Monday, October 11, 2010

CNN Interviews Central Florida Woman Victimized By Illegal Lock-Out Of Her Home By JPMorgan Chase

CNN's American Morning recently interviewed the Central Florida homeowner who suffered through a horrifying experience with someone breaking into her home, only to learn that the perpetrator was actually someone hired by JPMorgan Chase to change the locks to her home:
  • Nancy Jacobini was home alone in Florida when she heard what she thought was an intruder at the front door. There was no knock. She wasn't expecting anyone, so she grabbed her cell phone and called 911.

  • As it turns out, the man who broke the lock on her front door was actually a contractor hired by her bank. It is a procedure typically used to secure a foreclosed home. However, Jacobini's home wasn't foreclosed. She tells American Morning's Kiran Chetry how terrifying the experience was for her.

For more, see Bank breaks into home - over mortgage payments (A woman says her bank hired someone to break in and change the locks even though her home was not in foreclosure) (go here for the video of the interview).

Thanks to Mike Dillon of GetDShirtz.com for the heads-up on the interview.

State AGs To Band Together In Joint Probe Into Banks' Use Of Sloppy Paperwork In Foreclosure Actions

The Associated Press reports:
  • The attorneys general of up to 40 states plan to announce soon a joint investigation into banks' use of flawed foreclosure paperwork. A person briefed on the investigation said Saturday night that an announcement could come as early as Tuesday. The person spoke on condition of anonymity because the investigation was not yet public. Iowa Attorney General Tom Miller will lead the investigation. Miller already has been leading multistate reviews of questionable foreclosure documents.

For more, see Up to 40 states plan inquiry into foreclosure data.

Massachusetts High Court Hears Arguments In 'Ibanez' Case That Threatens To Open The Door To Voiding Thousands Of State Foreclosures

In Boston, Massachusetts, the Boston Herald reports:
  • Banks went nuts during the housing boom, so the state’s top court should uphold a ruling that potentially undoes the wave of foreclosures that followed, a pro-consumer lawyer says. “This industry was insane in its underwriting practices and its foreclosure practices,” attorney Paul Collier told the Supreme Judicial Court [last week]. “There are (liability) costs to that (behavior).”

  • The SJC is debating whether to uphold a 2009 Massachusetts Land Court decision(1) that voided two foreclosures - and opens the door to invalidating thousands more. The lower court ruled that Wells Fargo and U.S. Bank each seized a Bay State home without paperwork proving they really owned the properties’ mortgages.

  • The decision, known as the Ibanez ruling, centers on the way that banks trade mortgages back and forth like stocks these days. Under Massachusetts law, lenders must generate specific transfer documents every time a loan changes hands. Failure to do so can call into question who really owns the mortgage - and who has the right to foreclose.

  • Bank lawyer Robert Allensworth told the SJC that, while his clients used blank documents to transfer ownership of the mortgages in question, later paperwork proved they legally owned the loans. But Collier said the “ludicrous” paperwork that Allensworth cited included marketing sheets used to attract investors to a block of mortgages that included one of the Massachusetts loans.

  • SJC members, who are expected to take months to rule in the case, wondered how upholding the lower court’s decision would affect consumers who’ve bought foreclosed homes from banks. Experts say such homeowners would have to go to court to “cure” title problems before they could sell or refinance properties. “Given the extraordinary sloppiness that accompanied (the industry’s trading) of mortgages, there could be hundreds of thousands or maybe more of (problem) mortgages,” Justice Ralph Gants said.(2)(3)(4)

Source: Lawyer: ‘Insane’ foreclosures should be undone.

Go here to view oral argument (with Windows Media Player) and go here for the Case Docket.

(1) There were actually two rulings issued by Massachusetts Land Court Judge Keith C. Long:

(2) For earlier posts on this case, see:

(3) For the legal briefs filed in this case, see:

(4) It should be noted that, as far back as a year and a half ago in the Massachusetts Land Court decision in Ibanez #1, Judge Long foreshadowed the "crappy title" problem related to faulty foreclosures that has only recently garnered much attention, in the following excerpt (footnotes contained in the original text have been omitted here for ease of reading; bold text is my emphasis, not in the original text):

  • As even a cursory glance at the current caseload of this court reveals, titles arising from mortgage foreclosures can have many problems. These include the most fundamental: Did the party conducting the foreclosure have the authority to do so and, if challenged, can it prove that it had such authority? In short, will a purchaser at the foreclosure sale get good title and will get it in prompt fashion? These are increasingly important questions in the current deteriorating real estate market and are not small concerns. It is increasingly rare for a mortgage to remain with its originating lender. Often, as here, mortgages are assigned to other entities, and then assigned yet again into large securitized pools. Often, as here, the paperwork lags far behind. Sometimes mistakes are made. Mistakes can only be corrected, if at all, through confirmatory documents (which the borrower may not so easily agree to) or litigation. With so many foreclosed properties available for purchase, why bid on a property with even the possibility for such trouble? Why bid on a property when the foreclosing party cannot produce all the documents (including proper mortgage assignments in recordable form) that would give good title? Why take the risk that the foreclosing party will be able to produce the documents promptly after the auction takes place, that those documents will be complete and in proper form, or even (in this era of failed and failing institutions) that the foreclosing party will still be in existence, with intact files and knowledgeable employees able to find those files so that the proper paperwork can be completed? Since these concerns affect the ability to obtain clear, marketable title, why bid a reasonable market value instead of a discount price to account for that risk?

  • None of this is the fault of the mortgagor, yet the mortgagor suffers due to fewer (or no) bids in competition with the foreclosing institution. Only the foreclosing party is advantaged by the clouded title at the time of auction. It can bid a lower price, hold the property in inventory, and put together the proper documents at any time it chooses. And who can say that problems won't be encountered during this process? It is interesting that it took the plaintiff (the foreclosing party and successful bidder) almost fourteen months after the auction to obtain its assignment in Ibanez and ten months after the auction in Larace. Would any reasonable third-party bidder have been willing to wait that long, trusting that no other issues would arise? Only in Rosario was the assignment (showing that the foreclosing party held the mortgage and could convey title as a result of the sale) in hand and ready for recording at the time of the auction sale.

Buying A Home That's Been Recently Foreclosed? Title Insurance Rider Covering Appreciated Value May Help Protect In REO 'Crapshoot'

The New York Times columnist Ron Lieber writes:
  • [A]ll of the sudden, the importance of title insurance is becoming crystal-clear. In recent weeks, big lenders like GMAC Mortgage, JPMorgan Chase and Bank of America have halted many or all of their foreclosure proceedings in the wake of allegations of sloppiness, shortcuts or worse. And a potential nightmare situation has emerged that has spooked not only homeowners but lawyers, title insurance companies and their investors.

***

  • While homeowners [...] may have title insurance, it generally covers them only for the purchase price of the home. When you buy a home out of foreclosure, however, it often needs a lot of work. “If I bought it at $200,000 and it’s a steal but I had to gut it and sink $100,000 more in, my recovery is limited if there is a problem,” said Matthew Weidner, a lawyer in St. Petersburg, Fla.

***

  • Still, for anyone considering buying a bargain home out of foreclosure anytime soon, consider asking your title insurer if any special riders are available that can cover appreciation on your home in the event of a total loss.(1) That said, if you can possibly help it, stay away from foreclosed homes until the scene shakes out a little bit.

  • Some people will undoubtedly make a fortune investing in these properties in the next few months. But if your down payment represents most of what you have in the world, it’s hard to justify betting it all on a situation like this one.

