Wednesday, October 14, 2009

Lenders' Problem "Entirely Of Their Own Making" Says Judge In Affirming Earlier Ruling That Puts Title To Foreclosed Massachusetts Homes Into Question

In Boston, Massachusetts, The Boston Globe reports:
  • A Massachusetts Land Court justice's ruling today puts into question the ownership of hundreds -- and possibly thousands -- of foreclosed properties in the state.

  • Justice Keith C. Long affirmed his own March decision that invalidated foreclosure proceedings involving two Springfield homes because the lenders did not hold clear titles to the properties at the time of sale. In today's reconsideration of that ruling, Long described a convoluted process in which ownership of the mortgages changed multiple times without being properly recorded. He said the problems lenders now face are "entirely of their own making," and if they seek a change in law they should look toward the Legislature.

  • "The issues in this case are not merely problems with paperwork or a matter of dotting i's and crossing t's,'' Long said in a 27-page decision. "Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts Legislature."

  • The decision comes seven months after Long’s initial ruling, which came as a shock to many who deal with distressed properties. Lenders believed they could complete foreclosure transactions and later produce formal proof they held the mortgages.

  • Since March, some lenders have stopped selling foreclosed properties out of fear the sales later could be voided, and title companies have refused to insure them. The logjam has impaired efforts by communities and nonprofits to buy and rehabilitate foreclosed homes in some of the state's hardest hit areas. It has also made it difficult for individuals to buy foreclosed homes.

Source: Judge reaffirms crucial foreclosure sale ruling.

For the full text of the ruling in this consolidated case, see U.S. Bank, N.A. v. Ibanez; Wells Fargo Bank, N.A. v. Larace. EpsilonMissingDocsMtg

Statewide Ban On Upfront Fees For Loan Modifications Now Includes Attorneys, Out Of State Operators Who Solicit California Homewoners

In Sacramento, California, The Sacramento Bee reports:
  • Loan modification firms that promise to help struggling borrowers get their mortgages rewritten have been banned immediately from asking for cash upfront. Attorneys, too, who specialize in loan modifications are no longer allowed to ask consumers for payment before they perform services. The ban expires on Jan. 1, 2013. The abrupt change in California law comes after Gov. Arnold Schwarzenegger Sunday signed Senate Bill 94, by Sen. Ron Calderon, D-Montebello. As an urgency measure, the bill takes effect immediately.

***

  • Loan-modification firms have made relentless pitches to borrowers through radio and television ads, postcards and telephone calls. Many desperate people have turned to them, often coughing up a few thousand dollars for help that didn't come. "This is a huge problem, and the signing of this (bill) will help," said Tom Pool, spokesman for the California Department of Real Estate. He said the department has 1,300 complaints on file and has issued 400 cease and desist orders against loan modification firms. The law banning advance fees applies to firms in California or elsewhere that solicit clients in California.

For more, see Loan modification firms banned from demanding upfront fees.

Nevada Homeowners Saddled By IndyMac With "Exploding ARMS" To Freeze Foreclosure By Joining Class Action?

In Las Vegas, Nevada, the Las Vegas Review Journal reports on homeowner Luis Armando Benito and others who allege to have been duped into unaffordable adjustable rate mortgages from IndyMac Bank that "exploded" on them shortly after obtaining the loans:
  • Today, Benito and other locals with Indymac mortgages are fighting back -- and making progress. They have joined a federal class-action lawsuit against Indymac Mortgage brought by attorneys Matthew Callister and Brooke Bohlke. Their clients' homes range in value from $150,000 to more than $1 million.

  • Among many allegations, the attorneys contend OneWest "breached the loan agreements/contracts by failing to disclose the following: APR, method of determining the finance charge, balance, actual finance charge, total payments, amount financed, number of payments, and due dates. OneWest breached the loan agreements/contracts by doubling Plaintiffs mortgage payments when the mortgage 'arms' came due."

  • Although they come from vastly different backgrounds, the homeowners share a common story of how creatively they were qualified for their loans. Some of the loan documents contained more fiction than a Stephen King novel.

***

  • The list of homeowners taking action grows as they learn about the lawsuit. "Somebody's got to bite the bullet and say, 'We're going to freeze foreclosures on single family homes,'" Callister says. "If it takes the court system's intervention, then so be it." Once a troubled Indymac borrower learns of the lawsuit, Bohlke says, "We've been able to stop foreclosures with 24 hours' notice." With about 1,000 Indymac mortgage loans heading into default in Southern Nevada alone, the phones at the law office figure to keep ringing for some time to come.

For the story, see Homeowners whose mortgages fizzled fight back with class-action lawsuit. UndoMortgageLoans TILAdelta

Class Action Status Sought For Elderly Homeowners Persuaded To Borrow Against Home To Invest In Alleged Ponzi Scheme

In Constantine, Michigan, the Kalamazoo Gazette reports:
  • For more than three decades, Orrin and Jama Bowlby have enjoyed a quiet life on Patterson Road in this rural St. Joseph County community. But in the last eight months, the Bowlbys’ simple life has been turned upside down. They say Portage insurance company American Benefit Concepts Inc., which is facing several lawsuits from dissatisfied clients and an investigation by the state, persuaded them to invest in a California-based Ponzi scheme. And it may end up costing them their home.

***

  • The Bowlbys aren’t alone. Ann Arbor attorney Joseph Spiegel, who filed one of the three lawsuits pending against ABC, said the Bowlbys are among approximately 70 older homeowners in Michigan who were allegedly persuaded by ABC salesmen to take out new mortgages on their homes and invest the proceeds in Diversified Lending Group Inc. Spiegel’s suit seeks class-action status for an estimated 250 ABC clients in Michigan who invested with Diversified Lending Group, a California real-estate-investment company that was charged with securities fraud earlier this year. It promised investors 12 percent annual returns with no risk. Spiegel said he and West Bloomfield attorney Anthony Trogan represent about 160 ABC clients who claim they’ve lost about $7 million.

  • Diversified was a Ponzi scheme,” said David Gill, the court-appointed receiver overseeing Diversified Lending Group’s assets during the lawsuit. “The only way it could pay the returns it promised was by taking in and paying out money from new investors.”

For more, see Mortgage nightmare: Retired couple face foreclosure after 'too good to be true' investment (Orrin and Jama Bowlby, a retired couple in Constantine, say they were convinced by insurance company American Benefit Concepts Inc. to take out a loan on their house and invest the money into am alleged Ponzi scheme. Now they are at risk of losing their home to foreclosure).

Cop Accused Of Duping Girlfriend Into Signing Over Her Share Of Jointly-Owned Home, Then Giving Her The Boot

In Elk Grove, California, the Elk Grove Citizen reports:
  • Authorities arrested and jailed former Elk Grove City Council Member Michael Leary(1) for allegedly committing real estate fraud on Oct. 2. A warrant was served on Oct. 1 for his arrest when Sacramento County Sheriff’s Department investigators suspected that he forged real estate documents and unlawfully evicted his then-girlfriend from their house in Elk Grove’s Laguna West area. Leary, 49, now faces the felony charges of grand theft, forgery and recording a false document, the Sacramento County District Attorney’s Office announced on Oct. 2.

***

  • His former girlfriend Alyc Maselli claimed that Leary deceived her into believing they had equal ownership of a house they bought for $610,000 on Marina Cove Circle in 2005. Investigators believe that he forged the grant deed where he claimed 90 percent ownership of the home, without her knowledge. Leary allegedly had this altered document notarized.

***

  • Maselli claimed she did not know about Leary’s allegedly altered deed until last January when he evicted her from the house. Her attorney reportedly informed her that she did not have the title to the home as of 2006.

For more, see Ex-council member Leary arrested for alleged real estate fraud.

