Thursday, November 18, 2010

Foreclosure Mill Does The "Affidavit Two-Step" In Central Florida; Begins To Flood Court With Letters Requesting Judges To OK "Document Do-Overs"

In Central Florida, the St. Petersburg Times reports:
  • Judges in Pinellas-Pasco Circuit Court say they've never seen anything like the letters they've been receiving over the past few weeks from the South Florida foreclosure law firm of David J. Stern.

  • Referring to Florida Bar rules that say lawyers have a duty to disclose false evidence presented to the court, the letter said that unbeknownst to Stern's attorneys, previously submitted affidavits in foreclosure cases "may not have been properly verified" by the lender. But no worries: Substitute documents, this time "verified," would be forthcoming.

  • This highly unusual move — call it the affidavit two-step — is hitting foreclosure courts around the country as lenders try to regroup from revelations that employees never read or properly notarized critical loan documents that were processed at mind-boggling speed.

***

  • The legal system is trying to figure out how to respond to lenders' requests for do-overs while foreclosure cases continue to clog the courts. In Maine, a judge ruled that GMAC's submission of a [robosigning Jeffrey] Stephan affidavit amounted to "bad faith" and ordered the lender to pay the homeowner's attorney fees and costs.

***

  • McGrady, the chief judge, said the timing of when substitute affidavits are filed could determine their impact. "If the affidavits differ and there's a contradiction in facts, that could prevent a summary judgment and then it would have to go to trial or it could be dismissed," McGrady said. "But if the case has already gone to summary judgment or sale, there could be a motion to vacate the judgment, then a hearing and we'll start all over again. There will be a problem where the house has already been purchased by a third party."(1)

For more, see Robosigning in Florida foreclosure cases leads to requests for affidavit 'do-overs' in local courts.

(1) If the bogus affidavits are found to be absolutely void (as opposed to merely voidable), the foreclosure judgments based on the void affidavits could arguably be found to be absolutely void as well. In this case, any innocent third party would be out of luck regarding the ownership of their home (even if they had no knowledge of the facts surrounding the dubious documents), and would have to rely on their title insurance policies to obtain indemnification for their losses.

Alternatively, if the bogus affidavits are found to be merely voidable, the foreclosure judgments would probably found to be voidable as well, in which case, a third party purchaser's ownership claim to the home will withstand an attack, if and only if, said purchaser qualifies for protection as a bona fide purchaser.

The distinction between void and voidable judgments in Florida was described by a state appeals court deciding a mortgage foreclosure case in Sterling Factors Corp. v. U.S. Bank Nat'l Ass'n, 968 So. 2d 658 (Fla. App. 2d 2007):

  • There is distinction between a judgment that is "void" and one that is "voidable." See generally Malone v. Meres, 91 Fla. 709, 109 So. 677 (Fla. 1926).

    A void judgment is so defective that it is deemed never to have had legal force and effect.

    In contrast, a voidable judgment is a judgment that has been entered based upon some error in procedure that allows a party to have the judgment vacated, but the judgment has legal force and effect unless and until it is vacated. Id.; see also State v. Chillingworth, 126 Fla. 645, 171 So. 649, 652 (Fla. 1936); Chisholm v. Chisholm, 98 Fla. 1196, 125 So. 694 (Fla. 1929); Paleias v. Wang, 632 So. 2d 1132 (Fla. 4th DCA 1994) (Klein, J., concurring).

    A
    voidable judgment can be challenged by motion for rehearing or appeal and may be subject to collateral attack under specific circumstances, but it cannot be challenged at any time as void under rule 1.540(b)(4).

    A trial court's lack of subject-matter jurisdiction makes its judgment void. N.W.T. v. L.H.D. (In re D.N.H.W.), 955 So. 2d 1236, 1238 (Fla. 2d DCA 2007). So, too, a judgment that is entered against a defendant when the court has no personal jurisdiction over the defendant is generally regarded as a void judgment. Great Am. Ins. Co. v. Bevis, 652 So. 2d 382, 383 (Fla. 2d DCA 1995).

For a survey of court rulings from across the U.S. on void judgments, see:

Spooked Home Loan Industry Looks To Dodge Criminal Responsibility For Robosigner Mess Through Settlement Talks With State AGs

The Washington Post reports:
  • State attorneys general and the country's biggest lenders are negotiating to create a nationwide fund to compensate borrowers who can prove they lost their home in an improper foreclosure, state and industry officials said. The fund would present a solution for both sides, helping banks avoid lengthy and costly court challenges from homeowners and aiding state investigators in their efforts to seek relief for homeowners who were wronged, the officials said.

***

  • The fund, the first of its kind in the mortgage industry, would mirror victim-compensation efforts set up in recent years in response to the BP oil spill in the Gulf of Mexico, the shootings at Virginia Tech and the terrorist attacks of Sept. 11, 2001. Those were all administered by a specially appointed czar, Kenneth Feinberg, who had the tough task of figuring out what each victim should receive.(1)

For more, see States, mortgage lenders in talks over fund for borrowers in foreclosure mess.

(1) At this point, it may be that homeowners and their attorneys could be better off continuing to bring their cases in court without regard to any attempt by the state attorneys general to intervene on their behalf and reach a monetary "settlement." The lenders should probably be told to take their proposed settlement fund and shove it. This entire problem could have been avoided a couple of years ago had the lenders dealt with this problem in good faith. Their new-found "willingness" to negotiate (and stop their profuse 'bleeding') is just an attempt to wiggle their way off the hook in a matter that, to the extent the government intervenes, it should probably do so in criminal, not civil, court proceedings.

Florida Bar Puts Out Call To Judges Around State To Blow The Whistle On Rule-Breaking Foreclosure Mill Attorneys

The Florida Times Union reports:
  • Out of the more than 200 lawyers the Bar suspended or stripped of licenses this year, none was punished for lying in a foreclosure trial or making fake documents for one, behavior that a cottage industry of critics works to document. But that could change quickly.

  • This month, the Bar was investigating 43 reports of some type of foreclosure fraud involving 32 lawyers. One involves a Jacksonville judge’s ruling this year that lawyers from a South Florida firm committed “fraud on the court.” A new category solely for foreclosure fraud was added recently to the Bar’s system for tracking complaints.

  • To find new cases, the head of the Bar is asking judges around the state to report lawyers who break the rules — and pointing specifically to news coverage of claims about foreclosure suits.

For more, see Foreclosure firms facing action from the Florida Bar (Lenders’ lawyers have already been taking some knocks in court).

The Bleeding Continues For South Florida Assembly Line Foreclosure Mill King

Mother Jones reports:

For more, see Wells Fargo Dumps Foreclosure King.

(1) For other Mother Jones reporting on the now near-defunct Law Office of David J. Stern, see:

Wednesday, November 17, 2010

Florida Chief Justice To State Trial Judges: 'Open Up Doors To Foreclosure Proceedings'

The Palm Beach Post reports:
  • [Florida Supreme Court] Chief Justice Charles Canady ordered judges throughout the state to open up foreclosure proceedings, responding to requests from civil rights lawyers, the media and First Amendment advocates. Florida law already requires that the foreclosure cases be open, but judges and court officials have barred the public from attending them in part because the onslaught of foreclosures has forced some judges to hear the cases in their chambers.

For more, see Chief Justice orders judges to open foreclosure proceedings.

Go here for Florida Chief Justice Canady's letter to trial judges throughout the state.

Atlanta's Largest Foreclosure Mill, Document Processor Among Those Targeted In Federal Robosigner Suit Seeking Class Action Status

In Atlanta, Georgia, WSB-TV Channel 2 reports:
  • A Channel 2 consumer investigation is now the basis for a federal class action lawsuit. Distressed homeowners accuse Atlanta’s largest foreclosure law firm, and its document processor, of fraud and racketeering. Fraud is among the allegations in the lawsuit filed against Prommis Solutions and several employees, foreclosure firm McCalla Raymer and two of its attorneys, and several client lenders.(1)

  • This is wrong; it's fraud,” said homeowner Jeff Crawford, whose wife is named as a plaintiff. Foreclosure of Crawford’s Marietta home is central to the case. “You hear about all this mess going on with foreclosures across the country. This is robo-signing, pure and simple,” he told Channel 2’s Jim Strickland.