For more, see After Foreclosure, a Focus on Title Insurance.

(1) Inasmuch as the "robosigner" racket has been going on for at least several years, I would extend this caution to the purchase of any property, bargain or not (even from private homeowners, investors, etc.), if it's been through the foreclosure process within the last five years (or possibly more). I don't know anyone buying real estate that doesn't expect some appreciation in their investment (By the way, would-be buyers should be on the look-out for those homeowners and investors who have bought bank-owned REOs in recent years that are now considering unloading them, given the recent publicity on potentially faulty foreclosures leading to potentially "crappy titles").

Unwanted Attention Continues To Target South Florida Foreclosure Mill

The Palm Beach Post reports:
  • A former paralegal for Florida foreclosure giant David J. Stern describes an office where signatures on notarized documents were regularly forged, legal papers were prepared en masse in Guam and the Philippines, and closed-door screaming matches erupted when files weren't moved fast enough.

  • The accusations were made in a sworn statement taken Sept. 22 by the Florida Attorney General's Office for its investigation of the Plantation-based law firm, and appear to support nationwide concerns about behind-the-scenes practices used to take people's homes.

  • Paralegal Tammie Lou Kapusta, who said she was fired by the firm in July 2009 after refusing to falsify documents, recalls Stern's business growing from 200 employees to 1,100 in a little more than a year's time as foreclosures skyrocketed and staff struggled to keep up. Notary stamps, Kapusta said, were readily available in the office and employees, including herself, who were not notaries, routinely stamped documents.

For more, see Ex-employee says foreclosure firm forged signatures.

Go here to read the entire Deposition of Tammie Lou Kapusta taken by the Florida AG's office.

Go here for a graphic included in the story entitled How MERS Blurred The Ownership Of Homes (if graphic appears too small to read, click on it to enlarge).

Sunday, October 10, 2010

Comedy Central's Stewart Chimes In On Mortgage Securitizations, Robo-Signers, Foreclosure Freeze, Illegal Lockouts, Recently-Vetoed Notary Bill & More

The Huffington Post notes:
  • Last [week] on "The Daily Show," Jon Stewart lambasted the big banks for ignoring the fine print that they themselves came up with. "Wait, what? The banks weren't reading the fine print? You're the people who came up with the f**king fine print in the first place!" Stewart said in shock.

  • Stewart pointed out that regular people typically never read fine print, using the length of a standard iTunes contract as an example, but that the banks weren't even reading the "regular print" when they decided to change the locks on homes that were not in foreclosure, which happened in Orange County, FL recently.

For the story, see Stewart Takes On Big Banks For Accidental Foreclosures.

To watch Stewart offer his comic observations on the current mess (salty language has been 'bleeped out'), see Foreclosure Crisis (The banks admit to not reading the fine print on the crappy mortgages the American taxpayers now own) (approx. 7 minutes - courtesy of Comedy Central).

Obama Is Planning To "Accidentally" Not Veto Controversial Foreclosure Bill?

Clusterstock reports:
  • Apparently there's this rumor going around of a scandal having to do with Obama's pocket veto of the HR 3808 bill, the one that would make it much easier for banks to foreclose upon houses and un-do the current mass stall in foreclosures.

For more, see Latest Tinfoil Hat Theory: Obama Is Planning To "Accidentally" Not Veto Controversial Foreclosure Bill.

See also, 4closurefraud.org: Action Alert – Is Pres Obama’s Pocket Veto on H.R. 3808 Possibly Ineffective?

Fla. Appeals Court Nabs Sneaky F'closing Lender In Attempt To Improperly Go After Foreclosed Property Owner's Personal Assets To Satisfy Unpaid Debt

According to a recent ruling by Florida's 3rd District Court of Appeal, an otherwise-successful foreclosing mortgage lender was nabbed in its attempt (probably through its legal counsel) to dupe an ostensibly snoozing trial judge into signing an improperly-worded proposed judgment by sneaking a few extra words into the judgment that enabled it, after a foreclosure sale had already taken place, to go after the foreclosed property owner's personal assets to satisfy the remaining unpaid balance on the home loan without first obtaining a deficiency judgment, a process the lender apparently sought to surreptitiously circumvent.

The ruling is short and to the point, and appears below in its entirety (including the court's footnote):

  • The final judgment of mortgage foreclosure on appeal unauthorizedly and contrary to Form 1.996, promulgated by the Florida Supreme Court for such actions, provides "for let execution issue," upon the amounts due on the underlying debt. As in American General Finance, Inc. v. Graves, 621 So. 2d 585 (Fla. 5th DCA 1993),(1) those words are stricken from the judgment under review, which is otherwise affirmed.

    The effect and purpose of this ruling is to prevent the circumvention of the process required to establish the right to a deficiency judgment, which prominently includes a valuation of the mortgaged property. See Century Group, Inc. v. Premier Fin. Servs. East, L.P., 724 So. 2d 661 (Fla. 2d DCA 1999).

    In other words, we disapprove any effort — including those already undertaken by the appellee in this case — to reach the personal assets of the mortgagor until, unless, and only to the extent that a deficiency judgment is rendered after an appropriate exercise of the trial court's discretion in accordance with applicable principles of law and equity. See Wilson v. Adams & Fusselle, Inc., 467 So. 2d 345, 346 (Fla. 2d DCA 1985), and cases cited therein; see also Fulton v. R. K. Cooper Constr. Co., 208 So. 2d 863 (Fla. 3d DCA 1967), writ dismissed, 216 So. 2d 11 (Fla. 1968).

    Moreover, the trial court must also consider the claim that the appellee specifically waived the right to a deficiency in the proceedings below, in which case no such judgment may be entered. See Taylor v. Kenco Chem. & Mfg. Corp., 465 So. 2d 581, 584 (Fla. 1st DCA 1985); Capital Bank v. Needle, 596 So. 2d 1134, 1136 (Fla. 4th DCA 1992).

    Affirmed in part, reversed in part and remanded in part.

    Not final until disposition of timely filed motion for rehearing.

(1) American General Finance, Inc., 621 So. 2d at 585, states in its entirety:

  • We delete the words "for which let execution issue" from the final judgment of mortgage foreclosure which is otherwise affirmed as modified.

    AFFIRMED as modified.

For the ruling, see Farah v. Iberia Bank, No. 3D09-2524 (Fla. 3d DCA, October 6, 2010).

See Abstract Appeal: Second District: Adopting Proposed Judgments Verbatim for an observation on the not-uncommon occurrence of trial judges signing proposed judgments, prepared by counsel for a victorious litigant, without making any changes thereto.

Note: This ruling serves as a reminder that, at least in Florida, after a foreclosure sale has taken place, the lender has no business trying to hit up the foreclosed homeowner for the unsatisfied portion of the loan balance without first going through the aggravation of heading back to court and obtaining a deficiency judgment (which necessarily requires some judicial determination of the property value to determine exactly how much the lender is entitled to collect from the homeowner).

Keep in mind that, in the event the unsatisfied balance on the foreclosed loan ends up in the hands of some scavenger "zombie debt" buyer for collection (who then pursues the foreclosed homeowner without first obtaining a deficiency judgment), such collection attempts could constitute a violation of the Federal Fair Debt Collection Practices Act.

Title Underwriter Heightens Level Of Scrutiny When Issuing Title Insurance On Property Foreclosed By Four Big Players

The Associated Press reports:
  • Stewart Title Guaranty Co. is clamping down on sales of foreclosed homes that may be linked to flawed documentation. In an internal memo obtained by The Associated Press, Houston-based Stewart is issuing guidelines to its agents that make it difficult to write policies on property foreclosed upon by four banks whose processes are in question. Those banks are JP Morgan Chase, Bank of America, OneWest Bank or Ally Financial's GMAC Mortgage unit.