(1) Reportedly, Leary is a Sacramento County Sheriff’s Department lieutenant who co-managed the Rio Cosumnes Correctional Center outside Elk Grove. His agency declined to release an official statement about his criminal case. A Sheriff’s department spokesperson said that Leary was placed on administrative leave, according to the story. DeedContraTheft

Buyer Of Foreclosed New Hampshire Home Seeks Death Declaration For Prior Owner Lost At Sea To Clear Cloud On Property Title

In Brentwood, New Hampshire, SeacoastOnline.com reports:
  • The owners of the former Stratham homestead of Stephen Woods of Exeter, who has been missing since he is believed to have fallen off his boat in 2005, are seeking to have him officially declared dead. In October 2005, Woods and his son, Asher Woods, planned to sail aboard their 41-foot ketch from Rockland, Maine, to Rye, where it would be docked for the winter. While the pair left Rockland, they never made it to Rye. A search by the Coast Guard found the boat with only Asher Woods on board six days after they departed. According to authorities, Asher said his father fell overboard without a life jacket near Boothbay Harbor, Maine. The boat, the Naobi, was found 133 miles east of Provincetown, Mass.

  • Four years later, the current owners of the former Woods home at 55 Bunker Hill Avenue are looking to declare Stephen Woods dead “in order to quiet the title of his home,” court documents state. A legal notice ran in The Exeter News-Letter on Tuesday, Oct. 6, and will run once a week for four successive weeks. [...] The notice is a part of the process in legally declaring his death.

***

  • Since Stephen Woods was lost at sea, no jurisdiction has been able to give a death certificate, said attorney John McGee. Although he is presumed dead as a result of being lost at sea, no formal proceedings have established his death as a legal fact.

***

  • The Woods home went to foreclosure after Stephen Woods’ death, according to court records. His wife mortgaged the home to Option One Mortgage Corp., but defaulted on the mortgage and the home was foreclosed on. A foreclosure deed was given to the current owners.

For the story, see Home owners seek to have man lost at sea declared dead. quiet title

Tuesday, October 13, 2009

CT Feds Indict Two In Alleged "Short Sale" Flipping Scam Using Straw Buyers To Dupe Lenders Into Accepting Less Than Full Payment On Underwater Loans

From the Office of the U.S. Attorney (Bridgeport, Connecticut):
  • Nora R. Dannehy, United States Attorney for the District of Connecticut, [...] announced that a federal grand jury sitting in Bridgeport has returned a two-count indictment charging SERGIO NATERA, 35, of Bridgeport, and ANNA McELANEY, 38, of Norwalk, with one count of conspiracy to commit bank fraud and one count of bank fraud. NATERA and McELANEY are licensed real estate agents and the charges stem from an alleged “short sale” mortgage fraud scheme involving four properties located in Connecticut.

***

  • The indictment alleges that in 2007 and 2008, NATERA and McELANEY conspired to defraud financial institutions of the full proceeds due to them on four separate real estate transactions in Bridgeport (2), Monroe and Wallingford. The indictment alleges that NATERA and McELANEY created straw buyer transactions in order to negotiate with mortgage holders to allow sales of the properties to occur without paying the mortgages in full. During the negotiations with the mortgage holders, NATERA and McELANEY knew that legitimate purchasers already had executed purchase and sale agreements with the property owners to purchase the property at higher prices.

  • On each of the transactions, NATERA and McELANEY are alleged to have arranged for two closings to take place, the first from the property owner to the straw buyer at the short sale price, and the second from the straw buyer to the legitimate purchaser at a higher price. The indictment alleges that the mortgage lenders did not know about the second closing and received no proceeds from the second closing.(1)

For the U.S. Attorney press release, see Two Connecticut Real Estate Agents Charged with Engaging In Short Sale Mortgage Fraud Schemes.

(1) For other stories on alleged short sale flipping scams, see:

California Man With History Of Real Estate Scam Accusations Bagged Again In Alleged Foreclosure Rescue Racket

In Stockton, California, The Stockton Record reports:
  • Benjamin Ferdin did not trust the man who had taken money from his father to save him from foreclosure. [...] So Ferdin set up a kind of sting, baited with the promise of more money. When the supposed high-roller showed up at his father's house Oct. 4, Ferdin called the police, and Jesse Manuel Munoz, 33, was arrested.(1) It was not the first time.

  • "He had a habit down here of selling properties that he didn't own," Merced County Deputy District Attorney Walter Wall said. "It sounds like he's up to doing the same thing again." In Merced, Wall said, Munoz ran a major real estate scam. Having obtained master keys to a development there, he would take prospective buyers on tours of model homes, take deposits from them and then vanish.

***

  • In April, Munoz pleaded guilty to multiple counts of fraud. He was sentenced to nine months' time served, a suspended 10-year prison sentence and three years' probation. He also was ordered to pay restitution. Wall said the plea was negotiated in an attempt to maximize restitution of victims. [...] In June, Munoz was arrested again, on a warrant that had been issued in Spokane County, Wash., in 2008 for similar frauds. He was extradited to Spokane County, where he posted bail. Spokane County Deputy Prosecuting Attorney Robert Sargent said he had expected Munoz to plead guilty at his next court appearance on Nov. 13.

For the story, see Man faces charges in alleged real estate scam in Stockton.

(1) Reportedly, Stockton Police Department Detective Ken Southwick [...] said Munoz would offer to rescue Stockton homeowners from foreclosure or, failing that, buy their home and sell it back - if they would just give him $1,000 to get started. According to a complaint filed in San Joaquin County Superior Court, Munoz now faces four counts of grand theft and four counts of real estate fraud. According to the story, Munoz clipped Ferdin's father for $5,800.

Nevada AG Bags Two, Seeks Another In Alleged Scam That Used Unwitting Homeowner's Stolen I.D. To Pocket Proceeds From Fraudulently Obtained Mortgage

In Las Vegas, Nevada, the Las Vegas Sun reports:
  • Two Las Vegas men have been arrested on several charges of theft, mortgage fraud, identity theft and forgery against senior citizens, Nevada Attorney General Catherine Cortez Masto said [...]. Thomas F. Gentile, 56, and Julio C. Martinez, 61, are in custody after they were allegedly involved in a scam to obtain a mortgage loan against a property owned by Gentile's former employer, without knowledge or consent, Masto said. An arrest warrant has been issued for a third man, 30-year-old Justin M. Sabo of Huntington Beach, Calif., whose whereabouts are unknown.

***

  • The three men, using the false identification, got a $65,000 mortgage loan against the former employer's property. The victims were senior citizens who had paid cash for their home and did not hold a mortgage on the property, Masto said. The lenders also were victimized when they approved an application without knowing it was false, Masto said. The elderly couple received a notice of foreclosure for non-payment, and they contacted the attorney general's office. Since the couple are senior citizens, several counts alleged in the criminal complaint could increases their sentences if the three men are found guilty, Masto said.

Source: Vegas men arrested in alleged mortgage scam against elderly.

For the Nevada Attorney General press release, see Attorney General Announces Arrest In Connection With Mortgage Scam Against Senior Citizens.

Florida Judge Rejects Motion To Force Convicted Deed Theft Scammers To Sign Over Home Back To 92-Year Old Victim

In New Port Richey, Florida, The Suncoast News reports:
  • Eloise Mudway, 92, has waited nearly five years for the return of her house. On Friday, she learned she would have to wait at least two more weeks. Pasco Circuit Judge Shawn Crane declined to grant a motion that could have forced the couple convicted of stealing Mudway's house to deed it back to her. [...] Assistant State Attorney Mike Halkitis filed the motion last month after a jury found Joseph and Cynthia Clancy guilty of grand theft from a person over the age of 65. Evidence at trial showed the couple bilked Mudway into signing a document that transferred her 2,900-square-foot house to Cynthia Clancy. The house is valued at more than $350,000. The Clancys each face up to 30 years in prison when they are sentenced Oct. 22.

  • Halkitis said he plans to ask Crane to grant the motion again at the sentencing. If that fails, Mudway's best hope to regain her home could be a lawsuit she filed against the Clancys in 2005. A hearing in the civil case is scheduled for November.

