Saturday, July 20, 2013

Another Corrupt Title Closer Goes Down; Cops Plea For Role In Multiple Real Estate Frauds, Including Shady Short Sales, Escrow Proceeds Pilfering That Left Lien Holders, Title Insurance Underwriters Holding The Bag

From the Office of the U.S. Attorney (Baltimore, Maryland):
  • Rhonda Scott, age 52, of Oxon Hill, Maryland, pleaded guilty [] before U.S. District Judge James K. Bredar to conspiring to commit wire fraud in connection with two separate mortgage fraud schemes which resulted in losses of over $2,500,000.
  • According to her plea, beginning in 2008, Scott agreed to participate in several fraudulent real estate transactions that settled at M&R Title, Inc., and Sanford Title Services LLC. The fraudulent transactions at each title company were part of different conspiracies, both of which Scott joined. In both schemes, Scott facilitated deals between her co-conspirators, identified and recruited individuals that could be parties to the real estate transactions generating proceeds for the co-conspirators, received proceeds of the fraudulent transactions through a shell company designed to disguise her receipt of the funds, sent money to co-conspirators and identified mortgage transactions that the co-conspirators could use to enrich themselves.

    As part of the M&R Title conspiracy, the co-conspirators deceived buyers, sellers and lenders to make it appear to sellers that they were selling their property at a low price, and to buyers and lenders that the property was being sold at a higher price. The co-conspirators created paperwork for two different sales of the property at the same time.

    The first sale was fraudulent because it was backdated, the buyer was planning to immediately flip the property in a subsequent sale and the settlement statement listed a fake hard money loan. The second sale involved a significantly increased sales price and the settlement statement showed a significant sum being disbursed to the hard money lender as a payoff of an existing lien, but in reality those funds would be used for improper disbursements to the co-conspirators.

    With respect to the Sanford Title conspiracy, improper disbursements were made from the title company to Scott and others. The conspirators engaged in many fraudulent techniques, including: short sales in which the property would be sold for a higher price than the seller was aware of; sales of properties not owned by the seller including properties Scott purported to own but did not own at the time of settlement; real estate transactions in which there were multiple sales of the same property at the same time; the seller and/or buyer were shown difference settlement statements and the conspirators used the difference between the figures in the two statements to enrich themselves; and Sanford Title did not disburse money that should have been paid to lien holders and instead diverted a portion of those funds to co-conspirators.

    Both of the M&R Title and Sanford Title fraud schemes involved at least 25 victims, including lenders, sellers and buyers of real estate, title insurance companies and lien holders. The reasonably foreseeable loss associated with Scott’s conduct is at least $2.5 million.

Another Reverse Mortgage Horror Story: Sleazy Bankster Saddled Now-Deceased 78-Year Old Widow With 'Estate-Devouring Home Loan'; Heirs Left To Fight Off Foreclosure, Claiming Deal Is Unconscionable, Usurious

Syndicated real estate columnist Kenneth Harney writes:
  • Call it the estate-devouring, nightmare home loan you hope to never encounter: A reverse mortgage with a base interest rate of 9.95 percent, plus a 50 percent share for the lender of increases in value of the house following closing, plus another 2 percent "maturity fee" to sweeten the payout even more.

    On top of that, there's a $33,000 mandatory purchase of an annuity by the homeowner that is added to the principal balance and incurs compounding interest while lessening the lender's future payments to the homeowner.

    Is this for real? Do mortgages with terms like this actually exist in this country today? They do. Talk to Sarah Havemeyer of Southampton, N.Y., who's been fighting a California bank in court for two years over her late mother's reverse mortgage that dates back to 1997.

    Although the bank, OneWest, has not yet provided a total of what it believes is owed on the reverse mortgage, according to Havemeyer, she estimates it could be in the neighborhood of $1.5 million to $1.6 million.

    By comparison, the amount that Havemeyer's mother actually received from the reverse mortgage between 1997 and her death in 2010 was just $272,911.51. A reverse mortgage places a lien against a senior's home in exchange for periodic or lump sum payments. The full amount borrowed does not come due until the borrower dies, moves out or sells the home.

    OneWest, for its part, isn't talking. The bank declined to discuss either Havemeyer's litigation or any details of the reverse mortgage terms. The law firm representing OneWest's subsidiary that claims ownership of the reverse mortgage note — Financial Freedom Acquisition LLC — did not respond to a request for comment.

    Financial Freedom has filed for foreclosure, seeking payment of the $272,911.51, plus "interest at the rate stated" in the mortgage along with legal and other fees. The filing did not indicate that a huge chunk of the "interest" due flows from its 50-50 share in the appreciation of the house from $556,000 in 1997 to its approximate current value around $1.8 million.

