Wednesday, January 28, 2009

Countrywide To Temporarily Freeze All Pennsylvania Foreclosures As Part Of $150M Suit Settlement With State AG

Reuters reports:
  • Countrywide Financial Corp has agreed to provide an estimated $150 million in mortgage relief and cash assistance for Pennsylvania homeowners to settle a state lawsuit over its lending practices, officials said on Wednesday.

  • Countrywide, once the nation's largest mortgage lender and now part of Bank of America Corp, also agreed to freeze foreclosure proceedings until it determines whether borrowers are eligible to take part in the settlement. [...] The settlement would provide them with loan modifications, relocation assistance and foreclosure relief as well as waivers of default or delinquency fees, Pennsylvania Attorney General Tom Corbett said.

Source: Countrywide settles Pa. lawsuit for $150 million.

West Virginia Loophole Allows For Judicial Double-Dipping As Some Judges Simultaneously Collect Pension, Paychecks

In Kanawha County, West Virginia, an opinion column in The West Virginia Record comments:
  • Kanawha Circuit Judge Charles King doesn't want to talk about how he found a legal loophole to rip off the taxpayers and enrich himself. We don't blame him. When it's your job to serve as a trusted arbiter of disputes between others who put their fates in your hands, the last thing you'd want is for word to get out that, when the robes come off, you play the legal angles for cash. Judge King "retired" last October after 20 years on the bench. He sent in a resignation letter to Gov. Joe Manchin.

***

  • King retired in October and won re-election in November. Now he's back on the bench -- collecting his judicial salary and his pension at the same time. That was the cash-point of the letter. It enabled King to double-dip on West Virginia taxpayer coffers, gaming [the] state pension system so he can work and collect a pension at the same time. Indeed, Judge King cynically knew what his future would bring.

  • King's 'legal' ploy -- retire and then rejoin the bench two months later -- lets him "earn" a taxpayer-supported paychecks of up to $188,000 per year. You can buy a lot of fancy robes with that.

  • Called on the carpet for his similar subterfuge, Cabell Circuit Judge Alfred Ferguson was quick to note that his deal is "perfectly legal," arguing that since he paid into the pension system, he's just collecting what is rightfully his.

For more, see Judicial hustle.

For other posts on the sometimes questionable judgment exercised by some of the members of our esteemed judiciary, go here and go here. knuckleheaded judges zeta

Texas Court Voids Home Title Transfer By 87-Year Old Widower To Caretaker; Evidence Proved Fraudulent Promises Were Made At Time Of Conveyance

In Beaumont, Texas, The Southeast Texas Record reports:
  • Liberty County District Judge C. T. Hight correctly returned a home to an old man who signed it away, the Ninth District appeals court in Beaumont decided. Hight heard enough evidence to find that Peggy Ballard Williams defrauded Melvin Kaufman, three justices ruled.

  • Kaufman, who was 87 when he conveyed his property to Williams, testified that she broke a promise to take care of him and keep him out of a nursing home. She testified that she promised nothing and received the property as a gift.

  • Hight held that she made the promise and never intended to keep it. Ninth District Justice Hollis Horton wrote in a Jan. 8 opinion, "Based on the testimony before it, the trial court's conclusion finds support in the evidence."(1)

***

  • He wrote, "Cancellation of a deed is a proper remedy when promises are fraudulently made with no intention of carrying them out at the time of the deed's execution."

For the details on how the 87-year old homeowner was found by the court to have been tricked into signing over the deed to his home to Williams, the great-niece of his deceased wife, see Appellate judges uphold Liberty County court finding of fraud in property dispute.

For the ruling of the Texas appellate court, see Williams v. Kaufman, NO. 09-07-00535-CV, 2009 Tex. App. LEXIS 37 (Tex. App.--Beaumont, January 8, 2009).

(1) According to the story, Justice Horton added, "Although none of the witnesses except Williams and Kaufman claimed to have any knowledge of the promise Williams allegedly made to Kaufman, we are not aware of any cases holding that corroboration of a promise is required in order for a court to find a witness's testimony about the promise credible." This goes to show that, even when there are no witnesses to the scam other than the victim and the scam artist, and none of the alleged fraudulent statements made by the scammer were reduced to writing, a victim can still bring a lawsuit and win by giving testimony that is more believable than the scammer's testimony. Unlike a criminal case, which requires proof beyond a reasonable doubt in order to prevail, winning a civil case in a "he said, she said" situation requires simply that one party be slightly more believable than the other. KappaDeedTheft

Failure To Receive 60-Day Notice, Being Bulldozed Into Unfavorable Agreements Among Complaints From California Tenants In Homes Facing Foreclosure

In San Mateo, California, a story in the San Mateo County Times on the problems facing local tenants renting homes in foreclosure contained the following excerpt on the affect of new rules in effect to help tenants in these situations:
  • [S]hirley Gibson, an attorney with the nonprofit Legal Aid Society of San Mateo, said the new rules have done little to stop the flood of renters coming to her for help. She holds drop-in clinics around the county three times a week for homeowners facing foreclosure and, more recently, renters being told they have to leave their homes. The clinics are packed, and only getting busier.

  • Common complaints are tenants not being given 60 days' notice to vacate, as required by California law, and tenants not being given 24-hour notice before a landlord visit. Gibson said many of the people she counsels are low-income, non-English speakers who are pressured into signing agreements that are not in their favor. "I've seen tons of this over the last couple of months," she said. "We have a huge population of chronically underemployed and these folks are always at the edge of their income, and the landlords and realtors have a hard time respecting the rules."(1)

For the story, see Duplex foreclosed on, renter struggles to stay (Amid foreclosure, renter struggles to stay).

For an article directed to California tenants living in homes in forecloure, addressing some of their legal rights, see see Tenants of Foreclosed Homes Often Short-Changed by New Owners.

(1) It may be important to note that, in the case of a tenant who receives a Section 8 federal rent subsidy (ie. a "Section 8" tenant), it has been reported that federal law prohibits a new owner, including foreclosure purchasers and foreclosing lenders, from evicting Section 8 tenants unless they first go to court and prove they’re being economically harmed by having a tenant remain in a building, or show other good cause. However, many Section 8 tenants panic and don’t fight eviction notices, not realizing they have rights. For more on this point, see Foreclosures hit tenants (Activists: New owners trample on renters’ rights).

For the specific federal regulation on this point, see 24 CFR 982.310(d)(1). Go here for the regulations (24 CFR 982) regulating the Section 8 rent subsidy program, generally. SkimmingKappaRent

Foreclosure Mediation Now Available In All 88 Ohio Counties

In Columbus, Ohio, WTTE-TV Channel 28 reports:
  • The Ohio Supreme Court says a foreclosure mediation program it launched less than a year ago is now available in all 88 counties. The high court provides step-by-step instructions to common pleas courts around the state to try to reach solutions in foreclosure cases. The local courts gather information from homeowners and lenders to reach a mutual agreement.