For the story, see Pasco woman, 92, still waiting to reclaim home.

Too Good To Be True Rent To Own Ads Making The Rounds On Craigslist?

In San Francisco, California, NBC Bay Area reports:
  • The latest round of "too good to be true" offers are making their round on Craigslist in the form of rent to own ads. The postings offer the homes far below market rate and claim you can "take over the mortgage." Recently a one bedroom condo in Saratoga was posted on Craigslist for just $350 a month. The advertisement said the home was in foreclosure and a tenant could become the owner by taking over the monthly mortgage.

For more, see The Craigslist Deal That's Too Good to Be True (Rent to own ads are not all they are cracked up to be).

Monday, October 12, 2009

Ohio Appeals Court Ruling Finding Wells Fargo "Lacked Standing" In Foreclosure Allowed To Stand; State High Court Declines Review Of Lender Appeal

From the Law Offices of Marc Dann:
  • In a significant victory for consumers and particularly victims of predatory lending the Ohio Supreme Court [see Case Announcement #2009-1030 - Wells Fargo Bank, N.A. v. Jordan; three of seven Justices dissenting(1)] on Wednesday [Sept. 30, 2009] quietly let stand what may turn out to be a landmark decision prohibiting banks, trusts and other loan servicing entities who cannot prove ownership of a mortgage note from foreclosing on Ohio homeowners.

  • Following a trend originally initiated by U.S. District Judge Christopher Boyko, Northern District of Ohio in Federal Court,(2) The 8th District Court of Appeals (Cuyahoga County) ruled in June of this year that banks, loan servicers and trusts did not have standing to pursue foreclosure of homes in Ohio if they could not prove that they owned the mortgage note at the time of the filing of the complaint.(3)

***

Attorney Dann goes on to make this observation regarding the effect of a court's lack of jurisdiction in a foreclosure action could potentially have on the current status of title to real estate that has gone through the foreclosure process in the past:

  • [S]ince Ohio Law has long recognized that the issue of Jurisdiction can be raised by a party in a lawsuit at anytime, there may be thousands of judgments granting foreclosure that are void putting the title to those properties in question. Ohio Courts have the inherent power to vacate the prior void ab initio judgments in foreclosure. Patton v. Diemer (1988), 35 Ohio St.3d 68, 70, 518 N.E.2d 952.

For more, see Ohio Supreme Court Lets Wells Fargo v. Jordan Stand (Foreclosure Plaintiffs Who Do Not Own the Mortgage at the Time of Filing Lack Standing to Pursue Cases).

Thanks to Richard Davet for the heads-up on this story.

(1) Apparently, three of the seven justices of the Ohio Supreme Court were eager to weigh in on this issue, only to be outvoted by their four colleagues. Maybe the four didn't feel this was the right case to create statewide precedent with.

(2) For Judge Boyko's ruling, see In re Foreclosure Cases, Case 1:07-cv-02282-CAB (N.D. Ohi0 2007).

(3) In Wells Fargo Bank, N.A. v. Jordan, 2009-Ohio-1092, 2009 Ohio App. LEXIS 881, Judge Frank D. Celebrezze Jr. writing for a unanimous panel of the 8th District held that in order to bring a lawsuit in Ohio the plaintiff must have an genuine interest in the subject matter of the lawsuit:

  • {¶ 21} “A party lacks standing to invoke the jurisdiction of a court unless he has, in an individual or a representative capacity, some real interest in the subject matter of the action. State ex rel. Dallman v. Court of Common Pleas (1973), 35 Ohio St.2d 176, 298 N.E.2d 515, syllabus. The Eleventh Appellate District has held that ‘Civ.R. 17 is not applicable when the plaintiff is not the proper party to bring the case and, thus, does not have standing to do so. A person lacking any right or interest to protect may not invoke the jurisdiction of a court.’ Northland Ins. Co. v. Illuminating Co., 11th Dist. Nos.2002-A-0058 and 2002-A-0066, 2004-Ohio-1529, at ¶ 17 (internal quotations and citations omitted). The court also noted that ‘Civ.R. 17(A) was not applicable unless the plaintiff had standing to invoke the jurisdiction of the court in the first place, either in an individual or representative capacity, with some real interest in the subject matter. Civ.R. 17 only applies if the action is commenced by one who is sui juris or the proper party to bring the action.’ Travelers Indemn. Co. v. R.L. Smith Co. (Apr. 13, 2001), 11th Dist. No.2000-L-014.” Wells Fargo Bank, N.A. v. Byrd, 178 Ohio App.3d 285, 2008-Ohio-4603, 897 N.E.2d 722.”

It went on to hold, "If plaintiff has offered no evidence that it owned the note and mortgage when the complaint was filed, it would not be entitled to judgment as a matter of law.” EpsilonMissingDocsMtg

NY Court Kiboshes Town's Attempt To Seize Mentally Unfit Homeowner's $200K+ Property For $13K In Back Taxes

In Lewisboro, New York, The Lewisboro Ledger reports:
  • Lewisboro erred in foreclosing on a resident’s property without ascertaining that the man was mentally fit, a state judge has ruled. State Supreme Court Judge Gerald Loehr ordered last month that the town must return Richard Egloff’s Lake Kitchawan home to him in exchange for the payment of $13,000 in back taxes.

  • According to the judge’s order, provided to The Ledger by Mr. Egloff’s lawyer, Thomas Decea, Judge Loehr ruled that Mr. Egloff was “incompetent at the time of the foreclosure” due to mental illness, and that the town’s seizure of the property, worth more than $200,000 according to court papers, was “invalid.” The town had confiscated the property in May 2008 after foreclosing on the property for non-payment of property taxes. In June, Mr. Egloff sued the town alleging that his rights had been violated, and that the town had ignored his mental illness.

For more, see Judge rules town must return seized house.

Go here for a copy of Judge Loehr's preliminary judgment against the town.

For the lawsuit, see Egloff v. Town of Lewisboro, et al.

For an earlier post on the original story, see Schizophrenic Employee Says In Suit Town Stiffed Him On Five Years Back Pay, Then Seized His $200K Property For $11K In Delinquent Real Estate Taxes.

Co-Owner Gets Reduced Penalty In Title Agency Scam; Mortgages Unrecorded On 3000+ Deals, Insurer Stiffed On Premiums, Lienholders Left Unpaid

In St. Paul, Minnesota, the Star Tribune reports:
  • The Minnesota Commerce Department, which has accused a Twin Cities title company and an affiliated insurance company of keeping the money from more than 3,000 real estate mortgage transactions, has agreed to a settlement with a co-owner in which she'll pay a fraction of her penalty as long as she stays out of the business.

  • In an enforcement action [in August] against Jennifer K. Frantz, the department listed her penalty at $500,000 but said that she'll only have to pay $7,500 of it as long as she complies with other parts of the settlement. Frantz was a co-owner of Zen Title and TitleSource, doing business as TitleDirect. Besides keeping mortgage money, the Commerce Department said it failed to remit $196,000 in premiums to an insurer and failed to make $1.3 million in mortgage payoffs to prior lenders. The companies are in Mounds View.

  • In addition, Frantz's license as a real estate closer and notary were revoked and she is barred from any work that requires a license from the department. "She's been barred from the industry. That's her main penalty," said department spokesman Bill Walsh. Frantz's attorney, Tom Kelly of Minneapolis, said the settlement reflects that she was a minor stakeholder in the company.

  • In March 2008, the department ordered the companies to pay $2 million in civil penalties.(1) After negotiations, Frantz reached the August settlement. Walsh said that order still stands against the other two owners, Charles E. Bethel and Trent C. Jonas.