    Havemeyer, who is serving as executrix of her mother's estate, is challenging the foreclosure, claiming that Financial Freedom has not been able to present documentation that it actually owns the mortgage, and the terms of the loan are "unconscionable and usurious" and violate state law.

    Were it not for the unusual terms of the mortgage, Havemeyer's dispute with the bank and its subsidiary might be seen as just another real estate squabble in the high-gloss Hamptons on New York's Long Island. But the terms make this case jump out as special.

    Start with the triple whammy of 50-50 appreciation sharing, plus the mandatory annuity added to the loan balance, plus the 2 percent extra fee tacked on at the end. Although the vast majority of reverse mortgages have never employed such payment terms, thousands that were marketed in the 1990s did.

    In the late 1990s, a series of California lawsuits claimed that terms such as these amounted to "financial abuse of the elderly" and allowed lenders to "[reap] unfair profits at the expense of the elderly," many of whom ended up owing far more than they borrowed.

    A consolidated class-action suit was later settled by the defendants — Transamerica Corp. Transamerica HomeFirst, Inc., Metropolitan Life Insurance Co. and Financial Freedom Senior Funding Corp — for $8 million. None of the companies admitted wrongdoing. Through a long chain of events spanning the mortgage crash, OneWest Bank acquired reverse mortgage assets that dated back to Transamerica and Financial Freedom Senior Funding, including the loan now in dispute.

    A widow and 78 when she originally obtained her loan from Transamerica Home First, Sarah C. Hoge, Havemeyer's mother, did not seek guidance from family members. Havemeyer's lawyer in the foreclosure case, Michael Walsh, says "I can't imagine that Mrs. Hoge really did understand what she was getting into." But she signed up, and ultimately did not opt out of the class-action settlement in California, which provided her a payment of $8,480.

    How Havemeyer's case ultimately turns out is anybody's guess. But the bottom line is this: Reverse mortgages, even today's friendlier versions that offer upfront counseling, can be hazardous to elderly borrowers' financial health and potentially costly for their heirs. Nearly one in 10 federally-backed reverse mortgages is in default, risking foreclosure for owners. Family members need to be involved from Day One. And stay involved.

Boot May Be Near For 13 Land-Renting Homeowners In Dilapidated Mobile Home Park Facing Foreclosure; Failing Infrastructure Requiring $750K In Water & Sewer Upgrades, Connection Fees May Be Too Tough A Nut To Crack For Interested Potential Buyers & Lead To Shutdown

In Bennington, Vermont, the Bennington Banner reports:
  • With their landlord in foreclosure proceedings and the infrastructure they rely on failing them, residents of the Sunset Farm Mobile Home Park eagerly sought answers Thursday from a host of town and state officials.

    Park owner John M. Bushee Jr. is not fighting foreclosure proceedings brought forth by Chittenden Trust Co. Bushee will eventually lose the land, leaving tenants unsure of their long-term living situation. They are facing the very real possibility the park will close, forcing them to find a way to relocate.

    The short-term situation is also dim. Residents described month after month of a failed water system, forcing those residing in the park's 13 housing units to purchase bottled water. Most residents are now subtracting the cost of bottled water from the rent they pay to lease the lots their homes sit on. Others, on the advice of Vermont Legal Aid, have begun placing their rent in escrow.

    Walking away

    Bushee has had problems supplying the park with a clean water supply since April 2012. The town of Bennington reached an agreement with Bushee to upgrade the system. The state has issued the requisite permits, but both tenants and state officials said Thursday it's clear Bushee is walking away from the property and has no intention of fixing it.

    "There is a permit out there that's approved but I don't believe the owner has any intention of putting in that new system," said Gary Kessler with the Vermont Department of Environmental Conservation.

    In the meantime, residents said they want to stop paying a monthly surcharge to Bushee for upgrades he claimed to make to the water system. Bushee signed an affidavit stating he has so far paid $4,900 to improve the water system. The $35 monthly surcharge cannot be assessed on each unit until that is paid off, according to Dale Azaria, general counsel for the Department of Housing and Community Development.

    The sewer system has also fared poorly. One woman, visibly upset, said contents of a septic tank "bubbled up" near her home leaving behind a bad odor. "My desire is to get out of the park," she said. "I can't afford to go anywhere else. I'm stuck here."

    Arthur Hamlin, housing program coordinator with the Vermont Department of Housing and Community Development, told residents Thursday that the bank has no interest in taking ownership of the park. The property will likely go to auction in the next several months, he said.

    A private buyer is unlikely to invest the necessary funds to make the park habitable for the long-term, however, according to John Broderick, executive director of Shires Housing, the Regional Affordable Housing Corp. for Bennington County.

    "I'm sorry to be the bearer of bad news here, but this is going to be a heavy bill," he said. "It's a pretty big bill, folks, and for 13 units it's going to be a tough sell."

