Saturday, July 13, 2013

Condo Developer, Engineering Firm To Cough Up $5.05M In Compensatory, Punitive Damages For Failing To Disclose Certain Construction Defects When Peddling Units To Homebuying Customers

From a client alert from the law firm Fox Rothschild LP:
  • A jury awarded $5.05 million to the Belgravia Condominium Association, after finding the developer, 1811 Belgravia Associated and PMC/Belgravia Associates, along with engineering firm O'Donnell & Nacaarato failed to disclose certain property defects to the buyers.

    "By awarding the association significant compensatory damages to repair the Belgravia building and, by further awarding punitive damages, the jury in this case sent a very resounding message to the developer that conduct like that engaged in by the developer and its representatives should not have occurred and would not go unpunished," said Robert Tintner, the association's attorney.

    According to the pretrial memorandum filed by the plaintiff, "The defendant and the developer compounded this fraud by failing to attach several subcontractor reports to the final report that was published to consumers in Belgravia's public offering statement, and by 'lowballing' the building's initial budget and reserves."

    "To purchase a condo unit in Pennsylvania, you should not have to hire an engineer and an attorney," Tinter said."

Foreclosures Of Mom & Pop, Neighborhood Elder Assistance Residences Lead To Unpleasant Surprises, Unwanted Shuffling From Home To Home For Some Care-Seeking Seniors

In Northern California, The Huffington Post reports:
  • Richard Miller had been living in his second-floor San Francisco apartment for 23 years when, one day in 2010, he fell down the stairs. His doctor recommended he move into a residential care facility for the elderly, where residents have meals provided and, if needed, get help with dressing, eating and bathing. Miller wasn’t eager to make the move, and three years later, he has had plenty of reasons to regret it.

    Miller, who is now 77, suffers from several health problems. He has sleep apnea and congestive heart failure, which causes him to get winded easily and pause every 10 or so steps to catch his breath. A large man with a thick swatch of white hair and a booming tenor voice, he calls his cane a "kind of a security blanket" because he's had two knee operations, and one of his legs sometimes gives out.

    Miller’s fall and subsequent move led him to two different elder care facilities -- both of which, he discovered later, were in foreclosure.

    He now lives in a third facility called Morning Glory Care Home, a four-bedroom elder care house on a cul-de-sac in Vallejo, a city of roughly 117,000 that's 35 minutes northeast of San Francisco. But only a few months after moving in, he noticed some unusual visitors passing through the home. "Two women came through with clipboards and were kind of looking around,” he said. "When you're 76 years old and it's your third place, you get a little bit scared."

    His fears turned out to be justified. He asked the home’s administrator about the women and was told they were relatives. But Miller didn’t believe him. As more strangers floated in and out, he felt an uneasy sense of foreboding. "So I Googled the property,” he said, "and was blown away to find that it had been in foreclosure since December 2010."

    Most disturbing to Miller was the lack of warning that his home was foreclosed. Despite a law put into force in January 2012 that expressly requires the people operating the homes to inform residents about the change, those in charge did not tell him that Morning Glory was in foreclosure. Nor had he been given any warning about his previous two residences. "The first home was bank-owned and being put up for auction,” he said. "The second one -- there was a notice on the door -- and [the owner] yanked it off so we couldn't see it."

    Miller’s experience of moving to three different facilities in just over a year's time -- and the possibility that he’ll have to move to a fourth -- may be extreme. But the elderly having to shuffle from home to home is certainly not a rarity in boom-and-bust California, where about 170,000 individuals live in residential care facilities that in some areas face alarming foreclosure rates. A state law requiring owners and administrators of these homes to inform authorities and residents if they miss a mortgage payment seems little more than words on paper. In many cases, the authorities are as much in the dark about a home’s financial troubles as the residents and their families.

Chicago Tenants In Foreclosed Homes To Get Either $10.6K 'Walking Money' Or Annual 12-Month Lease Renewals Until Premises Is Sold To Bona Fide 3rd Party Purchaser Under New Ordinance

From a client alert from the law firm Holland & Knight:
  • In early June, the City of Chicago passed the "Keep Chicago Renting" ordinance (SO2012-5127), which requires that the owner of foreclosed properties offer existing tenants renewal of their lease or pay expenses to the tenant for relocation. (The ordinance amends Chicago Municipal Code §2-25-050.)

    "Keep Chicago Renting" Ordinance

    The directive applies to any owner of a foreclosed property, defining an "owner" as someone who acquires title by a foreclosure sale or deed in lieu/consent foreclosure.

    Relocation or Renewal

    The ordinance requires that the owner post and deliver notices in four languages (English, Spanish, Polish and Chinese) no later than 21 days after becoming the owner, offering tenants either of the following:

    * 12-month renewal or extension of the tenant's existing lease (with a rent increase of no greater than 2 percent above the current rent)

    ** a relocation payment of $10,600 (per unit), paid by certified funds or cashier's check within seven days after the tenant vacates.

    The offer to extend or renew for 12-month periods (at a rate that is not greater than 2 percent above the current rent) continues until the property is sold to a bona fide third-party purchaser.
  • Scope of Ordinance and Prohibitions

    The ordinance applies to all dwelling units that are rented, not just rental buildings, but it does exclude the borrower, the borrower's family members, and others with below-market leases from its reach. It also prohibits a non-complying owner from collecting any rent until the owner complies.
  • Effective Date

    The ordinance is effective 90 days from passage — on September 3, 2013 — so lenders should be prepared to comply or challenge its validity.

Attorney Pinched For Allegedly Stealing Couple's Insurance Settlement Check, Forging Their Signatures, & Pocketing The Cash; Faces Larceny, Fraud Charges

In Boynton Beach, Florida, the South Florida Sun Sentinel reports:
  • When a Boynton Beach couple's car was stolen, their insurance company cut them a check to cover it.

    But police say the woman's attorney stole the $6,300 check, forging their signatures and depositing it in her personal bank account, which at the time carried a negative balance.

    Kathleen Plunkett, who had represented the woman as the couple sought a divorce last year, was arrested [] by Lantana Police. She was booked into the Palm Beach County Jail on larceny and fraud charges, and released later that day on $3,000 bail.

    The 45-year-old family law attorney, who goes by Kathleen Davis professionally and owned the Law Offices of Kathleen M. P. Davis in Greenacres, declined to talk about her arrest. "Unfortunately, despite my First Amendment rights, as an attorney I cannot comment," she said on Thursday.

    Christian Desiderio said he knew something was wrong when he repeatedly asked Plunkett for the check, which was mailed in March 2012, and she repeatedly put him off. It was made out to Desiderio and his ex-wife and mailed to Plunkett because the couple was still married at the time, he said.

    Eventually, Desiderio called GEICO and found out someone cashed the check. He asked for a copy.

    "Here comes back the check with my and ex's names signed on the back," said Desiderio, who called police in June 2012. "I just lost it. I could not believe it. I couldn't believe that somebody signed my name."

    He said he's never seen a cent of the money and doesn't know what happened to it.

    "I'd like for her to tell me," Desiderio said. "I'd like for her to repay everybody."

    When officers first met with Plunkett, she admitted to signing the Desiderios names on the check and depositing it in her account, according to her arrest report. She said that was "normal business" when dealing with two-party checks.