  • In a statement, Stewart Title said the memo provides guidelines to its issuing offices to enable them to insure foreclosure sales in jurisdictions where lenders or state attorneys general have not issued a moratorium on foreclosures. "Stewart stands ready to insure these transactions in accordance with these guidelines," the company said.

For the story, see Stewart Title clamps down on foreclosure sales.

Indiana Couple Scores Bankruptcy Court Win In Robosigner Ruling; Judge Says F'closure Docs Were Signed By "Bogus" Employee Purporting To Work For MERS

In Mishawaka, Indiana, The Edmonton Journal reports:
  • [Jason and Kristin Koontz ] surrendered one property to foreclosure but say they were still making payments for their house in Mishawaka, Ind. EverHome Mortgage Co. filed a claim on the three-bedroom ranch to ensure its rights in the bankruptcy proceedings.

  • But the validity of a key document that Ever-Home used to back up its claim has now been called into question, throwing the status of the Koontzes' mortgage into uncertainty. [... Their] lawyer is assessing next steps after a bankruptcy judge last week said EverHome isn't entitled to a fast judgment in its favour because of faulty paperwork.

***

  • In the Koontz case, U.S. Bankruptcy Court Judge Harry Dees Jr. in Indiana ruled that a document submitted by EverHome was signed by a "bogus" employee who purported to work for MERS, the nation's central electronic mortgage registration service. Because EverHome couldn't demonstrate a clear right to enforce the loan, a trial may be necessary to sort out control of the mortgage.

  • If EverHome cannot prove its rights at trial, it could be reduced to the status of an unsecured creditor, said lawyer Debra Voltz-Miller, who represents the Koontzes. That would drastically reduce the amount it could collect on the loan.

For the story, see 'Robo signer' ruling gives owners loophole in foreclosure cases.

Pro Se Oregon Homeowner Scores Temporary Injunction Halting Foreclosure; Judge To Review Evidence Of Alleged Irregularities By Lender, Loan Servicer

In Portland, Oregon, The Oregonnian reports:
  • A women representing herself convinced a federal judge in Portland this week to halt Bank of America's foreclosure on her home while examining the issue of a controversial deed. U.S. District Judge Garr King on Wednesday enjoined Bank of America from foreclosing on Natache D. Rinegard-Guirma's home in Northeast Portland until he could hear arguments about alleged improprieties in the foreclosure process. [...] King also ordered Rinegard-Guirma to make $1,000 monthly mortgage payments to Litton Loan Servicing Inc. while he resolved the issue.

***

  • It was at least the second victory by a homeowner suing without help from an attorney against Bank of America. Last month, Medford hair stylist Renee Fisher and her husband convinced U.S. District Judge Owen Panner to halt foreclosure on their Medford home after the bank failed to send any attorney to the first court hearing.

For more, see Oregon woman, representing self, halts BofA foreclosure in court.

For the court ruling, see Rinegard-Guirma v. Bank of America, et al..

See also, Bank of America halts foreclosures, Oregon lawsuit just one example:

  • On Oct. 6, U.S. District Court Judge Garr King stunned many local lawyers when he granted Rinegard-Guirma's request for a preliminary injunction putting the foreclosure on hold. In order to get a preliminary injunction, litigants typically must show that there is a substantial likelihood they will succeed on the merits of the case.

Saturday, October 09, 2010

Pro Se Homeowner "Loses The Farm" In Attempt To Void Sale Leaseback-Type Foreclosure Rescue Deal

A recent ruling by the Idaho Supreme Court dealt defeat to a pro se homeowner-couple facing foreclosure of their farm in their attempt to unwind a foreclosure rescue, sale leaseback-type arrangement. According to the facts in the case, when entering into the arrangement with the operator:
  • "they signed the warranty deed and contract for reconveyance under duress caused by those documents being presented to them about ten minutes before the real property would have been sold at a foreclosure sale."

The case provides an example of what not to do when trying to unwind these type of deals. Regrettably for the homeowners, they failed to raise, among other claims, the equitable mortgage doctrine which, if successful, would have resulted in recharacterizing the deal as a secured loan.(1)

For the ruling, see Bagley v. Thompson, Docket No. 36041-2009, 2010 Opinion No. 107, (Supreme Court of Idaho, Idaho Falls, October 6, 2010).

(1) See Dickens v. Heston, 53 Idaho 91; 21 P.2d 905 (Id. 1933); See also Equitable Mortgage Doctrine In Idaho.

Wells Fargo Agrees To $67M In Loan Modifications For NJ Homeowners Saddled With Wachovia, Golden West, World Savings "Pick-A-Payment" Loans

From the Office of the New Jersey Attorney General:
  • Attorney General Paula T. Dow announced [] that Wells Fargo Home Mortgage has agreed to provide New Jersey consumers with nearly $67 million in loan modifications and pay the state $3.98 million to resolve allegations that companies it acquired – Wachovia Corporation, Golden West and World Savings -- deceptively marketed adjustable rate mortgage loans.(1)

For the NJ AG press release, see Attorney General Announces Settlement with Wells Fargo Home Mortgage; Company Providing $67 Million in Loan Modifications, Paying State $3.98 Million.

Go here for the Settlement Agreement, and here for the Announcement of Restitution Fund.

(1) For announcements of "Pick-a-Payment" settlements in other states, see:

California Appeals Court Fires Warning Shot At R/E Agents Failing To Disclose That Property Is So Greatly Encumbered That Short Sale Is Doomed To Fail

A recent ruling by a California appellate court hammered real estate agents for failing to disclose to a home purchaser that the property was so overencumbered with mortgages that there was little likelihood that a desired short sale transaction would successfully close at the agreed-upon purchase price.

The court "kindly" commences its ruling with the following excerpt, which essentially serves as the shortened, "CliffsNotes" (aka Cliff Notes) version of the situation involved.
  • Particularly in these days of rampant foreclosures and short sales, "[t]he manner in which California's licensed real estate brokers and salesmen conduct business is a matter of public interest and concern. [Citations.]" (Wilson v. Lewis (1980) 106 Cal.App.3d 802, 805-806.)

  • When the real estate professionals involved in the purchase and sale of a residential property do not disclose to the buyer that the property is so greatly overencumbered that it is almost certain clear title cannot be conveyed for the agreed upon price, the transaction is doomed to fail.

  • Not only is the buyer stung, but the marketplace is disrupted and the stream of commerce is impeded. When properties made unsellable by their debt load are listed for sale without appropriate disclosures and sales fall through, purchasers become leery of the marketplace and lenders preparing to extend credit to those purchasers waste valuable time in processing useless loans. In the presently downtrodden economy, it behooves us all for business transactions to come to fruition and for the members of the public to have confidence in real estate agents and brokers.

  • The case before us presents the interesting question of whether the real estate brokers representing a seller of residential real property are under an obligation to the buyers of that property to disclose that it is overencumbered and cannot in fact be sold to them at the agreed upon purchase price unless either the lenders agree to short sales or the seller deposits a whopping $392,000 in cash into escrow to cover the shortfall.

  • Here, the buyers and the seller agreed to the purchase and sale of a residential real property for the price of $749,000. Unbeknownst to the buyers, the property was subject to a first deed of trust in the amount of $695,000, a second deed of trust in the amount of $196,000 and a third deed of trust in the amount of $250,000, for a total debt of $1,141,000, and the lenders had not agreed to accept less than the amounts due under the loans in order to release their deeds of trust.