    Broderick said his nonprofit organization was asked by the state to look into the issues surrounding the park and assess if it could take over the park. Broderick said he hired a civil engineer to investigate the water and sewer infrastructure. The findings are likely cost-prohibitive, he said.

    Anyone looking to acquire the property must pay down more than $30,000 in back taxes owed to the town. The bank is owed about $100,000. Additionally, it will cost about $150,000 to bring the water system up to current codes, and another $600,000 to connect the park to the town's sewer system, which appears to be the best solution, Broderick said.

    "Any new owner coming is going to be faced with a really, really large bill to get the water system to where it needs to be and to get either connected to the town system or get a workable septic system. It really might not even be possible," he said. "Would be willing to do it? Not under those circumstances. Not from what we've seen from this report. This would be very difficult. I have a board of directors I work for and I would have to convince them to take this on."

Renter Partially Blows Up Cockroach-Infested Chinatown Apartment House By Accident After Aerosol From Two Dozen Pesticide Foggers Ignites Gas, Blows Out Load-Bearing Wall; 60+ Residents Crammed Into Illegally Subdivided 'Deathtrap' Forced To Flee, Seek Red Cross Aid As NYC Officials Slap Structure Remains w/ Vacate Order

In the Chinatown section of New York City, the New York Post reports:
  • Cockroaches were the least of the problems for a Chinatown building that was blown apart by “bug bomb” canisters this week, officials said.

    It’s a deathtrap in there,” an FDNY firefighter said of 17 Pike St., which went up in a fiery explosion, injuring at least nine people, [...].

    An engineer called to investigate the five-story prewar structure described it as “a disaster” of illegal subdivides and fire hazards, and the Department of Buildings [] issued a full vacate order and slapped owner Mary Shiu with violations.

    At least nine people were injured in the blast, three critically.

    DOB inspectors found illegal partitions that compromised exits on the second through fifth floor, along with “illegal plumbing work and gas lines.”

    “There were inhumane living conditions,” said appalled structural engineer Gregory Georges. “There were a lot of violations. The apartments were subdivided. There were [illegal] SROs throughout the building. There were electric and gas lines everywhere.”

    The building — which can legally house 18 familieswas a maze of one-bedroom apartments split into four, the engineer said, with multiple sets of bunk beds in the rooms. Bathrooms had also been converted to bedrooms.

    Part of the building collapsed after aerosol from two dozen flammable aerosol pesticide foggers set out by a resident ignited on a pilot light or appliance and blew out a load-bearing wall, officials said.

    It will likely be a year before anyone can move back into the building, officials said.

    It is unclear how many people were living there but The Red Cross has had 61 residents register for emergency assistance.

    “I don’t know who is living here,” said co-owner Thomas Shiu. “I think there are a lot of illegal immigrants. We tell them it’s not allowed to put partitions in. Like the city, it is out of control.”

Lawsuit: Goy Landlord Allegedly Declared Rental Apartment “A Christian Residence!" As She Gave Orthodox Jew The Boot Over Refusal To Take Down Mezuzah From Front Door

In North Babylon, Long Island, the New York Post reports:
  • There was no welcome mat for his mezuzah.

    An Orthodox Jew claims he was booted by a Long Island landlord who demanded that he remove the treasured religious artifact from his apartment door and declared, “This is a Christian residence.”

    Arye Sachs says the mezuzah, a piece of parchment inscribed with verses from the Torah and typically hung in a special case at the entrance of a Jewish home, is a precious family heirloom handed down from his grandfather, a victim of the Holocaust.

    In a Brooklyn federal lawsuit, Sachs, 53, calls the mezuzah a “priceless, irreplaceable protector” that helped him recover from three strokes and even made his divorce “one of the most amicable and peaceful divorces known to man.”

    He claims that landlord Margarita Pascale, 57, repeatedly told him to take the mezuzah down from the door of the North Babylon home where she rented him an apartment and that she then evicted him when he didn’t.

    “Pascal [sic] informed me this residence is a Christian residence, and if I will not remove my mezuzah, I will be out ‘on the street,’ ” Sachs alleges.

    He says he discovered the mezuzah missing after returning from a trip last month. Pascale did not return a call for comment.
Source: Jew: I’m evict-im of bias.

For the lawsuit, see Sachs v. Pascal.

Friday, July 19, 2013

9th Circuit: No Right To Sue Landlords Under PTFA For Screwed Over Tenants In Foreclosed Homes; Right In Court Proceedings Limited To Defending Against Improper Boot

HousingWire reports:
  • Tenant protections are a way of life, especially in foreclosure cases, when a renter is often left dangling after a landlord loses a rental property to foreclosure.

    But no matter how many protections are crafted for tenants, a case out of the Ninth Circuit Court of Appeals, reveals just how slippery laws protecting renters can be.

