Saturday, February 20, 2016

NYS Announces Campaign To Run Statewide 'Stings' Using Undercover Fair Housing 'Testers' Posing As Renters, Home Buyers To Bag Discriminating Landlords, Real Estate Brokers & Sellers

In Albany, New York, the New York Daily News reports:
  • Gov. Cuomo [] announced a new state undercover program designed to root out discrimination in home rental and sales.

    "Discrimination in housing is not just immoral, it's not just wrong, it's not just unethical, it's also illegal," Cuomo told parishioners at Convent Avenue Baptist Church in Harlem. "We haven't been aggressive in enforcing the law in the past."

    Dubbed the Fair Housing Enforcement Program, trained "testers" will pose as potential renters or home buyers in order to uncover potential discriminatory bias amongst sellers and landlords.

    The testers, which will come from three fair housing agencies hired by the state, will be of different racial, gender and economic backgrounds. Some will be persons with disabilities.

    The treatment the testers receive will be documented and the results analyzed.

    Real estate agents, brokers, and landlords believed to be engaging in discrimination will be investigated and prosecuted if violations of the federal Fair Housing Act and state Human Rights law are found.

    "We want to show this state that we are not going to tolerate anti-discrimination of anyone by our deed," Cuomo said.
For more, see Gov. Cuomo announces undercover program to root out housing discrimination.

For the position of the New York State Association of Realtors on this development, see New York State’s REALTORS support Gov. Cuomo’s focus on Fair Housing for all.

Evanston Landlord/Developer Of Recently-Built, 175-Unit Residential Complex Agrees To Cough Up $175K To Fair Housing Group, Will Make Accessibility-Related Retrofits In Resolution Of Allegations Of Discrimination Against People w/ Disabilities

In Evanston, Illinois, Progress Illinois reports:
  • The fair housing advocacy group Open Communities(1) says it has reached a settlement with developers in Evanston to make an eight-story apartment building accessible to people with disabilities.

    The agreement [] settles a disability-related housing discrimination lawsuit brought by Open Communities against developers Focus Development, Inc. and Booth Hansen, Ltd.

    The lawsuit claimed the Evanston apartment building, constructed in 2013, failed to meet accessibility requirements under the federal Fair Housing Act.

    As part of the settlement, building modifications will be made over the next five years to make the 175 apartments and common areas accessible for people with disabilities, according to Open Communities.

    "Today we celebrate a victory for people with disabilities in Evanston. And by upholding their fair housing rights, we also uphold the rights of all people, including those with mobility impairments, to live in the housing of their choice," Open Communities Executive Director Gail Schechter said in a statement.

    The developers also agreed to pay $175,000 in damages to Open Communities.

    "This is the largest fair housing settlement in Evanston in more than 25 years since Open Communities (then known as the Interfaith Housing Center of the Northern Suburbs) and the city of Evanston successfully sued five real estate firms for racial steering and discriminating against African American home buyers," the organization noted in a news release.
Source: Disability Housing Discrimination Suit Settled In Evanston.
(1) Open Communities is a fair housing advocacy group in Winnetka, Illinois that, among other things, conducts housing discrimination investigation, provides housing rights education and referrals, and and provides foreclosure prevention services and advice in landlord-tenant matters. Their services are confidential and provided free of charge.

Their service area comprises the northern Cook and southern Lake County municipalities of Deerfield, Des Plaines, Evanston, Glencoe, Glenview, Highland Park, Highwood, Kenilworth, Lincolnwood, Morton Grove, Niles, Northbrook, Northfield, Park Ridge, Skokie, Wilmette, and Winnetka.

NYC Landlord/Developer Agrees To Make Expensive Retrofits In Nine Recently-Built Residential Complexes & Fork Over Up To $950K To Resolve Federal Lawsuit Alleging Its Buildings Had Accessibility Issues For People w/ Disabilities

In New York City, The New York Times reports:
  • Glenwood Management, a politically influential developer of luxury high-rise apartment buildings in Manhattan that figured in two recent public corruption trials, has agreed to settle a civil rights lawsuit that claimed three of its residential complexes violated the Fair Housing Act’s requirements for people with disabilities.

    The settlement was detailed in a consent decree approved [] by Judge J. Paul Oetken of Federal District Court in Manhattan, who will retain jurisdiction to enforce the deal’s terms for three years, according to the document.

    Glenwood agreed to make alterations at the three complexes in Manhattan, and to inspect six others and, if necessary, retrofit those as well, according to the deal the developer struck with the office of Preet Bharara, the United States attorney for the Southern District of New York.

    Glenwood also agreed to pay up to $900,000 in compensation to people who suffered as a result of what the decree described as the firm’s “discriminatory housing practices.” The developer also is to pay a $50,000 civil penalty.
    One of the buildings is Liberty Plaza, a 287-unit complex at 10 Liberty Street in the Financial District that Glenwood says was the first high-rise rental building constructed in Lower Manhattan after the Sept. 11, 2001, terror attacks. It was designed and constructed with many inaccessible features, Mr. Bharara’s office said, like a lack of space in bathrooms and kitchens for people in wheelchairs, and bathroom configurations that prevented the installation of “grab bars.”

    In the consent decree, Glenwood agreed that “without admitting liability,” it would address the alleged housing act violations. In a written statement [], it said it would work to “enhance the accessibility” of the nine buildings cited in the agreement.

    Mr. Bharara, whose civil rights unit handled the case, said on Friday that the Glenwood lawsuit was the 10th filed by his office to “ensure that the promise of the Fair Housing Act — that newly built residential buildings are accessible to people with disabilities — is being fulfilled in New York City.”

Alabama Construction Company Denies Discrimination Charges, But Agrees To $350K Fair Housing/ADA 'Squeeze' To Resolve Allegations It Built Low-Income Housing Complexes Throughout South That Contained Significant Barriers For People With Disabilities

In Birmingham, Alabama, the Atlanta Journal Constitution reports:
  • An Alabama-based construction company is settling claims that it built housing complexes that violate the Fair Housing Act and the Americans with Disabilities Act.

    Documents filed in U.S. District Court in Birmingham [] say Gateway Construction Corporation, its owner and CEO Allan Rappuhn and affiliated companies are ordered to create a $300,000 settlement account and pay a $50,000 civil penalty.

    Prosecutors have said Gateway used federal low-income housing tax credit incentives to build complexes that posed significant barriers to disabled people. The lawsuit listed 36 properties in Alabama, 25 in Georgia, nine in North Carolina and one in Tennessee.

    Gateway officials said in a statement that they agreed to the settlement to avoid time and cost of litigation and the company denies all of the justice department's allegations.

Despite Strong Community Opposition, 30-Bed Drug/Alcohol Detox Center & 40-Bed Sober Home About To Break Ground In Port St. Lucie; City Forced To Reverse Initial Denial Of Controversial Project To Settle Developer's Fair Housing Suit Alleging Discrimination Against Recovering Addicts

In Port St. Lucie, Florida, TCPalm reports:
  • Construction is to begin this month on a controversial drug-and-alcohol detox center that sparked outrage from neighbors nearly three years ago, according to its medical director.

    The $6 million Torino Addiction Treatment Campus is awaiting its city building permit, said Stuart neurologist and addiction specialist Dr. Jose Toledo. Toledo also heads New Life Addiction Treatment Center in Palm City.

    "We're finalizing everything with the bank, and if everything goes as expected we should break ground later this month," Toledo said.

    A lack of funding delayed the project, Toledo has said.

    Once completed, the 3.93-acre campus, on Northwest East Torino Parkway at Northwest Zenith Drive, would comprise two one-story buildings — a 30-bed, 9,900-square-foot drug-and-alcohol detox center; and a 40-bed, 14,000-square-foot sober home.

    Toledo anticipates the detox facility would be complete in December. He hasn't finalized construction plans for the second building, he said.

    Toledo said he has applied for a building permit. City officials, though, could not locate an application for the permit, Building-Code Administrator Joel Dramis said in an email.

    Neighbors who make up the Torino Residential Committee held numerous protests and packed City Hall in fierce opposition to the project. They argued the center would increase crime and drive down property values. The group had no comment Thursday.

    Toledo in 2013 applied for a special-exception use for detoxification services. The City Council denied the application, but reversed its decision several months later to settle a discrimination lawsuit filed by Toledo.

    Under the Americans with Disabilities Act, the Federal Fair Housing Act and the Rehabilitation Act of 1973, recovering alcohol and drug addicts are considered disabled, and denying them housing could be discriminatory.