  • According to the buyers, after they signed the deal with the seller, they sold their existing home in order to enable them to complete the purchase of the seller's property. Only then did they learn that the seller could not convey clear title because the property was overencumbered.

  • In a lawsuit against the seller's brokers, the trial court sustained a demurrer without leave to amend, holding that the brokers owed no duty of disclosure to the buyers. The buyers appeal. We reverse, holding that, under the facts of this case, the brokers were obligated to disclose to the buyers that there was a substantial risk that the seller could not transfer title free and clear of monetary liens and encumbrances.

For the rest of the ruling, see Holmes v. Summer, No. G041906 (Cal. App. 4th Dist., Div. 3, October 6, 2010) (go here for .doc version; when links expire, try here).

Mortgage Investors Suit Claiming Citi Doomed Foreclosure Attempt By Failing To Deliver Note To Go To Trial

Reuters reports:
  • CitiFinancial Mortgage must defend a lawsuit over problems with loan documents, a federal appeals court ruled, in a widening controversy over the quality of legal filings in U.S. foreclosure proceedings.

***

  • In the case decided by the 7th Circuit U.S. Court of Appeals this week, two investors purchased an Illinois mortgage from CitiFinancial for $140,000 in 2001. But the company never delivered a copy of the underlying note, which doomed the investors' attempt to foreclose on the property, according to the decision. The investors, Patrick Cogswell and Patrick O'Flaherty, then sued CitiFinancial.

  • The 7th Circuit reversed a lower court ruling and said the case could be decided at trial.

For the story, see Citi unit must defend foreclosure suit (Case involves allegations of missing documents).

For the ruling, see Cogswell v. CitiFinancial Mortgage Company, Inc., No. 08-2153 (7th Cir. October 5, 2010).

Republican Sham To Embarrass Democrats???

In Washington, D.C., The Spoof reports:
  • Bank of America announced today, that in what is being described as an "accounting oversight", foreclosure proceedings have been initiated on the White House, which could eventually force the eviction of the Obama family. Some are calling it a significant symbol of the state of the housing market, while others say it is a Republican sham to embarrass Democrats with the mid-term elections looming.

For more, see Foreclosure proceedings initiated on the White House.

In a related story from The Spoof, see President Obama Gets Eviction Notice from China.

Friday, October 08, 2010

BofA Slams Brakes On Foreclosures In All 50 States; PNC To Do Same In 23 States

The Washington Post reports:
  • Bank of America Corp., the nation's largest bank, said Friday it would stop sales of foreclosed homes in all 50 states as it reviews potential flaws in foreclosure documents. A week earlier, the company had said it would only stop such sales in the 23 states where foreclosures must be approved by a judge. The move comes amid evidence that mortgage company employees or their lawyers signed documents in foreclosure cases without verifying the information in them.

***

  • Also Friday, PNC Financial Services Group Inc. said it is halting most foreclosures and evictions in 23 states for a month so it can review whether documents it submitted to courts complied with state laws.

For more, see BofA halts foreclosure sales in 50 states.

Foreclosure Mill-Owned Title Insurance Agency Refuses To Insure Firm's Own Work

In Deerfield Beach, Florida, The Palm Beach Post reports:
  • The title insurance arm of one of the state's largest foreclosure law firms is refusing to cover properties foreclosed on by its own attorneys citing potential defects in court filings.

  • New House Title, which is owned by the same people who run the Tampa-based Florida Default Law Group, sent notice to a Boca Raton real estate attorney Wednesday that a 2009 foreclosure was off limits.

  • What Attorney Robert Feldman found interesting in New House's denial for the Deerfield Beach condominium is the foreclosure was handled by the Florida Default Law Group. "It is somewhat surprising that now they won't even insure their own work," Feldman said.

For more, see Florida foreclosure firm's title insurer won't insure firm's foreclosure titles.

David J. Stern's Allegedly Bogus Foreclosure Documents? Let The Whistleblowing Begin

The Tampa Tribune reports:
  • [N]ow, in a foreclosure industry bloated by the lingering effects of the housing crisis, a former employee in one of the firms under investigation describes in detail a secret system designed for speed at any cost.

  • Attorneys and staff members forged signatures and changed dates, casually passed around notary stamps, and notarized stacks of blank documents to be filled in later, said the employee, Tammie Lou Kapusta, in an interview with attorney general's staff.

  • At the Law Offices of David J. Stern in Broward County, where Kapusta worked, long "signing tables" were set up across eight floors and employees would process 250 documents per floor each day, she said during the interview.

  • Two or three employees sat around practicing the signature of Chief Financial Officer Cheryl Samons, at Samons' direction, Kapusta said. Company lawyers were overheard saying they worried about breaking the law or getting disbarred, but Kapusta said they worried more about losing their jobs.

  • Toward the end of the interview, which was conducted under oath with Kapusta's attorney present, she also describes romantic relations among people who worked in the office, including Stern.(1)

For more, see Fired worker says home foreclosure firm forged documents.

Go here to read the entire Deposition of Tammie Lou Kapusta taken by the Florida AG's office.

(1) As the "loose thread" that runs through these alleged bogus document-manufacturing foreclosure mill law firms keeps getting pulled, one question that arises is whether the "race to the prosecutor's office" has begun. See United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) for one Federal judge's observation, made in the context of drug conspiracy cases, on the so-called "race to the courthouse/prosecutor's office" (in my view, this observation is equally suited to other types of major, multi-defendant felony cases) (bold text is my emphasis, not in the original text):

  • In practical terms, drug conspiracy cases have become a race to the courthouse. When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed.

South Florida Court Voids $180K+ Mortgage As Foot-Dragging Lender Walks Away From Unwanted Collateral; HOA Makes Off With Free & Clear Condo

In Pompano Beach, Florida, the South Florida Sun Sentinel reports:
  • After winning a lawsuit against Wells Fargo that claimed the bank purposely delayed foreclosure proceedings on a condominium unit for more than a year, a Pompano Beach condo association has been awarded title to the unit without owing a dime on the original $184,400 mortgage.

  • The case, brought by the Palm Aire Gardens Condominium Association, is being seen as a precedent that could pave the way for other condo associations facing similar foreclosure delays.

  • "Banks are delaying foreclosures and abusing the process and our association is struggling financially because of it, that's why we filed our lawsuit.'' said Palm Aire Gardens President Oscar Garcia. "Now we own the property free and clear of the mortgage, which gives us options to sell it or rent it.'' Wells Fargo did not respond to requests for comment.

  • Palm Aire's legal strategy is being dubbed "The Mortgage Terminator'' by the Association Law Group, the South Florida firm that represents the condo complex and hundreds of others across the state. "Many of our association clients are already starting to use it,'' said attorney Ben Solomon, of Association Law Group. "The only criteria is that the association has title to the unit through its own foreclosure process and the mortgage holder has not initiated foreclosure yet.''

***

  • Solomon said his firm aimed to help the association financially by forcing the lender, Wells Fargo, to either foreclose on the loan and pay its share of unpaid maintenance fees or, instead, agree to release its mortgage and walk away. According to three court judgments already won by Association Law Group, including another issued last week on the behalf of Palm Aire Gardens, the bank cannot later try to collect on the original loan amount from the association.(1)

For the story, see New legal tactic helps associations gain control of abandoned condos.

(1) According to the story, Solomon noted that the bank still has a right to go after the original borrower (who abandoned the property) for the outstanding balance on the loan, but it cannot sue the association for that loan amount.