  • The lawsuit accuses Prommis Solutions and McCalla Raymer of churning out improperly executed foreclosure documents. A Channel 2 investigation revealed attorney Troy Crouse’s signature on Crawford’s document doesn't match the attorney's own mortgage signature. Channel 2 also uncovered the notary wasn't a notary at the date of signing on the document.

  • Attorney Ebony Ameen said the different signatures occured over and over again. “When you make one mistake that's one thing, but when you make thousands of mistakes, that rises to conduct that's unacceptable,” Ameen said.

  • Ameen is using a Facebook page called Georgia Mortgage Class Action to find other Georgians whose homes were foreclosed who believe their documents are dubious. Prommis said outside auditors are reviewing its procedures. The company told Strickland it has new strict guidelines for notaries, and even a hot line to report irregularities. “Now they may be doing it the correct way. That doesn't cancel out the thousands of times they did it the wrong way,” said Ameen.

Source: Class Action Suit Filed After Channel 2 Document Investigation.

Go here for the WSB-TV Channel 2 video report.

For the lawsuit, see Jenkins, et ano. v. McCalla Raymer LLC, et al.

(1) The defendants named in the lawsuit:

  • McCalla Raymer, LLC,
  • Thomas A. Sears, Esq.,
  • Charles Troy Crouse, Esq.,
  • Merscorp, Inc.,
  • Bank of America, N.A.,
  • BAC Home Loans Servicing, LP,
  • Wells Fargo Bank, N.A.,
  • Prommis Solutions, LLC,
  • Prommis Solutions Holding, Inc,
  • Great Hill Partners, Inc,
  • Mortgage Electronic Registration Systems, Inc,
  • Americas Servicing Company,
  • Taylor Bean & Whitaker,
  • Crystal Wilder,
  • Elizabeth Lofaro,
  • Chiquita Raglin,
  • Victoria Marie Allen,
  • Iris Gisella Bey,
  • Jamela Reynolds, and
  • Latasha Daniel.

BofA Seeks To Dodge State Court Adjudication In Ohio Robosigner Suit; Requests Removal To Federal Court

In Sandusky, Ohio, The Morning Journal reports:
  • A lawsuit brought by a Sandusky woman, who lost her home to foreclosure and is suing the bank, claiming the paper work was done improperly, could be moved to federal court. Rhonda McLaughlin filed the lawsuit against the Bank of America claiming a “robosigner” signed an affidavit during the foreclosure process, thus violating the law.

  • Bank of America wants the case moved to federal court because McLaughlin and her attorney, Daniel McGookey, are claiming the bank violated the Fair Debt Collections Practices Act, the Ohio Consumer Sales Practices Act, Ohio’s RICO Act and Ohio common law, which are all federal offenses. Bank of America also states because the judgment of the suit is more than $75,000, the action should be shifted to federal court. McGookey said [] he believed the case should remain in Erie County Common Pleas Court.(1)

For the story, see Robosigner suit should be moved, bank says.

For the lawsuit, as filed in Erie County Common Pleas Court, see McLaughlin v. Bank of America, et al.

(1) An ABA Journal article (see Judge Says Firm Must Explain ‘Fraudulent’ Removals or Pony Up $25K) offers this observation on the legal maneuver reported in this story, one commonly used in civil cases by big-time corporate defendants and their white-shoe law firms in lawsuits brought by individuals and other (possibly under-financed) plaintiffs, of moving a case from a state to a federal court:

  • [I]t is widely believed that plaintiffs, particularly individuals rather than corporations, fare better in state courts where they have greater likelihood of getting to a jury and often benefit from more favorable interpretations of law. Defendants in turn tend to prefer the federal courts. Thus removals can become a cat-and-mouse game in which a plaintiff names a party having nothing to do with the matter as one of the defendants to prevent the other side from removing the matter to federal court. That court can find fraudulent joinder and keep the case or remand it.

  • But studies have shown a greater increase in recent years of defendants removing cases to federal court, only for them to be dispatched back to state court for erroneous removal. One researcher, a third-year student at New York University School of Law, found that most often in such situations, the plaintiffs are individuals. And the rate of their cases being remanded back to state court is higher, too, wrote Christopher Terranova in last summer’s edition of the Willamette Law Review (PDF).

  • He adds that “the delays and costs of that extra procedural step to federal court are more costly and burdensome for most individual plaintiffs than they are for bigger defendants with more assets."

For the above-referenced Willamette Law Review article, see Erroneous Removal As A Tool For Silent Tort Reform: An Empirical Analysis Of Fee Awards And Fraudulent Joinder (article also available at http://ssrn.com/abstract=1073402).

For an example of one Federal judge excoriating a lawyer and law firm for, according to the judge, their history of fraudulent removal requests of cases from state court to Federal court, see Hollier v. Willstaff Worldwide, Case 6:08-cv-01382-TLM-CMH (W.D. La. 2009):

  • Sadly, the Court is not surprised by G.W. Premier’s counsels’ tactics in this proceeding as Ungarino & Eckert, L.L.C.’s reputation proceeds it. This case is but one in a long line of fraudulent and improper removals that Ungarino & Eckert, and more specifically Matthew Ungarino, have filed in this and other districts. [...] [For more, see Hollier v. Willstaff Worldwide (pp. 4-9).]

End Drawing Near For S. Fla. Foreclosure Mill? Stiffs Landlord On Office Rent; Affiliate Enters Into Loan Forbearance Over $12M Credit Line Default

In Plantation, Florida, The Miami Herald reports:
  • The Law Offices of David J. Stern, which has helped banks seize thousands of homes from homeowners who missed mortgage payments, is now having trouble paying its own bills. One of its subsidiaries is seeking bank forbearance for defaulting loans, and the shrinking company has fallen behind on rent payments at its Plantation offices, according to a regulatory filing Monday.

***

  • The law firm has already stopped paying some of its bills. The company also has not paid its rent for the month of November at its office space at 900 S. Pine Island Road, in Plantation. [...] Much like the troubled real estate market, Stern's firm has been enduring a post-boom decline of its own recently. After the growing five-fold in the last five years to more than 1,100 employees, a lightning round of negative news has leveled the foreclosure-processing giant in the last few months.

***

  • The same day layoffs were announced, employees from a document shredding company spent hours taking boxes from the firm to a truck parked outside. The DJSP stock price fell 32 percent on Monday to close at $0.48. It has plunged more than 95 percent since April, when it peaked at $13.65. In a letter announcing the layoffs to Florida Agency for Workforce Innovation, a Stern representative wrote that a complete closing of the firm "remains a possibility.''

For more, see Foreclosure attorney Stern struggling to pay his bills.

Florida Media Outfits, ACLU Call On State High Court To Leave Foreclosure Proceedings Open To Public

The South Florida Sun Sentinel reports:
  • A group of Florida news organizations and the American Civil Liberties Union Monday called on Florida’s Supreme Court to preserve open access to foreclosure proceedings.

  • In a letter to Chief Justice Charles T. Canady, the group cites “numerous reports” of barriers to access for the news media and the general public that have taken place since August in Duval, Hillsborough, Orange and Citrus Counties. The letter is signed by representatives of the ACLU, The First Amendment Foundation, Florida Association of Broadcasters, Florida Press Association, The Florida Society of Newspaper Editors and James Denton, editor of The Florida Times-Union, a newspaper based in Jacksonville.

  • The letter also referred to an incident in Jacksonville in which a legal aid attorney was told she might be cited for contempt of court in the future after the attorney attended a foreclosure proceeding with a reporter from Rolling Stone magazine.(1)

For more, see ACLU wants courts to keep foreclosure cases open to public.

(1) See Rubber-Stamping Judge Threatens Foreclosure Defense Legal Aid Lawyer With Contempt For Bringing Media Member To Observe Rocket Docket.