    In Logan v. U.S. Bank National Association, the Ninth Circuit held that the 'Protecting Tenants at Foreclosure Act' does not create a private right of action for tenants to bring a civil challenge in court when they believe a financial firm has violated provisions of the act.

    Instead, the court said the act is designed to give tenants a defense to an eviction proceeding rather than a private right of action to file suit, enforcing parameters of the Act.

    The case developed when the plaintiff’s rental property ended up in the hands of US Bank after a foreclosure proceeding against her landlord. The tenant received a three-day notice of termination from the bank, according to the court records.

    Logan claimed in her lawsuit that the eviction process violated the Protecting Tenants at Foreclosure Act, which requires a 90-day notice prior to eviction when removing an existing tenant after foreclosure.

    Even though the act is designed to protect tenants, the ruling shows its power sticks when tenants are defending themselves against an eviction.

    With no private right of action under PTFA, renters stuck in this situation do not have the same power to create a "federal ejectment claim" or to enforce the PTFA.(1)
Source: Ninth Circuit: An act protecting tenants after foreclosure has its limits.

(1) Possibly, violation of the 'Protecting Tenants at Foreclosure Act' might give a screwed over tenant some basis to file suit against the landlord under a state unfair & deceptive acts & practices ('UDAP') law.

Divorced Hubby: My Deadbeat Former Wife Is Stiffing Bank Out Of House Payments On Ex-Marital Home, Forcing Me To Cough Up Cash To Pay Loan & Protect My Credit

In Jefferson County, Texas, The Southeast Texas Record reports:
  • A man claims he was forced to make payments on a $100,000 loan in order to protect his credit after his ex-wife failed to do so.

    Noel Jaimes-Chavez filed a lawsuit July 8 in Jefferson County District Court against Elisavet Flores.

    In his complaint, Jaimes-Chavez alleges he and Flores divorced in 2012. In the divorce proceedings, Flores was ordered to make payments on a $100,000 loan in Jaimes-Chavez’s name. The loan was the lien to the property awarded to Flores in the divorce, according to the complaint.

    Flores, however, failed to make the required payments, the suit states. In order to avoid a bad credit score, Jaimes-Chavez made the monthly payments for Flores, the complaint says. However, he claims he should not be forced to make the payments.

    In his complaint, Jaimes-Chavez seeks foreclosure on the property to satisfy his debt, damages, and costs, plus costs and other relief the court deems just.

5th Circuit Rejects Homeowner Attempt To Challenge Bankster's Foreclosure Based On Robo-Signed Assignments Allegations

The Louisiana Record reports:
  • Homeowners seeking to avoid foreclosure lost an appeal in the U.S. Court of Appeals for the Fifth Circuit against the Deutsche Bank National Trust Company.

    Dia and Joseph Reinagel, the appellants, attempted to prevent the bank from foreclosing on their property, claiming that the assignments issued by the bank to the appellants were “robo- signed” and therefore invalid.

    The court found that the Reinagels had no right to challenge the assignments nor be considered on merits.

    The court denied the appeal and stated that the Reinagles may be subjected to double collection.

    Judge Patrick Errol Higginbotham, Priscilla Owen and James E. Graves Jr. over saw the case.

Tuesday, July 16, 2013

NC AG's Efforts Lead To Shutdown Of Loan Modification Racket For Allegedly Clipping Homeowners For Upfront Fees, Failing To Providing Meaningful Help

From the Office of the North Carolina Attorney General:
  • A Charlotte loan modification company that claimed to help people lower their mortgage payments and save their homes from foreclosure but actually did little or nothing to help them is permanently out of business in North Carolina, Attorney General Roy Cooper announced [].
  • Cooper filed suit in September 2012 against Lender Exchange for charging consumers illegal advance fees for mortgage loan modification services and then failing to provide them with meaningful help. Under North Carolina law, it’s illegal to charge an upfront fee for foreclosure assistance or loan modification services.

    Wake County Superior Court Judge Donald Stephens signed off on a consent judgment which permanently bans Lender Exchange and its owners, Kenneth Carl McCurd and Tanya Louisa Wilson, from conducting any loan modification, foreclosure assistance or debt relief services in the state. The owners will also pay refunds of $4,000 to consumers who complained to Cooper’s office about their company. If the defendants violate the judgment, they will have to pay an additional $58,000.

    According to Cooper’s complaint, Lender Exchange falsely claimed that no homeowner who used its services had ever lost their home to foreclosure and promised prospective customers a full refund if it wasn’t able to obtain a loan modification for them. However, homeowners who paid Lender Exchange its fee of one month’s mortgage payment and did not get meaningful help have had a hard time getting their money back.
For the North Carolina AG press release, see Charlotte loan modification business shuttered, AG Cooper says.