    A review of Plunkett's bank account showed it had a balance of -$414.57 before the deposit, the report states. In the next few weeks, she wrote four checks for a total of more than $3,000, including one for $900 that she cashed herself.

    It wasn't the first time Plunkett's firm ran into trouble. Florida Bar records show her license to practice law was suspended May 30, after she failed to respond to multiple Bar inquiries about a complaint filed against her in February 2012.

    In March 2010, she was publically reprimanded by the Bar, placed on a one-year probation and ordered to repay two former clients. The clients filed complaints after paying thousands of dollars to Plunkett for her services, then learning she never filed a single document on their behalf.

    Desiderio said he's still angry about the stolen money, which he'd planned to spend on a new car for his daughter.

    "I'm just glad they got her," Desiderio said of Plunkett. "And I hope she gets what she gets, because that was just low."(1)
Source: Greenacres attorney accused of stealing clients' check, forging signatures.

(1) The Florida Bar's Clients' Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

Friday, July 12, 2013

'Prescription Pooch' Feds Tag Landlord In Fair Housing Suit Alleging Refusal To Waive 'Pet Deposit' Requirement For Low-Income Tenant With Mental Disability Who Needed Emotional Support Animal, Followed By Subsequent Retaliation, Harassment That Forced Tenant To Move After She Filed HUD Complaint

From the U.S. Department of Justice (Washington, D.C.):
  • The Justice Department [] filed a lawsuit against the owners and managers of rental homes in and near Kelso and Longview, Wash., for violating the Fair Housing Act by discriminating against persons with disabilities.

    The lawsuit, filed in the U.S. District Court for the Western District of Washington, alleges that Linda Barber, Bert Barber and Lori Thompson engaged in a pattern or practice of violating the Fair Housing Act or denied rights protected by the Act.

    Specifically, the lawsuit asserts that the defendants established and implemented a discriminatory policy that allowed waiver of the defendants’ mandatory $1,000 “pet deposit” for service animals with specialized training, but not for other assistance animals, including emotional support animals. The suit also alleges that, by refusing a tenant’s requests for a reasonable accommodation to waive the $1,000 pet deposit for her assistance animal, the defendants violated the Fair Housing Act.

    “The Fair Housing Act ensures that individuals with disabilities who live with and benefit from assistance animals have equal access to housing,” said Eric Halperin, Senior Counsel and Special Counsel for Fair Lending in the Civil Rights Division. “The Justice Department will continue its vigorous enforcement of fair housing laws that protect the rights of persons with disabilities.”

    “The rights of our disabled citizens need to be protected and landlords should not engage in conduct that makes their lives more difficult,” said U.S. Attorney Jenny A. Durkan for the Western District of Washington. “A tenant should not have to repeatedly prove they need a service animal or other accommodation, and should not face retaliation when they make a complaint to those tasked with protecting their civil rights.”

    This lawsuit arose as a result of a complaint filed with the Department of Housing and Urban Development (HUD). A low-income tenant with a mental disability repeatedly asked the defendants to waive the $1,000 pet deposit for her assistance animal and provided numerous notes from medical professionals to support her request.

    As a result of the defendants’ policy and their failure to grant her request, she waited for over two and a half years to obtain an assistance animal and then began to pay the deposit in monthly installments at great financial hardship.

    After filing her HUD complaint, she was subjected to retaliation and harassment by the defendants, and she eventually moved out of the defendants’ unit. After HUD investigated the complaint, it issued a charge of discrimination and the matter was referred to the Justice Department.

Mobile Home Park Operator To Cough Up $35K To Settle Fair Housing Feds' Suit Alleging Refusal To Rent Lot To Black Family Was Based On Race, Forcing Them To Pick Up Their Recently-Purchased Home From Private Owner & Move It; Probe Triggered After Ex-Property Manager Tracked Victims Down & Spilled Beans On Outfit's Anti-African American Policy

From the U.S. Department of Justice (Washington, D.C.):
  • The Justice Department announced [] that Lawrence Properties Inc., Lawrence at Lakewood LLC, Michael Lawrence, and Williams Bounds have agreed to pay $35,000 to settle a lawsuit involving violations of the Fair Housing Act. The lawsuit alleged that the defendants denied housing to an African American woman and her family because of race. The lawsuit also alleged that the owner and the regional manager of Lawrence Properties communicated to employees a company policy of not renting to African Americans.(1)

    Under the consent order, which was approved [] by the U.S. District Court for the Middle District of Alabama, the defendants will pay $25,000 to the family who was denied housing and $10,000 to the United States as a civil penalty. In addition, the order prohibits the defendants from discriminating in the future against prospective tenants based on race, mandates the implementation of a non-discriminatory rental policy, and requires the defendants and their employees to receive training on the Fair Housing Act.
  • The lawsuit, filed in September 2012, arose as a result of a complaint filed with the U.S. Department of Housing and Urban Development (HUD). After HUD investigated the complaint, it issued a charge of discrimination and the matter was referred to the Justice Department.

    The lawsuit alleged that the defendants violated the Fair Housing Act by refusing to rent a lot at a mobile home park to the HUD complainant and her family due to a discriminatory policy against renting to African Americans. The suit also alleged that, as a result of the discriminatory policy, the defendants engaged in a pattern or practice of discrimination or denied rights protected by the Fair Housing Act to a group of persons.
For the Justice Department press release, see Justice Department Settles Race Discrimination Lawsuit Against Owners and Managers of Mobile Home Parks in Alabama and Georgia.

For the lawsuit, see U.S. v. Lawrence Properties, Inc., et al.

(1) According to the lawsuit, the alleged victim actually purchased, directly from a private homeowner, a mobile home located on a lot that the private owner rented from the mobile home park operator.

Apparently, the mobile home purchase was not contingent on obtaining approval from the park operator to take over the existing lease on the lot. After a bit of alleged jerking around by the park operator's employees, the alleged victim was advised that her rental application for the lot upon which her just-purchased mobile home sat on was rejected.

Consequently, not only was the alleged victim and her family unable to move into the mobile home, she was forced to pick up the mobile home and move it off the lot and out of the park, which she did, bearing the attendant costs of the move, according to the complaint.

By the way, these allegations came to light some seven months after the alleged victim's application was rejected.

According to the complaint, the then-property manager at the mobile home park, who now was no longer employed there, tracked down the alleged victim and informed her that her application to rent the lot had never been processed because the mobile home park owner did not want to rent to black people. Two other now-former employees have since come forward to assert that the company's policy was to limit rentals to black people, according to the complaint.

Non-Profit Law Firm Scores Permanent Injunction On Behalf Of Low-Income Farmworker Who Nearly Lost His Home To Foreclosure After Being Screwed Over By Loan Modification Racket

In Fresno, California, The Fresno Bee reports:
  • A judge has signed a court order that prevents a Fresno foreclosure consulting business from engaging in unlawful and deceptive practices.

    The permanent injunction names Legal Foreclosure Services, Inc. which operates at 135 W. Shaw Ave. and once did business as Foreclosure Counseling, Inc., and Foreclosure Professionals, Inc.