  • Some courts are using court staff, while others are using contract mediators. Others are using volunteers. Counties began joining the program after it launched in February. Local courts are to submit data to the Supreme Court so that the effectiveness of the county programs can be measured.

Source: Foreclosure mediation available in Ohio counties.

For the Ohio Supreme Court's "11 Step Program," see The Foreclosure Mediation Program Model.

L.A. Mayor, State Real Estate Commisioner, Others Caution Public On Loan Modification Fraud; "Scam Peddler" Sightings Up Sharply

In Los Angeles, California, the Los Angeles Times reports:
  • Alarmed by a huge increase in swindlers trying to take advantage of families whose homes are in foreclosure, Mayor Antonio Villaraigosa and a host of bankers, legal aid lawyers and law enforcement officials [Monday] called on the public to beware of people peddling loan modification scams.

***

  • From the ubiquitous orange signs on freeway off-ramps that blare “Modify Your Payment” to men impersonating bank executives going door to door, homeowners in trouble are being targeted relentlessly.

  • Jeff Davi, commissioner of the California Department of Real Estate, said his department has had to “shift resources” to keep up with the scammers. His office has 292 open investigations and expects to begin filing cases at a rapid rate, he said.

For more , see L.A. officials warn of foreclosure scams.

Three Months Jail Time For Two In SoCal Rent Scam; Judge Cuts Some Slack As Both Repay Victims; Craigslist Ads Used To Reel In Tenants

In Vista, California, the North County Times reports:
  • Two Orange County men who posed as landlords and rented out foreclosed homes, taking thousands of dollars from unsuspecting victims, left a Vista courtroom in handcuffs Monday. Linda Smith, who had fallen prey to their scam, whispered a loud "yes" in an otherwise quiet courtroom as Superior Court Judge Daniel Goldstein sentenced Alexander Braslavsky, 34, and Anthony Patrick Marshall, 38, each to 90 days in jail. [...] Braslavsky, of Irvine, and Marshall, of Mission Viejo, each pleaded guilty in September to a felony charge of grand theft.

  • Before announcing their sentences, Goldstein said he wanted to give each man a year behind bars. But the two men already had repaid the victims in exchange for a maximum sentence of 90 days. "I'm placing a great deal of weight on the fact that you made the victims whole," Goldstein told them.

***

  • According to [Deputy District Attorney Anna] Winn, the two men would dress in suits and ties to meet the victims, telling them that Braslavsky was the owner and Marshall was his real estate agent. The pair would show the home, make a deal with the victim, hand over a set of house keys and take the victim's money, Winn said. Each victim paid between $3,350 and $4,500 to the pair, she said.(1)

For more, see Men get jail for scamming renters (Carlsbad couple among SoCal victims).

Go here, go here, and go here for posts on phony landlord rent scams.

(1) According to the story, how the pair got keys to the homes is a bit unclear, Winn said, but she suspects Marshall, a licensed real estate agent, was able to access lock boxes containing the keys and made copies of them. After the hearing, Winn said it was the men's parents, not the men themselves, who fronted the money to pay back the victims. Winn said she believes there may be more victims out there."I just find it hard to believe that there are only four," she said. PhonyLandlordScamZeta

Tuesday, January 27, 2009

Foreclosing Lender Claims Mortgage Is Nine Years In Arrears; 68-Year Old Homeowner Says "Prove It!" As Bank Admits It Can't Find The Promissory Note

In Decatur, Georgia, The Atlanta Journal Constitution reports:
  • [C]itigroup and Wells Fargo say [68-year old Zella Mae] Green has failed miserably as a homeowner and is nine years behind on her payments. And they want to take the house. “Nine years? There ain’t no way,” Green said. “Ain’t no way you can stay someplace for nine years without paying anything.”

  • Determining whether a homeowner is truly years behind on a mortgage seems like a straightforward question. But Green and a string of lenders have been arguing about the matter in court for years now — with no resolution in sight. Her lawyer says the lenders have not even proven who owns the mortgage, let alone established how much Green owes.

***

  • Green’s case illustrates the complexities of the modern mortgage market and just how difficult it can be to unwind the history of a mortgage. Most mortgages are originated by one lender, then sold — often repeatedly — to other lenders or groups of investors. Other companies are often brought in to process payments and manage escrow accounts.

***

  • I’m just trying to find out two things: What Ms. Green’s proper loan balance is and who she owes it to,” [her bankruptcy attorney Howard Rothbloom] said. So far, who owns the mortgage has not been resolved.

  • A lender proves ownership of a mortgage by producing the “promissory note,” the document signed at closing in which the borrower agrees to the debt. The note is valuable and can be bought and sold by lenders. But like a personal check, it is only valuable in its original form. Green’s lenders have admitted in court documents they can’t find her note. Legal experts say that’s a big deal.

  • There is no excuse for the inability of mortgage lenders to know where the note is,” said Frank Alexander, an Emory University law professor and a leading expert on real estate law. “Without the note, you have virtually nothing. That is the one thing that is always locked in a vault.”

For more, see Mortgage market clouds who owns woman’s house.

For posts that reference the failure of mortgage lenders and their attorneys to prove ownership of the promissory note when starting foreclosure actions, Go Here, Go Here, Go Here, Go Here, and Go Here. KappaMtgDocsMissing

Woman Probed For Taking Out $400K+ Mortgage On Friend's Home Without His Knowledge Arrested For Draining $100K+ From His Bank Accounts

In Anchorage, Alaska, the Anchorage Daily News reports:
  • Local businesswoman Samantha DeLay-Wilson knew when to expect her longtime friend's disability check to hit his bank account, and, while he was in Central America, she slipped into his house, used his checks and drained more than $100,000 from it, according to charges filed Thursday.(1)

  • Court records indicate DeLay-Wilson, 62, is also under investigation for taking out a mortgage worth more than $400,000 against a home her ex-boyfriend and friend of 12 years owns in San Francisco -- without him finding out about it for years.

For more, see Woman accused of stealing checks (FELONIES: Total was in the hundreds of thousands, records say).

(1) DeLay-Wilson was arrested and booked into jail Thursday on 16 felony counts of scheming to defraud, forgery and theft after she allegedly stole 14 checks from the friend, according to the story. The charges filed Thursday are not DeLay-Wilson's first run-in with the law. Reportedly, in 1998, she was accused of duping two Anchorage men, including one who lost his life savings, into lending her $500,000 that she would pay back with interest. She didn't. Facing up to 10 years in prison, DeLay-Wilson pleaded no contest in 1999 to a count of scheming to defraud and was sentenced to serve seven months, a police detective told the Anchorage Daily News.

Bakersfield Cops Probe Two Property Managers Accused Of Failing To Turn Over Rent To Over A Dozen Landlords, Leaving Some In Danger Of Foreclosure

In Bakersfield, California, KBAK/KBFX TV Channels 29/58 report:
  • Court records show two women who are under investigation for their ownership of a local property management firm also have a history of white collar crimes. Bakersfield police are looking into fraud allegations against Kristi Smart and Michelle Gamero of now-defunct Elite Property Management LLC.(1)

  • More than a dozen property owners have come forward saying Smart and Gamero have been collecting rent from tenants for months but not turning the money over to the property owners. Some of the property owners said they are now in danger of losing their rental properties to foreclosure.