Tuesday, November 16, 2010

NY F'closures Screech To A Halt? Lender Lawyers Reluctant To Risk Bar Ticket By Filing Crappy Paperwork In Violation Of State High Court Directive

The New York Post reports:
  • Bank lawyers prosecuting the 80,000 foreclosure cases in New York are all but admitting that the cases they have filed over the past number of years have been riddled with fraud.

  • In the three weeks-plus since New York State Chief Judge Jonathan Lippman put the foreclosure lawyers on notice that any fraud in foreclosure paperwork would be met with severe penalties -- he is making lawyers sign affirmations promising they took "reasonable" steps to make sure the legal papers are true -- practically no new foreclosure cases have been filed, The Post has learned. And existing cases have ground to a halt, a source close to the state's foreclosure practice said.

  • "Banks do not want to be the first to test the new rules," the source said. The virtual shutdown of New York's foreclosure business comes despite chest-thumping, bravado-filled statements made by some banks in October that they had nothing to be afraid of when it came to foreclosure fraud and that the lawsuits aimed at kicking delinquent homeowners from their houses would continue shortly.

  • It seems lawyers pressing the foreclosure cases are not willing to bet their law licenses on such claims. [...] While many banks are not prosecuting foreclosures, they are still preparing those cases by sending paperwork to law firms on new homeowners who are behind on payments. The cases are just not being filed in court. "The spigot has not been shut off much, to my surprise," a foreclosure industry insider told The Post, of the bank's sending of the foreclosure paperwork to their lawyers.

For more, see Fraud-closure biz fizzles out.

'Lender' Targets Cash-Strapped, High-Equity Homeowners For Easy Profits; Tactics Embarrassing, Undermine Industry Reputation, Says Hard Money Lender

In Seattle, Washington, The Seattle Times reports:
  • Emiel Kandi forever changed the lives of a pregnant hairdresser, a jobless mechanic and a single mom when he loaned them money. These unsophisticated, desperate borrowers thought a short-term loan from the well-dressed professional could save them from financial collapse or foreclosure. But the very asset they were trying to hold on to — their home — was what Kandi was determined to take.

  • Kandi is the lender of last resort for some people who've been turned down by banks because of poor credit or limited income. He says his requirement for a borrower is merely "a pulse and a legal ability to sign." He admits he charges borrowers as much as he can get away with — 45 percent interest in one case — and makes it clear to them that if they fail to comply with the loan agreements, he will take their property. "I am a wolf," he explained.

  • A Seattle Times examination of numerous Kandi loan deals shows that they are set up so he can quickly take borrowers' homes and in some cases flip them for a profit. And he gets away with it. "He's in the business of taking people's property," said Martin Burns, a lawyer who sued Kandi on behalf of the mechanic. "He finds vulnerable people and exploits them."(1)

***

  • Established hard-money lenders, some of whom handle multimillion-dollar loans, say people like Kandi undermine the reputation of their industry. "They are trying to fly under the radar with these tactics that are embarrassing," said John Odegard, president of Seattle Funding Group, the Northwest's largest private lending company. "It isn't at all what our industry represents." Erik Egger, co-president of WADOT Capital, one of at least two dozen hard-money lenders that offer loans in the state, said no reputable lender would use a quitclaim deed to secure a loan. "It circumvents foreclosure," he said. "Those borrowers can be put in a bad situation."(2)

For more, including the stories of a couple of the victims, see Lender seizes desperate borrowers' homes (A Seattle Times examination of numerous Emiel Kandi loan deals shows that they are set up so he can quickly take borrowers' homes and in some cases flip them for a profit. And he gets away with it).

(1) Reportedly, one of Kandi's common practices is to have his victims sign over their title to the property using a quitclaim deed, writing the loan as a purported 'commercial' (as opposed to a 'consumer') loan in attempt to dodge certain consumer protections, and employing 'hair-trigger' default clauses in the loan agreement that allow him to take possession of the house immediately using the deed after a missed payment without going through foreclosure, which includes a 190-day waiting period and several consumer protections, the story states.

In one case, Kandi reportedly had a homeowner sign a promissory note for $170,000, even though he was getting only $17,000, and a quit claim deed to the home. Six days after a purported default (a point that was disputed by the parties), Kandi used the quitclaim deed to record a new owner of the property, a company in his mother's name, and subsequently flipped it for $235,000, walking away with more than $200,000.

After a lawsuit was filed by the homeowner, a court determined Kandi had violated the Washington State Consumer Protection Act by using "unfair and deceptive practices" and ordered Kandi to pay the homeowner $211,538, an amount Kandi has yet to pay, the story states. See Marsh v. Kandi, et al, NO. 9-2-11247-4 (Wn. Sup. Ct. Pierce County, October 20, 2010).

In another lawsuit (see Provost v. Kandi, et al., NO. 09-2-15191-6 SEA, May 30, 2010), Kandi was found to have violated the Washington Criminal Profiteering Act (RCW 9A.82), The Credit Services Act (RCW 19.134) the Distressed Property Act (RCW 61.34), and the Usury Act (RCW 19.52). In addition to $110,000+ in net damages, the victim was awarded her home back free and clear as a result of a successful action to quiet title.

Other homeowners who borrowed from Kandi have had different outcomes. A single mother of two children took out a loan for $5,000, missed a payment, and lost her Graham home and $70,000 in equity. In another case, a Puyallup woman who borrowed from Kandi filed a lawsuit against him, but lost.

For whatever its worth, in addition to other legal theories that are available to unwind or undo these type of home equity ripoffs, the judiciary in the State of Washington has a long history dating back over a century of recognizing the equitable mortgage doctrine, which when applicable, disregards the signing over of a deed in a racket like this and treats the entire deal as a loan secured by a mortgage. See Equitable Mortgage Doctrine In Washington State.

(2) A similar type of home equity ripoff was successfully prosecuted last year in a civil lawsuit alleging violations of the state Consumer Protection Act brought by the Washington State Attorney General's Office. See Washington AG Scores Big Win In Bogus Equity Stripping, Land Trust/Sale Leasebacks & Surplus Ripoffs; Foreclosure Rescue Operator Tagged For $4.2M (for the lawsuit setting forth the allegations, see State of Washington v. Kaiser, et al.).

For more on combatting home equity scams in court, see Foreclosure Rescue Scams, as well as this summary of legal theories available in undoing or unwinding these types of home equity scams (the latter made available online by the Washington State Attorney General's Office).

Cops Pinch Recently Disbarred Attorney; Suspect Accused Of Forging Court Documents While Peddling Foreclosure Defense Services

In Miami, Florida, The Miami Herald reports:
  • A Coral Springs lawyer forged the signatures of two Miami-Dade judges while lying to a client about a bogus lawsuit settlement, authorities said Wednesday. The lawyer, Frank J. Ingrassia, who was working with a disgraced foreclosure rescue company called Outreach Housing, was arrested last week in Broward County and charged with three felonies involving the forgery of court documents.

  • Ingrassia, who was disbarred last month for the misconduct, drew headlines in 2008 after he began preemptively suing banks for providing allegedly fraudulent mortgages. Aventura businessman William Klein hired Ingrassia to sue his bank after reading a Miami Herald article about the attorney's efforts.

  • According to an arrest affidavit released Wednesday, Ingrassia presented Klein with paperwork showing a $1 million settlement signed by Miami-Dade Circuit Judge Maxine Cohen Lando, and a foreclosure dismissal order signed by Miami-Dade Circuit Judge Ronald Dresnick.

  • But neither judge had signed any such legal documents, and they were never filed in court, according to an arrest affidavit by Florida Department of Law Enforcement Agent Michelle Bufalino.

For more, see Lawyer accused of forging foreclosure documents (A Coral Springs lawyer is facing three felony charges relating to the alleged forgery of court documents in a foreclosure case).

DC Now Requires Six-Month Mediation Period Before Proceeding With Foreclosure

In Washington, D.C. (a non-judicial foreclosure sale jurisdiction), The Washington Post reports:
  • [Last] week, the D.C. Council approved a measure requiring lenders to go through six months of mediation with a homeowner before proceeding with a foreclosure. Mediation allows the borrower and the lender's representative to negotiate, with the guidance of an impartial go-between, over possible alternatives to a foreclosure, such as a loan modification. But neither side can be compelled to agree to a mediated solution.