    Edward Anguiano, Raul Pelcastre, Brenda Alvarez and Frank Gutierrez -- who owned or worked for the companies -- also are named as defendants.

    The court order stems from a March 2011 civil lawsuit filed in Fresno County Superior Court by farmworker Florentino Salazar who nearly lost his Firebaugh home to foreclosure after he hired the consulting business.

    Salazar was able to save his home after the Central California Legal Services, Inc., in Fresno intervened on his behalf.(1)

    CCLS staff attorney Ofra Pleban said Friday that the defendants targeted Spanish-speaking people by advertising on television and through their web site.

    "The defendants operated as loan modification and foreclosure avoidance consultants in violation of the law," Pleban said. "They operated without the required licenses and bonds, and unlawfully charged advance fees, and misrepresented the type and scope of their services."

    Pleban said Anguiano is the principal owner of the three businesses. Efforts to reach him and his attorney Bruce Neilson were unsuccessful.

    Salazar, who is married and has three children, purchased his home in Firebaugh in 1996. He got behind on payments after he needed surgery and had to pay costly medical bills, Pleban said.

    In 2010, Salazar hired the defendants and paid them $2,400, Pleban said. In return, they promised to modify his home loan. But instead of refinancing the loan, the defendants advised Salazar to quit making payments, which put his home on the brink of foreclosure, Pleban said.

    Judge M. Bruce Smith signed the permanent injunction on June 26.

    Pleban said the defendants' unlawful activities were not limited to their transactions with Salazar, but rather "it was their business model."

    "They have failed to provide the promised services, failed to obtain any benefits to their clients, and many times were the direct cause of the eventual foreclosure of their clients' homes," she said.

    In addition, the California Department of Real Estate issued an order in March 2010, informing the defendants quit "these same unlawful activities," Pleban said. "Nevertheless they continued with their unlawful practices in complete disregard to the order," she said.

    If the defendants violate the judge's order, Pleban said CCLS will seek immediate enforcement "to make certain that homeowners are protected."

    "We applaud Mr. Salazar for standing up to defend his family and in doing so won protection for countless other families who otherwise could fall victim to these defendants," Pleban said.
Source: Judge prohibits Fresno foreclosure consultants from committing unlawful acts.

(1) Central California Legal Services is a non-profit law firm providing free legal assistance to low income families and individuals in the following counties in the state: Fresno, Kings, Mariposa, Merced, Tulare, and Tuolumne.

Thursday, July 11, 2013

S.C. Supremes: Bankster Loan Modifications Conducted, Supervised By Non-Attorneys Not An Unauthorized Practice Of Law

Housing Wire reports:
  • On June 19, 2013, the South Carolina Supreme Court issued its long-awaited opinion in Crawford v. Central Mortgage Co., determining that mortgage lenders and servicers may continue modifying mortgage loans without requiring supervision by a South Carolina-licensed attorney.

    Under this ruling, a loan modification conducted by a non-attorney does not constitute the unauthorized practice of law.

    This petition was filed as a result of the South Carolina Supreme Court’s original and subsequent substitute opinion in Matrix Financial Services Corporation v. Frazer.

    In Matrix, the court held that any mortgage transaction unsupervised by a South Carolina-licensed attorney constitutes the unauthorized practice of law and may bar a mortgage holder from obtaining equitable relief, including foreclosure. Subsequently, in BAC Home Loan Servicing, L.P. v. Kinder, the court clarified that the holding in Matrix would be prospective only and applies for all mortgages filed after August 8, 2011.

    On March 8, 2012, the court in its original jurisdiction agreed to hear oral arguments in Crawford as to whether modifying a mortgage loan without the participation of an attorney constitutes the unauthorized practice of law.

    Crawford involved two cases consolidated for review.

    In the first case, Cassandra Crawford purchased a home, subject to a mortgage loan from Central Mortgage Company. When Crawford became delinquent on payments, she received a loan modification, which reduced the interest rate and extended the time for repayment.

    Subsequently, Crawford received a second loan modification, further reducing the interest rate in the short term.

    Crawford executed the second loan modification in the presence of a notary with no attorney present. In the second case, James Warrington, a real estate investor, purchased property, subject to a commercial loan with the Bank of South Carolina. Warrington subsequently received three loan modifications to extend the time to repay the loan. The bank prepared each modification, using standard forms, without attorney participation.

    In both cases, the borrowers defaulted and foreclosure actions were filed. Both borrowers sought to prevent foreclosure and to have their loan modifications and the mortgages they modified declared void, arguing that the lenders engaged in the unauthorized practice of law by modifying the loans – the crux of the argument being that the loan modifications had a “legal effect” and changed the legal rights of the parties by altering the interest rate and repayment terms.

    The Supreme Court, however, rejected this argument, holding that mortgage lenders and servicers may modify mortgage loans absent supervision from a South Carolina-licensed attorney. The Court distinguished from two previous cases that addressed the unauthorized practice of law in real estate mortgage loan closing transactions: State v. Buyers Service Co., Inc. and Doe v. McMaster.

    Buyers Service established that a South Carolina-licensed attorney must supervise four stages of residential real estate closings: (1) title search, (2) preparation of the loan documents, (3) closing, and (4) recording of title and mortgage. McMaster extended this holding to include mortgage loan refinances. In this case, however, the Court drew a distinction, stating:

    A loan modification is an adjustment to an existing loan to accommodate borrowers who have defaulted. In contrast, refinancing is the issuance of an entirely new loan, often used by home owners to take advantage of lower interest rates. Thus, the same public policy that requires attorney supervision for home purchases and refinancing does not apply to loan modifications.(1)

    The court also cited increased costs to the consumer, the existence of a robust regulatory regime, and the presence of competent non-attorney professionals as additional reasons for not requiring attorney supervision in the preparing, mailing to borrowers, and recording of executed loan modifications.
Source: S. Carolina Supreme Court: Non-attorneys can modify home loans.

For the ruling, see Crawford v. Central Mortgage Company, Opinion No. 27273 (June 19, 2013).

(1) In its ruling, the court appears to assume that the typical "loan modification" involves nothing more than a simple adjustment in the financial terms of the loan (ie. interest rate and payment terms).

In fact, the South Carolina describes the distinction between a loan modification and a refinancing as follows:
  • A loan modification is an adjustment to an existing loan to accommodate borrowers who have defaulted.

    In contrast, refinancing is the issuance of an entirely new loan, often used by home owners to take advantage of lower interest rates.
However, banksters have been notorious for making changes in the substantive, non-financial terms as well (ie. changes & waivers of certain legal rights, for one) such that the "modified" loan, in form, is still the same loan but, in substance, constitutes an entirely new loan. Bankster loan modifications generally do not involve a simple alteration in the borrower's interest rate and payment terms.

From the ruling:
  • Previously, in State v. Buyers Service Company, Incorporated, 292 S.C. 426, 357 S.E.2d 15 (1987) and Doe v. McMaster, 355 S.C. 306, 585 S.E.2d 773 (2003), this Court addressed the unauthorized practice of law in the context of real estate transactions. In Buyers Service, we divided the purchase of residential real estate into four steps: (1) title search; (2) preparation of loan documents; (3) closing; and (4) recording title and mortgage, and held that a licensed attorney must supervise each of these steps.[3] Id. at 430-34, 357 S.E.2d at 17-19 (emphasizing protection of the public as the paramount concern).