For more, see Business owners under fraud investigation have criminal past.

(1) According to the story:

  • In 1992, Smart was convicted of writing more than $2,500 in bad checks;
  • In 1997, she was convicted of forging checks. Smart was sentenced to two years at Central California Women's Correctional Facility in Chowchilla.
  • In 1997, Gamero was convicted of embezzling nearly $130,000 from a former employer. She was sentenced to three years at CCWCF in Chowchilla.

Legal Aid Lawyers Save Day For Massachusetts Couple Facing Foreclosure; Counsel Helps Reach Agreement Allowing Homeowners To Buy Back Home

In Uxbridge, Massachusetts, The Metrowest Daily News reports on a local couple who were able to dodge the loss of their home to foreclosure with the help of a local non-profit law firm:

  • "When all hope was lost, they came in like a white knight. I wasn't in a position to hire a lawyer, but they came in and took care of everything," said Michael Damon by phone from Cape Cod, where he is training for a second tour in Iraq, beginning in June. "That's why we're so adamant about helping legal aid."

  • Now, nearly a year later, Lisa Damon told a crowd of a few hundred lawyers who filled the State House's Great Hall of Flags yesterday, her family is close to re-purchasing the house. With the help of their lawyers, they were already able to reach an agreement to keep living in their house through the process, she said. [...] The Damons' recent history was the centerpiece of a morning of lobbying by Massachusetts lawyers for legal aid organizations such as the one that helped them. [...] Unlike criminal cases, civil courts do not automatically appoint an attorney for people who cannot afford one.

For more, see Free lawyers helped couple stay in home.

Indiana Lawmakers Consider Bill Allowing Tenants To Void Leases In Homes That Fall Into Foreclosure

In Indianapolis, Indiana, the Post Tribune reports:
  • Renters would have the power to void their leases if the properties where they live fall into foreclosure under a bill that passed the Senate Judiciary Committee on Wednesday. Tenants would be guaranteed notification if the property is foreclosed on, and then would be able to break their lease so they could find somewhere else to stay, rather than risk getting tossed out when someone new buys the building. The Senate Judiciary unanimously adopted the proposal, which will next head to the full Senate for consideration.

For more, see Bill would aid renters in foreclosed properties.

See also, WTHR-TV Channel 13: Lawmakers look to tighten up laws on mortgage foreclosure.

Monday, January 26, 2009

Detroit-Area Sheriff Asks Governor To Declare State Of Emergency, Six Month Moratorium On Foreclosure Sales

In Detroit, Michigan, The Detroit News reports:
  • Wayne County Sheriff Warren Evans has written a letter to Gov. Jennifer Granholm calling for a state of emergency on the foreclosure crisis in the state's largest county. Evans, a Detroit mayoral candidate, is asking Gov. Granholm to exercise an executive order for a six-month moratorium on foreclosures in Wayne County.

  • "Not only is Wayne County experiencing a time of great public crisis, disaster and catastrophe, public safety is imperiled by the number of foreclosed citizens living on the street or committing crimes with the actual intent of being jailed," Evans' letter said.

Source: Sheriff Evans asks governor for moratorium on foreclosures in Wayne.

Mortgage Servicer's Libel Suit Against "Victim" Of "Engineered" Foreclosure To Begin Today; Firm Admits Loan Was Current When Legal Action Started

In Dallas, Texas, MSNBC.com reports:
  • On the surface, the trial scheduled to begin Monday morning in the Dallas courtroom of U.S. District Judge Jane J. Boyle is your basic libel suit. Orix Capital Markets, a $1 billion financial services company, says its reputation is being seriously damaged by allegations posted on a Web site that mocks its very name.

  • Indeed, the Web site’s shocking claims of massive fraud and deceit by a prominent member of the mortgage-servicing industry have captured the attention of high-powered attorneys and others immersed in the current foreclosure crisis.

***

  • Cyrus Rafizadeh, a defendant in the libel case, says the lawsuit is the work of an evil corporate giant determined to silence him, a 20-year-old law student, “computer nerd” and self-taught expert on mortgage securitization and trusts.

  • Rafizadeh says he is using his Web site, Predatorix.com, to expose a vast scam by Dallas-based Orix, information that is directly related to the current U.S. mortgage meltdown and is of vital interest to investors, regulators and taxpayers.

***

  • The libel suit was filed as a counterclaim to a 2006 suit against Orix by a company called Super Future Equities, in which Cyrus Rafizadeh was a corporate officer. SFE owned shares in the securitized mortgage trust that held the loan on his family’s foreclosed apartment complex. Rafizadeh said much of the material in SFE’s lawsuit, which was dismissed by Judge Boyle in December 2007, was the fruit of his thousands of hours of research into Orix, the mortgage-servicing industry, real estate trusts and the securitization process.(1)

For more, see Libel trial begins over mortgage scam charges (Current showdown is latest chapter in 8-year, Texas-sized legal drama).

(1) According to the story, Rafizadeh told msnbc.com that he became interested in the topics after Orix foreclosed on the family’s Louisiana property. Orix, “engineered the default because they figured out you make more money in foreclosure and default than if the borrower makes all the principal and interest payments,” which his family was doing, he reportedly said to msnbc.com.

The story further reports that Orix attorney Greg May acknowledged to msnbc.com, as noted by Cyrus Rafizadeh, that principal and interest payments were not in arrears when Orix foreclosed on the Louisiana property. “The monthly payments of principal and interest were being made but there were big deferred maintenance and life-safety issues on the property,” May reportedly said. “It was a slum and they were running it as a slum.” A state court judge agreed with Orix that the Rafizadehs had failed to maintain the property as required by the loan and, further, ruled that fraud had been committed in obtaining financing for its purchase, according to the msnbc.com story. In 2004, the court entered a judgment of nearly $11 million for Orix.

Ohio AG Files Civil Charges Against Upfront Fee Loan Modification Firms Offering Help To Homeowners Facing Foreclosure

From the Ohio Attorney General's Office:
  • Ohio Attorney General Richard Cordray has filed a lawsuit against two Cincinnati-based foreclosure rescue companies accused of failing to deliver on their promises to save consumers from foreclosure. The suit, filed in the Hamilton County Court of Common Pleas, charges Foreclosure Assistance USA, Inc. (FA USA) and American Foreclosure Professionals, Inc. (AFP) with several violations of Ohio consumer protection law.(1)

  • "These companies have been sending direct-mail solicitations that specifically refer to the foreclosure lawsuit an individual consumer is facing by its unique case number," said Attorney General Cordray. "The companies said they could offer immediate assistance in saving the consumer's home from foreclosure, but they failed to do so. They promised work-out agreements, but did not deliver."