  • Peter Tatian, research associate with the Urban Institute, a social policy think tank, said mediation can be useful in a place such as the District, which does not require courts to review foreclosure cases.

***

  • The new D.C. program was proposed by Ward 4 council member Muriel Bowser and will be managed by the District's Department of Insurance, Securities and Banking. The department offers a printed "Foreclosure Mitigation Kit," which can be downloaded from disb.dc.gov.

For the story, see Mediation now required for District foreclosures.

For related information from the District's Department of Insurance, Securities and Banking, see DISB to Deal with Irregularities in Foreclosures.

Thanks to Donald Marritz of the nonprofit law firm Regional Housing Legal Services for the heads-up on the story.

Monday, November 15, 2010

MERS Primed For Congressional Bailout?

CNBC's NetNet blog reports:
  • When Congress comes back into session next week, it may consider measures intended to bolster the legal status of a controversial bank owned electronic mortgage registration system that contains three out of every five mortgages in the country.

  • The system is known as MERS, the acronym for a private company called Mortgage Electronic Registry Systems. Set up by banks in the 1997, MERS is a system for tracking ownership of home loans as they move from mortgage originator through the financial pipeline to the trusts set up when mortgage securities are sold.

  • The system has come under scrutiny by critics who charge MERS with facilitating slipshod practices. Recently, lawyers have filed lawsuits claiming that banks owe states billions of dollars for mortgage recording fees they avoided by using MERS.

***

  • Now it appears that Congress may attempt to prevent any MERS meltdown from occurring. MERS is owned by all the biggest banks, and they certainly do not want it to be sunk by huge fines. Investors in mortgage-backed securities also do not want to see the value of their bonds sink because of doubts about the ownership of the underlying mortgages.

  • So it looks like the stage may be set for Congress to pass a bill that would limit MERS exposure on the recording fee issue and perhaps retroactively legitimate mortgage transfers conducted through MERS private database.

For more, see Get Ready for the Great MERS Whitewash Bill.

Scrutiny Into Short Sale 'Flopping' Deals Continues

In Phoenix, Arizona, The Arizona Republic reports:
  • As more houses in metro Phoenix go on the market for short sales, some investors have begun buying and reselling them quickly for a profit, using strategies that some in the housing industry say could be unethical or worse. The deals work in a variety of ways, but all involve the same basic strategy. An investor persuades a lender to agree to a short sale, buying a house for less than what the lender is owed. But the investor has another buyer lined up who is willing to pay more.

  • The bank, usually unaware of the other waiting buyer, accepts a lower price from the investor, who then quickly resells the home - for a higher price - to the waiting buyer. The deals, which have become more common as short sales have increased, are now drawing the attention of real-estate and financial regulators. Most lenders object to such deal-making because, had they been aware of the other waiting buyer, they would have taken the higher price. Banks take a loss on short sales, and the deals can make their losses greater.

  • Real-estate professionals disagree over the nature of the deals. Some insist they are a smart way to make a profit in a tough market. Others call them unethical at best and question whether investors violate the law if they conceal information from a lender.

***

  • The Arizona Department of Real Estate, mortgage giants Fannie Mae and Freddie Mac and the FBI are all investigating flopping deals. "Short-sale flopping is one of our real-estate industry's biggest issues right now," said Judy Lowe, Arizona Department of Real Estate commissioner. "We are all looking at the legality and ethics of these deals. And it varies by flop because it appears every deal is done a little differently."

For more, see Phoenix real estate strategy of 'flopping' examined (Manipulated short sales resold for quick profits).

Online Videos Expose Multi-Hatted 'Corporate Vice Presidents' As Clueless Robosigners Cranking Out Foreclosure Documents In Assembly Line Operation

In Central Florida, the St. Petersburg Times reports:
  • Over the past several years, Bryan Bly, Crystal Moore and Dhurata Doko have signed thousands of mortgage assignments as vice presidents of Citi Residential and other major lenders. Yet when asked in a recent deposition what a mortgage assignment is, Bly replied: “I’m really not sure.”

  • Moore, meanwhile, defined a promissory note as something “that says the interest rate and stuff like that on it.’’ And Doko, a native of Albania who speaks shaky English, expressed befuddlement at the whole idea of loaning someone money to buy a house. “We don’t do mortgages in my country,’’ she said.

  • Bly, Moore and Doko work for Nationwide Title Clearing, a Pinellas County company that found itself in an unwelcome spotlight this week when video depositions they gave in a foreclosure case popped up on YouTube and AOL. “We kind of suspected those would be some of the answers we’d get, but to hear it done in sworn testimony was disturbing,’’ says Christopher Forrest, the lawyer who questioned the three on Nov. 4 and uploaded the videos to the Internet. “This issue potentially affects so many, I thought people should be able to see for themselves what’s going on.’’

***

  • Pressed in his deposition to say how many banks he had represented as vice president, Bly demurred. When asked if it would be "in excess of 20,'' he said, "That would be accurate.''

***

  • All three employees described an assembly-line process in which they signed huge stacks of documents at a time and attached “routing’’ forms that showed who should get the paperwork next. Moore said some documents she signed were notarized by a notary public who was in another part of the room and couldn’t see her. State law requires the notary to be in the presence of the person signing.

For more, see On video, alleged 'robo-signers' describe assembly line work.

For links to the videos, see Nationwide Title Clearing Robosigners On Parade.multiple corporate hat-wearing

Homeowner's Payment In Full Not Enough For Citi To Call Off Foreclosure Mill As Action To Take Colorado Home Continues

In Fruita, Colorado, The Denver Post reports:
  • Brent and Wendy Diers of Fruita thought their foreclosure nightmare would end in April when they sent a check to pay off their mortgage. But more than six months later, CitiMortgage hasn't followed through on repeated assurances it would release the lien and give them title.

  • And despite a judge's ruling that they are not in default, the lender's law firm, Castle Meinhold & Stawiarski, continues to pursue a foreclosure sale. "We are not in default and they do not have authorization to sell our house," a frustrated Wendy Diers said.

  • Although the Diers case is extreme, it is just one of several stories of borrowers in Colorado and elsewhere who find themselves trapped in a frustrating state of limbo. [...] The couple don't deny missing payments after Brent suffered a work injury and lost his job in 2008. But unlike most people in that predicament, they had a relative willing to lend them enough to pay off the mortgage, more than $212,000 in their case. "We did everything we were supposed to do," Wendy said. "This is such a boondoggle of a mess."

For more, see Foreclosure paperwork miscues piling up.

Sunday, November 14, 2010

Sloppy Bay State Banks Resort To Foreclosure "Do-Overs" As Title Insurers Refuse To Insure Crappy Titles; Opportunities Open Up For Booted Homeowners

In Boston, Massachusetts, The Boston Globe reports:
  • Zepheniah Taylor lost his Dorchester three-decker to foreclosure two times in 17 months. Now the 59-year-old grandfather has returned home to stay. The scenario, once implausible, is becoming more common in the crazed and fast-changing world of foreclosures.

  • Hundreds — and possibly thousands — of Massachusetts homeowners are facing back-to-back foreclosures as lenders realize there were problems with property titles the first time around. Those lenders, often unable to obtain title insurance, are opting to start from scratch with what is being called a “re-foreclosure.’’

  • The prospect of going through a foreclosure all over again may seem nightmarish for homeowners, but in a growing number of cases the do-overs are creating opportunities for them to repossess their homes. Such was the case with Taylor, who decided to fight the second foreclosure. The tactic paid off: He won the right to repurchase the home at current market value.(1)

***

  • The recent burst in re-foreclosures can be traced to a 2009 Massachusetts Land Court ruling(2) that called into question the validity of a home’s ownership in cases where foreclosure paperwork was incomplete or inaccurate. The finding is now being reviewed by the state Supreme Judicial Court.(3) Its decision could determine whether tens of thousands of homes with foreclosures in their backgrounds have valid titles. [...] Many lenders believed they could still proceed with a foreclosure and later sort out the legal mess by proving they held the mortgage. That premise was rejected by the Land Court.