    In Doe v. McMaster, 355 S.C. 306, 312, 585 S.E.2d 773, 776 (2003), the Court mandated attorney supervision for the refinancing of mortgages.[4] In that case, the lender attempted to distinguish Buyers Service by arguing that in McMaster the transaction centered on refinancing an existing mortgage rather than dealing with the purchase of a new property. Id. at 312, 585 S.E.2d at 776. We held this essentially a distinction without a difference because refinancing a mortgage entails the same four steps involved in purchasing a property. Id.

    McMaster, like Buyers Service, emphasized the public policy of advancing consumer interests. Id. at 311 n.3, 585 S.E.2d 776 n.3 (citation omitted) ("[T]his Court grounds its unauthorized practice rules in the State's ability to protect consumers in the state and not as a method to enhance the business opportunities for lawyers.").

    Petitioners argue loan modifications "change the existing terms of the legal rights of the parties" by altering interest rates and repayment terms.

    Petitioners further assert that because the modification agreements have a "legal effect," the agreements must constitute the unauthorized practice of law. We disagree.

    This case is distinguishable from both Buyers Service and McMaster. A loan modification is an adjustment to an existing loan to accommodate borrowers who have defaulted.

    In contrast, refinancing is the issuance of an entirely new loan, often used by home owners to take advantage of lower interest rates.

    Thus, the same public policy that requires attorney supervision for home purchases and refinancing does not apply to loan modifications. Requiring attorney supervision over a loan modification would create a cost to the consumer outweighed by the benefit. Additionally, the existence of a robust regulatory regime and competent non-attorney professionals militates against extending the attorney supervision requirement to loan modifications.

    Thus, we hold that lenders do not engage in the unauthorized practice of law by preparing and mailing loan modifications to borrowers and recording the executed documents without participation of a licensed attorney.

    Given our rejection of the allegation that Respondents practiced law without authorization, it is unnecessary to reach Petitioners' issue as to whether this Court should deem their mortgages void. See Futch v. McAllister Towing of Georgetown, Inc., 335 S.C. 598, 613, 518 S.E.2d 591, 598 (1999) (holding an appellate court need not address remaining issues when resolution of a prior issue is dispositive).

Lawyer's Direct Mail Solicitations Intended For Homeowners In Foreclosure Mistakenly Sent To Those With Either On-Time Or Paid-Off Mortgages Instead, Leaving Hundreds Of Recipients Freaked Out

The Oregonian reports:
  • The letter began with a bang.

    "Dear Friend, I am writing because I saw your residence on a list of house (sic) in danger of being foreclosed and lost by their owners."

    Sue Bernert's 84-year-old father read it and, understandably, freaked out. Though the retired lawyer had paid off his home two decades ago, he worried that something had gone terribly wrong or that his identity had been stolen.

    "That letter made him confused and anxious," Bernert said. "That's a crummy way to solicit business."
    Kelly Kennedy Brown, a bankruptcy lawyer from Southwest Portland, sent the letters in late June. Well actually, as he explained on his website soon after, he hadn't meant to send them – at least not to the 16,711 local consumers who received them.

    Brown, a member of the Oregon State Bar since 1983 who's never faced disciplinary action, told The Desk he bought a list of addresses from a direct-mail company based in Florida.

    The list was supposed to be made up of folks who'd fallen behind on their house payments or were in foreclosure. Instead, he said, he received a list of consumers, who like Bernert's father, had no mortgage at all or were current on their payments.

    "My main concern is the unnecessary distress the mailing caused to a large number of its unintended recipients," Brown wrote on his website. "I do not know how to fix that, other than to post this note of apology."

    The Desk has an idea: Mail another letter explaining the mistake.

    Bernert said her father doesn't use a computer and wouldn't have seen the digital mea culpa. Still, even PC access is no guarantee anyone would have gone looking for it.

    Brown said he tried to stop the mailing as the first upset calls began trickling in, but the mailing company said it couldn't. He's distressed and frustrated by the mistake but says he can't afford the $7,700 in postage to send new letters explaining the mistake.

    Perhaps that wouldn't help, anyway. Even after Bernert explained the mistake, she said. her father was still so concerned that he asked her to check his credit to be sure his identity was safe.
  • He's heard from 476 upset recipients since the letter went out June 21. The Oregon Department of Justice heard from consumers, too, as did the Oregon State Bar, which dismissed the few complaints it received because there appeared to be no rule violations, said Kateri Walsh, the group's spokeswoman.

    The state bar sets advertising guidelines for members, which includes wording that they shouldn't make statements that are false and misleading.

    Still, The Desk contends, when someone works off a list with more than 16,000 names, there's bound to be errors -- be it outdated information or a simple goof. So it's important not to scare the wits out of the recipient.

    Brown said that he's written around six such letters each week to folks whose names he received from title companies and he's never received a complaint. He admits that, in hindsight, he should have toned down the wording of the letter when he aimed for a broader audience.

    The Desk appreciates Brown's honesty. Mistakes do happen.

    However, when Brown purchased the list for around $13,000, he was told that as much as 20 percent of it could be inaccurate.

    Put another way, he knew when the letters went out that as many as 3,200 folks could open an envelope, see that line and worry that it was a mistake.

    Or not.

Probe Into Career Con Man's Recent Alleged Forged Deed Scam Uncovers Pill-Peddling Operation

In Newton, New Jersey, The Star Ledger reports:
  • Up until about 2011, Robert Kosch Jr. had primarily handled shady real estate deals.

    With a slumping housing market, the 56-year-old Bloomfield man with a long history of real estate fraud apparently then launched another criminal enterprise: using phony prescriptions to buy large quantities of the painkiller oxycodone and then selling the pills.

    “He’s a lifelong con man. His tentacles go all over,” said Sussex County Assistant Prosecutor Seana Pappas.

    Last week, Kosch was charged in Pennsylvania with obtaining more than 13,000 oxycodone pills – valued at more than $400,000 — by passing 69 prescriptions with phony names at three pharmacies between January 2011 and October 2012, according to his affidavit of probable cause.

    The prescriptions were written “for no valid medical purpose” by John “Jack” Manzella, a Pennsylvania osteopathic physician, the affidavit states.

    With at least two dozen previous criminal convictions related to fraudulent real estate deals dating to the 1980s, Pappas said the most recent investigation of Kosch began when a Vernon Township woman was told a strange man was living in her Highland Lakes house.

    With foreclosure proceedings on the home pending, Kosch, who posed as a real estate investor specializing in finding private lenders for people with bad credit, got the woman’s deed and forged her name, transferring the property to himself, according to Pappas.

    A neighbor alerted the woman that someone was living in the house. The man at the house said Kosch let him stay there for free, Pappas said. “The homeowner never heard of Robert Kosch or any of his companies.”

    The man living in the home was later identified as Kosch’s former attorney, Stephen Rosen of Little Falls, who was indicted in May with Kosch and charged with one count of fourth-degree criminal trespass.

    Pappas said she did not know how much Kosch allegedly stole in the Vernon real estate transactions.