For more, see Foreclosure Rescue Companies Sued for Deceptive Practices.

(1) According to the story, the lawsuit charges the companies with violating Ohio's Consumer Sales Practices Act, Credit Services Organization Act and Debt Adjusters Act. The Attorney General's Office currently has four unresolved complaints against AFP, with damages ranging from $700 to $900 each. The office also has four unresolved complaints against FA USA, with alleged damages between $900 and $1200 each.

Florida Foreclosure Defense Attorney Draws Overflow Crowd For One-Day "Boot Camp" In Tampa

In Tampa, Florida, The Tampa Tribune reports:
  • Millions of homeowners across the nation have been sued by lenders who seek foreclosure. Their biggest cheerleader may be April Charney. The lawyer with the Jacksonville Area Legal Aid agency wants to shout from the top of her lungs that every one of them - regardless of circumstance - should fight back. Problem is, she said, there aren't enough lawyers who take these cases, and many don't have enough training to be successful.

***

  • On Thursday, Charney spent the day with 200 lawyers and other real estate professionals. Part of her requirement for the one-day, boot-camp-style training: 20 hours of pro bono service. "I've been drafted for this work," she said of her position with the legal aid group, which represents low-income clients for free. "I'm trying to train other recruits."

***

  • Catherine Peek McEwen, a U.S. bankruptcy judge in Tampa, attended and said she wants to gain a better understanding of foreclosure law. "I think the learning curve was up a notch for the Tampa Bay area," she said. "The state court judges are going to have more to chew on if these lawyers get in front of them."

For more, see Lawyer Provides Foreclosure Arsenal.

Defect In Serving Notice Of Legal Action, Subsequent/Innocent Buyer's Failure To Probe Rights Of Occupants Leads Court To Void Sale Of Foreclosed Home

A 2006 decision of a New Jersey trial court provides another example of the problems a foreclosing creditor causes for itself and others when it chooses to serve delinquent property owners with notice of a foreclosure action by publishing a legal notice in a local newspaper (ie. known as constructive service - service by publication) without first making a diligent search and inquiry of the names and the whereabouts of the property owners in a manner satisfactory enough to establish that face-to-face service (ie. known as personal service) upon the property owners is not possible.

The decision also addresses the problems a property purchaser has when asserting bona fide purchaser status when it buys property subject to the occupancy of someone other than the seller, and fails to inquire as to the nature of any property rights (either recorded or unrecorded) that the occupants may have in the home.

For the long version of this post, including links to court decision and other relevant cases, see Faulty Service Of Process In Tax Foreclosure, Failure To Investigate Rights Of Persons In Possession Leaves Unwitting Buyer Empty Handed.

Go here and go here for other posts on foreclosures involving faulty notifications to property owners. foreclosure faulty notice ScrewUpProcessServing

California Court Hammers Foreclosure Rescue Operator For $280K Plus Attorney Fees In Sale-Leaseback Foreclosure Rescue Deal

A November, 2008 decision by a California appeals court affirmed a lower court ruling that awarded a homeowner facing foreclosure monetary and exemplary damages in the amount of $280,000 (plus the homeowner's legal fees) from a real estate broker / foreclosure rescue operator to whom she sold her home in a sale-leaseback arrangement which violated the California Home Equity Sales Contract Act (Section 1695 through 1695.17, California Civil Code).

For the long version of this post, see California Appeals Court Affirms $280K Damage Award For Homeowner In Sale-Leaseback Foreclosure Rescue Deal.

Upfront Fees For Loan Modifications In California Prohibited Once Notice Of Default Is Recorded On Home In Foreclosure

Contrary to what some loan modification firms doing business with California homeowners may believe, a Consumer Alert appearing on the California Department of Real Estate ("DRE") website makes clear that charging upfront fees from California homeowners for providing loan modification services is prohibited once a Notice of Default has been recorded against an owner's home by his/her mortgage lender.(1)

The alert goes on to state that, when a Notice of Default has not been recorded against an owner's home, it may be permissible for a California licensed real estate broker to assist in working out a loan modification or otherwise negotiate a possible resolution to a mortgage problem with the lender or loan servicer and seek payment in advance for their services, provided certain requirements are met.(2)

In such a case, however, the broker cannot have a homeowner sign an agreement until it has been submitted to the Department of Real Estate for review and the broker has received permission from them to use it and collect the advance fee. Permission is granted by DRE through their issuance of a “no objection” letter to the real estate broker regarding the use of the agreement.

For more, see Consumer Alert - Advance Fees and Loan Modification Services.

(1) California Civil Code Section 2945 through 2945.11, which regulates "foreclosure consultants", forbids anyone who falls under the definition of a “foreclosure consultant”, as well as a real estate licensee, from collecting any advance fees for these types of services if a Notice of Default has been recorded against an owner's property. California licensed lawyers when rendering services in the course of their legal practice(s) are exempt from this prohibition, according to the California Department of Real Estate.

(2) Of course, this presumes that the nature of the services provided by a non-attorney real estate broker doing loan modifications is such that it doesn't constitute the unlicensed / unauthorized practice of law.
Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law.

Sunday, January 25, 2009

CNBC On Upfront Fee Loan Modification / Foreclosure Rescue Scams

CNBC's nightly consumer finance program On The Money ran a segment last week on upfront fee loan modification / foreclosure rescue scams.

For the video (6:23), see Fraud At Your Front Door (or go here for a summary of the report).

Loan Modification Firm's Instructions To Withhold Mortgage Payments From Lender During Negotiations Leaves Two Homeowners Facing Foreclosure

In Burlington, North Carolina, WFMY News 2 reports on two area homeowners who claim were screwed out of thousands of dollars from loan modification firms and, after following their instructions to withhold the mortgage payments while the purported negotiations with the lenders were ongoing, were left facing foreclosure.

For the story, see What's Worse Than Losing Your House?

Three Miami Women Accused Of Cheating Housing Authority Of Federal Rent Subsidies Close To Winning $60K Lawsuit Settlement

In Miami, Florida, The Miami Herald reports:
  • The proposed settlement figure is small -- $60,000 for three women who said they were wrongly denied housing benefits in Miami-Dade County. But the lawsuit that emerged from the fight provides a window into the far-reaching problems that plagued the county's Housing Agency and Section 8 voucher program.

  • Last summer, Prudence Jones, Nola Farquharson and Alexandra Coronado filed suit against the county, arguing they were denied rent subsidies through an unfair system that failed to provide applicants' proper notice or the right to a hearing. In denying housing benefits, the county contended Jones lied about undisclosed income, Farquharson had a secret border and Coronado didn't live where she claimed.

  • All three denied the allegations -- and all may be vindicated [...] when county commissioners vote on a $60,000 settlement that also calls for extensive training for Miami Dade Housing Authority hearing officers and staff, and more oversight.

For more, see Miami-Dade may pay 3 who were denied rent subsidies (County commissioners are expected to vote Thursday to settle a lawsuit seeking to restore rental benefits to three needy local residents).