Friday, February 19, 2016

Void vs. Voidable Mortgage Assignments: California Foreclosed-Upon Homeowners Score Big Win Over Sloppy Banksters; "[A]n Allegation That The Assignment Was Void, & Not Merely Voidable At The Behest Of The Parties To The Assignment, Will Support An Action For Wrongful Foreclosure," Say State Supremes In Unanimous (7-0) Decision

In Sacramento, California, National Mortgage News reports:
  • The California Supreme Court on Thursday ruled that borrowers may challenge a wrongful foreclosure on the grounds that the assignment of the deed of trust was invalid.(1)

    The decision in Yvanova v. New Century Mortgage Corp. has the potential to radically increase the number of lawsuits brought by borrowers, particularly on loans that were pooled into securitized trusts, experts on both sides of the issue said.

    "There will be a flood of litigation only because the lending industry was not diligent in doing its paperwork during the housing finance boom," said Richard Antognini, who represented the plaintiff, California homeowner Tsvetana Yvanova.

    The decision tackles a question that became important after the housing market's collapse in 2008: can a defaulted homeowner contest the validity of the chain of assignments involved in the securitization of loans?

    In 2012 Yvanova challenged the foreclosure and public auction of her Woodland Hills, Calif., home, alleging there was a four-year break in the chain of title, essentially making it void.

    Yvanova in 2006 took out a loan for $483,000 from Irvine, Calif.-based New Century Mortgage, which went bankrupt the next year. In 2011 the mortgage servicer Ocwen Loan Servicing executed an assignment of the deed of trust on Yvanova's loan to Deutsche Bank, which served as a trustee of a Morgan Stanley investment trust.

    But Yvanova alleged that the Morgan Stanley investment trust had a closing date of January 2007 and should never have been assigned the mortgage. But the foreclosure went through, and Yvanova ultimately was evicted in May 2015.

    Multiple lower courts in California had ruled in high-profile cases such as Jenkins v. JPMorgan Chase that borrowers have no standing to file a claim of wrongful foreclosure because they are not a party to or holder of the debt.

    However, the state Supreme Court disagreed with those rulings and essentially sided with a 2013 state appellate ruling in Glaski v. Bank of America, which held that a borrower has standing to challenge a nonjudicial foreclosure sale based on alleged violations of the terms of a pooling and servicing agreement.

    "The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security," the Supreme Court stated in a 33-page ruling. "A homeowner who has been foreclosed on by one with no right to do so has suffered an injurious invasion of his or her legal rights at the foreclosing entity's hands. No more is required for standing to sue."

    The case now will go back to the state Court of Appeals or a trial court, which would decide on the merits of Yvanova's claim.

    Frederick Levin, a partner at BuckleySandler, said the decision will breathe new life into the foreclosure defense bar, which believes that a loan assigned into a securitized trust after the trust's closing date makes the assignment void.

    "This decision has [the] potential to increase litigation challenging securitized loans," said Levin, who on behalf of banks has long argued that contractual language gives investors and lenders broad latitude to reassign loans.

    Others said the court was sending a big message to the lending industry.

    "This was the court in California directing lenders and Wall Street securitizers to be very careful in documenting their instruments and assignments," said Kenneth Styles, a litigator at the law firm Miller Starr Regalia. "They've been more than sloppy in the past, and this was a directive to make sure their procedures are clean."

    Antognini, the attorney for Yvanova, put it this way: "if you claim you own a debt, you have to prove it. And if you claim to own a debt, the borrower has the ability to allege and later to prove that you don't own it."
Source: Calif. Supreme Court Lets Borrowers Challenge Wrongful Foreclosures.

For the court ruling, see Yvanova v. New Century Mortgage Corp., S218973 (Cal. February 18, 2016).

Editor's Note: Having a clear understanding of how this ruling may lead to a flood of litigation against banksters guilty of using sloppy mortgage assignments in their chains of title, the California Supreme Court took great pains in trying to tamp down the excitement this ruling will create within the foreclosure defense bar.

In that light, the court prefaced its ruling with the following admonition:
  • Our ruling in this case is a narrow one. We hold only that a borrower who has suffered a nonjudicial foreclosure does not lack standing to sue for wrongful foreclosure based on an allegedly void assignment merely because he or she was in default on the loan and was not a party to the challenged assignment.

    We do not hold or suggest that a borrower may attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party‘s right to proceed.

    Nor do we hold or suggest that plaintiff in this case has alleged facts showing the assignment is void or that, to the extent she has, she will be able to prove those facts.

    Nor, finally, in rejecting defendants‘ arguments on standing do we address any of the substantive elements of the wrongful foreclosure tort or the factual showing necessary to meet those elements.
(1) From the introductory part of the ruling:
  • The collapse in 2008 of the housing bubble and its accompanying system of home loan securitization led, among other consequences, to a great national wave of loan defaults and foreclosures. One key legal issue arising out of the collapse was whether and how defaulting homeowners could challenge the validity of the chain of assignments involved in securitization of their loans. We granted review in this case to decide one aspect of that question: whether the borrower on a home loan secured by a deed of trust may base an action for wrongful foreclosure on allegations a purported assignment of the note and deed of trust to the foreclosing party bore defects rendering the assignment void.

    The Court of Appeal held plaintiff Tsvetana Yvanova could not state a cause of action for wrongful foreclosure based on an allegedly void assignment because she lacked standing to assert defects in the assignment, to which she was not a party. We conclude, to the contrary, that because in a nonjudicial foreclosure only the original beneficiary of a deed of trust or its assignee or agent may direct the trustee to sell the property, an allegation that the assignment was void, and not merely voidable at the behest of the parties to the assignment, will support an action for wrongful foreclosure.

Title Search Screw-Up At Center Of Controversy Leaving Recent Hombuyer-Couple Wrestling w/ Bank Over Ownership Of Home, Despite Never Having Missed A Payment

In Tampa, Florida, WFLA-TV Channel 8 reports:
  • Kris and Rebecca Kraft face losing their South Tampa Home, even though they’ve never missed a mortgage payment. They never even did business with the bank trying to take their home.

    The Krafts bought their house, at 1508 S. Arrawana Ave., in 2013. Everything was fine, but then they started receiving strange mail from real estate professionals. The professionals offered to help the couple fight foreclosure or relocate to another home they could afford.

    “It’s mind blowing that something like this could happen,” Kris Kraft told 8 On Your Side.

    Then the situation got worse. They came home to find foreclosure notices taped to their front door and garage. Plus, a “relocation specialist,” hired by Nationstar Bank, started calling constantly, wanting to the Krafts to move out.

    And then, the unthinkable happened. A friend in the real estate business called them to ask why their house was listed for sale on The Krafts had no idea and panicked. It was late at night when they got the news.
    Here’s a rundown of how thing unraveled:

    The house first sold in 2004. That buyer took out two mortgages from two different banks and then lost the home to foreclosure in 2013. This is when things got weird. The second mortgage holder beat the main mortgage holder in a race to foreclose. That bank sold the home to an investor who then flipped it to the Krafts.

    But no one caught the big title mistake. The home should have never been sold because of the clouded title. Then in December 2015 the first mortgage holder, now Nationstar Bank, decided to foreclose on its lien and take the title. Today, both Nationstar and the Krafts claim title.

    For the Krafts, it’s a nightmare. They have a 4-month-old baby and gave a down payment of $80,000. They also stand to lose years of equity and improvement, such as new windows and a custom driveway.

    A spokeswoman for Nationstar said the bank was not aware of the problems until contacted by 8 On Your Side. She vowed to get to the bottom of things and promised to take the Krafts’ home off of the real estate market until the issues are sorted out.

    The Krafts did buy title insurance when they bought the home from Old Republic. 8 On Your Side went there for answers, too, but no one would come out of a fancy Tampa office to answer questions.

    The title insurance could cover mortgage costs for the Krafts if they have to give their home back to Nationstar, but that doesn’t make the Krafts feel much better. They want this sorted out so they can keep their home.

    “It makes me sick,” Rebecca Kraft said. “It makes me physically ill. I can’t tell you. Every time I walk by, there’s photos on the wall. It breaks my heart.”

Recent Homebuyer Gets Slammed With $18K Bill For Undisclosed Sewer Hook-Up Charge Two Months After Closing; Lien Was Unrecorded At Time Of Sale, But Related Easement Was Recorded & Disclosed On Title Insurance Policy

In Lincoln County, Missouri, KMOV-TV Channel 4 reports:
  • Leonard Bogacki bought his home in Lincoln County in 2014. One of the added attractions of the home was that it was connected to a sewer, as opposed to a septic system.

    Two months after moving in, Bogacki and the other homeowners in his neighborhood got an unexpected bill from Lincoln County Clerk Crystal Hall for $17,905.

    The bill included a warning that if it was not paid a lien could be placed on the property.

    Bogacki is on disability and brings in less than $1,000 a month. He said he can’t afford that kind of a bill on top of a mortgage.

    Hall told News 4 she understands that Bogacki and the other homeowners are in a tight spot. She explained the bill dates back to 2009, when residents of the neighborhood agreed to hook up to city sewers and to the formation a neighborhood improvement district, also known as “NID.”