    A subsequent investigation led to a search of Kosch’s real estate offices on Speedwell Avenue in Morris Plains, where “stacks of blank prescription pads,” as well as prescriptions filled out to fictitious people, were found, Pappas said. Rosen owned the offices.

    A list that included the names, addresses and Social Security numbers of more than 500 people also was found, she said.

    Kosch used the list of names, according to Pappas, to write phony prescriptions to get access to oxycodone pills. He also was accused of making fraudulent real estate deals, Pappas said.

Wednesday, July 10, 2013

Bay State Appeals Court Green-Lights AG's Probe Into Notorious Foreclosure Mill For Possible Violations Of Massachusetts UDAP Statute In Dealings With Financially Strapped Homeowners, Tenants Living In Foreclosed Homes

In Boston, Massachusetts, The Boston Globe reports:
  • Massachusetts Attorney General Martha Coakley on Monday applauded a state Appeals Court decision that gave her permission — once again — to investigate a Newton law firm specializing in home foreclosures.

    The recent unanimous court ruling affirmed a 2011 Suffolk Superior Court decision allowing Coakley’s office to continue examining Harmon Law Offices for alleged “unfair and deceptive acts” related to the firm’s foreclosure and eviction work.(1)

    This strong ruling upholds this office’s investigatory power,’’ Coakley said in a statement. “Harmon Law Offices had a vital obligation to follow Massachusetts law and court orders. Our office will continue to fully investigate this case and take action if appropriate.”

    The decision is the latest development in a long-simmering dispute between the state and Harmon, one of the largest law firms specializing in foreclosures in Massachusetts. In 2010, Harmon Law sought court protection to stop or modify the attorney general’s efforts to seek certain legal documents. Among other issues, Harmon argued the demand interfered with attorney-client privilege and that it was the conduct of the firm’s clients, not its attorneys, that was in question.

    Associate Justice Ariane D. Vuono, who wrote the five-page decision made by a three-member panel, said the lower court judge’s ruling in favor of the state was sound.

    “Harmon has not met its burden of showing good cause why it should not be required to produce the requested documents,’’ Vuono wrote.

    Mark P. Harmon, president of the firm, said he is considering what to do next. “We are disappointed with the Appeals Court decision on this important issue,” he said.

    Coakley’s office began looking at Harmon Law three years ago in an effort to determine whether the firm failed to comply with a new Massachusetts law protecting tenants living in foreclosed homes from being evicted without cause.

    Harmon said in legal briefs that it filed eviction notices for residents in properties seized by lenders before the law became effective.

    The state also is investigating whether Harmon Law disregarded a court order requiring it to notify the state before initiating foreclosures on homeowners with mortgages that originated with Fremont Investment & Loan, a California firm Coakley sued for predatory lending practices.

    Harmon, which also runs a title firm and auction company, has been the focus of criticism by some consumer advocates and foreclosure law specialists for violating homeowners’ rights so it could maximize profits.

    George E. Babcock, a Rhode Island attorney who specializes in foreclosure defense, said Harmon Law continues to improperly foreclose on borrowers, sometimes taking back properties without the proper documentation.

    Although foreclosure numbers have dropped this year, Babcock said many borrowers in lower-income communities still struggle to keep up with mortgages on homes they purchased at inflated prices.

    More than 1,200 Massachusetts homeowners lost their properties to foreclosure during the first five months of the year, a 69 percent decline compared with the same time last year, according to the Warren Group, a Boston company that tracks local real estate.

    Babcock said Harmon is still by far the largest foreclosure firm he encounters in his Rhode Island defense work. “They continue to run roughshod over the citizens of Rhode Island and the Commonwealth of Massachusetts,’’ he said.

    Harmon Law declined to comment on Babcock’s allegations.
Source: AG Martha Coakley gets OK to examine law firm (Alleges deception tied to foreclosures).

For the court ruling, see Harmon Law Offices, P.C. v. Attorney General, No. 12-P-407 (June 28, 2013).

(1) From the court's ruling:
  • Acting pursuant to her authority under the Massachusetts consumer protection act, G.L. c. 93A (c. 93A or the statute), the Attorney General issued two civil investigative demands (CIDs or demands) to Harmon Law Offices, P.C. (Harmon), seeking information regarding its foreclosure and eviction practices.[1]

    Harmon challenged the demands and filed a complaint seeking relief under § 6(7) of the statute.[2] After a hearing, a judge of the Superior Court concluded that Harmon had not met its burden of showing good cause to set aside the CIDs and dismissed the complaint.

    Harmon appeals, claiming that the judge abused her discretion because the demands interfere with Harmon's attorney-client relationships, and the requested documents are protected by the litigation privilege.

    Harmon also contends that, by representing its clients in foreclosure and eviction proceedings, it is not engaged in trade or commerce and therefore cannot be subject to liability under c. 93A. Thus, Harmon maintains, the Attorney General exceeded her authority by requesting information directly from Harmon regarding possible violations of c. 93A.

    For substantially the reasons articulated by the Superior Court judge in her thorough memorandum of decision and order dismissing Harmon's complaint, we conclude that Harmon has not met its burden of showing good cause why it should not be required to produce the requested documents.

    Accordingly, we affirm.

Sacramento Feds Score Another Guilty Plea In Foreclosure Rescue Scam That Falsely Promised Homeowners Easier House Payments Thru Discount Delinquent Mortgage Purchases; Used Fractional Interest Deed Transfers, Bogus Bkrptcy Filings Invoking Automatic Stay To Drag Out Legal Process & Continue Collecting Periodic Fees

From the Office of the U.S. Attorney (Sacramento, California):
  • Jewel Hinkles, aka Cydney Sanchez, 63, of Los Angeles, pleaded guilty [] to bankruptcy fraud in connection with a foreclosure rescue scheme she ran, United States Attorney Benjamin B. Wagner announced.

    According to court documents, on December 1, 2011, a federal grand jury indicted Hinkles along with Jesse Wheeler, 36, of Roseville, Cynthia Corn, 60, of Oakland, and Brent Medearis, 46, of Modesto, in connection with the scheme. Wheeler operated JW Financial Solutions in Roseville and Corn operated Property Relief! in South San Francisco, both as affiliates of programs created by Hinkles. Medearis worked out of Modesto for Corn. Wheeler and Medearis previously pled guilty to bankruptcy fraud.

    According to court documents, Hinkles was the founder and general manager of Horizon Property Holdings LLC, in Beverly Hills. From 2008 through 2010, Hinkles offered a service called the “Save My Home” or “Homesaver” that promised to rescue financially distressed homeowners from foreclosure and reduce the principal on homeowners’ mortgages. Horizon offered its program directly to clients and also through several layers of “affiliates,” who promoted and sold the program to clients, mostly in Northern California.

    The defendants allegedly told homeowners that they would save their residences from foreclosure by arranging for investors to purchase their existing mortgage at a discounted price, thereby reducing the homeowner’s principal and monthly mortgage payment.

    To prevent foreclosure and defraud the existing lenders, the defendants filed fraudulent deeds transferring an interest in the homeowner’s property to a fictitious entity called Pacifica Group 49/II.(1)

    In many instances, the defendants also filed fraudulent petitions in bankruptcy court, often naming both the homeowner and Pacifica Group 49/II as the debtor. The purpose of these petitions was to invoke the automatic provisions of federal bankruptcy law that bring to an immediate halt any foreclosure actions against a debtor’s property.