  • In the document ordering the $2 million in penalties, the department said the companies caused losses to lenders and exposed homeowners to disputes that can cloud property titles. It also said an $800,000 mortgage that wasn't recorded was for one of the owners. Walsh said the department has referred the case for criminal prosecution. "What they did was criminal. They essentially closed mortgages and did not finish. They did not send the money on, they did not pay the loans," Walsh said, calling it a "huge fraud." Some of the mortgages were in Minnesota and some in other states, he said. Kelly said he did not expect criminal charges to be brought against his client. Neither Bethel nor Jonas could be reached for comment [...].(2)

Source: State OKs deal in real estate loan case (A settlement with a co-owner of Zen Title and TitleSource cuts her share of a $2 million penalty to $7,500 and a ban from the industry).

See also, Minneapolis/St. Paul Business Journal: Title firms co-owner settles with state.

Thanks to Bill Collins of Crossroads Abstract, Rochester, NY for the heads-up on this story.

(1) See Minneapolis/St. Paul Business Journal: Title firms hit with $2M fines (The DOC contends that the companies, which operated out of the same office, failed to record more than 3,000 mortgages on real estate deals they closed and failed to make more than $1.5 million in payments to mortgage lenders and insurers, among other charges).

(2) According to the Minnesota Department of Commerce website, all licenses held by this outfit have been revoked. EscrowRipOffKappa title insurance legal issues

Amendment To NJ Tenancy Complaint May Create Hurdle For Foreclosure Rescue Operators Attempting To Boot Homeowners In Sale Leaseback Deals Gone Sour

A press release from The Law Office of Michael D. Mirne discusses the hurdles foreclosure rescue operators in New Jersey may be facing when attempting to boot homeowners from their houses in the context of sale leaseback, "home saver" arrangements:
  • Under ordinary circumstances, a landlord can expect that an action filed for non-payment of rent will result in a Judgment for Possession within about 4 weeks of the time the action is filed. The expediency of this process is attractive to most landlords who are often struggling to pay their own bills, and cannot afford to subsidize a tenant who is not paying rent. At an eviction trial, the Judge reads a preliminary set of instructions, which includes the statements that (1) he or she may not force the landlord to wait for rents, and (2) all outstanding rents must paid by the day of Court or the tenant will be evicted.

  • However, Landlords who have acquired title to the property from the tenant,(1) and Landlords who have given the tenant an option to purchase may not have the right to have their cases heard in Landlord Tenant Court.

  • The body of the Tenancy Complaint has been recently amended to include an inquiry as to whether the Landlord acquired title to the property from the Tenant, or alternatively, if the Landlord gave the tenant an Option to Purchase the Property. Since both of these conditions would substantially affect the equitable property rights of the tenant, the cases brought under these conditions are not easily resolved on a summary basis.

  • To put it simply, Judges in Tenancy Division, who are often swamped with a heavy caseload of relatively simple matters, are reluctant to make the factual inquiries necessary to resolve a dispute when the ultimate issue affects the ownership of the property.(2) The unfortunate(3) result is that these matters are routinely transferred out of Tenancy Division into the Law Division (or even worse, the Chancery Division), where the parties can spend the next 12 months exchanging discovery, attending Court Ordered mediations, and waiting for trial. More importantly, the Tenancy Judge very often orders that the tenant does not need to pay rents to the Landlord until the Law Division has an opportunity to rule of the issues of the case. Under the Rules of Court, the Transfer out of Tenancy Division can be requested by the Judge, sua sponte (on his own initiative), or by one of the parties (usually the tenant).

For the press release, see Information for Landlords who Acquire Title from their Tenants.

(1) A typical sale leaseback arrangement.

(2) A judge in the Tenancy Division may lack jurisdiction to make rulings that adjudicate title to property. Further, regardless of what judicial division hears the case, a court could make a finding that the sale leaseback foreclosure rescue deal between the operator and the homeowner is an equitable mortgage, in which case an eviction of the homeowner would be rendered legally impossible without the operator first filing a lawsuit to foreclose on its equitable mortgage (exactly the scenario the operator wanted to avoid in the first place when it structured the financing transaction with the financially strapped homeowner as a sale leaseback, coupled with an option to repurchase).

(3) Or fortunate, depending on one's perspective.

Last Minute Legal Aid Help Thwarts Real Estate Agent's Attempt To Illegally Boot Tenants From Recently Foreclosed Home

In New Haven, Connecticut, the New Haven Independent reports on a Bridgeport-based real estate agent who, on behalf of a mortgage lender, attempted to force the tenants out of a foreclosed house in violation of the recently enacted Protecting Tenants At Foreclosure Act,(1) which, among other things, requires lenders to respect any existing tenant leases, and provide at least 90 days notice when vacating month-to-month renters. In fear of getting the boot, the tenants were referred to a local legal aid lawyer, who put a stop to the failed eviction scam.
  • [Local legal aid attorney Amy] Marx — who has found ways to help other tenants stay in foreclosed-upon homes — blasted the realtor and OneWest for “a shockingly flagrant violation” of the new law. Foreclosers are entitled to offer cash-for-keys deals, she said. But not to present them as the only option. It has to happen “only in the context of an honest conversation of what the tenants’ options are,” Marx said.

  • Marx said she’s confident the law will protect them in the meantime. She worries about other tenants who don’t have City Hall relatives to steer them to legal-aid lawyers. “Miss Walters is extremely lucky. She knew someone who knew someone” who knew someone else who could help, Marx observed. “What we are really worried about are the countless tenants out there who do not know about the law and will not get the chance to fight back against the bank the way Miss Walters is now doing.”

For the story, see Foreclosure Law Has Her Back.

(1) This federal foreclosure law was passed this spring and requires (with one exception not applicable here) property owners who come into land through foreclosure to honor all existing leases, and to provide a 90-day window for any month-to-month tenants. See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009. RentSigmaSkimming

Sunday, October 11, 2009

Media Intervention Clears Up Another Mortgage Servicer Screw Up That Left Victimized Homeowners Fearing Foreclosure

In Tulsa, Oklahoma, KJRH-TV Channel 2 reports:
  • Every time the phone rang at the Beeghlys the last few months, they panicked. They say chances were good it was their mortgage company, making collection call after collection call. [...] Lindsey and Eric say CitiMortgage insisted they had missed four monthly payments this year. The Beeghlys were told their automatic payments had been declined because of insufficient funds in their bank account. Yet their bank statements showed those payments had cleared. "They lost four payments of ours." And each time, Lindsey says they felt pressured into making another payment, afraid they might be forced into foreclosure. [...] Essentially, the Beeghlys made two house payments for each of those four months, causing several bounced check charges from other payments they had to make every month. And even though Lindsey says she sent the mortgage company the proof that those original payments and cleared their bank several times, it didn't help. "It's just a lot of hassle that we shouldn't have had to deal with for a problem that wasn't ours."

  • So Lindsey finally called the 2News Problem Solvers and we contacted CitiMortgage. They assigned a specialist to work directly with the Beeghlys to help solve the problem surrounding their home mortgage. And things started to happen quickly. "It was taken care of, they refunded us for the four full payments." Lindsey says in amounted to four thousand bucks in all, including all those bounced check charges. And the mortgage company wrote letters to the credit bureaus to clear up the Beeghly's credit report. CitiMortgage told Lindsey they eventually discovered those four missing payments had been sent to the credit card division, even though the Beeghly's don't have a credit card with them. "It's a huge burden lifted off us." And they no longer panic everytime the phone rings.

For the story, see Missing Mortgage Payments.

Lender Loses REO For Failure To Pay Real Estate Taxes; Original Foreclosed Owner Buys Back Home At County Tax Auction For $10K

In Holland, Michigan, The Michigan Sentinel reports:
  • The house on West 16th Street still doesn’t have curtains and boxes need to be unpacked, but the path home was longer than a simple drive in a moving truck for Claudia Zamora. She lived at this house on West 16th Street with her family for 12 years until divorce and a nearly $1,000 house payment became too much, and the bank foreclosed. [...] But now she’s back and free of a mortgage because the bank that took her property back failed to pay the taxes.