Recent Foreclosure 'Freeze' Leaves Would-Be Homebuyer Homeless; Gets 90 Minutes Notice Of Deal Cancellation After Wiring $75K To Closing Agent

In Fort Lauderdale, Florida, The Palm Beach Post reports:
  • Sales of bank-owned homes are being called off statewide, leaving buyers with uncertain contracts to purchase properties and, in some cases, scrambling to find places to live. [...] The move by three of the nation's largest lenders to pull back foreclosure operations in light of flawed court documents is causing an unexpected chain reaction of real estate tumult.

***

  • Norman Lachance is living with a friend after he was told 90 minutes before he was to get the keys for a bank-owned home last week that Fannie Mae was canceling the closing. The JPMorgan Chase-managed property near Fort Lauderdale is now on real estate's equivalent of a do-not-call list.

  • "I gave up my apartment because I was supposed to be in my home Oct. 1," said Lachance, whose belongings are in storage. "I bought insurance, paid for an inspection, had the electricity turned on." Lachance said his $75,000 cash payment already had been wired when the closing was canceled. He said he was told that if he asks for the money back, he will lose his hold on the home. "My lawyer asked how long this situation would take. There was no answer to that," Lachance said.(1)

For more, see Foreclosure sales freeze leaves buyers in the cold.

(1) It may be that Mr Lachance also lost out on a now-expired Federal tax credit that required a closing no later than September 30. For more on the loss of homebuyer income tax credits due to the foreclosure freeze, see 1st Time Homebuyers May Be Out Thousand$ In Tax Credits Due To Stalled Closings Resulting From Recent 'Robo-Signer' Mess.

Another Would-Be Homebuyer Faces Homelessness After Loan Servicers Pull Rug Out From Under Imminent Closings

In Ocala, Florida, The New York Times reports:
  • Amanda Ducksworth was supposed to move in to her new home this week, a three-bedroom steal here in central Florida with a horse farm across the road. Instead, she is camped out with her 7-year-old son at her boss’s house.

  • Like many buyers across the country, Ms. Ducksworth was about to complete the purchase of a foreclosed house when it suddenly went off the market. Fannie Mae, the giant mortgage holding company that buys loans from commercial lenders, is pulling back sales of homes that might have been foreclosed in bad faith.

  • I gave up my rental thinking I would have a house,” said Ms. Ducksworth, a 28-year-old catering assistant. “Now I’m sharing a room with my son. What the hell is up with that?

For more, see Flawed Foreclosure Documents Thwart Home Sales.

Ohio AG Tags Ally/GMAC With Civil Suit; Cite 'Stephan' Testimony As Trigger For Probe Into Allegedly Bogus Affidavits Filed In State F'closure Actions

From the Office of the Ohio Attorney General:
  • In a lawsuit filed [] against GMAC Mortgage, LLC and its parent, Ally Financial Inc., Ohio Attorney General Richard Cordray accuses the loan servicer and its agents of filing fraudulent affidavits to mislead courts in hundreds of Ohio foreclosures.

***

  • Through the lawsuit, Cordray is asking the court to grant a preliminary and permanent injunction preventing GMAC/Ally from proceeding to foreclose in any pending Ohio case or allowing the property to be sold. Cordray is also asking for civil penalties of up to $25,000 for every violation of Ohio’s Consumer Sales Practices Act and for consumer restitution.

  • As a result of similar reports regarding depositions taken by a JPMorgan Chase and Bank of America employees, Cordray [] also requested that JPMorgan Chase and Bank of America suspend moving toward a judgment, sale, eviction or property transfer involving any foreclosure case with affidavits signed by those employees. Cordray also sent letters to Wells Fargo and Citibank, requesting that the banks meet with his office to discuss foreclosure affidavit procedures.

For the Ohio AG press release, see Attorney General Cordray Files Lawsuit Against GMAC Mortgage.

For the lawsuit and exhibits, see State of Ohio v. GMAC Mortgage, LLC, et al.

Lender Abandons Foreclosure Action, Leaving Unwitting Property Owner Holding The Bag On Code Enforcement Violations & Facing Criminal Charges

In Atlanta, Georgia, WGCL-TV reports:
  • Marcus Kyzer could receive thousands of dollars in fines or even jail time for failing to maintain two rental properties in Southwest Atlanta. "I have no options at this point," said Kyzer. "The mortgage companies have written the debt off, but they don't want the properties on their books so they've written the debt off and left the titles in my name."
  • Kyzer said he filed for bankruptcy a year ago and was under the impression that the homes on Baker Drive would go into foreclosure. However, when the homes didn't go into foreclosure, code enforcement slapped Kyzer with three arrest warrants for not keeping the properties maintained.
  • "Why didn't you maintain the properties until foreclosure went through?" asked CBS Atlanta reporter Adam Murphy. "Because I didn't realize the properties hadn't been foreclosed on. I believed that had happened right after I got the discharge from my bankruptcy," said Kyzer.
  • It's a common problem throughout the city. Fulton County Code Enforcement Director Tony Phillips said Kyzer's case happens to about one-third of all property owners trying to get rid of properties in unincorporated Fulton County. "Simply because you've received a letter or had conversations about a foreclosure, it doesn't actually mean the property has actually transferred ownership, and until it does you're still legally responsible for property maintenance and other code violations that could occur on that property," said Phillips. Kyzer will have to explain his case to a judge next week.
Source: Property Owner Faces Possible Jail Time (Marcus Kyzer Received Arrest Warrants For Properties He Thought Were Bank Owned).

Cops Accept "The Bank Sent Me!" Defense In Home Break-In Probe Targeting "Trash-Out" Agent; Say No Crime Was 'Intended' - "It's A Civil Matter!"

Sarasota Herald Tribune columnist Tom Lyons writes:
  • The oldest trick in the book when cops want to avoid investigating a complaint is to simply insist it is a civil matter. Sometimes I can’t blame police for saying that. [...] Sometimes that phrase probably does save all involved a lot of useless trouble.

  • But the sheriff’s offices in Sarasota and Charlotte counties use that dodge when a bank sends property preservation contractors — that is, hired burglars -- to break into a house and change the locks while the resident owner or tenant is not there. That's outrageous. And it doesn't matter that there is probably a foreclosure lawsuit under way on that house.

***

  • But the old "that's a civil matter" dodge is exactly what was used when, for instance, tenants at a house in Punta Gorda found that men had broken in by jimmying a sliding glass door. The renters also reported some valuable items stolen, and said a beer that had been in the fridge was found half consumed on a table.

  • The sheriff's investigators did go to the trouble, at least, to get the denials of any theft from the men who broke in. And the investigators accepted those assurances, even though one of those men's fingerprints was on the beer bottle.

  • That beer issue aside, the men were excused because they worked for a company that is paid by banks to break into homes, and there was a work order to prove it. No charges were filed against the professional housebreakers or the bank officers who sent them.

  • In Sarasota, sheriff's investigator Jeff Bell explains that there has to be criminal intent to charge a crime, and there isn't any bad intent when a bank is just sending someone to secure houses that may have been abandoned during a drawn-out foreclosure lawsuit.(1)

  • Sorry, but that's weak. When a house is clearly abandoned and power is off and mold is growing, that's one thing. But when a house is obviously lived in, insisting that a housebreaking there isn't a crime is just bizarre.

For more, see Break-in? Not if bank is calling the shots.