    Because the fraudulent deeds and bankruptcy petitions delayed foreclosure proceedings, the defendants were able to pretend that they were providing a legitimate service and continue to collect fees from defrauded homeowners.

    To enroll in the Save My Home program, clients were required to pay an initial payment of approximately $3,500 and monthly fees up to $1,500. The Homesaver program required clients to pay an initial payment ranging from $1,750 to $6,500 and monthly fees up to $850.

    In total, the scheme collected at least $4.9 million from more than 1,000 homeowners, including homeowners whose mortgages were owned by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

    According to the indictment, the defendants never arranged for the purchase of a single mortgage from any of the clients’ lenders and never negotiated a single mortgage principal reduction for any of Horizon’s clients.
For the U.S. Attorney press release, see Los Angeles Woman Pleads Guilty To Foreclosure Rescue Scheme.

(1) See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a discussion of fractional interest deed transfer scams and other foreclosure rescue rackets involving the abuse of the bankruptcy courts.

Operator Of Loan Modification Racket Faces Multiple Grand Theft, Burglary Charges For Allegedly Clipping Homeowners Facing Foreclosure With Upfront Fees, Providing No Assistance

In Tulare County, California, The Fresno Bee reports:
  • A man who allegedly committed foreclosure fraud by taking money from poor, Hispanic victims and then doing nothing to help them is in jail in Tulare County.

    Ricardo Melgoza, 43, was arrested last week in Los Angeles County on arrest warrants and felony complaints issued last year. He is also being held at the request of immigration authorities.

    Melgoza was brought to Tulare County to face two counts of grand theft, involving more than $950 per count, and two counts of burglary between August 2008 and July 2010, the Attorney General's Office said.

    He also faces 15 counts of grand theft for similar crimes in Kern County. If found guilty, he faces about 20 years in prison, Deputy Attorney General Leslie Westmoreland said. The Special Crimes Unit of the Attorney General's Office is prosecuting the case.

Tuesday, July 09, 2013

Speculating Banksters Increase Use Of Credit Bids At Foreclosure Auctions To Buy, Flip Their Own Distressed Properties

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • As home prices in the region climb and inventory dries up, the nation's largest mortgage lenders are gambling on the future of the housing recovery, a Herald-Tribune analysis shows.

    Banking giants from Wells Fargo to Fannie Mae are routinely paying top dollar on the auction steps to hold onto their own distressed properties, outbidding cash offers and paying well above assessed value, according to a review of thousands of Southwest Florida auction purchases.

    They are speculating that the properties will appreciate even more in the next couple of years.

    The new strategy is a shift from the years after the nadir of the foreclosure crisis, when mortgage lenders accepted any fair offer to avoid the hassle of listing the default.

    Yet worries are mounting that the competition between lenders and billion-dollar investment funds could drive housing values higher through the kind of price speculation that marked the walk-up to the Great Recession.
  • So far, lenders have had mixed results.

    The strategy worked to near perfection for a 2,100-square-foot house on Venice's Flamingo Road. To keep the three-bedroom home, Fannie Mae outbid a $161,700 third-party offer at a Jan. 11 auction — committing $31,700 more than the property's assessed value.

    With a $276,827 final judgment and $250,297 unpaid principal in the deal, the government enterprise famously bailed-out by federal tax dollars was bound to take a loss on the property either way.

    But by holding onto it for six more months, the lender found a retail buyer willing to pay $194,000 on May 30 — reducing the loss by $32,300 with the gamble.

    Although Fannie Mae can still go after the borrower for the difference, banks rarely pursue a deficiency judgment to collect the remaining balance.

    Fannie Mae whiffed on a similar attempt with a home on Lockwood Meadows Boulevard in Sarasota.

    The lender turned down firm cash offers at an auction in late January to bid a winning $121,001 for the property — a 203 percent markup from the assessed value.

    During the next five months in Sarasota, the median prices for single-family homes grew nearly 19 percent.

    Despite that rapid appreciation, the home could only fetch $92,200 on the retail market in May. Fannie Mae's overpayment at auction ultimately cost the lender $28,800 on top of the soured principal amount, plus any subsequent expense to maintain the property and brokerage fees to find a buyer.

5th Circuit Affirms Texas Bankruptcy Court Ruling Slamming Bankster's Attempt To Squeeze Loan Guarantors By Recovering More Than Amount Due On Foreclosed Mortgage; Lender Fails In Claim That Its Credit Bid Should Not Be Used As Basis For Reducing Loan's Outstanding Balance

  • A bank made loans to the debtor to finance construction of a golf course. The loans were secured by senior liens on the debtor’s assets, limited guaranties of its principals, and a $1.2 million certificate of deposit. During a sale of the debtor’s assets ordered by the bankruptcy court, the holder of the senior debt submitted a credit bid. Spillman involved a dispute over the effect of the credit bid.

    After the debtor filed bankruptcy, a junior lender (Fire Eagle) that had loaned the debtor $4.1 million, purchased the senior debt from the bank. At that time, the parties stipulated that the outstanding balance of the senior loans were ~$9.1 million.

    After the bankruptcy court refused to confirm any of the proposed plans of reorganization, it ordered a sale of the debtor’s assets under Section 363 of the Bankruptcy Code. After the bidding at the sale reached a cash bid of $9.2 million, Fire Eagle submitted a credit bid of $9.3 million, which was the winning bid.

    The debtor and most of the guarantors brought an action in the bankruptcy court seeking a declaratory judgment that the guarantors were released from their obligations. Fire Eagle argued that its credit bid did not result in the senior debt being paid in full. Instead, it contended that the court should have determined the fair market value of the assets, and only that value should have been credited against the senior debt. Assuming the value was less than the debt, Fire Eagle argued that it could still recover the deficiency from the guarantors.

    The bankruptcy court found that the credit bid paid the senior debt in full so that there was no deficiency claim left and Fire Eagle was not entitled to recover from the guarantors. Consequently, the bankruptcy court granted summary judgment to the guarantors holding: “This is not rocket science. The Senior Loan has been PAID!!!!(1)

    On appeal Fire Eagle proposed three arguments to support this position:

    (1) Credit bidding in a bankruptcy auction affects only the claim in the bankruptcy and not any underlying debt.

    (2) Bankruptcy events “do not typically ‘inure to the benefit of non-bankrupt guarantors.’”

    (3) The guaranties provided that the guarantors’ obligations would not be affected by a bankruptcy.

    The 5th Circuit rejected the first argument as “logically unsound.” The court noted that if Fire Eagle had been outbid by a cash bid, the cash would have been applied against the senior debt, and if the debt was paid in full with cash, it would be absurd to allow Fire Eagle to collect again from the guarantors. Otherwise it could recover more than the face value of the senior debt notwithstanding that the guaranties explicitly provide for termination upon payment in full.

    So, Fire Eagle had to be arguing that a credit bid is not equivalent to a cash payment. However, the 5th Circuit found that the provision in Section 363(k) of the Bankruptcy Code that allows credit bidders to offset their claims against the purchase price implicitly assumes the equivalence of the value of the credit bid with cash.