    Bogacki said he was never told about the bill in any of the usual home disclosure statements.

    “It’s a series of unfortunate circumstances for Mr. Bogacki. The fact that it wasn’t disclosed to him was the main thing I do feel for him,” Hall said.

    When he bought the home, Bogacki did everything he was supposed to. He hired Tom Burkemper’s title company to search for outstanding liens.

    Burkemper said the lien didn’t show up because no liens had been recorded at that time.

    While the lien was not recorded at the time of sale, an easement was, and is listed on the title company’s paperwork.(1) But, there are several other easements listed as well, which is common when homes are bought and sold, and those won’t result in liens.

    Bogacki says he cannot afford to pay the amount.

    “There’s no way,” he said, “I get $916 a month on disability. I’m barely scraping by.”

    When asked who’s responsible, Hall said, “In my opinion the seller or real estate agent should have been the one to disclose that information to him.”

    Bogacki’s agent said there were no red flags, and no indication a bill was coming.

    The selling agent said his client bought the house as a foreclosure and didn’t disclose the NID, because his client didn’t know about the NID.

    As a result, Bogacki can’t sell the house unless he pays up or gets an attorney to fight it.
Source: News 4 Investigates: $17,000 sewer bill.
(1) It appears that the screwed-over homeowner may possibly have a legal against the title insurance underwriter, the agent who conducted the title search, and the attorney who represented him at the closing of sale (if he had one) for missing the unrecorded lien.

While the lien was unrecorded at the time of sale (often referred to as an "off-the-record" lien), the constructive notice created by the properly-recorded easement relating to the neighborhood improvement district ("NID") placed the title insurance agent (and/or the homeowner's attorney) on implied notice (also referred to as "inquiry notice") of the possible existence of outstanding charges for any special assessments in connection with the property improvement for which the NID was created.

That notice, consequently, imposed a duty upon the agent (and/or the homeowner's attorney) to make the further appropriate inquiry that any reasonable person would be expected to make to ascertain whether there were any unpaid special assessments owed to the NID for the improvements related to the sewer connection (ie. the reason why the NID was created in the first place). Had such an inquiry of the NID been made by the title insurance agent (or homeowner's attorney), it would have led to the discovery of the unrecorded lien for the outstanding $17,905 sewer connection charge.

Alleged Lack Of Proper Notice At Center Of Another Battle Between Foreclosing Municipality & Homeowner Over Unpaid Real Estate Taxes; Teaxs Appeals Court Reinstates Pro Se Owner's Effort To Void Sale, Keep Home

In Beaumont, Texas, The Southeast Texas Record reports:
  • The Ninth Court of Appeals recently reinstated a civil case against Jefferson County alleging wrongful foreclosure of a tax sale.

    As previously reported, Charles Kirkwood filed suit against W. Properties LLC and Jefferson County in Jefferson County District Court on Nov. 12, 2013.

    Kirkwood, the owner of a property located at 2356 Briarcliff Drive in Beaumont, filed a writ of review after his property was allegedly sold at a sheriff’s sale without adequate notice.

    Court records show that after Kirkwood’s motion for a new trial was granted last year, the county filed motions to dismiss for lack of standing and for lack of jurisdiction, which were both granted.

    On July 29 Kirkwood filed a pro se appeal with the Ninth Court, seeking injunctive relief to prevent the county from denying him possession of his real property.

    Seven months later, justices reversed the trial court and remanded the case for further proceedings, finding that while Kirkwood may not be able to maintain a suit for damages against the county, he can maintain a suit for equitable relief based on an alleged deprivation of his property without due process.

    “Because governmental immunity does not bar Kirkwood’s due process claim for equitable relief, the trial court erred by granting the County’s motion to dismiss for lack of jurisdiction,” the Feb. 11 opinion states.

    “Under these circumstances, we sustain Kirkwood’s complaint challenging the dismissal of his lawsuit, we reverse the trial court’s orders granting the County’s motions to dismiss, and we remand for further proceedings consistent with this opinion.”

    Case background

    In January 2012, the county filed suit to collect overdue property taxes but named Sara Gleason, the previous owner, as the defendant.

    Kirkwood acknowledges that his property taxes were in arrears but says he was never notified that the house would be put up for sale, since Sara Gleason was the named defendant in the lawsuit.

    Kirkwood claims that in August 2010 the property was sold without his knowledge to W. Properties LLC.

    Kirkwood says Jefferson County should have known he was the owner of the property because it was titled in his name, and they should have notified him about the lawsuit and the sale. Instead, Kirkwood claims he found out about the sale when W. Properties LLC asked him to vacate.

    Kirkwood wanted to void the sale and get his property back.

    He originally asked the court to vacate the judgment, void the Writ of Execution and grant an injunction to stop W. Properties from taking any more steps to remove Kirkwood from the property.
Source: Ninth Court reinstates property suit against Jefferson County.

For the Texas appeals court ruling, see Kirkwood v. Jefferson County, No. 09-15-00296-CV (Tex. App.-Beaumont [9th Dist.] February 11, 2016).

Thursday, February 18, 2016

Kentucky Homeowner Keeps Finding Himself Targeted By Foreclosure Trash-Out Contractors Despite Not Being In Foreclosure

In Lexington, Kentucky, WLEX-TV Channel 18 reports:
  • One group of movers hired by a mortgage foreclosure company to clean out a house say they didn’t find out the house wasn’t actually foreclosed until their moving truck was almost half full.

    They were cleaning out the house because everything left behind is cleared out when a bank forecloses a house.

    The only problem was this house wasn’t actually foreclosed.

    The homeowner called Sheriff Mark Bess Wednesday morning to tell them that the movers were there. “A neighbor called him and told him his house was being foreclosed upon and they were at the wrong address,” said Bess.

    LEX 18 Investigative Reporter, Richard Essex, was told that this is the third time movers have tried to clean out this house in two years.

    The movers have been ordered by the sheriff to put everything back as they found it and that they could face trespassing charges. “They have offered to make full restitution, replace anything that was damaged in their attempt to move items out of the residence,” said Bess.

    The sheriff says that if it hadn’t been for the neighbors, the house would have been completely cleaned out.

Contract For Deed: Handy, Informal Way For Sleazy Investors To Trap Novice, Low-Income, Crappy-Credit Homebuyers w/ Long Term Contracts For Dilapidated Homes; Typically Avoids Standard Formalities (Appraisal, Inspection, Title Search, Attorney Review) Of Conventional Sales; No Different From 'Buy-Here, Pay-Here' Used Car Lots; 'White Picket Fence' Dreams Used Against Victims, Says One Lawyer

In Corpus Christi, Texas, the Corpus Christi Caller-Times reports:
  • Arturo Rodriguez wished for a house of his own for most of his life. When he found someone who would sell him one, he willingly stepped into a trap.

    "I wanted a house," he said. "My credit was bad. This was all I could afford. It was falling apart."

    Rodriguez and hundreds of others entered into a type of legal arrangement called a contract-for-deed.(1) House dwellers make payments, pay taxes and insurance on a house as if they own it, but they don't receive the property deed until it is paid off. Equity doesn't accrue. Interest rates are high, a home inspection and appraisal aren't conducted and repairs are the responsibility of the residents.

    Seven years ago, a storm damaged Rodriguez's roof and water soaked through to his ceiling tiles. He eventually made repairs himself, spending at least $10,000 to $12,000.

    He already has paid for the house's $50,000 sale price through his monthly payments, but because of the high interest rate, his deed wont mature for another eight years. By that time, he could have bought his house twice. His monthly payments that were $470 are now $620.

    The questionable sales become a public concern when the houses are falling apart, trash accumulates in yards and weeds grow wild. The city has to follow a legal maze to find out who is accountable.

    It's a problem that puzzles city leaders, plagues neighborhoods and makes a living for a small group of people -- owners who have a convenient, legal exit from maintaining the property.

    Those who sell and rent the houses say they're giving people with bad credit and low incomes an opportunity to own a home they wouldn't have otherwise. The contracts are legal, and people should know what they're getting into, they said.

    Despite legal reforms that now allow those such as Rodriguez to modify contract-for-deeds to their advantage, the local agency that offers free legal assistance to the needy couldn't convince anyone to file the paperwork.

    While homeowners can sell their houses and renters can walk away from the dilapidated properties when their lease expires, this group of people has few options.

    Because it's often those with low or middle incomes and bad credit who sign up, repairs often lag. When absentee landlords sell groups of houses under these contracts, neighborhoods take a turn for the worse.

    Councilman Kevin Kieschnick, who represents a district that includes many rundown neighborhoods where renters entered such agreements, asked city officials to develop a plan to tackle the problem. But the contract agreements are legal, not always abused and difficult for the city to track.

    "These people are being taken advantage of," he said. "This is predatory lending at its worst. There are holes in these peoples floors."