Alleged Fraud By Federally Subsidized Renters Involving Housing Assistance Benefits Leaves Landlord Of 50-Unit Building Facing Foreclosure

In Fairhope, Alabama, the Press Register reports:
  • Some Spring Run Apartments residents say the bills came without warning. Internal Revenue Service records had revealed that certain residents had under-reported their income to the U.S. Department of Housing and Urban Development, and now they faced eviction if they failed to pay back rent.

  • Some of the back-rent bills were $3,000 or more, representing the federal housing authority's share of pay they had allegedly hidden for the past year, according to former tenants. Rent in government-subsidized housing is based on each tenant's income. And so, also without warning, many Spring Run residents moved out of Spring Run without paying the bills, federal housing officials said.

  • Now, the federal government may foreclose on the property within a month or two. Officials with The Mitchell Company in Mobile, the 50-unit apartment complex's owner, said they are struggling to make mortgage payments because more than half of the tenants either left or were evicted after the back-rent bills were sent early last year.(1)

For more, see Feds may foreclose on Fairhope apartments (Problems over back rent at federally subsidized complex date from late 2007).

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For other stories on Federally subsidized tenants allegedly cheating the government out of housing assistance payments, see:

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For a story of three Miami, Florida women who sued the Miami Dade Housing Authority for allegedly stripping them of their housing benefits after accusing them of lying about their qualifications for housing entitlements, see Dade commissioners to vote on $60K housing settlement.

(1) Reportedly, the trouble over back-rent began in late 2007, when the managers of Spring Run Apartments began using the federal government's Earned Income Verification system. Using a tenant's Social Security number, a housing manager can find the income reported by that person to the Internal Revenue Service the previous year. If discrepancies are found, the tenant must be charged for the rent that would have been paid if accurate income information was provided. The property managers' inquiries using IRS records discovered that the occupants of more than 30 of the Spring Run complex's 50 units had under-reported income in the previous year and now owed back rent, the landlord said. But instead of paying the bills, many tenants left without notice.

Fannie Targets Florida Condos With Tougher Lending Rules

The Miami Herald reports:
  • Lending giant Fannie Mae is slapping tough new requirements on mortgages for Florida condos, moves that analysts believe will make it even more difficult to sell units in buildings already starved for residents and struggling financially.(1)

***

  • The company, wracked with financial problems of its own and in conservatorship with the federal government, said it singled out Florida after a review of its mortgage loans revealed record-high default and foreclosure rates among condo owners. It also cited the excessive number of condos listed for sale, which has driven down prices.

Among the new rules:

  • No more than 15 percent of unit owners can be 30 days or more past due on association fees,
  • For new condo buildings and condo conversions, at least 70 percent of units must have been sold or put under contract. That's up from 49 percent previously,
  • Fannie will have to review condo buildings itself to make sure they meet Fannie requirements -- at the lender's expense. Before, Fannie relied on the lenders to perform these reviews.

For more, see New rules raise the bar for condo mortgages in Florida (In a move that will make it even more difficult to qualify for a condo loan, Fannie Mae is putting a host of new conditions on mortgages for condominiums in Florida).

In another new Fannie Mae rule, which reportedly applies nationwide, buyers qualifying for a mortgage loan conforming to Fannie Mae guidelines who fork up less than a 25% downpayment will be clipped for an additional 3/4% fee (see Fannie Mae's added fee to crunch condo buyers).

(1) According to the story, the new rules come at a time when condo buyers already face difficulties getting mortgages. Many banks over the past two years have dramatically pulled back on condo lending, requiring down payments of up to 40 percent in new buildings. Some lenders even have blacklisted condo buildings, citing a high risk of price declines and defaults.

Saturday, January 24, 2009

Lawyer On Trial Accused Of Placing Phony $160K Mortgage On Employee's Home Forces Mistrial; Fires Defense Attorney, Then Claims Depressed Mental State

In Barrie, Ontario, The Barrie Examiner reports:
  • After just two days at trial, a Barrie lawyer facing criminal charges has insisted he can't go on with his trial because he is depressed and mentally unstable, a court heard yesterday. "I'm not operating on all cylinders," Myles McLellan said.

  • McLellan, 55, [...] began his jury trial this week to face eight criminal charges, including forgery and criminal breach of trust in connection with a false mortgage scheme.(1)

***

  • His jury trial began [last] week, but after the first witness testified, McLellan suddenly dismissed his lawyer, Eginhart Ehlers. [...] Under lawyer-client privilege laws, he is not obliged to tell the court why. "I can't possibly go ahead," he said. "We are talking about my life here. I've got to assert my rights."

  • After his lawyer was gone, McLellan then asked the judge for a mistrial, stating he could not represent himself because he is "heavily medicated" and emotionally unstable. [...] In the end, Justice Jane Ferguson said she had to declare a mistrial and sent the jury home. "I know the Crown and the police have put tons of effort into this case," the judge said. "But this could aggravate his mental condition. We all know mental illness is a serious problem."

For more, see Mistrial declared in fraud trial (Crown doesn't buy suspect's argument).

Go here for related posts on this story.

(1) Reportedly, The Crown claims McLellan fraudulently registered a $160,000 mortgage against the home of one of his employees without the knowledge or consent of that employee. McLellan was arrested in September 2006 and has been out on bail ever since. KappaDeedTheft

Fire Inspector Gives Residents In 40-Unit Building In Foreclosure The Boot As Water From Burst Frozen Pipes Floods Premises

In Dayton, Ohio, the Dayton Daily News reports:
  • The freeze-thaw cycle from the recent cold spell apparently caused pipes in an apartment building to burst on Thursday, Jan. 22, sending water cascading through ceilings and displacing as many as 10 residents. Dayton firefighters dispatched to 27 Central Ave. at 4:07 p.m. found water gushing throughout the 40-unit, three-story building and at least 3 feet of standing water in the basement.

  • Fire Inspector Andrew Steele told all the residents to leave and firefighters shut off the water, electric and gas service to the three-story building. Steele said residents told him that pipes froze last week, apparently were never repaired, and residents were using bottled water to flush toilets, bathe and eat.

  • At least two adult residents have requested assistance from the Red Cross, which will help with housing and clothing and other necessities. According to Steele, the owner of the building lives in California and the building went into foreclosure recently. There was no immediate estimate of the damage caused to the building or its contents.

Source: Pipes at apartment building burst, force out residents.

Go here for more on freezing pipes in vacant homes. frozenpipetheta ForeclosureHomeVacantBeta

Failure To Winterize Homes, Indoor Floods Due To Burst Frozen Water Pipes Tying Up Fire Department Resources

In Columbus, Ohio, NBC4 reports:

  • Pipes in vacant homes are causing problems for fire departments around Central Ohio. Battalion Chief Doug Smith said that when utilities aren’t turned off and homeowners or banks don’t properly winterize, fire crews end up getting tied up with a major mess and not able to answer other calls, NBC 4‘s Mikaela Hunt reported.