Acting On Homeowner's Complaint, Local Cops Bag Pair For Allegedly Using Forged Affidavit To Hijack Possession Of Vacant Home In Foreclosure, Then Pocketing Thousand$ By Duping Local Couple Into Renting It Out

In St. Louis, Missouri, KMOV-TV Channel 4 reports:
  • Two thieves are accused of stealing a house in north St. Louis, then collecting thousands of dollars after renting it out to a couple. Dwayne Ellis and Bertha Williams had no idea anything was fishy when they agreed to rent the house for $650 per month until the real owner returned six months into their “lease."

    The actual owner of the north St. Louis house was living out of town following the foreclosure of this home earlier in the year.

    “She went to the house and found, while it was supposed to be vacant, there as another family living there, so she contacted county police," Detective Andrew Soll said.

    Police believe Clay Winston and Todd Edwards noticed the home was vacant and took over the occupancy. They allegedly forged an affidavit stating the actual owner granted them possession of the house. They then listed the house for rent and collected thousands that they had no right to legally receive.

    Winston and Edwards were charged with forgery and stealing. “They broke in, changed the locks to locks they provided and since they had keys to the house, they were able to dupe the other woman and her family,” Soll added.

Homeowner Facing Foreclosure Now Also Faces Two Forgery Counts For Allegedly Manufacturing Phony Court Orders Purportedly Allowing Him To Dodge Boot

In Plainfield, Illinois, the Plainfield Patch reports:
  • A Plainfield man facing foreclosure is also facing some legal troubles after he allegedly forged court orders to stay in his home longer.

    Marc Franzen, 46, of the 25000 block of Michele Drive, was arrested July 8 and booked into the Will County jail on two counts of forgery.

    Will County Sheriff's Department spokeswoman Kathy Hoffmeyer said an attorney for Bank of America brought the alleged fraud to light during a June 10 meeting with sheriff's detectives.

    An attorney representing the bank, which now owns the Michele Drive home, told detectives that the bank had been in the process of foreclosing on Franzen's home and evicting him for several years, according to Hoffmeyer.

    Last year, Franzen obtained a Will County court order granting him an extension on the eviction process, police said.

    "In 2012, he was given an eviction/extension order but that time had since come and gone," Hoffmeyer said. The bank attorney told police that no further extensions were granted to Franzen in 2013 — but that the Plainfield man was in possession of three Will County orders from February, March and June of 2013.

    Investigators believe Franzen fraudulently obtained the the orders, including the judge's and attorneys' signatures. A warrant for his arrest was issued June 28, Hoffmeyer said.
For more, see Plainfield Man Accused of Forging Court Orders to Stall Eviction Process (Marc Franzen also faces identity theft charges stemming from a Naperville investigation).

Monday, July 15, 2013

World's Largest Bill Collection Racket Agrees To Fork Over $3.2M Civil Penalty To Settle Charges Of Harassing Consumers With Illegal Dunning Practices

From the Federal Trade Commission:
  • The world’s largest debt collection operation, Expert Global Solutions and its subsidiaries, has agreed to stop harassing consumers with allegedly illegal debt collection calls and to pay a $3.2 million civil penalty – the largest ever obtained by the Federal Trade Commission against a third-party debt collector.

    In its complaint, the FTC charged that the companies violated the Fair Debt Collection Practices Act and the FTC Act by using tactics such as calling consumers multiple times per day, calling even after being asked to stop, calling early in the morning or late at night, calling consumers’ workplaces despite knowing that the employers prohibited such calls, and leaving phone messages that disclosed the debtor’s name, and the existence of the debt, to third parties. According to the FTC’s complaint, the companies also continued collection efforts without verifying the debt, even after consumers said they did not owe it.

    Under the proposed order, whenever a consumer disputes the validity or the amount of the debt, the defendants must either close the account and end collection efforts, or suspend collection until they have conducted a reasonable investigation and verified that their information about the debt is accurate and complete. The proposed order also restricts situations in which the defendants can leave voicemails that disclose the alleged debtor’s name and the fact that he or she may owe a debt.

    Also under the proposed order, the defendants must: stop falsely representing that they will not call a number to collect a debt; not harass, oppress, or abuse a consumer while attempting to collect a debt; not communicate with third parties about a consumer’s debt; not communicate with a consumer at his or her workplace if it is clearly inconvenient or prohibited by the consumer’s employer; except in limited circumstances, cease communications if a consumer has requested no further contact or if a consumer refuses to pay a debt; and not violate any provision of the Fair Debt Collection Practices Act. The defendants also are required to record at least 75 percent of all their debt collection calls beginning one year after the date of the order, and retain the recordings for 90 days after they are made.