    The agreements aren't all scams, but many are, said Darrell W. Cook, a Dallas-based real estate contract attorney.

    "They can be legitimate, but they are the perfect way to get scammed," he said. "You're someone who can't qualify. You think it's a lot better than leasing the property. Its really not anything different from a buy-here, pay-here auto lot. They're assuming you're going to fail. It's using their dream of a white picket fence against them."

    Jacqueline Capriles said she didn't realize what she was getting into when she bought her Northside home last March. She wanted an escape from rising rent at her Flour Bluff apartment. A friend recommended her to Ralph Shepard, who with his wife owns more than 70 moderately priced houses on the Northside and central area of the city.

    Her agreement isn't a contract-for-deed, but it is an owner-financed house that she believes is a rent-to-own agreement. "Stupid me, I signed that contract," she said. "The house is basically falling apart."

    Capriles' 30-year contract ties her to $650 monthly payments for a house that is appraised at $63,000. The interest rate is 12 percent, twice what many homeowners pay.

    When she moved her furniture into the front bedroom, an heirloom dresser started sinking through the floor. Her partner, Melissa Bolten, fell through a soft spot in the bedroom floor. The walls started cracking. She learned that holes in the walls were covered by a piece of stick-on tile. Every doorway is slanted. The gap between the porch steps and the house floor is wide enough to stick a finger through.

    The floor tilts in various directions. Soup cans roll downhill from one side of the kitchen to the other.

    Capriles said Shepard told her he was fixing it up. Her contract says otherwise. The house was sold as-is, without an inspection. "I try to fix it a little bit here and there," she said. "It's going to cost more than I ever make. I'm pretty much stuck here. If a real good wind would come along, it would be gone."

    Shepard tells a different story. Buyers should know what they're getting into, he said. "I tell them to check it out," he said. "I say, 'Take people over. Have an inspection. It's as-is." He told Capriles they could leave the house behind soon after they moved in and began complaining, he said. They didn't.

    He's made a living buying foreclosed and dilapidated houses and selling them on owner-financed contracts. Although he said he hasn't done a contract-for-deed in several years, he finances the houses himself. Buyers, many with bad credit scores, pay him directly. Capriles signed the contract thinking she was renting to own, she said.

    Shepard says the houses were sold outright but sees many buyers abandon the homes when they can't make payments. He then tries to sell them again.

    He said the legal arrangements with his buyers allow them to sell the house. In more than 15 years, his name is attached to more than 175 sales registered in the Nueces County Clerk's system. He estimated about 20 to 25 people sold their houses.

    "Trying to sell their house doesn't even enter into their mind," he said. "They might owe me three or four months of payments. They just walk away."

    That leaves Shepard with the cleanup bill. "Sometimes, it will look like a bomb went off inside," he said. "They leave all their dirty clothes. The pick up and go. It turns into my responsibility again, and I deal with it."

    Shepard said he would like the city to focus its enforcement on tenants. "When they go after the landowner, those people realize they can just move out," he said.

    The city doesn't have a grasp on how widespread the problem is but is beginning to evaluate it one neighborhood at a time, beginning with the Hillcrest neighborhood in Kieschnick's district.

    Barry Wolfson, whose family company leases homes in Hillcrest, said he thinks his rental houses fill a void for those who can't afford to rent in newer areas of town and don't qualify for public assistance. His company rents homes and has never sold homes on contract-for-deed.

    Several of Wolfon's shotgun-style houses have splintered siding, dirt driveways and rolled-on roofs.

    "I won't deny some of the houses need some tender loving care," he said. "Our renters are paying well below market. Some people pay tithes to church. We're even doing something better than that by helping out the poorest sects of society."

    In the Hillcrest area, which is bordered by the Port of Corpus Christi, refineries and other heavy industrial development, only 18 percent of homes are owner-occupied. Many landlords there are what Kieschnick considers slumlords. They lock renters into 15-year, 20-year and 30-year contracts, offer no help maintaining the houses and are difficult to pin down.

    Any enforcement action against the landlords could displace residents who have spent thousands on homes they thought they were buying.

    It's a dilemma that attorney Carlos Aguinaga, the regional director of Texas Rio Grande Legal Aid, faces often. The organization, with offices in the Nueces County Courthouse, offers free legal assistance to people with low incomes.

    People who have problems with sellers in rent-to-own contracts or their landlords have few options, he said. "I tell them, 'We can go after the slumlord, but you'll be out of a house,'" he said.

    Those buyers who have already scraped together enough money for deposits, payments and taxes rarely can afford to move. When the city tries to address problems at those crumbling houses, it's snagged in a legal maze trying to find out who is responsible.

    When houses fall into disrepair and violate city codes, it can be difficult for the city to determine who needs to pay.

    The seller is listed as the owner on property tax records, but the contract with the buyer says the owner isn't responsible for upkeep. The buyer could likewise say he doesn't own the house because he doesn't have the deed.

    Mayor Joe Adame, who owns a commercial real estate firm, said the landlords need to be held accountable. He hopes to identify major land owners who lease or sell problem properties and reach out to them.

    He supports a buyout for homes near the industrial corridor, a project that would pay residents to abandon their homes, tear them down and convert the area to green space. It could take years and require millions of dollars.

    In the meantime, he's also asking the city to study the problem.

    "We need to find them a way out," he said. "They're in checkmate. They can't move out and can't take care of the houses there."
Source: Residents stuck in contract-for-deed trap (No apparent fix for many homes).
(1) A 'contract for deed' (sometimes known as a “land contract,” "agreement for deed," "land installment contract" or an “installment sale agreement”) is a contract between a seller and buyer of real property in which the seller provides financing to buyer to purchase the property for an agreed-upon purchase price and the buyer repays the loan in installments.

Under such a contract, the seller retains the legal title to the property, while permitting the buyer to take possession of it for most purposes other than legal ownership. The sale price is typically paid in periodic installments, often with a balloon payment at the end to make the time length of payments shorter than a corresponding fully amortized loan without a final balloon payment. When the full purchase price has been paid including any interest, the seller is obligated to convey legal title to the property to the buyer. An initial down payment from the buyer to the seller is usually also required by such a contract. The legal status of such contracts varies from region to region. (Reference: Wikipedia).

Cops: Druggie-Nurse Physically Endangered Blind, 89-Year Old Patient, Used POA To Fleece Him Out Of $140K & Cooked So Much Meth Inside His Residence That Local Authorities Condemned Victim's Home (Which May Be A Total Loss - $100K+ Estimated Remediation Cost) For Testing At 105 Times Regulated Limit For Methamphetamine Contamination

In Longmont, Colorado, the KMGH-TV Channel 7 reports:
  • Condemnation notices have been posted on the front door of an elderly Longmont man’s home after tests showed meth levels 105 times the regulated limit.

    Police say a registered nurse who was charged with taking care of the blind 89-year old man, instead embezzled $140,000 in cash and property, and then used his house to cook meth with her two sons.

    “It’s going to require upwards of $100,000 to mitigate the meth use in that house,” said Cmdr. Jeff Satur, of the Longmont Police Department.

    The nurse, Shela Wagner, is being held for investigation of Theft from an At-Risk Adult, Caretaker Neglect, Negligence Resulting in Bodily Injury and Criminal Exploitation of an At-Risk Adult.

    Satur confirmed to Denver7 that the nurse is related to the patient. “We’re trying not to get into the exact relationship,” he said, “but I will say it was a family member.”

    The alleged theft was brought to light when a conservator for the estate noticed large amounts of money being transferred out of the patient’s account at Guaranty Bank, and then notified police.

    Court documents obtained by Denver7 show that Wagner has a criminal history which includes Dangerous Drugs, Witness Intimidation, Forgery, various probation violations and Failures to Appear dating back to 1990.

    Still, she obtained Power of Attorney and gained access to the patient’s bank account. Investigators say Wagner used that power of attorney to transfer funds from the patient's bank account to her two sons accounts.

    --Nurse Hallucinated--

    According to the Arrest Affidavit, Wagner experienced hallucinations related to her meth use.

    “Shela was so convinced the patient had worms she would take a pair of tweezers and pull skin off his leg thinking it was bugs,” the affidavit states. The leg wound became infected.

    Satur said Shela was not giving the patient the medication she was required to give him and would be gone for days and weeks.

    “When you start getting into the whole case, it’s just very, very sad,” Satur said. “He was living in filth in his room. He was isolated from his friends and family.”

    --Family Goes to Court--

    In October of 2015, other family members went to court and obtained a permanent protection order preventing Wagner from having any further contact with the patient.

    According to the Affidavit, one of the patient’s sons called the Division of Regulatory Agencies. Investigators learned that DORA is opening up a case against Shela’s nursing license.

    Another son told investigators that he moved back to Colorado from California in 2012 because of health issues affecting his mom and dad. He said his mother died a month later (August 2012) and so did his older brother, Ronnie.