***

  • [Elizabeth J. Barton, chairwoman of the Massachusetts Bar Association’s Foreclosure Legislation Task Force,] said lenders are primarily targeting properties for which they have been denied title insurance because the original foreclosure did not comply with the court’s ruling. “Title insurance companies hesitate to extend protection to a loan that violates the ruling,’’ said Barton, title counsel at Connecticut Attorneys Title Insurance Co., which has offices throughout New England. “A lot of lenders have had to re-foreclose.’’

  • The problem of cloudy title histories also is providing a boost to an increasing number of homeowners who are going to court to force lenders to prove they have a legal right to seize their properties.

For more, see Legal twist forces foreclosure redos (Creates second chance for former owners).

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

(1) According to the story, after leaving his home, Mr. Taylor returned several months later upon the urging from community activists at City Life/Vida Urbana in Jamaica Plains. He then challenged the foreclosure in Boston Housing Court with the help of attorneys from the non-profit law firm Greater Boston Legal Services, claiming Wells Fargo made additional errors in the second foreclosure and still could not prove it had clear title to the home, the story states.

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

(3) For links to the briefs filed with the Massachusetts Supreme Judicial Court, see Massachusetts High Court Hears Arguments In 'Ibanez' Case That Threatens To Open The Door To Voiding Thousands Of State Foreclosures.

Opportunity To Reclaim Homes For Foreclosed Owners Victimized By "Nail & Mail" Sewer Service?

As the number of ex-homeowners looking to reclaim their unlawfully foreclosed-upon homes increases, a number of methods to accomplish this goal will gain attention. One method is to challenge the propriety of the manner in which the notice of the foreclosure lawsuit was purportedly served upon the homeowner.

In New York, one approach to "sewer service" engaged in by lazy or corrupt process servers involves the use of the "nail and mail" (also known as "post and mail" in some parts of the country) method of serving notice on the homeowner when the server fails to first use "due diligence" in attempting to locate the homeowner. (The "nail & mail" method allows the process server to simply affix the foreclosure notice - the summons and complaint - on the front door of the homeowner's last known residence - ie. "nailing" - and follow up by mailing the notice to said residence).

For those homeowners in New York (and possibly elsewhere) who were purportedly served notice by this method, and now seek to void the foreclosure judgment and the subsequent foreclosure sale (even if the home has since been sold to a new homeowner), the following excerpt from a 2009 Suffolk County, New York lower court ruling may provide some perspective as to what to look for when reviewing the affidavits the process server filed in court swearing that he/she properly served the required notice (bold text is my emphasis, not in the original text):

  • The "due diligence" portion of the plaintiffs affidavit of service indicates that prior to the "nail and mail" service, the process server attempted to deliver the summons and complaint to the defendant(s) on 4/30/08 at 5:30 pm, on 5/17/08 at 10:30 am. The "nailing" was then accomplished on 6/7/08, with the '"mailing" being effectuated several days later. There is no indication that the process server attempted to inquire about or serve the defendant(s) at a place of employment.

    The "nail and mail" method of service pursuant to CPLR §308(4) may be used only where personal service under CPLR §308(1) and (2) cannot be made with "due diligence" (Lemberger v Khan, 18 AD3d 447, 794 NYS2d 416 [2d Dept 2005]).

    The due diligence requirement of CPLR §308(4) must be strictly observed, given the reduced likelihood that a summons served pursuant to that section will be received (McSorley v Spear, 50 AD3d 652, 854 NYS2d 759 [2d Dept 2008]; Estate of Waterman v Jones, 46 AD3d 63, 843 NYS2d 462 [2d Dept 2007]; O'Connell v Post, 27 AD3d 630, 811 NYS2d 441 [2d Dept 2006]; Scott v Knoblock, 204 AD2d 299, 611 NYS2d 265 [2d Dept 1994]; Kaszovitz v Weiszman, 110 AD2d 117, 493 NYS2d 335 [2d Dept 1985]).

    What constitutes due diligence is determined on a case-by-case basis, focusing not on the quantity of the attempts at personal delivery, but on their quality (McSorley v Spear, supra; Estate of Waterman v Jones, supra). Attempting to serve a defendant at his or her residence without showing that there was a genuine inquiry about the defendant's whereabouts and place of employment is fatal to a finding of due diligence as required by CPLR §308(4) (Id.; see also, Sanders v Elie, 29 AD3d 773, 816 NYS2d 509 [2d Dept 2006]).

    Further, absent any evidence that the process server attempted to determine that the address where service was attempted was, in fact, the actual dwelling or usual place of abode of the defendant(s), such as by searching telephone listings or making inquiries of neighbors, the requirement of CPLR §308(4), that service under CPLR §308(1) and (2) first be attempted with "due diligence," is not met (Kurlander v A Big Stam. Corp., 267 AD2d 209, 699 NYS2d 453 [2d Dept 1999]).

    Since the plaintiff has failed to meet the ''due diligence" requirement for "nail and mail" service under CPLR §308(4), jurisdiction over the defendant has not been established(1) and the plaintiffs motion must be denied (Sanders v Elie, supra; Earle v Valente, 302 AD2d 353, 754 NYS2d 364 [2d Dept 2003]; Annis v Long, 298 AD2d 340,751 NYS2d 370 [2d Dept 2002]) Earle v Valente, supra; Annis v Long, supra)
    .

For the ruling, see Countrywide Home Loans, Inc. v Bouvin, 2009 NYSlipOp 32670(U) (NY Sup. Ct. Suffolk County, September 28, 2009).

Go here for links to court rulings involving "nail & mail" method of process-serving and the due diligence required before using this method.

See also:

  • Arizona Real Estate Inv., Inc. v. Schrader, 244 P.3d 565 (Az. Ct. of App. Div. 1, November 9, 2010) for an Arizona ruling reaching the same result involving the "post and mail" method of service, where it found a process server's affidavit of service deficient in that it was silent as to whether he made more than one attempt to serve the homeowner, who still resided in the home. The affidavit also included no facts attesting to any impediments to or evasion of personal service.

  • Bogus v. Bank of New York, No. 2081195 (Ala. Civ. App. April 16, 2010) for an Alabama ruling holding that a lower court had no jurisdiction to boot a homeowner out of his recently foreclosed home where there was no attempt to personally serve the homeowner with process. All the process server did was post the notice on the premises without any attempt to first physically locate the homeowner's whereabouts and provide him with the required notice personally.

(1) Keep in mind that it is "axiomatic that the failure to serve process in an action leaves the court without personal jurisdiction over the defendant, and all subsequent proceedings are thereby rendered null and void." Elm Mgt. Corp. v. Sprung, 33 A.D.3d 753; 823 N.Y.S.2d 187; 2006 N.Y. App. Div. LEXIS 12494 (App. Div. 2nd Dept. 2006). This means that the foreclosure judgment, the foreclosure sale, and any subsequent sale to unwitting third parties would also be null and void. (To those under the mistaken belief that an unwitting purchaser, for value and without notice of the defects in the foreclosure sale is a bona fide purchaser whose claim will defeat the claim of the foreclosed homeowner, I would point out that bona fide purchaser status is only relevant if the judgment is found to be merely voidable, as opposed to absolutely void (wholly void, void ab initio, or just plain void). Stated another way, there is no such thing as bona fide purchaser status in the context of an absolutely void judgment).

For more on void judgments, see:

Rubber-Stamping Judge Threatens Foreclosure Defense Legal Aid Lawyer With Contempt For Bringing Media Member To Observe Rocket Docket

Buried in a recent story in Rolling Stone, in which columnist Matt Taibbi writes about, among other things, his experience witnessing the proceedings in the Jacksonville, Florida foreclosure 'rocket docket' of Judge A.C. Soud, is the following excerpt:
  • Just minutes before, I had watched what happens when defendants don't show up in court: kerchunk! The judge more or less automatically rules for the plaintiffs when the homeowner is a no-show. But when the plaintiff doesn't show, the judge is suddenly all mercy and forgiveness. Soud simply continues [homeowner Shawnetta] Cooper's case, telling [foreclosure mill lawyer Mark] Kessler to get his [*]hit together and come back for another whack at her in a few weeks. Having done this, he dismisses everyone.