***

  • Once a year, the county auctions off the properties. Someone tipped off Zamora that her property was among those to be auctioned last month. [...] Before the auction began, the auctioneer asked the crowd whether anyone was buying back lost property. “And I raised my hand up,” Zamora said. Her West 16th Street home was No. 13 on the list. “Nobody else bid on it. Not even online,” she said. “I was in shock; I was in tears; I couldn’t believe I got my house back.” Since she lost the house in 2006, Zamora and her children have moved five times. [...] The crowd applauded her when she got the property.

  • There are rules to the annual county tax auction. You must have the cash in hand. Three years of taxes, plus county’s fees totals $10,030. That’s the price she paid, in full, to get her home back.

For the story, see Foreclosure story has happy ending (Woman wins own home back at auction).

2005 Bankruptcy Reform, Electronic Filing Requirements "Impede Consumers Trying To Save Their Homes From Foreclosure" Says Attorney In Federal Suit

In Chicago, Illinois, Courthouse News Service reports:
  • The combination of Bush-era bankruptcy law reform and a new electronic filing rule in the Northern District of Illinois bankruptcy court reduced competition among lawyers, increased legal fees and hindered the public from trying to rescue their homes from foreclosure, a lawyer argues in a federal lawsuit. Attorney Thomas Holstein claims that the two actions, which he describes as "two sides of the same coin," are "overly broad and restrictive." In particular, Holstein says the mandatory electronic filing rule adopted by the bankruptcy court just months after the Bush reforms went into effect wrongfully "impedes consumers trying to save their homes from foreclosure under Chapter 13."

***

  • Holstein argues that the filing of a bankruptcy case is "an entirely clerical act" that doesn't require the skills of a licensed attorney. However, the bankruptcy court's mandatory e-filing rule holds that only lawyers are allowed to register for the service, Holstein says. He bases his challenge on federal antitrust law, which he says favors competition and is based on the principle that increased competition stimulates lower prices in the public interest.

For more, see Lawyer Says E-Filing Rule Is Anticompetitive.

Woman Fraudulently Obtains Property Tied Up In Bankruptcy Case, Then Pockets Refinancing Proceeds, Say California Feds

From the Office of the U.S. Attorney (San Jose, California):
  • Vallejo, Calif., resident Myra Holmes was indicted by a federal grand jury with concealment of assets and bank fraud, United States Attorney Joseph P. Russoniello announced.

***

  • The indictment accuses Holmes of enriching herself by convincing her father – who had previously filed for Chapter 11 bankruptcy – to convey to her, without consideration and without notifying or obtaining the permission of the bankruptcy court or the bankruptcy trustee, his interest in the Vallejo property where she lived. The indictment further alleges that after Holmes obtained her father’s interest in the property she withdrew the equity from the property through a refinancing mortgage loan, which she procured with a fraudulent refinancing application. According to the indictment, as a result of her fraudulent refinancing application, Holmes received a refinanced mortgage, which increased the outstanding mortgage on the Vallejo property from approximately $180,000 to approximately $338,000; [...]. To date, Holmes has not repaid the bankruptcy estate for the funds she took out of the Vallejo property in the November 2005 refinancing.(1)

For the press release, see Vallejo Woman Charged With Mortgage And Bankruptcy Fraud (Defendant Used Fraudulent Deed to Obtain More Than $130,000 in Equity From Residence in Bankruptcy Proceeding).

For the indictment, see U.S. v. Holmes.

(1) According to the indictment, Holmes legitimately owns a 50% interest in the home, with her father holding the remaining 50% interest. The indictment states that the bankruptcy trustee in her father's case had filed court papers seeking a sale of the entire property (including Holmes' 50% share, despite the fact that she herself was not under the jurisdiction of the bankruptcy court) in order to get at and apply her father's 50% share of the sale proceeds to outstanding debts owed to his creditors, leaving her with half the home sale proceeds, but forcing her out of the house. The actions she is accused of may have been an attempt to thwart the bankruptcy trustee in his/her desire to liquidate the property.

Elderly California Retiree Files Suit Alleging Negligence, Fraud, Elder Financial Abuse In Attempt To Undo Predatory Loan & Fight Off Foreclosure

In Carmel Valley, California, The Monterey Herald reports:
  • A Carmel Valley woman is facing the loss of her home of 50 years after she allegedly was led into a risky investment in the failed real estate investment firm Cedar Funding Inc. Margaret Bennett, 75, a retired government worker, is trying to stave off the foreclosure sale of her home in which she raised six children as a single mom. She filed a civil suit [...] that accuses a Monterey mortgage broker and the foreclosing bank of putting her into the predicament.

***

  • Her suit alleges that she was effectively duped into borrowing $600,000 on her home and putting $470,000 of that money into Cedar Funding — just 15 months before the real estate investment company sank into bankruptcy.(1) Cedar Funding owner David Nilsen was indicted on federal fraud charges last month [go here for Nilsen indictment].

For more, see Woman sues broker, bank over Cedar Funding investment (Retiree invested $470,000).

(1) According to the suit, Bennett went to mortgage broker Heidi Daunt in September 2006 to see about getting a $130,000 loan on her home, which was then valued at about $1 million, according to the story. She wanted to pay off a home-equity line of credit and to consolidate other debts. Her only source of income was about $2,000 a month from Social Security and her pension, she said. The suit alleges Daunt proposed that Bennett get a $600,000 loan instead from Washington Mutual, and put most of the money into Cedar Funding. According to the suit, Daunt told Bennett that her income would increase because Cedar Funding investors were making 10 percent on the company's real estate loans, the story states. The monthly payments on the $600,000 loan came to nearly double Bennett's monthly income, the suit alleges. The loan application to Washington Mutual stated Bennett's monthly income was $8,000, a figure used "without (her) knowledge or approval," the suit alleges.

The suit accuses the defendants of negligence, fraud, elder financial abuse and other wrongful actions. It contends they should have known the loan and investment strategy was unsuitable for Bennett, with her limited financial means and lack of financial savvy. The suit alleges she was taken advantage of by people motivated by greed.

Saturday, October 10, 2009

Indianapolis Feds: Attorney Skimmed $106K In Foreclosure Sale Proceeds From Lender

In Indianapolis, Indiana, The Indianapolis Star reports:
  • An Indianapolis lawyer was charged today with bilking a mortgage company of $106,000 from the purchase of foreclosed homes. The U.S. Attorney's office in Indianapolis said Brian L. Nehrig, 43, skimmed profits from 32 foreclosure purchases in Indiana. He was hired by CitiMortgage to place bids for foreclosed homes at sheriff's auctions. He was charged with mail fraud because he mailed checks that were less than he received for selling the properties to third parties.

Source: Feds charge lawyer with skimming foreclosure cash.

See also, Former Fishers foreclosure lawyer faces federal mail-fraud charges (Man allegedly was to place bids on homes for lienholder but bought properties himself).

For the U.S. Attorney (Indianapolis) press release, see Former Attorney Charged With Fraud:

  • [According to the charging documents,] Nehrig placed an inflated minimum bidding price for many of the properties at the sheriff’s sale. He then completed sales of the properties with third parties with whom he was associated without CitiMortgage’s knowledge and permission. Nehrig hid the conduct from CitiMortgage by sending CitiMortgage a check for its minimum price plus $1, making CitiMortgage believe its property had sold at the sheriff’s sale in an arm’s length transaction. The charging document alleges that the difference between the funds sent to CitiMortgage and the actual funds received by the deals was $106,122.

Georgia Homeowner Faces Mold Threat From Next-Door Vacant Foreclosure

In Cobb County, Georgia, WXIA-TV Channel 11 reports:
  • What to do? You've been flooded. You've cleaned up and now your home is threatened by mold and mildew from an abandoned foreclosed property. We are starting to hear the complaints. Sharon LaNata of Austell has a story to tell. Her flooded house shares a wall with an abandoned foreclosed property next door.

  • FEMA couldn't help because it can only help individual homeowners living in a flooded property. Sharon contacted her county. Cobb County Environmental Services officials contacted the property management company. If nothing is done court action could be taken but that can take a long time and the mold from the neighboring rotting property could spread and hamper all cleanup efforts. It's an emergency.