    He said two weeks after his mother’s death, Shela was admitted to Longmont United Hospital for narcotic withdrawal.

    According to the affidavit, that son now believes Shela stole his mom’s pain medication and used it herself.

    He told police that when he went to the hospital to see his father, he was shocked to see how much weight he had lost and how swollen his legs were. He said the doctors told him that if his father hadn’t come to the hospital when he did, “he would have been dead within three days due to the infection.”

    Satur says the patient has been transferred to an assisted living center and is now gaining his weight and his health back.

    “He’s in a better spot,” Satur said, “but financially, he’ll never be able to recover from this.”

Wednesday, February 17, 2016

Real Estate Broker Who Pilfered $145K In Homebuyers' Deposits From Escrow Account Dodges Hard Prison Time, Gets 4 Months In County Jail, 4 Years Probation, & Ordered To Pay Back Fleeced Victims

In DuPage County, Illinois, the Daily Herald reports:
  • A Burr Ridge real estate agent, convicted of stealing potential homebuyers' earnest money, avoided prison time [] but will serve probation and 120 days in jail.

    A DuPage County jury convicted Harry "Bud" Simons in November of five counts of theft. He faced between four and 15 years in prison.

    Judge Robert Miller sentenced Simons to 48 months probation, 120 days in jail and ordered him to gain employment and pay $145,000 in restitution.(1)

    Assistant State's Attorney Diane Michalak said that between February 2013 and February 2014, Simons accepted earnest deposits totaling $145,300 from clients who wished to purchase homes being sold by his real estate agency, County Line RE/MAX in Burr Ridge.

    But once business slowed and the former Willowbrook resident began having trouble paying the agency's bills, prosecutors said, he began transferring money from the agency's escrow account that holds the buyers' earnest money into the agency's operating fund. In all, more than $239,000 was transferred among the accounts in 68 transactions.
For more, see Jail time, probation for real estate broker who stole clients' escrow money.
(1) The Illinois Department of Financial and Professional Regulation administers a Real Estate Recovery Fund, which provides for a limited means of compensation for actual cash losses (as opposed to losses in property fair market value) suffered by anyone who, in connection with a real estate transaction, was screwed over by the fraudulent conduct of an Illinois licensed real estate agent, or a licensee's unlicensed employee. Reference: Illinois Real Estate Licensing Law, pp. 414-416. See also, 225 ILCS 454/20-85, et seq.

BC's Real Estate Brokers' Ripoff Reimbursement Fund Coughs Up $66K+ To Homebuyer Who Was Fleeced Out Of $100K By Sales Agent & Co-Conspirator; Scammer's Seized Bank Accounts Cover Balance

In Vancouver, British, Columbia, The Province reports:
  • A single mother has been paid nearly $70,000 in compensation by the Real Estate Council of B.C.(1) after she was allegedly defrauded of $100,000 by suspended Vancouver realtor Dacheng (Damon) Wan and convicted fraudster Ayaz Dhanani.

    Details of the case — dubbed “extremely serious” in a cease-and-desist order from B.C.’s registrar of mortgage brokers — involve alleged con artists, bank drafts, currency exchanges and a risky home investment.

    It is the second alleged transaction discovered by The Province involving Dhanani and Vancouver realtors. And the registrar warned in 2014: “It is reasonable to assume that Mr. Dhanani may continue to deceive others in a similar way.”

    Wan — who was indicted in September 2015 along with Dhanani on charges of fraud over $5,000 — had his licence suspended in April 2014 after an investigation by B.C.’s Financial Institutions Commission (FICOM) was submitted to the B.C. Real Estate Council.

    Compensation hearing documents say that in October 2014 the council paid Wan’s client $66,570 for losses caused by Wan. She had already recovered $33,429 from the provincial Crown through bank seizures related to Wan’s accounts. [more]
For more, see Single Vancouver mom gets $70,000 compensation from Real Estate Council of B.C. after alleged fraud (Woman says she lost $100,000 in alleged real estate fraud).
(1) The Real Estate Special Compensation Fund of the Real Estate Council of British Columbia provides protection if a member of the public has suffered a compensable loss through the provision of real estate services in circumstances where money entrusted to a real estate licensee or an unlicensed individual related to the brokerage has been misappropriated or wrongfully converted, intentionally not paid over or accounted for, or obtained by the fraud of that licensee or individual.

Tuesday, February 16, 2016

Prominent Bay-Area Church Squelches Suspected $40 Million Money Grab By Non-Profit Affordable Housing Group It Founded Decades Ago That Was Accused Of Pursuing Plans To Sell Federally Subsidized 104-Unit Apartment Complex Out From Under Poor Tenants For Market-Rate Conversion

In San Francisco, California, the San Francisco Chronicle reports:
  • An internecine legal fight between a prominent San Francisco church and the nonprofit it founded — and then sued — has been settled out of court.

    Third Baptist Church sued Third Baptist Gardens Inc. in July, accusing the nonprofit of betraying its mission to operate affordable housing in the Western Addition and of illegally trying to sell Frederick Douglas Haynes Gardens for a $40 million profit to market-rate developers.

    It was a fight that underscored how the city’s hot housing market can make enemies even out of onetime allies.

    Under the settlement, finalized last week, the nonprofit’s board resigned in exchange for the church dropping the lawsuit it had filed in San Francisco Superior Court. The outgoing members helped select a new, 11-person board to run the nonprofit.

    The settlement bars the former board members from having any contact with their replacements about management of Frederick Douglas Haynes Gardens, a 104-unit apartment complex at 1049 Golden Gate Ave. where 80 percent of residents receive federal Section 8 rental-assistance vouchers.

    Residents feared eviction

    Third Baptist Church founded the nonprofit in 1969 to purchase land and build affordable housing in the Western Addition. Some residents of the Golden Gate Avenue complex have lived there for decades and pay as little as $222 a month for a three-bedroom apartment, with the federal vouchers covering the rest of the rent.

    Last summer, the nonprofit solicited bids to purchase the complex. Many residents feared they might be evicted because, according to the lawsuit, the nonprofit’s real-estate agents told potential buyers that monthly rents could go to $3,000 to $7,000, far in excess of what most tenants say they could pay.

    Despite the rancorous legal fight — in its lawsuit, Third Bapist Church accused the nonprofit of being “blinded by the riches the gold rush dangles” — the two sides issued an amicable joint statement as part of the settlement.

    It said the church “deeply appreciates the important services rendered by these former board members” of the nonprofit “in working to preserve this precious affordable housing stock.”

    Complex to stay affordable

    Dolores Dalton, an attorney who represented the ex-board members, said the nonprofit “vigorously disputed every allegation in that complaint aimed at them. Our client always had the goal of preserving this project as affordable housing.”

    Former City Attorney Louise Renne, who represented the church, said the settlement ensures that the complex will stay affordable.

    She added that the settlement was a warning to owners of publicly subsidized housing developments that, like the Third Baptist nonprofit, are on the verge of paying off their mortgages to the federal government.

    “If there are other Section 8 housing projects that are giving thought to turning into market-rate development, this case sends a message — you can’t do it, and you shouldn’t do it,” Renne said.

    Anthony Wagner, a retired health care executive and deacon at Third Baptist Church, will be chairman of the nonprofit’s new board.

Georgia Woman Gets Four Years For Role In Hijacking Possession Of Vacant Houses, Then Using Craigslist To Reel In Unwitting Renters

In Cobb County, Georgia, The Marietta Daily Journal reports:
  • A Powder Springs woman has pleaded guilty to racketeering, burglary and other charges related to a real estate scheme and was sentenced to four years in prison [], according to the Cobb District Attorney’s office.

    As jury selection was about to begin for her trial, 60-year-old Mona Lisa Smiley pleaded guilty to 18 charges against her, said Kim Isaza, spokesperson for the Cobb DA’s office.

    According to investigators, Smiley and two others entered vacant houses, took them over and then advertised the houses for rent on Craigslist in the fall of 2014. Five houses in Cobb County were rented to tenants in this way, and evidence showed the three defendants had more planned, Isaza said.

    Smiley also falsely notarized a Quitclaim Deed on one of the properties and filed it in the Cobb Superior Court Clerk’s office, Isaza said.

    After Smiley pleaded guilty to the charges against her, including two counts of racketeering, five counts of burglary, five counts of theft by taking, four counts of theft by deception and a count each of forgery and filing false documents, she was sentenced to 10 years, with four to serve in custody and the rest on probation, by Cobb Superior Court Judge Tain Kell.

    Kell also ordered Smiley to pay $1,100 in restitution to two of the victims and perform 100 hours of community service in addition to the prison sentence, Isaza said.

    “The charges in this case are significant,” Kell told Smiley. “People’s right to be secure in their homes is serious.”