  • In those situations another fire station has to pick up the slack. Some of the vacant properties are due to foreclosure.

  • Hunt visited a vacant house in Genoa Township, where the chief there said the water probably had been running for a week. The ceiling fell in and water was spilling out the door.

Source: Frozen Pipes Cause Problems In Vacant Homes.

See also, The Columbus Dispatch: Weather has pipes bursting (Frozen lines common as vacant homes increase):

  • [F]irefighters have responded to 69 calls of damaged pipes so far this month, compared with 33 calls during January last year, [battalion chief Doug] Smith said.

Go here for more on freezing pipes in vacant homes. frozenpipetheta ForeclosureHomeVacantBeta

Arson Suspected As Vacant Home In Foreclosure Burns To The Ground

In Alvin, Texas, The Facts reports:
  • Alvin fire officials suspect arson as the cause of a blaze that destroyed a vacant two-story home and led to a firefighter’s injury early Monday morning. Fire officials received the call about 1 a.m. Monday, and once they arrived at the 3,500-square-foot house [...], it was engulfed in flames, Alvin Fire Chief Rex Klesel said. “The second floor collapsed down into the first floor,” he said. “There was a garage we were able to save.”

***

  • The detached, two-story garage had living quarters inside, but the home has been vacant because it’s been involved in foreclosure proceedings for several months, fire officials said. [...] The home had no electricity turned on nor was there any lighting Monday morning, which is why officials believe the fire was set intentionally.

For more, see Vacant house burns to ground; arson suspected.

For other stories on fires & foreclosures, go here, go here, go here, go here, go here, and go here. ForeclosureHomeVacantBeta

Church Finance Director Facing Foreclosure Charged With Pocketing $37K In Bank Deposits

In St. Paul, Minnesota, the Pioneer Press reports:
  • A former finance director for the Church of St. Bernard in St. Paul has been charged with embezzling $37,000 from church deposits and covering her tracks by moving money from church reserve accounts. Debra Ann Thompson, 44, of St. Paul, was hired in 2006 as a bookkeeper and was promoted the following year to director of business and finance, according to a complaint filed Thursday by the Ramsey County attorney's office. Among her duties: delivering church deposits to the bank.

***

  • When questioned by police, Thompson said her family owed $12,000 to the IRS, more than $15,000 to creditors and a large amount in medical bills. She admitted she altered deposit slips and took money for herself because of her financial turmoil but believed the total amount stolen was no more than $10,000. She said that most of the money she took went toward bills or mortgage payments, that her house was in foreclosure and that she had no food.

For more, see Finance director at St. Paul church charged with embezzling $37,000 (Family was having financial trouble, priest told cops).

Loan Modification Foreclosure Scams On The Upswing In Montana

Montana's News Station reports:
  • Foreclosure scams are becoming more frequent in Montana. That's according to Consumer Credit Counseling Service Branch Director Beverly Johnston who warns about companies that promise to get people out of a foreclosure by charging enormous fees. If a company charges an up front fee, it's most likely a scam, she said.

For more, see MT foreclosure scams becoming more frequent.

Foreclosed Homeowner Fights Back - Files Police Complaint Reporting Burglary After Mortgage Firm Employee Was Sent To Change Locks On Home

In Lake Oswego, Oregon, the following blurb is buried on the Police Blotter under "Burglaries" appearing in The Lake Oswego Review:
  • 1/15/09 11:45 a.m. Homeowners on Summer Woods reported a burglary when a mortgage company employee was sent to the home to change the locks following a foreclosure.

Source: Police Blotter - Burglaries.

Friday, January 23, 2009

Swastikas Painted On Vacant Foreclosed Home Creates Eyesore In Upstate NY Town, Leaves Neighbors Angry

In Monroe, New York, the Times Herald Record reports:
  • For more than two months, neighbors and passers-by have had to endure the sight of three big, red swastikas, spray-painted on the front of an empty house on Dug Road. Neighbors have complained to the state police and the real estate broker who's been trying to sell the house, which was seized through foreclosure six months ago. But to their growing chagrin, nothing has been done to remove the ineptly drawn Nazi symbols from the gray vinyl siding.(1)

  • "To just see a lack of concern about it — it hurts," said Paul Dreyfus, who lives a short distance away. "I would imagine this is the act of some idiot kids who don't really know what it means. But regardless of who did it and why, it shouldn't stay there."

For more, see Swastikas mar vacant house in Monroe.

(1) Coincidentally, property records indicate the house belongs to German financial giant, Deutsche Bank National Trust, which foreclosed on the four-bedroom colonial July 10, according to the story.

St. Louis Builder Faces Charges Of Bank Fraud; Lenders, Subs, Homebuyers Take $10M+ Hit, Say Prosecutors

In St. Louis, Missouri, the St. Louis Post Dispatch reports:
  • [L]ongtime, high-end west St. Louis County home builder [Edward A. Levinson, 49,] has been indicted on bank fraud charges after his attempts to prop up his struggling business cost banks, subcontractors and home buyers more than $10 million, federal prosecutors said this morning.

In addition to the losses allegedly taken by the lenders, Levinson is accused of stiffing his subcontractors out of about $1.5 million, and pocketing $500,000+ in homebuyer deposits, according to the story.

For more, see St. Louis home builder indicted for bank fraud.

NY Landlord Fined Nearly $10K For Taking Tenant's Toilet To Force Move; Social Services Helps Relocate Woman, Child

In Spring Valley, New York, The Associated Press reports:
  • A landlord was fined nearly $10,000 for removing the toilet and other fixtures from a basement apartment to get his tenant to move out. The Rockland Board of Health issued the fine to Fausto Pinos on Wednesday. He had been charged with 24 housing code violations for conditions in the building in Spring Valley, a town north of New York City.

***

  • Pinos, of Bushkill, Pa., did not appear at the meeting, but his brother, Jesus Pinos, speaking on his behalf, said the landlord did not dispute the charges. He said Pinos thought that removing the toilet, bathtub, sink, oven and countertop would force the woman and her child to move.

***

  • The Department of Health issued emergency violations letters to Fausto Pinos on Nov. 5, according to records. When inspectors visited the apartment again Nov. 17, they discovered that the toilet and other fixtures had been removed.

  • The tenant told inspectors that Pinos removed the items the day before and told her to leave. But she said she had no other place to go. The Department of Social Services helped relocate the woman and her child.

For more, see NY landlord fined $10K for taking tenant's toilet (if link expires, try here).

Section 8 Mom, 4 Kids May Face Illegal Foreclosure Eviction

In West Palm Beach, Florida, WPEC-TV Channel 12 reports:
  • It's a dire situation more and more renters are facing--losing your rental home to foreclosure. But for one West Palm Beach mother--her future looms. "If I'm not out early Friday morning than they are just going to come in and throw my stuff out," said renter Barbara Wright.