    With more than 32,000 employees and revenues in 2011 of more than $1.2 billion, the Texas-based Expert Global Solutions and its subsidiaries – ALW Sourcing, LLC; NCO Financial Systems, Inc.; and Transworld Systems, Inc., which also does business as North Shore Agency, Inc. – collectively are the largest debt collector in the world. In addition to their U.S. offices, the companies operate in Canada, Barbados, India, the Philippines, and Panama.
For the FTC press release, see World's Largest Debt Collection Operation Settles FTC Charges, Will Pay $3.2 Million Penalty (Largest Civil Penalty Ever Obtained by the FTC Against a Third-party Debt Collector).

Jail Time Expected For Pair In Recent Unrelated Cases Involving Use Of Bogus Recorded Documents To Dodge, Delay Foreclosure

In Modesto, California, The Modesto Bee reports:
  • Several industry insiders charged in real estate scams have reached plea deals in recent weeks with prosecutors who say the spate of convictions is coincidence.

    Most will produce jail or prison sentences, rare for white collar crime in this area.

    "There is an emphasis on real estate professionals because of higher standards and the trust people place in them," said Jeff Mangar, a prosecutor with the Stanislaus County district attorney's real estate fraud unit.

    Chronologically, working backward:

    • Phil Sotelo agreed [] to a six-month jail sentence for filing phony documents with the county recorder's office in an effort to avoid foreclosure on his north Modesto home. He had owned Realty Executives Sotelo & Associates when arrested two years ago and had worked with other Modesto firms since 1989.

    Documents indicate he owed $1.4 million on his Papillon Drive home in a gated community and posed as a representative of his lender while deeding the property to a corporation he owned.
  • Gabriel Albor, who once owned Fidelity First Mortgage in Escalon, pleaded May 15 to a felony count of filing a bogus document to postpone losing his wife's property. He is expected to receive a six-month term when sentenced Aug. 7.

New Florida Law Puts End To Squatting Crackpots Who Use Bogus Adverse Possession Claims As Free Housing Vouchers; Procedures Enacted Leave Cops Without Excuses When Asked To Conduct Trespassing Probes Into Deadbeats Who Purportedly Hijack Possession Of Vacant Homes

In Tallahassee, Florida, the South Florida Sun Sentinel reports:
  • A squatter justifying his existence in a multi-million dollar home in Boca Raton went viral earlier this year, but it wasn't a laughing matter for the neighbors in Golden Harbour.

    Andre "Loki Boy" Barbosa occupied the house around Christmas and wasn't locked out until early February. The home at 580 Golden Harbour Drive was subsequently sold on May 6 for $2,229,900.

    "We felt it was important that no other neighborhood go through this," said Christine Cherepy, president of the Golden Harbour Homeowners Association.

    The community of 106 homes came together when this happened, Cherepy said. Led by 30 neighbors, "we contacted multiple representatives to try and change the law."

    That effort worked. Co-sponsored by State Reps. Jim Waldman, D-Coconut Creek, and Daniel Davis, R-Jacksonville, House Bill 903 was signed into law by Gov. Rick Scott on June 28 and went into effect on July 1.

    The state law prevents "acquiring title to real property by possession," according to the summary. The occupant would have to pay all taxes for seven years, file a return of the land for taxes, protect the property with an enclosure or cultivate it, and maintain and occupy the land.

Operator Of Alleged Loan Modification Scam Faces 15+ Counts Of Grand Theft, Burglary For Allegedly Ripping Off $35K+ From Homeowners Facing Foreclosure

In Tulare County, California, the Visalia Times Delta reports:
  • A Tulare County man accused of swindling more than $35,000 from people at risk of losing their homes was arrested last week in southern California.

    Five years after Ricardo Melgoza began a scheme to defraud homeowners in default of their mortgage loan, according to police, he was charged with more than 15 counts of grand theft and burglary.

    “There is probable cause to believe that from July 2008 to July 2010, Melgoza and additional agents, associates, affiliates and/or co-conspirators, engaged in a scheme to defraud homeowners for financial gain, and that the loss was in excess of $35,000,” stated Special Agent Cesar Sanchez in an arrest warrant.

    Melgoza, 43, is said to have swindled homeowners throughout Tulare, Fresno and Kern counties. According to police, Melgoza and at least five associates were operating under the business KNC Financiera. The group would target the Spanish-speaking community and aired numerous commercials with Spanish language media outlets.

    Melgoza, who’s being held in Tulare County’s Pretrial Facility, doesn’t have a valid Social Security number or driver’s license. He is also being held on an immigration hold, according to the arrest warrant.

    Police say Melgoza and associates would promise to obtain a home loan modification for the homeowners, in exchange for a fee anywhere between $1,500 and $3,400. Typically, Melgoza required an upfront cash payment for the fee.

    “It is currently illegal to accept fees for a loan modification,” said Lisa Stratton, a spokeswoman for the Department of Consumer Affairs. “The mortgage crisis brought a lot of fraud with it.”