    In December, one of Smiley’s codefendants, Elishia Betts, pleaded guilty to one count of theft by taking and received four years of probation. The third codefendant, Edgar Lee Rodgers, has not yet been arrested on charges related to the case. Rodgers is last known to have lived in Atlanta, Isaza said.

"Trump: What's the Deal?" An Unflattering 1989 Documentary On Presidential Frontrunner That Never Hit The Airwaves Now Available Online

From an August, 2015 story in The Weekly Standard:
  • A September 1989, feature in New York magazine by Edwin Diamond, titled “Trump vs. Stern: The Unmaking of a Documentary” closed with this line:

    "A close associate of Stern's says, 'Trump may be tough, but so is Leonard. He's living a good life now, and he doesn't need this. But somewhere down the road, he'll be heard from."

    Two and a half decades later, Leonard Stern, a real estate competitor of Trump's, has a late-blooming investment that is finally airing, even though he hasn't had anything to do with the project since the Reagan administration. This, thanks to a producer he once employed named Libby Handros.

    Just yesterday, went online with a hilarious teaser trailer that shot around the web. (You can watch the full movie here.) The documentary film, Trump: What's the Deal? was the subject of Diamond's 1989 feature story. Funded by Stern, the documentary was never broadcast over the airwaves.
For more, see Trump: The Documentary (A New York street fight finally unearthed, 25 years later).

Monday, February 15, 2016

Another Attorney Loses Bar Ticket For 'Renting' His Law License To Scammer Who Then Fleeced Homeowners Through Loan Modification Foreclosure Rescue Ripoffs; Agrees To Reimburse Bar's Client Security Fund For Any Victim Payouts Due To His Handiwork

In Englewood, Florida, WFTV-TV Channel 9 reports:
  • Englewood attorney John Charles Archer essentially was disbarred for five years by the Florida Bar Association in January amid several allegations he defrauded clients through foreclosure scams.

    According to court documents, Archer, 48, who practiced at 1408 S. McCall Road, Suite 4F, has pending charges against him, including failing to properly supervise nonlawyer employees, sharing fees, false advertising, mishandling of client funds, failure to properly maintain trust account records and accepting certain prohibited upfront legal fees.

    Court records show in 2010, Archer was associated with Jim Richman, who was doing business under the name Bradford Law Firm and ModifyMyMortgage. The Bradford Law Firm name was misleading because Richman was the only employee at the firm.

    The business allegedly engaged in foreclosure-related rescue services, which generated substantial income through collection of illegal fees to represent homeowners from across the U.S. in loan modifications, court records show.

    Clients Nancy Taylor and Trent Speakman, who paid the Bradford Law Firm for loan modifications, complained that no meaningful services were provided to them.

    The business induced clients to pay an initial fee to be held in trust until the bank or lender confirmed receipt of the clients’ loan-modification application, followed by a monthly maintenance fee to be paid while their loan modification was being processed.

    Archer didn’t hold the initial fee in trust. He also failed to supervise Richman, who had almost exclusive contacts with the clients, court documents show.

    Archer shared legal fees with Richman and allowed him to exercise exclusive control over the business, websites, and fee agreements and documents. Richman also shared unverified loan-modification statistics with clients. He told clients the Bradford Law Firm had "licensed attorneys" in offices in all 50 states.

    Bank of America submitted two insufficient fund notices proving Archer commingled his funds with client funds, improperly disbursed client funds, made personal disbursements from the account and failed to properly maintain trust account records, according to court records.

    Archer, who had been practicing since 1991, agreed to reimburse the Client Security Fund for any claims resulting [from] his misconduct.(1)

    Archer applied for disciplinary revocation, which is equivalent to disbarment, according to the Bar. Like disbarment, disciplinary revocation terminates Archer’s license and privilege to practice law. Archer can reapply to the Florida Bar in five years. He also has to repay the Florida Bar for the costs incurred in his disciplinary case.
Source: Local attorney 'disbarred,’ has pending charges.
(1) The Clients' Security Fund was created by The Florida Bar to help compensate persons who have suffered a loss of money or property 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.

See generally:
  • N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;

    When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),

    Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.

Co-Conspirator Of San Diego-Area Loan Modification Racket That Used Figurehead Attorney As A Paid Dummy To Hold Itself Out As Law Firm Gets Off w/ Only Nine Months In Prison; Over 1000 Financially Struggling Homeowners Were Ripped Off Of $3.5+ Million

From the Office of the U.S. Attorney (San Diego, California):
  • San Diego businessman Michael Nazarinia was sentenced [] to 9 months in custody for his role in a fraudulent mortgage loan modification business that duped hundreds of struggling homeowners.

    The business, known as “Haffar & Associates,” owned by figurehead attorney Mohamed Haffar, recruited new customers using telemarketers who lied to clients in order to induce more than 1,000 people to sign up to pay more than $3.5 million in total.

    Haffar & Associates Scheme

    Nazarinia’s co-conspirator Charles Rose managed a call center staffed with as many as 30 telemarketers, whose job was to recruit new clients. Rose trained the telemarketers, wrote telemarketing scripts for use on calls with potential clients, wrote form letters for the salespeople to send to potential clients, and recorded his own sales calls for telemarketers to emulate. Rose pleaded guilty in July, admitting that he and his business partners, including Nazarinia, trained telemarketers to make statements to potential clients that were false, such as the following: [more]
    Despite the representations made to clients, attorney Haffar did not directly supervise Nazarinia’s case managers, and instead, Nazarinia and the case managers provided legal services to clients without Haffar’s input or direction.

    Haffar rarely reviewed the clients’ files and almost never provided direction to the case managers.

    According to Rose’s plea agreement, Haffar, Nazarinia, and Rose all understood that Haffar’s fees were his compensation for the risk he took in allowing Nazarinia and Rose to use his name, bar license, and law firm, and not for any actual work Haffar did on loan modification cases.

Hundreds Of Homeowners Victimized By Law Firm Peddling Mass Joinder Lawsuit Scam To Fight Foreclosure Will Collect Over $11 Million In Restitution From Feds, Asset Liquidation; Now-Disbarred Lawyer At Center Of Ripoff Was Used As Paid Patsy By True Operators, Simply Lending Name To Racket w/ No Operating Control

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Hundreds of victims of a mortgage-rescue scheme rooted in Palm Beach County will receive full recompense for their losses in a landmark reward of $11.7 million.

    The money, which will be paid to homeowners who contracted with the North Palm Beach-based Hoffman Law Group, is a combination of auction proceeds from the sale of jewelry and firearms belonging to the company’s operators and funds from the federal Civil Penalty Fund.

    The Hoffman Law Group was shut down in July 2014 by the Florida Attorney General’s office and the Consumer Financial Protection Bureau following Palm Beach Post stories that uncovered dozens of complaints against the firm.

    According to court documents and two former employees, the company used boiler room-style sales tactics to rope struggling homeowners nationwide into pricey “mass litigation” lawsuits against their banks.

    Consumer protection groups have warned for years that the lawsuits, which can include dozens of homeowners in a single case, are ineffective or outright scams.

    “I want to cry I’m so happy,” said Orlando resident Regino Becerra, when he was told Tuesday about the pending refund. Becerra, 72, said he paid about $10,000 to the Hoffman Law Group and lost his home to foreclosure. “It’s been very hard,” he said. “We lost the home. We lost everything. It’s hard trusting anyone.”

    An estimated 1,200 struggling homeowners from the Pacific Northwest to South Florida were clients of the Hoffman Law Group. Many paid upfront fees of $6,000 and monthly payments of $495 to join the lawsuits.

    Mark Bernet an attorney with Akerman LLP was appointed receiver in the Hoffman case. He was able to recover more than $1 million, including by auctioning luxury jewelry owned by Hoffman operators. Items auctioned included watches by Breitling, Cartier and Rolex. Diamond and gold pendants, earrings and bracelets, as well as a Glock 45 semi-automatic pistol and a Ruger .380 were also sold at auction.

    “The most challenging part of the case was realizing that so many people relied upon the misrepresentations of the Hoffman enterprise by sending in almost $12 million,” Bernet said. “I had dozens of conversations with struggling homeowners who could have used the money they sent to Hoffman to work with their home lenders.”

    More than $11 million in refunds are coming from the Consumer Financial Protection Bureau’s Civil Penalty Fund, which was established by the Dodd-Frank Wall Street Reform Act of 2010.

    Since 2013, more than $225 million has been allocated nationwide to victims in civil cases against firms such as Payday Loan Debt Solution, American Debt Settlement Solutions, Culver Capital and Student Financial Aid Services.

    The federal case against the Hoffman operators, Consumer Financial Protection Bureau and State of Florida Office of Attorney General vs. Michael Harper, et al., was settled in May 2015 when final judgments were issued.