For the story, see Foreclosed Flood Properties Hamper Clean Up.

Arizona HOA Thrown Into Receivership Amid Allegations Of Board Members' Fraud, Theft Of Association's Funds

In Pinal County, Arizona, the Arizona Capitol Times reports:
  • A Casa Grande homeowners association was placed in receivership, following allegations that board members drained funds for their own benefit - including what was described as the “theft” of more than $600,000. Pinal County Superior Court Judge Robert Olson’s Sept. 30 order placed a receiver in charge of the Desert Carmel Lot Owners Association.

  • Along with other reasons, Olson cited a board member’s unauthorized withdrawal of $665,000 from association’s account. “The court finds that the parties controlling the DC Lot Owners Association were grossly negligent in failing to protect to, protect, preserve or detect these withdrawals, which constituted the bulk of the liquid assets of the association,” Olson said in his order. “This alone justifies the appointment of a receiver.”

For more, see Casa Grande HOA stripped of powers over accusations of theft and fraud.

Housing Authority Seeks To Boot 86-Year Old Tenant; Son Sold Drugs On Property, Say Officials

In Bucks County, Pennsylvania, the Bucks County Courier Times reports:
  • Officials said Belle Perry violated her lease because her son sold drugs on the property. The Bucks County Housing Authority has filed paperwork to evict an 86-year-old woman from her federally subsidized home in Venice Ashby because officials say her son sold drugs on the property, among other lease violations.(1)

***

  • Police records of the Aug. 20 drug arrest state that her son, Sylvester Perry, sold a small amount of drugs to another man on the 1600 block of Foster Avenue Circle. Belle Perry lives in that block. Sylvester Perry is in prison on $40,000 bail awaiting an October hearing on those charges. On Aug. 26, the housing authority filed a complaint seeking Belle Perry's eviction.

***

  • "Its disturbing that an 86-year-old woman would be evicted and given less than 72 hours to leave for something her son allegedly did and he doesn't even live there," Philadelphia attorney L. Kenneth Chotiner said Friday. Chotiner, a former Philadelphia Housing Authority attorney, said he advised Belle Perry to file for bankruptcy to try to stave off the eviction. [Daughter] Bobbie Perry said she filed for bankruptcy on behalf of her mother Friday morning.

For the story, see 86-year-old woman fights eviction.

(1) In court records, the authority states that Belle Perry violated her lease by allowing drug-related activity on her premises, allowing herself, tenants and guests to disturb the peace, failing to maintain decent, safe and sanitary conditions, allowing herself, tenants and guests to engage in illegal, unlawful or disorderly conduct, and allowing drug-related criminal activity, according to court records.

Federal Law w/ Foreclosure Eviction Safeguards No Help To Tenants Forced From Building As Burst Sewer Pipe, Power Cut Leads City To Condemn Premises

In Opa Locka, Florida, WFOR-TV Channel 4 reports:
  • Imagine being told you had only days to move out of your home. That's the reality for several Opa-Locka renters, who got the shock of their lives when they were told their apartment building had been foreclosed on. They say they'd been paying their rent all along. Many of the renters gave off feelings of frustration and fear as they packed up to leave their homes.

  • In a matter of days, their apartment building was condemned. A sewer pipe burst and the power was cut. [...] Residents had nowhere to go after they were told they had to leave. The city felt the building was unsafe after the developer cut corners on renovations and lost the property to foreclosure, leaving the renters in the middle.

For the story, see Families Forced Out In Surprise Foreclosure. RentSigmaSkimming

Friday, October 09, 2009

Decision Imminent On Judge's Reconsideration Of Ruling Negating Validity Of Thousands Of Massachusetts Foreclosure Sales

In Boston, Massachusetts, The Boston Globe reports:
  • A court decision expected as soon as today could negate the validity of sales of thousands of foreclosed homes in Massachusetts, causing havoc for buyers and sellers and further stalling the housing market’s recovery in hard-hit areas. At issue is proof of ownership at the time of a foreclosure sale. During the housing boom, millions of mortgages were bundled into bonds and sold to investors, a process that resulted in lengthy and twisted paper trails that can obscure ownership. Many lenders believed they could complete foreclosure transactions and later produce formal proof they held the mortgage.

  • That changed in March when Justice Keith C. Long of Massachusetts Land Court found that two foreclosures in Springfield were invalid because ownership of the mortgages was not clear at the time of the foreclosures. Long’s ruling, which came as a shock to many who deal with distressed properties, called into question the ownership of hundreds if not thousands of foreclosed homes in Massachusetts, prompting some lenders to delay sales out of fear they could later be voided, title companies to balk at insuring them, and nonprofits to steer away from certain foreclosed homes altogether.

***

  • Two of the plaintiffs asked Long to reconsider the ruling, and a decision is imminent.(1)

***

  • Gary Klein, a consumer law attorney who filed a friend of the court brief in the case, said the real estate system placed “expedience and convenience’’ before the law. Providing home buyers with a “full set of procedural protections,’’ he said, is more important than comforting lenders who ignored the law. He said the lending community created the mess and it needs to fix it.(2)

For more, see Foreclosure sales in limbo over title issue (Expected ruling may complicate transactions).

(1) For earlier posts on this story, see:

(2) Kathleen Engel, professor of law at Suffolk University, said the federal government should step in to help states deal with “toxic titles’’ that are clogging up the system from California to Florida. EpsilonMissingDocsMtg

Ex-Cincinnati Cop Gets 3 Years For Stealing $188K In Life Insurance Proceeds From Victim Of Alleged Foreclosure Rescue Sale Leaseback Scam

In Cincinnati, Ohio, WCPO-TV Channel 9 reports:
  • As a former Cincinnati police officer, Adrian Mitchell understands hierarchy and chain of command. That chain led all the way up to a three-star general of the U.S. Army who [...] accused Mitchell of wrecking the life of the general’s sister. Adrian Mitchell will spend three years in prison after a federal judge sentenced him Wednesday in a scheme to defraud an insurance company. But prosecutors and the general said the scheme was much worse than it sounds.

  • Mitchell was a Cincinnati police officer who operated a foreclosure rescue and real estate business on the side. Police say he solicited homeowners having financial problems and offered to buy their houses, which they would then rent from him. If they couldn’t pay, he’d evict them. One of the owners committed suicide. That was the general’s brother-in-law.

  • Prosecutors say Mitchell then forged the widow’s name on a life insurance claim form and falsely represented himself to the insurer as a family member, depositing the $188,327 proceeds into his business bank accounts. He pleaded guilty in February to one count of mail fraud and one count of filing a false income tax return.

  • On Wednesday, he faced the judge for his sentencing. But first he had to listen as Army Lt. Gen. Lloyd Austin, one of the top officers at the Joint Chiefs of Staff in Washington D.C., who recalled the devastation to his sister, who hasn’t recovered after losing her husband, home, and insurance proceeds.

For the story, see Former Police Officer Sentenced To Prison.

For the FBI (Cincinnati Field Office) press release, see: Former Cincinnati Police Officer Sentenced to Three Years Imprisonment for Mail Fraud, Tax Crimes.

Virginia Couple Get Prison Time For Running Foreclosure Rescue Ponzi Scheme Resulting In $9.7M In Losses

In Richmond, Virginia, the Richmond Times Dispatch reports:
  • Darrell and Cynthia Underwood were sentenced to prison terms of 10 years and three years, respectively, [...] in a real estate investment scheme that caused $9.7 million in losses. The Chesterfield County couple were sentenced by U.S. District Judge James R. Spencer, who imposed the stiffest term called for under Darrell Underwood's plea agreement but two years less than the maximum his wife was facing. Each apologized yesterday for their conduct and to their victims, many of them fellow church members at the Mount Gilead Full Gospel International Ministries.

