.


        In First United Security Bank v. McCollum, the Alabama Court of Civil Appeals addressed the rights of a lender that redeems property sold at a tax sale as a result of its borrower’s failure to pay his property taxes. In McCollum, the property owner executed a promissory note and a mortgage in favor of his lender.

        When the property owner failed to pay his 2009 property taxes, his property was sold at a tax sale. The tax purchaser not only paid the back taxes for 2009, but also paid an excess bid of $32,305.12. The lender subsequently foreclosed on the property and recorded its foreclosure deed in the county where the property was located. The lender, as the current owner of the property, then redeemed the property by paying the back taxes for 2009, interest and the excess bid of $32,305.12.

        The lender then applied to the probate court for reimbursement of the excess bid it paid to redeem the property. The probate court refused, saying that the excess bid could only be claimed by the original property owner, that is, the individual who failed to pay the taxes on the property.

        In rejecting the lender’s claim for reimbursement of the excess bid, the Court in McCollum stated that only the property owner was entitled to receive the excess bid even though such owner did not pay to redeem the property. The court based its ruling on Section 40-10-28 of the Alabama Code which provides, in pertinent part, as follows:

        The excess arising from the sale of any real estate remaining after paying the amount of the decree of sale, and costs and expenses subsequently accruing, shall be paid over to the owner, or his agent, or to the person legally representing such owner, or into the county treasury, and it may be paid therefrom to such owner, agent or representative in the same manner as to the excess arising from the sale of personal property sold for taxes is paid.

        The Court then ruled that even though the lender foreclosed on the property and was now the owner of the property, the lender still would not be entitled to receive the excess bid because the lender foreclosed after the tax sale took place.

        Therefore, the only person entitled to recover the excess bid was the owner of the property at the time of the tax sale, the person who failed to pay the property taxes. The Court reached its decision even though a party other than the property owner paid the excess bid as part of its redemption of the property.
      For the story, see Pitfalls in the Redemption of Property by Lenders.

      For the court ruling, see First United Security Bank v. McCollum, (Ala. Civ. App. November 30, 2012).

      Lack Of Contract Privity Between Mortgage Servicer, Borrower Sinks Homeowner's Claim Under Ohio Consumer Protection Law; Court Ruling Kiboshes Use Of Attorney Fee-Shifting Statute Against 3rd Party Banksters

      In Columbus, Ohio, The Columbus Dispatch reports:
      • The Ohio Supreme Court has ruled that servicing a residential mortgage does not constitute a “consumer transaction” as defined by state law, a ruling that consumer groups and attorneys say eliminates a protection for homeowners trying to save their homes amid the housing collapse.

        The ruling stems from a lawsuit filed by a Norwalk homeowner against Barclay’s Capital Real Estate in U.S. District Court in Toledo.

        The homeowner, Sondra Anderson, alleged that Barclay’s, which operated the mortgage-servicing business under the name HomEq before selling it three years ago, had not applied her mortgage payments correctly. As a result, she was stuck with hundreds of dollars worth of fees that it has yet to account for, despite her attempts to obtain more information, said her attorney, John Murray of Sandusky. He said Anderson is up to date with her mortgage payments.

        The federal court asked the Supreme Court for clarification of the situation in the context of the Ohio Consumer Sales Practices Act, which generally prohibits unfair or deceptive acts in consumer transactions. It is common for federal courts to ask for guidance from the Supreme Court on questions of state law.

        The court, in a 5-2 ruling written by Chief Justice Maureen O’Connor, effectively determined that the interaction between the servicer and the homeowner is not a consumer transaction. Mortgage-servicing companies act as an agent for the lender by collecting payments, late fees and other assessments and handling day-to-day interactions between lenders and their customers.

        “Mortgage servicing is a contractual agreement between the mortgage servicer and the financial institution that owns both the note and mortgage,” she wrote. “Mortgage servicing is carried out in the absence of a contract between the borrower and the mortgage servicer.”

        O’Connor acknowledged that the servicer’s duties may involve interactions with borrowers and may even help them modify their loans, but the company does that on behalf of the financial institution.

        In his dissent, Justice William O’Neill said dealings between consumers and mortgage servicers should not be exempt from the law.

        Given the foregoing history of protecting consumers when they are forced into the hands of third-party debt collectors, it is wholly appropriate to also protect residential-mortgage-loan borrowers when they are forced into the hands of mortgage-loan servicers,” he said.

        The issue of whether the state’s consumer-protection law applies in these relationships was important because the law would have allowed consumers the possibility of recovering attorney fees along with damages, attorneys say.

        A lot of homeowners in foreclosure don’t have the money to pay the attorneys to represent them,” said Linda Cook, senior staff attorney for the Ohio Poverty Law Center. “Legal-aid resources are limited ... so having fee-shifting statutes in consumer sales practices actions level the playing field.”

        Cook disagreed with the ruling, saying mortgage servicers “are the middlemen, and most of the time that’s the only entity that homeowners deal with once the loan is closed.”

        Murray said the problems Anderson has been facing are industry-wide. “It’s unfortunate for consumers to not have this protection,” he said. Murray said the ruling will not stop the lawsuit that he expects ultimately will include tens of thousands of homeowners.

        Attorney General Mike DeWine’s office, which also asked the court to rule on Anderson’s behalf, said it, too, was disappointed in the court’s ruling.