    As for the second argument, the cases cited by Fire Eagle addressed situations where the debt was not paid in full. Consequently those cases were not applicable. Similarly with respect to the third argument, relying on provisions in the guarantees that a bankruptcy does not affect the validity of the guarantee ignores the fact that the guarantees also provide for termination upon payment of the guaranteed debt.

    So, the 5th Circuit agreed with the lower courts that the credit bid had the effect of paying off the senior debt so that Fire Eagle could not collect on the guarantee agreements.

    The very nature of a credit bid is that the bidder holds debt secured by a lien on the assets that are being sold. If the bidder paid cash, the seller would have to turn around and apply that cash to the bidder’s debt. Rather than require an unnecessary back and forth payment of cash, the bidder is allowed to “credit” or setoff its bid against the debt owed to it.

    It is important to remember that, although money doesn’t actually change hands, there is still in effect a payment and a repayment. A credit bid is not “funny money,” rather it actually reduces the debt. Similarly, it is key that the seller be required to return the sale proceeds to the bidder in repayment of its debt. If instead a third party held a lien that was senior to the bidder’s lien, payment would have to be applied first to the third party debt, and only any excess would have been returned to the bidder. Thus, the bidder would have to pay cash to the extent of the senior lien, and could credit bid only the excess.

    It is surprising that people often don’t “get it.” As the bankruptcy court said, this isn’t rocket science.
Source: Credit Bid: “This Is Not Rocket Science”.

For the court ruling, see Fire Eagle L.L.C. v. Bischoff (In re Spillman Dev. Group Ltd.), 710 F.3d 299 (5th Cir. 2013).

(1) In re Spillman Development Group, LLC, 401 B.R. 240 (Bankr. W.D. Tex. 2009).

Montana Feds Pinch Woman For Allegedly Forging Hubby's Name On POA, Loan Documents To Pocket Proceeds From Fraudulently-Obtained HELOC

In Billings, Montana, the Billings Gazette reports:
  • A Billings woman suspected of impersonating a nurse at a local hospital is facing federal bank and wire fraud charges.

    Appearing for arraignment Tuesday morning before U.S. Magistrate Judge Carolyn Ostby, defendant Angela Corson Smith, 32, was charged with a series of crimes accusing her of defrauding banks and individuals of thousands of dollars by lying about her health, family and work.

    Smith pleaded not guilty to an eight-count indictment charging her with bank fraud, aggravated identity theft, false statements to a bank and wire fraud.
  • The indictment accuses Smith of three schemes.

    In the bank fraud scheme, Smith is accused of defrauding Altana Federal Credit Union of $27,300 by getting a home equity loan on a residence owned by her husband, identified as B.S., without his permission. The money was for her personal use, the indictment said.

    Smith applied for the home equity loan on Oct. 23, 2009, by forging a power of attorney representing she had her husband's authority to get the loan, the indictment said. Smith also forged her husband's signature on the loan documents.

    About three years later, on Nov. 5, 2012, Altana contacted Smith about delinquent loan payments. Smith lied and told the credit union that her daughter had died the day before of leukemia and that she would be unable to make the payments because of medical and funeral expenses related to her daughter's death, causing Altana to defer four loan payments, indictment said.

    Smith's daughter was not suffering from leukemia and didn't die, the indictment noted.

Monday, July 08, 2013

9th Circuit: Dual-Tracking Of Homeowner Making Prompt Payments Under Loan Modification Agreement Constitutes "Adverse Action" That Triggers Bankster's Duty To Give Notice Within 30 Days Under Federal ECOA

In San Francisco, California, Bloomberg reports:
  • Wells Fargo & Co. (WFC) must face borrowers’ claims that it violated the Equal Credit Opportunity Act by starting foreclosure proceedings while the customers were making payments under a loan-modification agreement.

    The U.S. Court of Appeals in San Francisco [] reinstated the claims of John and Carol Schlegel, who received default notices after the bank told them to proceed with payments under a loan-modification plan and failed to respond to their inquiry seeking an explanation.

    The bank’s action, the court found, constituted a revocation of credit without notice required under the Equal Credit Opportunity Act, which makes it illegal for creditors to discriminate against applicants and requires them to provide an explanation within 30 days when denying or revoking credit or changing credit terms.

    “While sending a mistaken default notice would not necessarily constitute an adverse action, the Schlegels’ complaint describes egregious conduct that goes far beyond clerical error,” the three-judge panel said.

    The bank sent five default notices before acknowledging the modification agreement was in effect and the notices were incorrect, according to the ruling. The panel sent the case back to federal court in San Francisco. The Schlegels had sued on behalf of themselves and other borrowers.

    Jennifer Temple, a spokeswoman for San Francisco-based Wells Fargo, didn't immediately respond to an e-mail seeking comment on the ruling.
Source: Wells Fargo Must Face Foreclosure Suit After Loan Accord.

For the ruling, see Schlegel v. Wells Fargo, No. 11-16816 (9th Cir. July 3, 2013).

HOA Lien For Unpaid Maintenance Survives Condo Association's Foreclosure Sale; 3rd Party Buyer At Subsequent Foreclosure By Existing 1st Mortgagee Finds Itself Stuck Inheriting Said HOA Lien, Despite Association's Interim Ownership

In Miami, Florida, the South Florida Business Journal reports:
  • A Miami circuit judge has upheld his original 2011 ruling that an Aventura condo association lien survives foreclosure and must be paid by the buyer even though the association itself owned the home briefly. In effect, this decision reinforces the idea that buyers are responsible for paying condo association fees attached to foreclosure purchases they make.

    The ruling was hailed by the association’s lawyer, Ben Solomon of the Association Law Group, as helpful for associations trying to shore up their finances in the wake of the recession. Many associations took hits to their budgets as units went vacant due to foreclosures.

    Miami Dade Circuit Judge Ronald Dresnik had ruled in favor of the association at Spiaggia Ocean Condominium two years ago, in a lawsuit filed by a buyer called Aventura Management. According to Solomon, the buyer owes $101,000 to the association.

    But the Third District Court of Appeal sent the case back to Dresnick for more consideration of whether the association was also liable for association fees during the period it owned the condo.

    On May 28, Dresnick reaffirmed his own ruling, adding that the association is also liable for the fees accrued on the unit, but it can choose to pursue collection against the new buyer severally.

Homebuyer Who Paid $160K To Purchase Foreclosed REO Inherits Pre-Existing Squatter, Can't Move In

In Lake Worth, Florida, WPEC-TV Channel 12 reports:
  • An outrageous story about Lake Worth homeowner who purchased a house back in April, but he can't even get into the home because the people that have been living there are refusing to get out.

    It all started several years ago when the home at 5035 Woodstone Circle went into foreclosure. The bank took it over, but the people who were renting from the owner never moved out.

    Now the house has been sold, and believe it or not, the new owner can't move in.

    Marilyn Rodriguez, the president of the neighborhood association, is fed up with the people who refuse to get out. "This person is squatting and it seems like he has more rights than the new owner," said Rodriguez.

    Even though the new owner closed on the house in April and paid $160,000, he can't move in. Believe it or not, the squatters actually have rights according to foreclosure defense attorney Anisha Atchanah with Ice Legal.