  • Stunned, Cooper wanders out of the courtroom looking like a person who has stepped up to the gallows expecting to be hanged, but has instead been handed a fruit basket and a new set of golf clubs. I follow her out of the court, hoping to ask her about her case. But the sight of a journalist getting up to talk to a defendant in his kangaroo court clearly puts a charge into His Honor, and he immediately calls Cooper back into the conference room. Then, to the amazement of everyone present, he issues the following speech:

    "This young man," he says, pointing at me, "is a reporter for Rolling Stone. It is your privilege to talk to him if you want." He pauses. "It is also your privilege to not talk to him if you want."

  • I stare at the judge, open-mouthed. Here's a woman who still has to come back to this guy's court to find out if she can keep her home, and the judge's admonition suggests that she may run the risk of pissing him off if she talks to a reporter.

  • Worse, about an hour later, [Jacksonville Area Legal Aid's] April Charney, the lawyer who accompanied me to court, receives an e-mail from the judge actually threatening her with contempt for bringing a stranger to his court. Noting that "we ask that anyone other than a lawyer remain in the lobby," Judge Soud admonishes Charney that "your unprofessional conduct and apparent authorization that the reporter could pursue a property owner immediately out of Chambers into the hallway for an interview, may very well be sited [sic] for possible contempt in the future."

  • Let's leave aside for a moment that Charney never said a word to me about speaking to Cooper. And let's overlook entirely the fact that the judge can't spell the word cited. The key here isn't this individual judge — it's the notion that these hearings are not and should not be entirely public. Quite clearly, foreclosure is meant to be neither seen nor heard.

For more (column contains a sprinkle of "f-bombs" and other equally indelicate "terms of art"), see Matt Taibbi: Courts Helping Banks Screw Over Homeowners (Retired judges are rushing through complex cases to speed foreclosures in Florida).

Be Prepared To Ask Questions About Legal Fees When Hiring A Foreclosure Defense Attorney

For those homeowners looking to hire a foreclosure defense attorney and are wondering how they get paid, attorney Mark Stopa offers his views on the subject:
  • The New York Times did a story over the weekend about how Florida foreclosure attorneys are charging homeowners facing foreclosure. I’ve read the article and, with respect to my colleagues, I’m disturbed.

For more, see Paying a Foreclosure Defense Lawyer.

For The New York Times story, see Taking On a Second Mortgage to Pay the Foreclosure Lawyer.

Saturday, November 13, 2010

Trying To Unwind Or Undo A Deed Ripoff? Pleading Inconsistent Facts In Lawsuit May Be Necessary

In a recent ruling addressing various issues raised in a lawsuit filed by apparent victims of an alleged deed ripoff, a California appeals court said, among other things, that there was nothing disqualifying, as one Defendant asserted, for the Plaintiffs to plead alternative facts in an attempt to undo both the deed ripoff itself, and the mortgage that was placed on the subject properties subsequent thereto.

This appeal involved a reversal of a trial court's judgment of dismissal after sustaining one defendant's demurrer. The ruling, although unpublished, may nevertheless be instructive for those in the legal profession looking to unwind or undo a wide variety of deed ripoffs, particularly, as in this case, where the attorney representing one of the defendants attempts to trip up his/her adversary on a "pleading technicality."

In addressing multiple questions surrounding an alleged deed ripoff, the ruling may contain some valuable insight to anyone (primarily those in the legal profession or real estate business) seeking a starting point in commencing the arduous process of undoing or unwinding a deed ripoff (ie. whether it be through forged deeds & other land documents, forged or improper use of powers of attorney, sale leaseback foreclosure rescue scams, or the otherwise duping of a property owner into signing over deeds and other land documents), including the voiding of any mortgage or other encumbrance placed on the property simultaneously with, or subsequent to, the deed ripoff.

For the longer version of this post, and the link to the court ruling, see Void vs. Voidable Deeds - Actions to Undo A Deed Scam; OK To Plead Inconsistent Facts - No Need To "Gamble", Says California Appeals Court.

No Foreclosure Rubber-Stamping In This Courtroom

Over the last couple of years, Suffolk County, New York Supreme Court Justice Peter H. Mayer has demonstrated little hesitancy in holding foreclosing lenders' and other creditors feet to the fire when it comes to having all their paperwork in order when trying to take the home away from a delinquent borrower or otherwise attempting to enforce the terms of a loan in a court proceeding.

To see what I mean, here are links to a number of his rulings:
  1. Aurora Loan Servs, LLC v Thomas, 10/14/2010, 2010 NYSlipOp 33023(U);
  2. Bank of Am., N.A.. v Maharaj, 09/21/2010, 29 Misc 3d 1202(A), 2010 NYSlipOp 51665(U);
  3. Bank of NY v Trezza, 12/08/2006, 2006 NYSlipOp 52367(U);
  4. Bank of New York v Kahl, 10/30/2009, 2009 NYSlipOp 32741(U);
  5. Bank of New York v Smalls, 09/28/2009, 2009 NYSlipOp 32672(U);
  6. Butler Capital Corp. v Cannistra, 10/08/2009, 26 Misc 3d 598, 2009 NYSlipOp 29460;
  7. Butler Capital Corp. v Cannistra, 01/06/2010, 2010 NYSlipOp 30035(U);
  8. Citimortgage, Inc. v McGee, 10/26/2010, 2010 NYSlipOp 20444;
  9. Countrywide Home Loans, Inc. v Bouvin, 09/28/2009, 2009 NYSlipOp 32670(U);
  10. Countrywide Home Loans, Inc. v Hovanec, 02/16/2007, 15 Misc 3d 1115(A), 2007 NYSlipOp 50696(U);
  11. Countrywide Home Loans, Inc. v Taylor, 09/20/2007, 17 Misc 3d 595, 2007 NYSlipOp 27383;
  12. Credit Acceptance Corp. v Greve, 03/22/2007, 15 Misc 3d 1115(A), 2007 NYSlipOp 50657(U);
  13. Deutsche Bank Natl. Trust Co. v Lewis, 11/29/2006, 2006 NYSlipOp 52368(U);
  14. Deutsche Bank Trust Ams. v Eisenberg, 06/23/2009, 24 Misc 3d 1205(A); 2009 NYSlipOp 51271(U);
  15. Deutsche Bank Trust Ams. v McCoy, 09/21/2010, 29 Misc 3d 1202(A), 2010 NYSlipOp 51664(U);
  16. Deutsche Bank Trust Co. v Barbakoff, 07/13/2009, 2009 NYSlipOp 31595(U);
  17. GMAC Mtge. LLC v Munoz, 09/09/2010, 28 Misc 3d 1235(A) 2010 NYSlipOp 51598(U);
  18. GMAC Mtge., LLC v Ingoglia, 11/25/2009, 2009 NYSlipOp 32854(U);
  19. HSBC Bank USA v Boucher, 07/17/2009, 2009 NYSlipOp 31617(U);
  20. HSBC Bank USA, N.A. v Fama, 10/29/2009, 2009 NYSlipOp 32671(U);
  21. HSBC Bank USA, N.A. v Olsen, 10/27/2009, 2009 NYSlipOp 32669(U);
  22. IndyMac Bank F.S.B. v Garcia, 06/22/2010, 28 Misc 3d 1202(A), 2010 NYSlipOp 51127(U);
  23. Indymac Fed. Bank FSB v Chappory, 10/22/2009, 2009 NYSlipOp 32511(U);
  24. Indymac Fed. Bank FSB v Hamilton, 10/21/2009, 2009 NYSlipOp 32510(U);
  25. JPMorgan Chase Bank, N.A. v Guevara, 08/17/2009, 2009 NYSlipOp 31892(U);
  26. Novastar Mtge, Inc. v Sachse, 07/14/2009, 2009 NYSlipOp 31616(U);
  27. Saxon Mtge. Servs., Inc. v Montes, 06/23/2009, 2009 NYSlipOp 31418(U);
  28. U.S. Bank National Association v Maffei, 03/19/2007, 2007 NYSlipOp 30487(U);
  29. U.S. Bank Natl. Assn. v Kosak, 09/04/2007, 16 Misc 3d 1133(A), 2007 NYSlipOp 51680(U);
  30. U.S. Bank Natl. Assn. v Merino, 05/01/2007, 16 Misc 3d 209, 2007 NYSlipOp 27170;
  31. Wells Fargo Bank Ntl. Assn. v Melgar, 10/15/2009, 2009 NYSlipOp 32442(U);
  32. Wells Fargo Bank, N.A. v Davilmar, 08/15/2007, 16 Misc 3d 1133(A), 2007 NYSlipOp 51682(U);
  33. Wells Fargo Bank, N.A. v Emmet, 10/21/2009, 2009 NYSlipOp 32509(U).