  • Yesterday when Wright opened her door she found a 48-hour eviction notice in the hands of deputies. The single mother of four is a section 8 housing tenant(1) who has rented the same house for more than five years. But last year her landlord could no longer pay the mortgage.The home went into foreclosure, now she is desperately looking for a new place to live. "I'm trying to pull a miracle out of a hat," said Wright. Meanwhile her four kids have no idea they may be homeless Friday morning.

For the story, see Single Mother and Children Losing Rental Home to Foreclosure.

(1) According to a 2007 Boston Herald story, Section 8 tenants renting homes in foreclosure have rights under federal law that prevent them from getting kicked out of a home because of any change in ownership, including a foreclosure:

  • Chris Norris, executive director of [Metropolitan Boston Housing Partnership, a nonprofit group that administers Section 8 housing programs for the federal government], and legal experts say Section 8 tenants have their rights - and can fight eviction attempts by new building owners snapping up properties at auctions. Under federal law, Section 8 tenants with proper leases can’t be immediately tossed out of their units because of a change in ownership, experts say.

  • Federal laws trump state laws, so (Section 8 tenants) can stay,” said Rafael Mares, an attorney at Harvard Law School’s WilmerHale Legal Services, which is helping tenants during the current foreclosure crisis. Even if a tenant’s Section 8 lease has expired, federal law requires that property owners must prove they’re being economically harmed by having a tenant remain in a building, said Mares. Non-Section 8 renters, who have also been hard hit by the foreclosure crisis, also have rights that require court approval before an eviction can take place, Mares said. But Section 8 tenants are better protected, he said. [...] But many Section 8 tenants panic and don’t fight eviction notices, not realizing they have rights, said Mares.

It may be that a lack of affordable legal counsel knowledgeable in Section 8 tenant issues may result in this family being illegally bounced out of their home. For the specific federal regulation on this point, see 24 CFR 982.310(d)(1). Go here for the regulations (24 CFR 982) regulating the Section 8 rent subsidy program, generally. SkimmingKappaRent

B of A Gives California Congresswoman The "Telephone Bounce Around" In Her Attempt To Seek Loan Modification Help For Constituents

ABC News Nightline reports:
  • In a revealing example of what she says the average homeowner faces, a California Congresswoman spent more than two hours on the phone trying, without success, to find someone at the Bank of America who could help a struggling constituent modify his mortgage payments. ABC News "Nightline" cameras were rolling as Congresswoman Maxine Waters (D-Ca.) was repeatedly put on hold for long stretches, disconnected, transferred to extensions that did not work and ultimately switched to a recording which directed her to the bank's website.

For more, see: On Hold: Even Congresswoman Gets the Runaround on Bank Help Lines (Rep. Maxine Waters Dials and Redials Attempting to Get Help for Constituents).

Improvements Sought In Philly Foreclosure Diversion Program

In Philadelphia, Pennsylvania, the Philadelphia Business Journal reports:

For more, see ‘Model’ foreclosure program seeks ideas for improvement.

NYC Man Accuses Sister Of Tricking 80-Year Old Mom Into Signing Over The Deed To Her $1.2M Home

In Forest Hills, Queens, the New York Post reports:
  • A Queens man says his sister bamboozled their elderly mother out of the deed to a $1.2 million house in exclusive Forest Hills Gardens, according to court papers. James Leong said his sister, Jean Tom, told their mother, Poy Fong Leong, 80, that the deed she was signing over was a "document designed to ensure that Mother Leong would be cared for as she got older," according to the suit filed last month in Queens Supreme Court. Tom did not comment.

Source: Bro: Sis Stole Mom's Home.

Go here, Go here, go here, go here, and go here for other posts related to deed or refinancing scams by forgery, swindle, etc.

Go here, here, here, here, here, and here for other posts on elder financial abuse. KappaDeedTheft FinancialAbuseOfElderlyAlpha

Illegal Loan Modification Firms Beware

Appearing on the MortgageOrb website is, what appears to be, a press release announcing:
  • A new investigative firm has been created to contend with the growing number of illegally run loan modification and foreclosure rescue companies. MFI-Mod Squad, founded by MFI-Miami LLC head Steve Dibert, is a privately funded loan modification company based in Boynton Beach, Fla., that aims to expose companies that charge troubled homeowners large up-front fees in exchange for promising to save their homes from foreclosure.

***

  • Once MFI-Mod Squad completes its investigation, a report will be posted on its Web site and a copy will be immediately sent to state and federal law enforcement officials and regulators for further action.

For the press release, see New Firm Investigates Illegal Mod Companies.

Miami Feds Bust Mortgage Fraud/Marijuana Grow House Operation; 10 Of 18 Homes Financed With Fraudulently Obtained Loans Used As Indoor Pot Farms

In Miami, Florida, the U. S. Attorney's Office (Fla. Southern District) announced last week the indictment of nine Miami residents(1) allegedly involved in a mortgage fraud scheme used to finance the purchase of a number of homes used in a marijuana grow house operation. An excerpt from the press release:
  • [A]s set forth in the Indictment, from on or about March 2, 2004, and continuing through about May 1, 2008, [eight of the defendants] were the buyers and sellers of real estate in St. Lucie County, Miami-Dade County, Lee County, Columbia County, and Marion County, Florida. At least ten of the houses were purchased through fraudulent mortgage applications, and after purchase, were used and maintained as marijuana grow houses. The defendants made false representations of material facts in mortgage applications, thereby causing mortgage companies to issue mortgages for the purchase of 18 houses.

***

  • The Indictment further alleges, on a number of the fraudulent transactions, the loan officer was defendant Magalys Fajardo, a/k/a Magalys Rodriguez, who was employed by mortgage brokers, LendAmerica Home Loans, Bluetrust Capital, and Monster Mortgage, Inc.(2) [...] The aggregate dollar amount of all loans procured fraudulently by the defendants from the mortgage lenders exceeded six million dollars.

For the U.S. Attorney press release, see Miami Residents Indicted In Marijuana Grow House, Mortgage, And Money Laundering Scheme.

Go here and go here for other posts on Marijuana Grow Houses.

(1) The indicted defendants are: Manuel Pupo, a/k/a Tata, Elieser Pupo, Serguey Pupo, Elmer Pupo, a/k/a Elmes, Maritza Perez, Noel Albanes-Gomez, Omar Cardenas, Zenaida Rodriguez and Magalys Fajardo, a/k/a Magalys Rodriguez.

(2) Reportedly, as part of the mortgage lending process, the defendants, via Magalys Fajardo, a/k/a Magalys Rodriguez, allegedly submitted fraudulent Uniform Residential Loan Applications, Requests for Verification of Employment, Requests for Verification of Deposit, IRS Forms W-2, payroll stubs, bank statements, as required by the mortgage lenders, through the mortgage broker to the lender for review and credit worthiness approval. pot grow ops beta

Thursday, January 22, 2009

Trump Tower Tampa Going Down The Tubes?