***

  • The Underwoods were owners of Walkwood Properties,(1) which specialized in helping homeowners about to lose their homes to foreclosure. The company solicited money from investors to help purchase homes. Many who invested were promised -- and received -- a 50 percent return on their money within 60 to 90 days. But the Underwoods were running a Ponzi scheme in which money from new investors was used to pay earlier ones. [...] Of $18 million the couple brought in from investors in just eight months, only $2.1 million was used in any housing transactions.

For more, see Chesterfield couple sentenced in fraud scheme.

For the U.S. Attorney (Richmond, VA) press release, see Chesterfield Husband and Wife Sentenced in Multi-Million Dollar Fraud Scheme.

(1) According to the U.S. Attorney's Office, Walkwood Properties is connected to another case styled United States v. Colin C. Connelly, Case No. 3:08CR466. In connection with a guilty plea entered on December 2, 2008, Connelly admitted to conspiring with representatives from Walkwood Properties to skim equity in housing transactions by making false entries on HUD-1 Settlement Statements. On March 10, 2009, Judge Spencer sentenced Connelly to 24 months imprisonment and ordered him to pay $376,464.62 in restitution.

Attorneys Accused Of Misleading Consumers About Nature Of Legal Services, Level Of Attorney Involvement When Offering Loan Mods Begin Feeling The Heat

Buried in a recent column in the Miami Daily Business Review is a recounting of a South Florida homeowner's experience with a local attorney selling loan modification services to the public:
  • The [Florida Attorney General's] office is investigating consumer complaints that Brian Korte, a West Palm Beach attorney tied to a Fort Lauderdale company called Legal Modification Attorney at Law, allegedly charged advance fees and “misled consumers regarding the nature of the legal services provided by the company and the level of involvement the attorney would have with each consumer’s case,” [deputy director Ryan] Wiggins said.(1)

***

  • Homeowner Peter Fischer of Sunrise said in a complaint to the AG’s office that he paid Korte’s law firm $2,900 to oversee a loan modification. According to Fischer, Korte and his staff told him to stop paying his mortgage and not to contact or answer calls from the lender. Fischer said he was told the fee would be refunded to him if the modification did not go though.

  • Fischer said after several failed attempts to reach Korte, a member of the lawyer’s staff called and said Fischer’s files had been lost and they needed his information again. Shortly after that, Fischer said, a Korte staffer told him he did not qualify for a loan modification. “I asked for the paperwork on why I was denied and nothing was ever sent to me,” Fischer said. “So I asked for my money back and they said ‘let me think about it.’"

  • Fischer said he was later told half of his fee would be returned. Fischer said ‘half is better than nothing,” but still filed a complaint with the attorney general’s office. The AG’s Wiggins said it has received six other complaints about Korte, but declined to discuss details of the investigation. The Florida Bar said it too has received multiple complaints against Korte, but would not provide additional information because the investigation is confidential. Bar complaints remain confidential until a grievance committee finds probable cause for the investigation to continue.

For the story, see Record number of complaints target modification lawyers.

(1) Reportedly, the attorney general’s investigation is continuing and no charges have been filed. Korte did not return messages left at his West Palm Beach office and did not respond to an e-mail seeking comment, according to the story. UnauthPractOfLawTheta

Mortgage Broker Cops Plea To Using Phony Lien Claims To Pocket $1.8M In Proceeds From Real Estate Closings

From the Office of the U.S. Attorney (Sacramento, California):
  • United States Attorney Lawrence G. Brown and Federal Bureau of Investigation Special Agent-in-Charge Drew Parenti announced [...] that JOSHUA GERVOLSTAD, 31, of Redding, pleaded guilty today to one count of mail fraud in connection with a mortgage fraud scheme. This case is the product of an extensive investigation by the FBI.

  • According to Assistant United States Attorney Matthew D. Segal, who prosecuted the case, GERVOLSTAD, who was a mortgage broker, submitted inflated appraisals and false lien documents for use in closing purchase transactions involving five different real properties located in Redding and in Lodi. The closing statement for each property contained fraudulent papers requiring the payoff of a lien to an entity called "TPG Investments." In each case, the lien did not exist. In reality, GERVOLSTAD controlled TPG Investments and used its bank account to divert mortgage loan funds to himself and other persons.

  • His conduct caused $1,798,888.91 in fraudulent payouts for liens that did not exist, affecting mortgages with a total value of $5,441,562. At least three of the properties were foreclosed and were sold for a combined loss of at least $1,170,000.

For the U.S. Attorney press release, see Redding Mortgage Broker Pleads Guilty To Mortgage Fraud.

Woman Charged With Forging Quit Claim Deed, Stealing Thousands From Incarcerated Acquaintence

In Bantam, Connecticut, The Register Citizen reports:
  • A New York woman is accused of taking advantage of a local man’s incarceration by stealing thousands of dollars from him and his family. Judy L. Lamay, 61, was arraigned Tuesday in Bantam Superior Court on charges of first-degree larceny, second-degree larceny and second-degree forgery.

***

  • Lamay reportedly convinced [Pieter] Parker to grant her power of attorney to cash his paychecks for him and under the guise of looking after his home. Lamay reportedly forged a quit claim deed in an attempt to place the home in foreclosure, and gain access to Parker’s mortgage account, according to the [arrest] warrant.

For the story, see Woman steals from jailed man. DeedContraTheft

Thursday, October 08, 2009

Florida Prosecutor Asks Judge To Order Deed Theft Duo To Return Stolen Home To 92-Year Old Widow

In New Port Richey, Florida, The Tampa Tribune reports:
  • Joseph and Cynthia Clancy no longer live in Eloise Mudway's 2,900-square-foot house on Hilltop Drive, a house valued at $350,000 that they stole out from under the 92-year-old in 2004. A judge assigned the couple new digs after their convictions Sept. 21 on grand theft charges: the Land O' Lakes Jail. The Clancys will remain in custody until their sentencing Oct. 22. They each face up to 30 years in prison.

  • Mudway continues to live with Jeff and Debra Kores, a local couple who have been caring for her since early 2005. Mudway's most pressing wish has been to reclaim the house she and her late husband purchased in 1980. Assistant State Attorney Mike Halkitis hopes to make that happen this week. Last month, Halkitis filed a motion asking a judge to order the Clancys to sign a document that would divest them of any interest in the house. A hearing is set for Friday.

  • "If they comply and sign, the house is hers," Halkitis said. "But I don't think they're ever going to do that. If they don't, the judge can hold them in contempt, but they probably don't care because they're in custody now and are probably going to do state prison time." If Halkitis is right, Mudway's best chance of recovering the house likely will be the lawsuit she filed against the Clancys in 2005. The lawsuit was filed to recover the house and 5 acres, but the case has moved slowly. It is scheduled to be back in court Nov. 23.

For more, see Pasco 92-year-old hopes to reclaim house (Though the couple who took her house is behind bars, Eloise Mudway still doesn't have her house back).

Fugitive Duo Charged In C. Florida Equity Snatching Foreclosure Rescue Scam Nabbed In South America; Suspects On Secret Service Int'l Most Wanted List

In Tampa, Florida, The Tampa Tribune reports:
  • The owners of a Tampa company have been arrested in Peru in a scheme to defraud nearly 300 Florida homeowners, most of them Hispanic, with offers to help them avoid foreclosure. Mario Quiroz and Jose Oliveri, who owned Valrico-based 4 Solutions, were taken into custody late last week, said John Joyce, special agent in charge of the Secret Service's Tampa field office. They disappeared two years ago as a mortgage fraud investigation expanded.(1)

  • "These guys were on our international most-wanted list, and some of our agents in Peru were contacted with information as to their whereabouts," Joyce said. The U.S. government is tying to extradite them to face charges of wire fraud, conspiracy, mail fraud and money laundering, Joyce said. The company, he said, carried out an elaborate scheme targeting homeowners in the Tampa area, Orlando and south Florida.