(1) As reasonable as it may sound that "there has to be criminal intent to charge a crime," a victim of this type of violation must be ready to follow up and ask the cop making such a statement whether there is such a thing as criminal negligence. In other words, is it possible that a crime can be committed by someone who, despite a complete lack of intent to commit the crime, acted in such a negligent manner that the conduct rises to the level so as to constitute criminal negligence? (After asking the question, just be quiet and carefully listen to see whether the cop tries to tap dance his/her way around the question, or sincerely accepts the legitimacy of the question and decides to take a second look at the case (Since a cop is arguably less likely to try and BS an attorney asking a question like this, a victimized homeowner or renter may want to secure the services of counsel to ask the questions).

In Florida, the recording of a notice of pendency (ie. lis pendens - typically filed at the commencement of a foreclosure action) in the public records operates as notice to the world of litigation pending involving the property against which the lis pendens is recorded, and serves as constructive notice of the proceeding, the claims made therein, and the documents forming the causes of action (that can be found in the court file associated with the particular action at the local courthouse) against the property in the proceeding (F.S. 48.23 and the case law thereunder).

The issue here is whether the foreclosing lender's trash-out contractor has a legal obligation to:

  • ask the lender to provide him/her with a copy of a writ of possession (obtained after a foreclosure sale when the home's occupants are officially booted out by the local sheriff's office) evidencing that the lender is now in legal possession of the premises, or

  • familiarize him/herself with the court file associated with the foreclosure action (which, under F.S. 48.23, he/she is deemed to have constructive notice of) to determine whether a writ of possession stripping legal possession from the homeowner and turning it over to the lender was issued (or evidence that the writ was actually executed by police),

  • visit the Civil Division of the local Sheriff's Office (the department that handles evictions) and inquire as to whether a writ of possession was executed for the premises, or

  • take any other action (checking for active utility meters outside the premises, inquiring of neighbors, etc. to determine whether anyone is living in the home or whether they witnessed the last occupants moving out) that leads to solid, objective evidence that the premises has been abandoned (particularly applicable when the foreclosure action is not yet completed)?

In Florida and elsewhere, "A person has no right to shut his eyes or ears to avoid information, and then say that he has no notice; that it will not suffice the law to remain willfully ignorant of a thing readily ascertainable by whatever party puts him on inquiry, when the means of knowledge is at hand." Sapp v. Warner, 105 Fla. 245, 141 So. 124; aff'd on rehearing 143 So. 648 144 So. 481 (Fla. 1932), among scores of other cases throughout the country to the same effect.

The question for police and prosecutors, in my view, is whether the foreclosing lender's trash-out contractor exercised prudent, reasonable diligence in determining that the bank legitimately had the right of possession to the premises, or whether the contractor negligently or willfully closed his/her eyes to readily obtainable facts, and simply indulged in possibilities or probabilities before deciding to break into the premises.

If it's the latter, the question for law enforcement then is whether such careless or reckless conduct rises to the level of criminal negligence. ( It seems to me that the standard of diligence to which a trash-out contractor should be held before committing a home break-in should, at a bare minimum, be the same as that legally required of a process server serving a lawsuit.)

Until the cops get up to speed in this area of law enforcement, the victimized homeowner's (or tenant's) recourse in these situations is limited to hiring a lawyer and suing the perpetrators. As noted in earlier posts, media reports reveal that at least one Massachusetts law firm is apparently going around the country taking on these illegal lockout cases on behalf of screwed-over homeowners. See:

For those homeowners (and tenants) who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

JPMorgan Chase Behind Recent 'Break-In' Of Orlando-Area Home Owned, Occupied By Delinquent Borrower

In Orange County, Florida, The Raw Story reports:
  • In yet another sign that the foreclosure crisis in the US may be getting out of hand, a Florida woman has gone to the press about having her home broken into -- by an agent of her mortgage bank.

  • Nancy Jacobini of Orange County, Florida, says she was three months behind on her mortgage payments, but not in foreclosure, when she heard an intruder breaking into her home. Panicked, she called 911 and spent 10 nervous minutes on the phone with a dispatcher only to discover that the intruder was an agent of her mortgage company, JPMorganChase, who had come to change the locks on her home.

***

  • According to WFTV, the bank claims Jacobini never established a mortgage payment plan, and the house was assumed to be vacant as there were no utilities at the address. But the news crew found electricity and running water in the house.

  • A JPMorganChase representative told the news crew that the company had made a "mistake" in attempting to change the locks, and that the company has no right to change the locks on a home that hasn't been foreclosed and which is occupied.(1)

For more, see JP Morgan ‘thug’ breaks into home not in foreclosure: report.

Go here for the WFTV-TV Channel 9 video.

(1) Until the cops get up to speed in this area of law enforcement and start bringing criminal charges against the perpetrators, the victimized homeowner's (or tenant's) recourse in these situations is limited to hiring a lawyer and suing the perpetrators.

As noted in earlier posts, illegal lockout lawsuits on behalf of screwed-over homeowners are beginning to gain some steam. See:

For those homeowners (or tenants) who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

Thursday, October 07, 2010

Obama To Nix Notary Bill

The Washington Post reports:
  • Amid growing furor over the legitimacy of foreclosure proceedings, White House officials said Thursday that President Obama will not sign a two-page bill passed by lawmakers without public debate after critics said the legislation could loosen standards for foreclosure documents.

  • The bill, named the Interstate Recognition of Notarizations Act, would require courts to accept document notarizations made out of state. Its sponsors intended the effort to promote interstate commerce. But homeowner advocates warn the new law could allow lenders to cut even more corners as they seek to evict homeowners.

For more, see Obama won't sign bill that would affect foreclosure proceedings.

Obama Administration Aware Of Mortgage Industry Attempt To Sneak Through Proposed Law Affecting Document Notarizations

The Huffington Post reports:
  • White House is taking a careful look at legislation recently passed by Congress with little notice that would require courts to recognize notarizations from out-of-state, which some consumer advocates say would make it more difficult to fight bogus foreclosures by banks.

  • "There were a series of meeting on that this morning here," said White House spokesman Robert Gibbs, who added the White House would have a more definitive statement later on Thursday. "It is something that, as you said, there has been a lot of news on, the processing of documentation, the resulting impact on foreclosures, and that is being evaluated....In general, there is concern, ultimately, about the situation."

  • Max Gardner, a foreclosure defense attorney, said the timing of the bill was suspicious, considering fraudulent notarization of bogus foreclosure affidavits is at the heart of a scandal that has prompted the nation's largest banks to pause foreclosures in 23 states.

  • "The timing is just a little curious to me that all of a sudden you can't get anything through the Senate at all and then all a sudden on a voice vote," Gardner said. "This was first introduced in the House in 2007."

  • The legislation, titled the "Interstate Recognition of Notarizations Act," would "require any Federal or State court to recognize any notarization made by a notary public licensed by a State other than the State where the court is located when such notarization occurs in or affects interstate commerce." The bill would also require courts to recognize electronic notarizations.

  • "The thing that concerns me about the bill is that the provisions in it that allow for digital notarization by electronic means," said Gardner, "which implies that anyone with the appropriate software could notarize a digital document or image of a document, which would allow someone to notarize a document without seeing someone execute the document or doing the things a notary is supposed to do. In my mind that would lead a broad exception for more fraudulent practices."

For more, see White House Has 'Concerns' About Notarization Bill Seen As Foreclosure Cover.