The Parade Of Booted Lenders In Brooklyn Foreclosures Goes On

The following 2010 table of cases involve lenders who have been denied attempts to move forward on foreclosure actions this year by Kings County Supreme Court Justice Arthur M. Schack for a variety of missteps and assorted screw-ups:
  1. Lasalle Bank N.A. v Smith, 26 Misc 3d 1239, 2010 NYSlipOp 50470 (NY Sup. Ct. Kings County, March 22, 2010);
  2. Wells Fargo Bank, N.A. v Hunte, 27 Misc 3d 1209, 2010 NYSlipOp 50637 (NY Sup. Ct. Kings County, April 14, 2010);
  3. Flushing Sav. Bank, FSB v Chancay, 27 Misc 3d 1212, 2010 NYSlipOp 50687 (NY Sup. Ct. Kings County, April 20, 2010);
  4. JP Morgan Chase Bank, N.A. v George, 27 Misc 3d 1217, 2010 NYSlipOp 50786 (NY Sup. Ct. Kings County, May 4, 2010);
  5. U.S. Bank, N.A. v Emmanuel, 27 Misc 3d 1220, 2010 NYSlipOp 50819 (NY Sup. Ct. Kings County, May 11, 2010);
  6. HSBC Bank USA, N.A. v Yeasmin, 27 Misc 3d 1227, 2010 NYSlipOp 50927, (NY Sup. Ct. Kings County, May 24, 2010);
  7. Argent Mtge. Co., LLC v Maitland, 28 Misc 3d 1224, 2010 NYSlipOp 51482 (NY Sup. Ct. Kings County, August 19, 2010);
  8. Bank of NY v Mulligan, 28 Misc 3d 1226, 2010 NYSlipOp 51509 (NY Sup. Ct. Kings County, August 25, 2010);
  9. LaSalle Bank, N.A. v Bouloute, 28 Misc 3d 1227, 2010 NYSlipOp 51513 (NY Sup. Ct. Kings County, August 26, 2010);
  10. OneWest Bank, F.S.B. v Drayton, 2010 NYSlipOp 20429 (NY Sup. Ct. Kings County, October 21, 2010).

For an earlier post with links to 30+ earlier cases of lenders getting the boot by Justice Schack, see Brooklyn Trial Judge Nixes "Rubber Stamp Method" Of Adjudicating Foreclosures; Lenders, Lawyers Lacking Legal Standing To Bring Actions Get Bounced.

3.5-Pound Yorkie KOs NYC HOA In Eviction Suit; Failed Effort To Boot Pooch To Cost Unit Owners $100K As 'Underdog' Wins Reversal Of Lower Court Ruling

In Middle Village, Queens, the New York Post reports:
  • A Queens condo board spent a whopping $100,000 during a three-year battle to evict a cute, 3.5-pound pooch named Charlie -- and in a stunning upset, the underdog scored a knockout. For those counting, the figure comes to nearly $28,600 per pound of pup.

  • The teacup Yorkshire terrier is owned by Donna Forman, a 10-year resident of the Village View Condos -- a 24-unit development in Middle Village.

***

  • A lower court had ruled against Charlie, but the decision was overturned by the Appellate Division last week, said her lawyer, Michael Mauro, who disclosed the legal cost to the condo owners -- nearly $4,200 each.

  • This wasn't Forman's first dogfight with the board. It unsuccessfully tried to oust her previous pet, Rugby -- a Shih Tzu her son inherited from grandma. Rugby died in 2006.

***

  • Charlie won the appeal on a TKO -- after the case turned on a technicality. The condo's bylaws say unit owners, their pets and guests shall not create a nuisance, Mauro said. By including the word "pets," he said, the rules implied that dogs that are not a nuisance are OK. The rules have since been changed to eliminate the word "pets" -- but they won't apply retroactively to Charlie, Mauro said.

For more, see Court says 'stay!' (Condo meanies waste 100G in nixed dog evict).

For the appellate court ruling, see Board of Mgrs. of Vil. View Condominium v. "Charlie the Yorkie", 2010 NY Slip Op 07877 (NY Sup. Ct., App. Div. 2nd Dept., November 3, 2010).

Friday, November 12, 2010

Bond Insurer Left Holding The Bag On $312M+ In Crappy Home Loan-Backed Mortgage Securities Sues Deutsche Affiliates To Force Buy-Back

Bloomberg News reports:
  • A unit of Assured Guaranty Ltd. sued affiliates of Deutsche Bank AG over $312 million of mortgage-backed securities that the bond insurer guaranteed and says were “plagued by rampant fraud and misrepresentations.”

  • Assured Guaranty Corp. is asking a judge to force the bank to repurchase the loans, on which the insurer has already paid almost $60 million in loss claims and sees the potential for tens of millions of dollars more, according to a complaint filed today in New York state Supreme Court against DB Structured Products Inc. and ACE Securities Corp. The bond insurer, backed by billionaire Wilbur Ross, is also seeking reimbursement for the claims paid and for future losses.

For more, see Assured Guaranty Sues Deutsche Bank Over Mortgages.

For the lawsuit, see Assured Guaranty Corp. v. DB Structured Products Inc., et ano. (Index #651824/2010, NY Supreme Court - New York County (Manhattan); go here for related court docket).

Thanks to Mike Dillon at GetDShirtz.com for the heads-up on the story.

'Insurer Is Stiffing Us On Our 'Soured Loans' Claims Alleging Lack Of Proper Paperwork & Lying Borrowers,' Bellyaches BofA In Lawsuit

In Charlotte, North Carolina, The Charlotte Observer reports:
  • Bank of America Corp. is suing its mortgage insurance company for denying its claims. It's the latest twist in finger-pointing over the mortgage crisis. The bank says that Old Republic Insurance Co., which Bank of America paid to insure it against losses on potential borrower defaults, is "manufacturing excuses" to deny the bank's claims.

  • In a lawsuit filed last week in district court in Charlotte, it calls Old Republic's conduct "aggravating and outrageous," and says Old Republic is making "unreasonable interpretations" of the requirements in its policies.

  • Old Republic says it is denying claims where borrowers misrepresented themselves or where the bank is missing paperwork, according to the lawsuit. The bank says that borrowers didn't misrepresent themselves, that Old Republic had ample access to Bank of America's loan books, and that any missing paperwork has "nothing to do" with the claims.

For more, see Bank of America sues its insurance provider over foreclosure claims.

Out-Of-Control, Rubber-Stamping Jacksonville Judge Featured In Recent Column

In a recent story in Rolling Stone, columnist Matt Taibbi writes about the foreclosure rocket docket in Jacksonville, Florida, and describes his experience observing one hour of court proceedings in one such docket presided over by Judge A.C. Soud.

Mr. Taibbi starts by observing that the rocket docket wasn't created to investigate any of the alleged fraudulent conduct underlying the making and subsequent securitization of the home mortgages that's led to the current mess, but that, according to him:
  • It exists to launder the crime and bury the evidence by speeding thousands of fraudulent and predatory loans to the ends of their life cycles, so that the houses attached to them can be sold again with clean paperwork.

He addresses the "public" nature of such proceedings in the following excerpt:

  • The hearings, [local foreclosure defense attorneys] said, aren't exactly public. "The judges might give you a hard time about watching," one lawyer warned. "They're not exactly anxious for people to know about this stuff." Inwardly, I laughed at this — it sounded like typical activist paranoia. The notion that a judge would try to prevent any citizen, much less a member of the media, from watching an open civil hearing sounded ridiculous. [*$%&!]-up as everyone knows the state of Florida is, it couldn't be that bad. It isn't Indonesia. Right?