***

  • Using the Internet, radio and television, the company marketed a method to avoid home foreclosures. Financially strapped homeowners thought they were refinancing or signing over rights to their homes temporarily. The company then sold the homes without the homeowner's knowledge, the Secret Service said. Twelve financial institutions lost a total of $8 million, Joyce said.

  • In some cases, homeowners were told they were refinancing their homes. In other cases, the company agreed to make the mortgage payments for up to two years, stopping the foreclosure and give the homeowner time to get back on their feet. Homeowners say they were told they would get their houses back. Instead, the company put the homes in the names of others - often the wife of one of the owners – and took out large mortgages, stripping the home of its equity. The company then stopped paying the mortgage and let the homes fall into foreclosure.

For more, see Tampa suspects in statewide mortgage fraud arrested in Peru.

See also, St. Petersburg Times: Tampa mortgage fraud suspects arrested in Peru.

For the October 2, 2008 indictment, see U.S. v. Quiroz, Oliveri.

Go here for other stories on this alleged foreclosure rescue racket.

(1) Oliveri's wife, Carmen Maria Oliveri, was arrested by Tampa police in June 2007 on charges of grand theft of $100,000 or more and organized fraud over $50,000. equity stripping

Florida Appeals Court Puts Kibosh On Judicial "Benevolence & Compassion" When Setting Sale Dates In Foreclosure Actions

In Miami, Florida, the Miami Daily Business Review reports:
  • "Benevolence and compassion” have no place when it comes to setting foreclosure sales, a state appellate court ruled in a stern order. The 3rd District Court of Appeal judges said they "thoroughly disapprove" of a decision by Miami-Dade Circuit Judge Valerie Manno Shurr to give an extra month to a couple trying to sell their home before a foreclosure sale, Senior Judge Alan R. Schwartz wrote for the panel last week.

  • Manno Shurr declined to comment on the decision, citing judicial rules that prohibit her from talking about specific cases. But in court, she made her position clear. “People are having a hard time now. They are having a difficult time. Everybody knows it. Businesses are failing. People are losing money in the stock market. You know, unemployment is high,” Manno Shurr said. “Everybody knows that we are in a bad time right now, and I hate to see anybody lose their home.”(1)

  • The appellate court found her reasoning flawed and said her decision granting extra time was “an abuse of discretion in the most basic sense of that term” because the bank had a right to the sale.(2)

For more, see Appeal court takes judge to task for ‘benevolence’.

For the court ruling, see Republic Federal Bank, N.A. v. Doyle, No. 3D09-2405 (September 30, 2009 ).

(1) Charles M. Rosenberg, attorney for Republic Federal Bank, said his client decided to appeal Manno Shurr’s decision in part because the bank felt Miami-Dade trial judges “needed some guidance.” “With all of the foreclosures being filed in this county, we thought that the trial judges needed some guidance from the court of appeal on under what circumstances they could grant extensions because it’s very common for people to run into court at the last minute asking for extensions,” he said.

(2) The Florida appellate court reinforced their ruling with this observation from a 1980 ruling of the Florida Supreme Court, which, in turn, invoked some words of wisdom from the late U.S. Supreme Court Associate Justice Benjamin Cardozo, regarding the discretionary power of judges:

  • The trial courts’ discretionary power was never intended to be exercised in accordance with whim or caprice of the judge nor in an inconsistent manner. Judges dealing with cases essentially alike should reach the same result. Different results reached from substantially the same facts comport with neither logic nor reasonableness. In this regard, we note the cautionary words of Justice Cardozo concerning the discretionary power of judges:

  • The judge, even when he is free, is still not wholly free. He is not to innovate at pleasure. He is not a knight-errant roaming at will in pursuit of his own ideal of beauty or of goodness. He is to draw his inspiration from consecrated principles. He is not to yield to spasmodic sentiment, to vague and unregulated benevolence. He is to exercise a discretion informed by tradition, methodized by analogy, disciplined by system, and subordinated to "the primordial necessity of order in the social life." Wide enough in all conscience is the field of discretion that remains. B. Cardozo, The Nature of the Judicial Process 141 (1921).

Minnesota Regulators Take Action Against Title Agency That Allegedly Stiffed Underwriter Out Of Insurance Premiums Collected From Real Estate Closings

In St. Paul, Minnesota, the Duluth News Tribune reports:
  • A family-owned and operated title insurance agency in Duluth and Two Harbors has been accused of fraud and operating without proper licenses by the Minnesota Department of Commerce. Scenic Title and Abstract Inc. is accused of collecting premiums from clients on behalf of Fidelity National Title Insurance Co. and never sending the collections to Fidelity. The title company, owned by Kevin Eckholm, is accused of failing to submit premiums in 237 instances in the past four years, court documents show.(1)

For more, see Title company accused of fraud.

For the Minnesota Department of Commerce press release, see Title Insurance Company in Duluth and Two Harbors charged with fraud.

Thanks to Bill Collins of Crossroads Abstract, Rochester, NY for the heads-up on this story.

(1) The Minnesota Department of Commerce Order for Summary Suspension of the firm's licenses is effective immediately and will be considered at a hearing before an Administrative Law Judge. EscrowRipOffKappa title insurance legal issues

Financially Strapped Title Agency Owner Charged With Illegally Dipping Into Escrow Accounts To Pay Off Gambling Debts

In Brevard County, Florida, Florida Today reports:
  • Mark Brady seemed to have it all during the real estate boom -- two title companies, BMWs, a Hummer, powerboats, a $2 million home on Merritt Island, an oceanside condominium in Cape Canaveral and three other riverfront properties. Then, two days before Christmas, Brady was arrested -- charged with illegally using $80,000 of his clients' money from escrow accounts to pay off gambling debts in the Bahamas. Brady pleaded not guilty and was released on $8,500 bail. Hearings and sworn testimony are scheduled to begin in November. [...] Although it's unclear whether any real estate transactions were disrupted because money was removed the from escrow account, the money belonged to other people -- deposits toward purchases of homes, or mortgage money released to pay home sellers.(1)

  • And the state takes laws regulating escrow accounts seriously, Deputy State Attorney Wayne Holmes said. "These are essential components and aspects of commerce," Holmes said. "You have to have faith and trust in those entities or certain things just don't function."

For the rest of the story, see Fraud case tied to escrow checks.

(1) Reportedly, since his arrest, Brady has fallen into a financial spiral. He defaulted on several mortgages and is in foreclosure proceedings on his homes and condo, cars were repossessed, banks have sued him, and his two companies, Adams Title Co. and American Heritage Title Co., are defunct, according to the story. In September, he filed for bankruptcy, listing about $8 million in debt, including $500,000 in casino markers, the story states. EscrowRipOffKappa

Long Island Man Gets 4-12 Years In Vacant Home Hijacking Scam; Filed Phony Liens On Houses In Foreclosure, Then Rented Them To Unwitting Tenants

In Suffolk County, New York, Newsday reports:
  • A Medford man who rented out homes he didn't own continued to collect rent from unsuspecting tenants even after he was arrested in February on fraud and burglary charges, a prosecutor said Tuesday at the man's sentencing in Riverhead. Paul Salamone, 28, was sentenced Tuesday to 4 to 12 years in prison by Suffolk County Court Judge James Hudson, who ordered Salamone to pay more than $10,000 in restitution to his victims.

  • Salamone filed phony liens against seven homeowners in the midst of foreclosure proceedings, falsely claiming they owed him money, prosecutors said. He fixed up two of those homes, in Medford and East Patchogue, then rented them to tenants, prosecutors said.

  • Insisting he owned the homes, Salamone removed signs and changed the locks to keep homeowners and bank and real estate agents from entering the properties, prosecutor Marc Lindemann said. [...] Salamone placed dogs on the properties to scare off real estate agents and continued to collect rent after his indictment, Lindemann said. Salamone's victims will have to apply to the state to have the false liens declared invalid, Lindemann said.

For the story, see Man posing as landlord collected rent even after arrest.

See also, Long Island Press: Wannabe Landlord Gets 4-12 Years. mechanics lien KappaPhonyLandlordScam