DeKalb Cops, Feds Raid Suspected Loan Modification Scam Operation; Walk Off With Four Car Loads Of Records, Dozens Of Computers

In DeKalb County, Georgia, WGCL-TV reports:
  • DeKalb police executed a search warrant at Matrix Capital Resources Tuesday. They are sorting out the details of the sale pitch that lured in hundreds of unsuspecting mortgage clients. Police hope the evidence will seal their case against Fred Lee, who they said is the mastermind behind Matrix Capital.

***

  • [P]olice filled four car loads with records from the company. Police are investigating allegations of fraud and theft. One of those boxes may hold the key that could land Lee behind bars. “We are out here conducting a search warrant on Matrix Capital Resources, looking for documents and uncovering other victims that we may not know about at this time,” said Sgt. John Germano of the DeKalb County Police Fraud Unit.

  • The DeKalb police and Secret Service agents confiscated dozens of computers. Each of the computers they believe holds the stories of victims who have lost their homes. “We are looking at any related documents that would reveal any loan modifications either successful or unsuccessful,” Germano said.

  • The files confiscated in this search warrant will likely detail how the ploy worked, police said. Police say Lee travels from state to state, community to community, and church to church selling hundreds of people on the hope of a lowering their mortgages. The cost was $1,500 up front. Police said Lee told clients that while the loan is in the modification process, they don’t have to make payments.

For the story and video, see Search Warrant Executed At Loan Modification Company.

Fla. F'closure Mill Wins Round 1 In State AG's Dubious Document Probe; Is Appeal Next, Or Will AG Give Up & Throw In The Towel? (Everyone's Watching!)

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Florida's attorney general has no authority to investigate or discipline one of the state's large foreclosure law firms, a Palm Beach County judge ruled Monday.

  • The five-page ruling from Circuit Judge Jack S. Cox was in response to a request from the Shapiro & Fishman law firm to quash an attorney general's subpoena for information. The attorney general's office announced in August it was investigating Shapiro & Fishman, which has offices in Boca Raton and Tampa, as well as two other large firms that represent lenders in foreclosure hearings.

  • Cox said the Florida Bar, not the attorney general's office, is responsible for investigating allegations of misconduct, including complaints that foreclosure paperwork was doctored in order to rush cases through the courts.(1)

For more, see Judge rules in favor of so-called foreclosure mill.

(1) A notation on the Florida AG's website indicates that its probe "relates to a civil -- not a criminal -- investigation." The AG's office was not probing possible criminal conduct, but possible civil violations of the Florida Deceptive and Unfair Trade Practices Act (F.S. 501.201 et seq.).

I may be wrong on this, but on the surface, this court's ruling supports the seemingly ridiculous proposition that Florida attorneys and law firms are immune from civil lawsuits (at least those brought by the state attorney general) for violations of the Florida Deceptive and Unfair Trade Practices Act. An appeal should be forthcoming, in my view.

Maybe the state AG's office would be better off conducting a (or "recruiting" the local county prosecutor's office and/or U.S. Attorney's office for participation in a joint) criminal investigation, which clearly is not within the purview of The Florida Bar ("A guardian for the integrity of the legal profession" in Florida, according to its website).

Wells Fargo Stands Pat On Mass-Produced Foreclosure Document Scandal; Insist Robosigned Affidavits Are Accurate

Bloomberg News reports:
  • Wells Fargo & Co. is standing by the accuracy of foreclosure filings and won’t follow competitors in delaying seizures, after an employee testified he signed documents for proceedings without personally reviewing records. The bank said yesterday it doesn’t plan to halt repossessions because its “procedures and daily auditing demonstrate that our foreclosure affidavits are accurate.”

For more, see Wells Fargo Foreclosures Proceed After Data Queried.

See also the San Francisco Chronicle's The Bottom Line blog: Wells Fargo on foreclosure checks: "We don't need no stinkin' audits."

Ohio Secretary Of State Warns Against Mortgage Industry Gambit To Minimize Problems With Bogus Notarizations

In a recent interview with American Public Media, Ohio Secretary of State Jennifer Brunner made this observation on an apparent mortgage industry response to the recent brouhaha involving bogus notarizations(1) and foreclosure robosigners:
  • And what's very interesting is that on Sept. 27, Congress very quickly passed House Resolution 3808 (PDF) and it requires that state and federal courts honor notarizations from another state as long as they were lawful in that state.

  • It seemed innocuous at first, but when you really look into it, and you look into what's happening out there with technology and mortgages, and see that there are states with very lax laws and allow for electronic notarization without even presenting in front of a notary.

  • It seems very clear that there an attempt of the banking industry to flank what's being discovered by consumers with a lot of indignation.

For the transcript of the entire interview, see Faulty foreclosure papers notarized.

(1) See Ohio Secretary Of State Asks Feds To Open Criminal Probe Into 'Robo-Notary' Abuses Involving Mass-Produced Foreclosure Docs; Lists 5 Violations Of Law for recent action taken by Secretary of State Brunner in connection with dubious notarizations on foreclosure documents.

Wednesday, October 06, 2010

Stall Foreclosures As Long As Possible, Say Junior Mortgage Bond Investors As Loan Servicers Keep Coughing Up The Cash, Absorbing Up The Pain

A recent story in The Wall Street Journal noted the effect the foreclosure suspensions in connection with the recent robosigner brouhaha may have on cash flow for the holders of junior mortgage bonds:
  • While it is unclear whether the delays will have a deep impact on the market for bonds, the changes are already creating some unexpected outcomes, say investors.

  • When houses that have been packaged into a mortgage bond are liquidated at a foreclosure sale—the very end of the foreclosure process—the holders of the junior, or riskiest debt, would be the first investors to take losses.

  • But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream.

  • The latest events thus set up an odd circumstance where junior bondholders—typically at the bottom of the credit structure—could actually end up better off than they expected. Senior bondholders, typically at the top, could end up worse off.

  • Not surprisingly, senior debt holders want banks to foreclose faster to reduce expenses. Junior bondholders are generally happy to stretch things out. What is more, it isn't entirely clear how the costs of re-processing tens of thousands of mortgages will be allocated. Those costs could be "significant" said Andrew Sandler, a Washington, D.C., attorney who represents mortgage companies.

  • "This is sort of an extraordinary situation," said Debashish Chatterjee, a vice president for Moody's Investors Service who covers structured finance. By delaying foreclosures, "it means the subordinate bondholders don't get written down for a much longer period of time, and they keep getting payments."

For the story, see Mortgage Investors Are Set for More Pain.

LI Judge "Extends Invite" To RoboSigning Duo To Appear At F'closure Settlement Meeting While Hammering Lender's Lawyer In Failed 'Bamboozle' Attempt

In Riverhead, New York, a recent ruling in a foreclosure action presided over by Suffolk County Supreme Court Justice Peter H. Mayer merits a quick note here.

In his ruling denying, without prejudice, a motion for an Order of Reference,(1) Justice Mayer sounds like someone who believes he may have just nabbed a couple of multiple corporate hat-wearing robosigners, along with the attorney representing the foreclosing lender, attempting to bamboozle him with the various documents that they submitted in court in their effort to force a sale of the home securing the loan purportedly owned by the plaintiff.(2)

Those interested in the facts should read the ruling; it suffices to say here the lender's attorney took a bit of a hammering, and that robosigners Sherry Hall (possibly also known as "Sherri D. Hall") and Nikole Shelton have been ordered to appear at the Foreclosure Settlement Conference scheduled in this case for November 17, 2010.(3)

For the ruling, see Deutsche Bank Trust Ams. v McCoy, 2010 NY Slip Op 51664(U) (NY Sup. Ct. Suffolk County, September 21, 2010).