    "As the owner of the property you've got to file a cause of action to the court and prove your case," said Atchanah. "It is very bold, very bold on part of squatter to think they have entitlement to property. It is a huge problem."

    Rodriguez and other neighbors agree. "This is ridiculous, it's absurd that in this day and age the new owners has to petition the court and go through all this rigamarole to occupy the house that he purchased."

Sunday, July 07, 2013

Cleveland Feds: Closing Agency Pair Looted Real Estate Escrow Account Out Of $290K, Then Doctored Documents To Dupe Title Insurance Underwriter Into Believing Funds Were Properly Accounted For

From the Office of the U.S. Attorney (Cleveland, Ohio):
  • Two Lorain County men were charged with conspiracy to commit wire fraud for defrauding companies and customers out of more than $290,000, said Steven M. Dettelbach, United States Attorney for the Northern District of Ohio.

    Charged in the criminal information are Gregory R. Klima, 52, of Avon Lake, and Timothy R. Grodzik, 52, of Columbia Station. The men owned Title Access, LLC, with Klima serving as president and Grodzik as vice president of sales, according to the information.

    Title Access was formed in 2000 and in the business of administering real estate transactions by providing services including title insurance and escrow account management. Title Access used Stewart Title as an underwriter for the issuing of title insurance, according to the information.

    Klima and Grodzik are accused of defrauding Stewart and parties to real estate transactions by diverting funds from Title Access’ escrow account for their personal benefit between December 2009 and February 2011, according to the information.

    Around February 2011, Grodzik, with Klima’s knowledge, falsified Access’ financial documents to conceal from a Stewart auditor the fact that they diverted funds from the Title Access escrow account, according to the information.

Bond Set At $100K & $50K For Pair Pinched By Michigan AG For Allegedly Running Loan Modification Ripoff Racket That Screwed 200+ Homeowners Out Of $400K+

In Detroit, Michigan, M Live reports:
  • Two men are accused of offering services they never provided to vulnerable homeowners looking to refinance their mortgages.

    State Attorney General Bill Schuette issued a statement [] announcing charges against Jeffrey Baker, 45, of Detroit and Leroy Yeagin Jr., 44, of Southfield related to the 9-month scam that allegedly defrauded 272 victims of more than $400,000.

    The men are each charged with operating a criminal enterprise, punishable by up to 20 years in prison; conspiracy to conduct a criminal enterprise, punishable by up to 20 years in prison; and four counts of false pretense, punishable by up to 5 years in prison.

    The men are accused of forming the company Wayne County Loan Modification in February of 2010.

    The company offered loan modifications to customers to reduce their monthly mortgage payments and usually charged a fee of one month's mortgage up front for the service, an average of near $1,500.

    Yeargin and Baker, however, never provided the loan modification.
  • Bond for Baker was set at $100,000 and bond for Yeargin at $50,000. The men are scheduled to appear in court for their preliminary examination July 15.

Homeowner Forced To Refinance To Save Home After Being Hit With Foreclosure Notice On Mortgage-Free Residence Over Unpaid, 2006 Property Tax Bill; Investor Purchased Tax Lien, Then Allegedly Sat On It For Six Years Until $500 Debt Grew To $13K Before Notifying Homeowner

In Hartford, Connecticut, NBC Connecticut reports:
  • For nearly 40 years, Butch Lewis has strolled the streets of northeast Hartford. “I’ve been living on Vine Street for 37 years,” said Lewis. “Same house. Identical. My kids were raised in that house.”

    Lewis didn’t leave when the drug dealers tried taking over. Instead of turning away, Lewis started a neighborhood watch and helped turn this community around. “We fought back, run drug people out, and it’s quality of life,” he said.

    But a few months ago, Lewis got the shock of his life when he was served with foreclosure papers on the Vine Street home he’d already paid off. “This guy walks in the driveway and says, ‘We have a lien against your house. We’re going to take it,’” recalled Lewis.

    Turns out he was caught in a business transaction between Hartford and tax lien purchaser American Tax Funding, or ATF.

    It’s a common practice across the country: municipalities sell property tax liens to private companies. The companies take over the lien and by law can charge up to 18 percent interest on the back taxes – and foreclose if they don't get paid. It's a tried and true way for towns and cities to collect on delinquent taxes. But critics like City Councilman Larry Deutsch (Working Families Party) believe it shouldn't be happening.

    “We have to stop this practice,” said Deutsch.

    He explained that once the lien is sold, it is taken off of the city’s books. Lewis said he never knew he owed the city of Hartford $500 back in 2006, and didn’t even realize the lien was sold off.

    “We thought we were up to date. If you check our records and it says your taxes have been paid, you do not owe the City of Hartford [anything],” said Lewis. Lewis insisted that ATF only came calling after a $500 debt had skyrocketed over half a dozen years with interest and fees.

    It ended up being $13,000," Lewis said. "Yeah, at 18 percent." “It’s in the interest of the company to be very quiet and then after two, three, four, five years of 18 percent accumulating, then they’ll let someone know,” argued Councilman Deutsch.
  • In the meantime, Lewis isn’t going anywhere. He worked out an agreement with ATF to pay $10,000 by refinancing his home. “We are fortunate that we can do that, but what about the other people in this city?” asked Lewis.

Foreclosure Forces License Revocation, Shutdown Of Longtime Assisted Living Facility, Leading To Short-Notice Boot For 28 Frail Residents

In Ridgefield, Washington, The Columbian reports:
  • The state Department of Social and Health Services shut down a longtime assisted living center in Ridgefield after the facility went into foreclosure and was sold at public auction.

    DSHS issued notice of its intent to revoke the operating license for Carolees at Ridgefield on March 21, after learning owner Carol Fox had fallen behind on her mortgage payments and was facing foreclosure, said Nancy Tyson, district administrator for DSHS residential care services. At the time, 28 residents lived there, Tyson said.

    The license revocation was effective April 18, after a 29-day appeal period expired without Fox challenging the state decision, Tyson said. All of the residents had relocated before the April 18 revocation, she said.

    The property sold for $3 million at a public auction March 29. Fox's lender, Matrix Advisors IV, took possession of the deed of trust.

    The property also included 12 cottages that were rented but were not licensed as part of the assisted living facility.

    Walt Bassett, 84, and his wife, Vera, rented one of the cottages for 11/2 years before learning in early April that they had to move out. "That's when everything hit the fan and everything went to pot," Walt Bassett said.

    The Bassetts were told the facility had sold and they had a week or two to find a new place to live. "It was a very short time, and it didn't seem reasonable," Walt Bassett said. "There was no forewarning," he added. "We didn't know anything was going on until it was too late."

    The Bassetts were renting a cottage month to month for $1,500, which included prepared meals. They paid for the month of April, and another $300 in advance for the month of May, but Walt said the couple never got any of their money back when they were forced to move out. The Bassetts moved into a new facility April 15.

    Fox could not be reached for comment.

    Carolees at Ridgefield, 888 S. Hillhurst Road, operated as a licensed assisted living facility for 24 years. The facility was licensed to house 36 residents.
Source: State puts end to Carolees assisted living center (Ridgefield facility had operated for 24 years until foreclosure, auction).