In Tampa, Florida, the (Un)Real Estate blog at the St. Petersburg Times reports:
  • The fading hopes of Trump Tower Tampa just got fainter. A Tampa bankruptcy judge has ruled that Colonial Bank, owed $3.5-million by tower developer SimDag LLC, can proceed with its foreclosure against the project’s riverfront lot at 100 S. Ashley Drive.

***

  • Trump Tower was supposed to be the region’s tallest skyscraper, but could never get a $200-million construction loan. Its namesake, New York mogul Donald Trump, canceled his licensing agreement with the project in September.

Source: Trump Tower Tampa fated for foreclosure?

Title Closing Company Owner Gets 10+ Years In Cash Back Mortgage Scam

In Miami, Florida, the South Florida Business Journal reports:
  • A Miami woman was sentenced in federal court on Thursday to more than 10 years in prison and ordered to pay more than $6 million in restitution for her role in a multimillion-dollar mortgage fraud scheme. Magile Cruz, who also went by several aliases, pleaded guilty in November to charges that she engaged in a scheme to obtain fraudulent mortgage loans on properties in Miami-Dade and Broward counties.(1)

For more, see Miami woman sentenced in multimillion-dollar mortgage fraud.

Go here for the U.S. Attorney press release: De Facto Owner Of Mortgage Companies And title Agencies Sentenced In Multi-Million Dollar Mortgage Fraud Scheme.

For earlier post and more details on this case, see Florida Feds Obtain Indictment In Alleged Mortgage Scam Involving 79 Homes, $24M In Fraudulently Obtained Loans, $5M In Lender Losses.

(1) Reportedly, Cruz, who owned several mortgage and title companies, along with other co-conspirators, would recruit and pay straw buyers for the properties. They then would prepare fraudulent loan applications on behalf of the straw buyers, using false financial documentation. Once the mortgage applications were approved, the lenders would wire the loan proceeds to her companies for closing.

Civil War Amongst Interest Holders Of Securitized Mortgages May Be On Horizon As Investors Begin To Fight Over Foreclosure, Loan Modification Issues

In Boston, Massachusetts, The ABA Journal reports:
  • A default on debt tied to Boston’s John Hancock Tower highlights the kind of legal fights that will likely break out among investors who have varying rights to repayment after property foreclosures.

  • When mortgages are pooled and securitized, the investors purchase bonds that are grouped by payment priority known as tranches. Those with the lowest risk are first in line for payment if some of the receivables go into default. Once they are paid, those at the next risk level have a right to payment, and so on down the line in a “waterfall” of cascading payments.

  • In the Hancock Tower dispute, investors who believe they will be in the money because of more senior rights to repayment are seeking an immediate foreclosure, the Wall Street Journal reports (sub. req.). Those with lesser rights believe that declining real estate values mean they won’t get paid after foreclosure. This group is instead urging extended time for repayment of the debt, the story says.

  • The securitization agreement anticipated a fight over foreclosure decisions, and provided that the most junior creditor still in the money has the right to decide whether to foreclose. But the creditors are arguing over which one meets the agreement’s definition of “controlling holder” with the right to make the foreclosure decision, the story says.

  • John Zizzo, a real-estate lawyer at Cadwalader, Wickersham & Taft, told the Wall Street Journal that the mortgage crisis is bringing the legal issues to the fore. "Tranche warfare is starting," he said. "It has never been tested before this current market meltdown."

Source: Mortgage Meltdown Results in ‘Tranche Warfare’

For The Wall Street Journal story, see Hancock at Center of 'Tranche Warfare' (subscription required; those without a subscription, go here for a copy & pasted version of the entire story).

For more on the trouble facing the Hancock Tower, see:

Owners Desperate To Rent Out Their Homes The Target Of Anti-Tenant Neighbors, Municipalities

A recent column at SmartMoney.com gives a look at the problems facing homeowners in rental-restricted communities - whether it be those who need to move, can't unload their home, and want to bring in some quick cash by renting to tenants; or those who remain and wish to limit rentals, arguing that a failure to do so will result in the neighborhood's quality of life will go down the tubes:
  • [F]or owners who have to move or who own houses as investment properties, short-term rentals can bring in some cash and keep them from having to sell at a big loss. But instead of greeting renters with hosannas, many towns and subdivisions are barring their doors, arguing that tenants usher in neglect, misbehavior and even violent crime. Almost 60 million Americans live in developments governed by homeowners associations, and by some estimates as many as 40 percent of those communities enforce restrictions that keep owners from becoming landlords.

For more, see New Battle Affects Home Values: No-Rental Rules.

Owners Desperate To Rent Out Their Homes The Target Of Overseas "Cash Back" Rent Scams

In Nashville, Tennessee, WSMV-TV Channel 4 reports:
  • Police said they have seen an increase in scammers hoping to make money from desperate property owners during the current recession. Many people are looking for renters to help them make their mortgages and avoid foreclosure, but that is putting them in a vulnerable position to be bilked.

For more on a story of a homeowner desperate to rent out her home, who received a $5,000 check from a prospective tenant from overseas, with instructions to deposit the check, keep $1,900 for the lease, and wire back the balance, see Police See Increase In Home Rental Scams (Home Owners Become Desperate To Rent Property).

Federal Law Protects Against "Due On Sale" Clauses When Inheriting Mortgage Property From Relatives

A Real Estate Mailbag Q&A article by attorney and syndicated columnist Benny Kass serves as a reminder of the Federal law that protects those who inherit a mortgaged home of 4 units or less from relatives. Specifically, it prohibits lenders from demanding that the new owner(s) immediately fork over the entire outstanding balance on the loan by exercising a "due-on-sale" clause in the mortgage, even though all the payments are current.
  • Federal law - called the Garn-St. Germain Depository Institutions Act of 1982 - protects you. [...] According to that law, a lender "may not exercise its option pursuant to a due-on-sale clause upon ... a transfer to a relative resulting from the death of a borrower."(1)

***

  • Congress recognized that the due-on-sale clause was unfair to many people, especially in situations [...] where you inherited the property - and the existing loan. You should send your lender a copy of [the deceased owner's] death certificate, and merely advise that you will be taking over the mortgage payments. There is absolutely nothing that the lender can do to hurt you.

For the column, see Federal law protects those who inherit homes.

(1) For the Federal law, see 12 USC 1701j–3(d)(5) - Preemption of due-on-sale prohibitions (Exemption of specified transfers or dispositions).

Fannie To Tack On 3/4% Fee On All Condo Loans Made With Less Than 25% Downpayment

The Chicago Tribune reports:
  • With many lenders already casting a wary eye on condo loans because of their default rate, Fannie Mae has upped the ante by adding a fee of .75 percent of the loan amount of a 30-year fixed mortgage, for borrowers who put down 25 percent of the purchase price or less, effective April 1. In simple math, for a condo priced at $300,000, with a mortgage of $240,000 (a 20 percent down payment), if Fannie will be purchasing the loan from your lender, it will assess the buyer an additional $1,800.

For more, see Fannie Mae's added fee to crunch condo buyers.