    While Florida attorney Marc Hoffman lent his name to the company, court records say Michael Harper of North Palm Beach and Benn Willcox of Palm Beach Gardens were truly running the organization.

    Hoffman, who was struggling financially, embroiled in a divorce, and “eating cheap meals from value menus at fast-food restaurants,” got involved after answering an advertisement posted on Craigslist in 2011.

    “Hoffman Law was owned by Marc Hoffman although, as will be discussed below, the firm was not controlled by Hoffman,” Bernet wrote in court filings. “He had only a vague notion of the nature of the lawsuits that the firm filed. He was not invited to attend weekly meetings to discuss the business.”

    Last year, the Florida Supreme Court revoked Hoffman’s license for at least five years. His legal settlement also bars him from working in the loan modification industry.

    Harper and Willcox are similarly banned from selling, advertising or otherwise participating in the sale or advertising of consumer financial products or services. Money judgments against Harper and Willcox were suspended so long as they surrendered personal property for liquidation.

    [Go here f]or more information about the suit against the Hoffman Law Group and settlement.

Now-Disbarred NYC Attorney Gets 3 To 9 Years In Slammer For Fleecing Over $2 Million From Three Clients

In New York City, DNAinfo (New York) reports:
  • A disbarred Midtown lawyer will spend between 3 and 9 years in prison after pleading guilty last month to stealing millions of dollars from clients,(1) including missionaries working in South Africa.

    A judge sentenced Philip Teplen, of Fairfield, Conn., for pillaging clients of more than $2 million when Teplen operated a law office out of the Empire State Building.

    In April 2011, a client named Teplen his agent in order to finalize a $3.5 million loan from a financing company, according to Manhattan District Attorney Cyrus Vance Jr. Instead of helping his client disburse the money, Teplen stole more than $2 million from him, using the cash to pay for personal expenses and investments and to reimburse clients he had previously stolen from, Vance said.

    Teplen’s misdeeds continued in March 2012, when he was working out of a law office at 708 Third Ave. in Midtown East, according to the DA.

    A client asked Teplen to deposit a check for about $135,000 to a Christian missionary group working in South Africa, but instead Teplen stole more than $100,000, Vance said.

    The disgraced attorney has paid the client back some of what he stole but still owes her about $82,000, according to Vance.

    In May 2014, Teplen then represented the seller of a co-op apartment in Harlem and was supposed to hold a $69,500 deposit paid by the buyers in an escrow account until the sale closed, Vance said. When the buyers canceled the purchase and became entitled to the deposit in July of that year, the money had vanished.

    Teplen was already in the process of resigning from the bar in response to another theft complaint against him when the 2014 incident occurred, said Vance.

    “For years Philip Teplen lied to his clients and stole their money for his own personal gain,” Vance said in a statement. “He even had the audacity to continue this pattern of theft while his resignation was pending with the First Judicial Department.”

    Teplen pleaded guilty to first and second degree larceny on Jan. 22.

    Vance encouraged anyone who thinks they may be the victim of a financial crime to contact his office’s financial frauds hotline at 212-335-8900.

    A lawyer for Teplen did not return a request for comment.

For the Manhattan DA press release, see Former Attorney Sentenced To 3-To-9 Years In State Prison For Stealing More Than $2 Milliom From Three Clients.
(1) Clients found to have been victimized by a theft by a New York attorney may be able to seek some reimbursement for being screwed over by turning to the The Lawyers’ Fund For Client Protection Of the State of New York, which manages and distribute money collected from annual dues paid by members of the state bar to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the bar acting as an attorney or a fiduciary.

For similar "attorney ripoff reimbursement funds" that attempt to clean up 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.

See generally:
  • N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;

    When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),

    Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.

Another Lawyer In Hot Water: State Regulators Seize North Texas Title Insurance Agency; Cops Give Attorney/Owner The Pinch After She & $3 Million In Escrow Money Go AWOL; Two Real Estate Investors Claim They're Out $1 Million Each

In Southlake, Texas, KXAS-TV Channel 5 reports:
  • An investor who lost $1 million in a property deal involving a failed Southlake title company says he’s “blown away” by what happened but is optimistic he’ll get it back.

    The company, Millennium Title, was taken over by the Texas Department of Insurance last month when regulators said it had become insolvent, the owner had disappeared and nearly $3 million had vanished from the company’s escrow account.

    “It doesn’t seem real,” said Scott Schambacher, owner of a Keller company that buys and sells property.

    Schambacher said his company, Avondale Development Group, wired $1 million to Nancy Carroll, the owner of Millennium Title Company.

    He said the money was supposed to be held temporarily until a property sale involving several buildings was completed. "It was one million to the penny,” he said. “Our proceeds were a little more than that, so we said, 'Let's round it out.'"

    Schambacher said he stopped by the title office in December to set up a closing date and realized there was a big problem when he overheard the receptionist talking.

    "I hear, 'Oh, we don't know where she's at. It appears worse than what we thought. Let me email you something, bla-bla-bla,' and hangs up,” he said. “And I'm thinking that doesn't sound good."

    Within a few days, he said he learned the Texas Department of Insurance had seized the company.

    In court papers, regulators said the owner, Nancy Carroll, had disappeared and that $3 million was missing from the company's escrow account. Another investor, John Herlihy, filed a lawsuit accusing Carroll of fleeing the country after absconding with $1 million of his money.

    "I was blown away,” Schambacher said. “I've been doing this 24 years and have never seen anything like this." Now, Schambacher said he can’t get any answers about what happened to his money.

    "From what we were told, that money went out the same day it went in,” he said. Now, he doesn't know if he'll ever see the money again. "I'm a pretty optimistic guy because you've got to be in today's world, so we'll see,” he said.

    In emails to NBC 5, Carroll denied the accusations against her and said Schambacher was an investor in Millennium, a claim he denied.

    She did not answer specific questions about what happened to the money. Carroll also referred NBC 5 to her attorney, Michael McCue of Dallas, who did not return phone calls or emails.

    Jerry Hagins, a spokesman for the Texas Department of Insurance, said homeowners who had money in escrow with the title company are insured by a state fund.

    But he said Schambacher’s $1 million was invested in a special tax-deferred account which the fund does not cover.
Source: Investor Says He Lost $1 Million in Southlake Title Company (Regulators seized title company last month after owner vanished).

For a story update, see Southlake Title Company Owner Arrested (Title company seized after millions stolen, regulators say):
  • The owner of a Southlake title company accused of stealing money and skipping town was arrested Thursday in Illinois, police said. Nancy Jackson Carroll, also known as Nancy Jackson Spinks, was arrested in Lake County near Chicago.

    She was booked into jail on charges of theft and being a fugitive from justice. She has no bond, pending extradition to Texas. Carroll owned Millennium Title Company, which was taken over by the Texas Department of Insurance last month.
See also:

Sunday, February 14, 2016

Attorney Who Once Handled As Many As 80 Real Estate Closings/Month Faces Disbarment For Role In $2.3 Million Trust Account Theft; He Continues To Claim He Had No Knowledge Of It, Blaming Former Wife/Office Manager For Ripoff

In Columbus, Georgia, the Columbus Ledger-Enquirer reports:
  • A State Bar of Georgia Review Panel has recommended that Columbus attorney Michael Eddings be disbarred for his role in the theft of more than $2.3 million from his trust account that was discovered in October 2011.

    The final decision will rest with the Supreme Court.

    The Review Panel report and case record will be filed with the Georgia Supreme Court. Eddings and the State Bar have 30 days to file exceptions to the report. If either side files an exception, the other side will then have 30 days to respond.

    Eddings' fate had been in the hands of the Review Panel since October 2014 when the attorney and the State Bar both appealed the initial decision by a special master, Katherine L. McArthur, who recommended Eddings' law license be suspended for one year and he have a plan in place to repay 10 percent of the stolen money.

    Eddings and the State Bar both appealed the special master's decision to the Review Panel. Eddings contended the recommended punishment was too severe and the State Bar maintained it was not strong enough.

    Since the theft was discovered, Eddings has steadfastly maintained he had nothing to do with the fraud and had no knowledge of it. He has repeatedly contended the scheme was orchestrated and carried out by his then-wife and office manager Sonya Eddings. In the April 2014 hearing before the special master, Sonya Eddings admitted that she was responsible for the theft and said she purposefully hid the information from her then-husband.

    Michael Eddings could not be reached for comment on Friday.

    The Review Panel's recommendation was filed with the state Supreme Court late Thursday, and it asserted that Michael Eddings was ultimately responsible for safeguarding his trust account and that he demonstrated "an extreme disregard" by not doing so.

    Eddings "was on notice of multiple examples of irregularities in his trust account; he lost the services of Stewart Title & Guaranty Company because of issues related to his trust account; he continued to rely on the same person to explain these discrepancies and manage the accounts; and he never retained an independent audit of his accounts in spite of this information," the report stated. The Review Panel also took exception with the way Eddings has handled himself since the thefts were discovered.