    After the payment had been made, according to police, Melgoza would inform the homeowner that he was unable to obtain a loan modification. Instead, he referred them to one of two attorneys working in conjunction with Melgoza, police said.

    At times, he would refund the money back to homeowners, but used checks from an account with no available money, police added.

    Both lawyers, David Robinson and Mark Shoemaker, were disbarred by the state. In Robinson’s case, he was disbarred a year before the schemes began, the arrest warrant states.
For more, see Tulare County man arrested in foreclosure scam (Ricardo Melgoza to face 15 counts related to defrauding people in Tulare, Kern and Fresno counties).

Sunday, July 14, 2013

Colorado AG Begins Probe Into Accusations That High-Volume Foreclosure Mills Are Artificially Padding Their Costs When Processing Foreclosures

In Denver, Colorado, The Denver Post reports:
  • The Colorado attorney general is investigating whether law firms specializing in foreclosures regularly inflate the fees that homeowners must reimburse them in order to avoid losing their house, according to court records detailing the scope of the inquiry.

    Law firms pay as little as $25 for someone to post official notices on a property advising homeowners of their rights, but some then charge as much as $150 in the bills they file with the public trustee overseeing the foreclosure case, according to details contained in four lawsuits the attorney general's office filed against the law firms.

    In two cases, the law firms hired companies, known as process servers, owned by family members and friends, investigators say.

    The fees are allowed by law but are limited to the amount a lawyer actually paid or was billed for a service or expense such as mailing costs, property inspections, title searches and court docketing charges. The charges are tacked on to the overall cost of a foreclosure and the unpaid mortgage amount, then paid by the homeowner facing foreclosure, the foreclosing bank or investors who buy the property at public auction.

Colorado Judge Gives Preliminary Green-Light To Probe Into Alleged Inflated Costs Scam Targeting Foreclosure Mills, Ordering Attorney To Fork Over Paperwork Requested By State AG

In Denver, Colorado, The Denver Post reports:
  • With a handful of foreclosure lawyers listening intently from the back of the courtroom, a Denver District Court judge Thursday ordered one of their colleagues to comply with a state investigation into their billing practices — after denying efforts to close the case from the public.

    Judge Edward Bronfin said lawyer Robert Hopp Jr. must gather the paperwork subpoenaed by Attorney General John Suthers' office in its investigation of lawyers specializing in foreclosures and provide it within 60 days.

    Before that, Bronfin denied Hopp's request to keep the case from the public, saying the investigation had an "overriding public interest" that superseded Hopp's privacy rights.

    Hopp had complied somewhat with attorney general subpoenas issued months ago but has held back some of the most critical documents investigators said they need to determine whether the lawyer was padding his bills, Assistant Attorney General Erik Neusch said in court. Hopp said the investigation covers "about 10,000 files" going back at least five years.

    "The scope of the investigation is very simple: why (attorneys) charge more than their actual costs," Neusch told Bronfin. "Yet we can't get any of these law firms to give an answer to that."

    The investigation extends to at least a half-dozen law firms that have filed foreclosures in several Front Range counties, according to people familiar with the probe. The Hopp Law Firm was one of the state's most prolific in filing foreclosures.

    Hopp filed for personal bankruptcy in June after closing his law firm in April.

    Investigators are poring over the bills that lawyers submit in a foreclosure case that outline expenses for which they are entitled to be reimbursed.

    Investigators say in court documents they found records indicating those expenses — particularly the costs to post a pair of required notices advising homeowners of their rights — were inflated, sometimes by nearly 10 times the amount actually spent.

    The costs are paid by homeowners looking to keep their house from foreclosure, by the foreclosing bank or by the buyer of the property, usually an investor, at public auction.

Foreclosure Defense Attorney's Court Sanctions Now Total $300K+ For Improper Practices Engaged In During Course Of Representing Homeowners

In Minneapolis, Minnesota, the Star Tribune reports:
  • The chief federal judge in Minnesota has taken the rare step of ordering an investigation of a Minneapolis foreclosure lawyer who has been slapped with sanctions at least nine times since 2011.

    The sanctions imposed by federal district judges against William B. Butler total $323,307, according to Star Tribune calculations. The self-described Libertarian openly defies the judges on his website, Butler Liberty Law, reveling in their attacks and declaring he won’t pay. In an interview, he said he believes their criticisms are “illegitimate and unfounded.”

    Chief Minnesota federal Judge Michael Davis filed court documents last week appointing former chief federal Judge James Rosenbaum “to investigate [Butler’s] fitness to appear before this court, and to make a recommendation regarding appropriate disciplinary actions or sanctions.”

    Martin Cole, who heads the Minnesota Lawyers Professional Responsibility Board, said it’s “quite rare” for the federal judiciary to investigate a lawyer. It usually relies on the state board to conduct inquiries and supports their discipline.