(1) Justice Mayer set forth the following legal basis under New York law for denying the lender's request to move forward with the foreclosure:
  • Only where the plaintiff is the assignee of the mortgage and the underlying note at the time the foreclosure action was commenced does the plaintiff have standing to maintain the action (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]; Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, 755 NYS2d 730 [2d Dept 2003]; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]; First Trust Natl. Assn. v Meisels, 234 AD2d 414, 651 NYS2d 121 [2d Dept 1996]).

  • An assignment executed after the commencement of an action, which states that it is effective as of a date preceding the commencement date, is valid where the defaulting defendant appears but fails to interpose an answer or file a timely pre-answer motion that asserts the defense of standing, thereby waiving such defense pursuant to CPLR 3211[e] (see, HSBC Bank, USA v Dammond, 59 AD3d 679, 875 NYS2d 490 1445 [2d Dept 2009]).

  • It remains settled, however, that foreclosure of a mortgage may not be brought by one who has no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]; Kluge v Fugazy, 145 AD2d 537, 536 NYS2d 92 [2d Dept 1988]).

  • Indeed, a plaintiff has no foundation in law or fact to foreclose upon a mortgage in which the plaintiff has no legal or equitable interest (Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]; Katz v East-Ville Realty Co., 249 AD2d 243, 672 NYS2d 308 [1st Dept 1998]).

  • Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]).

  • Although the February 28, 2008 assignment states it is "effective January 19, 2008," such attempt at retroactivity is ineffectual. If an assignment is in writing, the execution date is generally controlling and a written assignment claiming an earlier effective date is deficient, unless it is accompanied by proof that the physical delivery of the note and mortgage was, in fact, previously effectuated (see, Bankers Trust Co. v Hoovis, 263 AD2d 937, 938, 694 NYS2d 245 [1999]).

  • A retroactive assignment cannot be used to confer standing upon the assignee in a foreclosure action commenced prior to the execution of the assignment (Countrywide Home Loans, Inc. v Gress, 68 AD3d 709, 888 NYS2d 914 [2d Dept 2009]; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]). Plaintiff's failure to submit proper proof, including an affidavit from one with personal knowledge, that the plaintiff was the holder of the note and mortgage at the time the action was commenced, requires denial of the plaintiff's application for an order of reference.

(2) A similar paperwork gambit used in another New York case (Deutsche Bank Natl. Trust Co. v Maraj, 18 Misc 3d 1123, 2008 NY Slip Op 50176; January 31, 2008, Schack, J.) left one Brooklyn trial judge scratching his head wondering if he was the target of a "corporate 'Kansas City Shuffle' - a complex confidence game" (a reference to the 2006 film, Lucky Number Slevin, in which the term is explained by a hitman played by Bruce Willis). See also Brooklyn Judge Presides Over A Corporate "Kansas City Shuffle" In Foreclosure Action?

(3) Justice Mayer expresses some of his "dismay" towards the foreclosing lender's attorney in this unaltered excerpt:

  • Counsel also submits an Affirmation of Compliance with CPLR 3408, which states that "[w]e have determined that this loan is not subprime," and that the defendants "are not entitled to a court conference" (emphasis in original).

  • Despite counsel's assertions, the plaintiff's own affidavit of merit states that "[w]e have determined that this loan is subprime" and that "the defendants are entitled to court conference" (emphasis added).

  • The direct contradiction between counsel's "belief" and the assessment of one whose affidavit states, as in this case, that she has "first-hand knowledge of the facts and circumstances surrounding this action," validates this Court's approach in refusing to accept counsel's assertions as fact in any given foreclosure action.

  • The mistaken "belief" of an attorney who has no personal knowledge of the facts, yet opines in court documents that a homeowner-defendant is not entitled to a statutorily required court conference, may prejudice the homeowner's rights while subjecting the attorney to otherwise avoidable court sanctions.

Jurist, Media Reporter Give Their Views On Foreclosure Robo-Signers

Democracy Now! recently did an on-camera interview with Kings County (Brooklyn), New York Supreme Court Justice Arthur Schack and Mother Jones magazine reporter Andy Kroll for their views on the recent foreclosure brouhaha getting major coverage from media outlets around the country.

For the interview (approximately 15 minutes), see Lenders Forced to Suspend Thousands of Foreclosures.

Citigroup, Ally/GMAC, MERS Face Civil Racketeering Class Action Filed On Behalf Of Kentucky Homeowners Facing Foreclosure

Bloomberg News reports:
  • Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans. The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

For more, see Citigroup, Ally Sued for Racketeering Over Database.

Tuesday, October 05, 2010

Florida Judge Sticks Standing-Lacking Lender With $30K Tab For Homeowner's Legal Bill After Booting Case

In Loxahatchee, Florida, The Wall Street Journal reports:
  • Israel Machado's foreclosure started out as a routine affair. In the summer of 2008, as the economy began to soften, Mr. Machado's pool-cleaning business suffered and like millions of other Americans, he fell behind on his $400,000 mortgage.
  • But Mr. Machado's response was unlike most other Americans'. Instead of handing his home over to the lender, IndyMac Bank FSB, he hired Ice Legal LP in nearby Royal Palm Beach to fight the foreclosure. The law firm researched the history of Mr. Machado's loan and found two interesting facts.
  • First, the affidavits IndyMac used to file the foreclosure were signed by a so-called robo-signer named Erica A. Johnson-Seck, who routinely signed 6,000 documents a week related to foreclosures and bankruptcy. That volume, the court decided, meant Ms. Johnson-Seck couldn't possibly have thoroughly reviewed the facts of Mr. Machado's case, as required by law.
  • Secondly, IndyMac (now called OneWest Bank) no longer owned the loan—a group of investors in a securitized trust managed by Deutsche Bank did. Determining that IndyMac didn't really have standing to foreclose, a judge threw out the case and ordered IndyMac to pay Mr. Machado's $30,000 legal bill.(1)

***

  • Mr. Ice, who started Ice Legal four years ago, portrays his firm's work as defending the integrity of the legal process surrounding foreclosures. Banks can't repossess houses if they're using sloppy, and in some cases fraudulent paperwork, or if they can't prove that they own the loan. He says his firm has between 300 and 500 similar cases pending.

For more, see Foreclosure? Not So Fast.

(1) Florida foreclosure defense attorneys have got their motions ready for attorneys fees requests as courts have begun dismissing foreclosures based on these bogus documents. In Florida, where an agreement allows for an attorney fee award to one of the contracting parties (mortgage loan agreements typically allow a foreclosing lender to tack on its attorney fee to the amount owed on a loan when suing a homeowner to enforce the mortgage terms), state statute mandates an award of prevailing party attorney's fees to the other party under the reciprocity provisions of section 57.105(7), Florida Statutes; Landry v. Countrywide Home Loans, Inc., 731 So. 2d 137 (Fla. 1st DCA 1999).

Not only might the lender and servicer be court-ordered to cough up fees to the homeowners' attorneys, it's possible that the foreclosure mill law firms representing the lenders/servicers (at least in Florida) may also be ordered to foot part of the tab as well by reason of
section 57.105(1), Florida Statutes (bold text is my emphasis, not in the original text):

  • Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee, including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and the losing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:

    (a) Was not supported by the material facts necessary to establish the claim or defense; or

    (b) Would not be supported by the application of then-existing law to those material facts.

(For an old (July/August, 2000) article in The Florida Bar Journal that may be of some value in providing guidance to lawyers in requesting court-ordered, prevailing party attorneys fees from losing defendants (ie. lenders, servicers, etc.), see Pleading Requirements for a Claim for Attorneys' Fees.)