    "In addition, he has not made restitution to the grievants in this matter; he has not admitted to any violation of the Rules of Professional Conduct; and he has not expressed remorse for his misconduct," the report stated.

    Michael Eddings faced 10 complaints alleging 34 violations of state bar rules. They all stem from the real estate business in which he was handling as many as 80 closings a month.

    William J. Cobb, State Bar of Georgia assistant general counsel, sought disbarment.

    "The State Bar agrees with the recommendation of discipline by the Review Panel of the State Disciplinary Board, and is pleased that the case can now proceed to the Georgia Supreme Court for final decision and imposition of discipline," Cobb stated in an email.

    In 2012, First American Title Insurance of California sued Michael and Sonya Eddings, all of their restaurant holdings, and Columbus Bank & Trust in U.S. District Court, Middle District of Georgia. First American and CB&T settled out of court in January 2014, and terms of the deal were not released. In dismissing the case in early March 2014, Judge Clay Land issued a $1.99 million judgment for First American against Michael Eddings and a $2.09 million judgment against Sonya Eddings.

    "The special master failed to consider the actual harm suffered by the grievants in this case, pointing out the resolution of the civil suit did not resolve all of the losses in the underlying transactions," the State Bar contended to the Review Panel.

    On Monday, the state Supreme Court ordered Eddings reprimanded for questioning jailed suspects without their attorneys' consent when he turned to criminal defense law after trust account fraud was discovered in his practice. The reprimand on Monday was for separate incidents not related to the ongoing issues with Eddings' trust account.

    In May 2014, Eddings was found in contempt of court and fined $3,000 by Superior Court Judge Arthur Smith III. The judge also ordered Eddings to report his contempt citation to the general counsel for the State Bar of Georgia. Monday's Supreme Court action was the result of that.

    Eddings had been found in contempt for a similar complaint by Superior Court Judge William Rumer in July 2013. He was fined $500 for obstructing the administration of justice.

Florida Bar Seeks Boot For Young Attorney Who Mishandled $200K In Real Estate Escrow Cash; Legal Representative For Sloppy Lawyer Says 90-Day License Suspension Is Enough

In Miami, Florida, Law360 reports:
  • A Miami attorney who mishandled a $200,000 loan held in escrow for a second mortgage on a property asked the Florida Supreme Court to reject the Florida Bar's request for disbarment and instead issue the 90-day suspension recommended by a referee.

    Richard Marx, who represents attorney Jose Carlos Marrero, told the court that his client “made errors galore” as a young attorney in mishandling the loan and mortgage in question but did not deserve to be disbarred.

    Florida Bar attorney Jennifer Falcone pointed out that the court, in a previous appeal in this case, already determined that Marrero's actions were intentional and deliberate and asked for disbarment or a minimum three-year suspension.

    She pointed out that Marrero has made no effort to provide restitution and has not cooperated with the Florida Bar.

    “The Florida Bar is asking this court to enforce prior case law and hold the respondent to the same standard you've held others,” Falcone said.

    The Supreme Court has already found Marrero guilty of four violations of a rule barring misconduct involving dishonesty, fraud or deceit and of another regarding money entrusted to an attorney for a specific purpose.
For more, see Miami Atty Faces Disbarment Over Mishandled Escrow Funds (may require subscription; if no subscription, try here, then click the appropriate link for the story).

Attorney w/ History Of Sloppy Handling Of Client Cash In Trust Account Gets Two Year License Suspension For Excessive Delay In Distributing Money To Heir In Inheritance Case

In Baton Rouge, Louisiana, The Advocate reports:
  • Prominent lawyer Walter C. Dumas on Thursday had his law licenses suspended for two years for his misconduct and negligence involving a client’s funds in a succession his firm handled seven years ago.

    In its ruling Thursday, the Louisiana Supreme Court claims the Baton Rouge lawyer did not pay one of the heirs in the case until after she filed a complaint in October 2011 with the Office of Disciplinary Counsel — that was more than a year after the succession proceedings had concluded.

    “His misconduct was rooted in negligence,” the ruling states. “His lapses demonstrate a deviation from the standard of care that a reasonable lawyer would exercise, particularly since respondent was previously disciplined for the same type of misconduct.”
    He admitted to his misconduct and “sloppy bookkeeping” during Office of Disciplinary Counsel proceedings and is described in the ruling as being cooperative and taking full responsibility for his firm’s actions.

    According to the ruling, a woman hired an associate from Dumas’ law firm in 2009 to represent her in the handling of her father’s assets following his death.

    Dumas, the sole manager of the firm’s trust account, received $18,509 in funds that were supposed to be divided between the deceased’s spouse and daughter.

    Dumas paid the man’s wife the $11,105, that was owed to her, but the daughter was supposed to receive $7,403, the ruling reads.

    Dumas testified in disciplinary proceedings he first learned the daughter hadn’t received her share of the estate in June 2011 after she contacted him.

    The ruling says Dumas claimed an associate made an error and issued one check to the wife and the second to the wife’s attorneys.

    By the time he learned about the mix-up, Dumas testified he had miscalculated his trust accounts and didn’t have enough money available to pay the daughter immediately, the ruling says.

    The daughter filed a disciplinary complaint against Dumas in October 2011, even after he promised to “pay no matter how long it would take,” the ruling states.

    Dumas ended up paying the woman through her new attorneys in May 2012.

    A forensic accountant hired by the Office of Disciplinary Counsel reviewed Dumas’ trust account and testified during hearings that Dumas had paid himself $14,550 from the trust account.

    The ruling says Dumas would withdraw large sums from the account by writing checks to himself or by presenting counter checks made payable to cash. Those transactions lacked any explanations or identifying purposes for the payments.

    There was no way to know on any given day whether money in the account belonged to (Dumas) or to his clients,” the ruling describes the forensic account’s testimony, “and she had no confidence in (Dumas’) ability to make that determination either.”(1)

    Dumas has been dinged in the past for poor mismanagement of client funds and accusations of incompetence.

    In 1987, Dumas was reprimanded for withholding fees in excess of what was specified in an employment contract, failing to pay third-party medical providers and not depositing disputed funds in a trust.

    Then, in 1996, Dumas was reprimanded for engaging in behavior deemed incompetent, negligent and a conflict of interest.

    In 2002, he was suspended from practicing law for one year and placed on a yearlong supervised probation for commingling client and third-party funds, according to court records.
Source: Baton Rouge attorney Walter Dumas suspended from practice of law for two years, Supreme Court rules.

For the Louisiana Supreme Court ruling, see In re Walter C. Dumas.
(1) From the court ruling:
  • In connection with the management of his law office, respondent [Dumas] failed to keep and maintain complete records of trust account funds.

    Respondent also failed to maintain a single client trust account, instead choosing to maintain five separate client trust accounts, none of which was denominated or associated with a specific legal matter.

More Real Estate Escrow Money Goes AWOL - Another Attorney Accused

In Northern New Jersey, Law360 reports:
  • A New Jersey attorney is being sued for malpractice after he allegedly misappropriated $100,000 from an escrow account that was meant to cover environmental claims in a Newark property sale, according to a suit filed in New Jersey Superior Court.

    Miles Hunter, who represented the sellers of the Newark industrial property, allegedly failed to properly oversee a $100,000 escrow account that was set aside to address any environmental claims by the New Jersey Department of Environmental Protection stemming from the sale, according to the Jan. 19 complaint.

    The purchaser, B&B Blanchard LLP, planned to draw on the account to address remaining environmental issues with the site and would return any remaining funds to the sellers. The site was previously a chemical plant and had gone through extensive remediation, Robert J. DeGroot, the attorney for the buyer, told Law360 [].

    “[The site] previously had environmental issues that were the obligation of the seller,” DeGroot said. “Everything had been remediated but one issue.”

    The property sale closed in January 2007, and it had a clause that required $100,000 of the sellers’ funds be put in an escrow account overseen by Hunter. That account was meant to be used to resolve any remaining environmental issues raised by the state’s environmental agency, according to the complaint.

    B&B Blanchard hired a soil remediation professional to wrap up remaining environmental issues, and in November 2015, the company allegedly contacted Hunter to release the funds in the account. Hunter then allegedly said he closed the account and paid the funds out to the sellers and other third parties without notifying B&B Blanchard, the complaint said.

    This move constitutes malpractice, the suit says, as Hunter, the account’s trustee, owed a duty to the buyers and he breached that duty by failing to properly maintain the escrow account.

    DeGroot said this move has prevented B&B Blanchard from selling the property free and clear.

    The suit accuses Hunter of legal malpractice, breach of contract and failure to perform his duties as trustee of the escrow account.
Source: NJ Atty Failed To Maintain Environmental Escrow, Suit Says (may require subscription; if no subscription, try here, then click the appropriate link for the story).