    U.S. District Judge Patrick Schiltz announced last year that he was asking the state board to investigate Butler. Cole acknowledged last week that such a probe was underway. Now it appears that the local federal judiciary decided it was not going to wait for the state board’s conclusions.

    Butler has had cases in front of most, if not all, local judges, and several have publicly expressed exasperation.

    In a March 2012 memorandum, Schiltz hit Butler with a $50,000 sanction and another $7,500 in legal fees for the entities he’d sued, saying Butler had filed “nearly 30 frivolous lawsuits.” He called Butler’s arguments “evasive and often absurd,” said he misrepresents the facts withconstantly shifting and contradictory arguments.”

    Butler responded to those sanctions in a video on his website. “I haven’t paid it and I never will pay it and I don’t have the resources to pay it,” he said.

    In another case, in June 2012, U.S. District Judge Ann Montgomery ordered Butler to pay a $75,000 sanction, plus $17,068 in attorneys’ fees.

    Butler’s insistence on re-litigating losing arguments is staggering, and it comes with a cost, because it multiplies the expense of litigation and monopolizes scarce judicial resources,” she wrote. “Moreover, no one, not even Butler, can reasonably or competently believe in the merits of any of these arguments.”

    In August 2012, U.S. District Judge Donovan Frank hit Butler with $45,451 in sanctions. He said Butler’s “baseless” arguments had been “consistently rejected” by other courts. He also noted that Butler had defaulted on his mortgage and had “been living in his house for more than three years without making any payments.”

    A few days later, the 8th Circuit Court of Appeals affirmed an earlier Frank decision upholding the 2010 foreclosure on Butler’s house, which Butler and his wife, Mary, purchased in 2006 for $280,000. The Appeals Court labeled Butler’s reasoning “deficient” and having “no merit.”

    Butler said he remains in his home, having started a second action against Fannie Mae. U.S. District Judge Susan Richard Nelson threw that case out, but Butler said it is on appeal.

Florida Appeals Court To Foreclosure Defense Firm: Quality Of Legal Work In One Case "Disturbing" & "Resulted In A Waste Of Judicial Resources &, Perhaps, An Injustice To The Litigants"

In Orlando, Florida, the Orlando Sentinel reports:
  • When Emmett B. Hagood III's foreclosure case came before a judge last year, his Orlando lawyers were nowhere to be found. The judge promptly ruled against Hagood, and his home was eventually auctioned off by Wells Fargo & Co.

    Now an appeals court has fined KEL law firm partner Craig Lynd and staff lawyers Richard W. Withers and Angela Domenech, citing them for "multiple acts of professional negligence," according to a recent ruling from the Fifth District Court of Appeal.

    Though it found no intentional misconduct, the court's order on June 28 stated the lawyers had shown "systemic flaws in internal procedures, a lack of understanding of substantive law and rules of procedure, and a lack of supervision by senior lawyers."

    They were fined a combined $1,000.

    "The quality of the legal work performed by KEL's attorneys in this case is disturbing," the court said in a preliminary opinion in May. "It resulted in a waste of judicial resources and, perhaps, an injustice to the litigants."

    It was the latest legal snag for the Kaufman, Englett & Lynd law firm, known for its high-volume foreclosure defense, bankruptcy and loan-modification practices. The firm has been the target of a number of client complaints to the Florida Bar alleging impropriety or ethical violations. Some have been resolved in the firm's favor, while others are still being investigated.

    The Hagood case, however, was an embarrassment and "one of those 'perfect storm' circumstances not likely to be repeated," said KEL attorney Richard Withers, the case's lead counsel.

    "The fine was, fortunately, modest. I've practiced for 40-plus years without being criticized or sanctioned by a court," he said in an email. "So it still stung. We learn from it and keep working."

    The errors in Hagood's case began with a clerical scheduling mistake that caused KEL's lawyers to miss the final foreclosure hearing, according to court records. After the trial judge ruled for Wells Fargo, KEL argued "excusable neglect" in a motion to dismiss the judgment. The trial court rejected KEL's motion, setting the stage for the appeal.

    Things got worse at the appellate court, where KEL argued its lawyers had never even received notice of the final foreclosure hearing – a point refuted by the record, according to the court. Though KEL later realized its mistake, the lawyers failed to acknowledge that to the appellate judges and instead launched a new set arguments against the lower court ruling.

    Withers said the situation was caused by a communications breakdown between himself and Domenech, who was working remotely at the time. Lynd's name was added to the appeal only as a formality and he was not directly engaged in the case, though that drew the judges' criticism as well.

    Withers said the firm has now established new protocols to prevent the mistakes from happening again.
Source: KEL lawyers fined in foreclosure case.

For the court ruling, see Hagood v. Wells Fargo, N.A., Case No. 5D12-2016 (Fla: App. 5th DCA, May 17, 2013).