    Well, not quite. When I went to sit in on Judge Soud's courtroom in downtown Jacksonville, I was treated to an intimate, and at times breathtaking, education in the horror of the foreclosure crisis, which is rapidly emerging as the even scarier sequel to the financial meltdown of 2008: Invasion of the Home Snatchers II.

Judge Soud, described as a clueless, out-of-control, robo-rubber-stamper who reportedly "told a local newspaper that his goal is to resolve 25 cases per hour" (Taibbi observes that "His Honor could well be throwing one ass on the street every 2.4 minutes") does not come out unscathed in this column.

For the column (sprinkled with a few "f-bombs" and other equally indelicate "terms of art"), see Matt Taibbi: Courts Helping Banks Screw Over Homeowners (Retired judges are rushing through complex cases to speed foreclosures in Florida).

Another Process Server (& Rubber-Stamping Judge's) Screw-Up, Another Void Judgment Vacated On Appeal; Foreclosed Homeowner Stalls Getting The Boot

A recent ruling by an Arizona appeals court again illustrates how a sloppy (or possibly corrupt) process server can submarine a legal action, even after a court judgment has already been granted.

The case involved an attempt by a purchaser at a foreclosure sale to boot an ex-homeowner out of a home that was auctioned off at the public sale. In serving the ex-homeowner with notice of a forcible detainer action to oust him from the property, the process server improperly attempted service of process using the "post & mail" method of service (also known by some as "nail & mail").

Despite this screw-up, the lower court judge compounded the problem by approving the use of the improper method, which required this appeal, resulting in the proper vacating of the lower court judgment.(1)

Although this ruling involved an ex-homeowner's attempt to dodge the boot after a foreclosure sale took place (as opposed to an attempt to vacate the foreclosure sale itself), it should nevertheless serve as a reminder to all those now-foreclosed, ex-homeowners in judicial foreclosure states wanting to reclaim possession of their homes to review (or have an attorney review) the affidavits of service filed by process servers in their cases to see if they committed a screw-up (or engaged in corruption) that is fatal to the foreclosure judgment, and warranting a vacating (voiding, setting aside) thereof.(2)

For the ruling, see Arizona Real Estate Inv., Inc. v. Schrader, No. 1 CA-CV 10-0038 (Az. Ct. of App. Div. 1, November 9, 2010).

(1) According to the appeals court ruling, the lower court has the authority under Arizona statute to authorize an alternative method of service when attempting service by the statutorily-mandated method proves "impracticable." Regarding said "impracticability" in this case, the appeals court ruled (at page 6, ¶¶ 11-12) (bold text is my emphasis, not in the original text; link to cited case may require free registration with FindLaw.com):
  • The record here does not establish impracticability. The process server’s affidavit is silent as to whether he made more than one attempt to serve Schrader, who still resided in the home. The affidavit includes no facts attesting to any impediments to or evasion of personal service. See Barlage v. Valentine, 210 Ariz. 270, 273, ¶¶ 6-8, 110 P.3d 371, 374 (App. 2005) (affidavit of due diligence was inadequate where the affidavit merely asserted that a due diligence effort had been made without setting forth any facts showing such an effort). The process server did not testify.

  • Nothing in this record establishes the "impracticability" that might justify alternative service under Rule 4.1(m). The superior court commented on "the need to make speedy and quick determinations of forcible detainer actions." Although this is a legitimate concern, it cannot be the sole basis for establishing impracticability.

-------------------------------

In the above-referenced Barlage v. Valentine case, the Arizona appeals court noted the following universally-accepted truth regarding the proper service of process in a legal proceeding (bold text is my emphasis, not in the original text):

  • Proper, effective service on a defendant is a prerequisite to a court's exercising personal jurisdiction over the defendant. Koven v. Saberdyne Sys., Inc., 128 Ariz. 318, 321, 625 P.2d 907, 910 (App.1980) (“Proper service of process is essential for the court to have jurisdiction over the defendant.”);  Kadota v. Hosogai, 125 Ariz. 131, 134, 608 P.2d 68, 71 (App.1980) (“[T]he law is clear that a judgment is void if the trial court did not have jurisdiction because of a lack of proper service.”).

(2) For three New York cases that illustrate how the improper use of the 'nail & mail' method of process serving can submarine a foreclosure action, see:

  • Citigroup Global Markets Realty Corp. v. Bowling, 25 Misc 3d 1244; 2009 NY Slip OP 52567U (NY Sup. Ct. Kings County, December 18, 2009) (motion to proceed with foreclosure denied where process server failed to exercise due diligence in attempts to track down homeowner),
  • HSBC Bank USA, N.A. v Fleurimond, 2008 NY Slip Op 52320(U) (NY Sup Ct, Kings County, November 18, 2008) (foreclosure sale set aside),
  • Countrywide Home Loans, Inc. v Bouvin, 09/28/2009, 2009 NYSlipOp 32670(U) (NY Sup. Ct. Suffolk County, September 28, 2009): The court made this point regarding the exercise of due diligence by the process server when using the "nail & mail" method:

    The "due diligence" portion of the plaintiffs affidavit of service indicates that prior to the "nail and mail" service, the process server attempted to deliver the summons and complaint to the defendant(s) on 4/30/08 at 5:30 pm, on 5/17/08 at 10:30 am. The "nailing" was then accomplished on 6/7/08, with the '"mailing" being effectuated several days later. There is no indication that the process server attempted to inquire about or serve the defendant(s) at a place of employment. The "nail and mail" method of service pursuant to CPLR §308(4) may be used only where personal service under CPLR §308(1) and (2) cannot be made with "due diligence" (Lemberger v Khan, 18 AD3d 447, 794 NYS2d 416 [2d Dept 2005]). The due diligence requirement of CPLR §308(4) must be strictly observed, given the reduced likelihood that a summons served pursuant to that section will be received (McSorley v Spear, 50 AD3d 6152,854NYS2d 759 [2d Dept 2008]; Estate of Waterman v Jones, 46 AD3d 63, 843 NYS2d 462 [2d Dept 2007]; O'Connell v Post, 27 AD3d 630, 811 NYS2d 441 [2d Dept 2006]; Scott v Knoblock, 204 AD2d 299, 611 NYS2d 265 [2d Dept 1994]; Kaszovitz v Weiszman, 110 AD2d 117, 493 NYS2d 335 [2d Dept 1985]).

    What constitutes due diligence is determined on a case-by-case basis, focusing not on the quantity of the attempts at personal delivery, but on their quality (McSorley v Spear, supra; Estate of Waterman v Jones, supra). Attempting to serve a defendant at his or her residence without showing that there was a genuine inquiry about the defendant's whereabouts and place of employment is fatal to a finding of due diligence as required by CPLR §308(4) (Id.; see also, Sanders v Elie, 29 AD3d 773, 816 NYS2d 509 [2d Dept 2006]). Further, absent any evidence that the process server attempted to determine that the address where service was attempted was, in fact, the actual dwelling or usual place of abode of the defendant(s), such as by searching telephone listings or making inquiries of neighbors, the requirement of CPLR §308(4), that service under CPLR §308(1) and (2) first be attempted with "due diligence," is not met (Kurlander v A Big Stam. Corp., 267 AD2d 209, 699 NYS2d 453 [2d Dept 1999]).

    Since the plaintiff has failed to meet the ''due diligence" requirement for "nail and mail" service under CPLR §308(4), jurisdiction over the defendant has not been established and the plaintiffs motion must be denied (Sanders v Elie, supra; Earle v Valente, 302 AD2d 353, 754 NYS2d 364 [2d Dept 2003]; Annis v Long, 298 AD2d 340,751 NYS2d 370 [2d Dept 2002]) Earle v Valente, supra; Annis v Long, supra).

For other examples of process server screw-ups involving a failure to exercise due diligence to locate defendants in foreclosure actions or ascertain the identity of all occupants of premises under foreclosure, see: