Thursday, November 25, 2010

Judge Slams 'Adverse Possession' Defense; Trial Gets 'Go-Ahead' For Attorney Accused Of Hijacking Vacant Home In F'closure, Pocketing Rent From Tenant

In Allegan, Michigan, The Allegan County News reports:
  • Allegan attorney John Watts has been ordered to stand trial on all the charges against him. Watts, 65, was in Allegan County District Court Friday, Nov. 19, for a preliminary hearing before visiting Judge Richard A. Santoni.

  • Watts, of Cheshire Township, was arrested in May and charged with five felonies in three cases including two counts of false pretenses and one count each of embezzlement between $1,000 and $20,000, unlawfully driving away a motor vehicle and passing false title. He has pleaded not guilty to all charges.

  • At the hearing Friday, Santoni heard testimony on one of the false pretense charges. Police and prosecutors allege that in that case, Watts rented a home in Martin that didn’t belong to him and tried to collect rental income from it.

***

  • [Watts' defense attorney James] Shek [] made an argument regarding the state’s adverse possession laws that in this state it was technically legal to occupy unoccupied property and take ownership if the rightful owner didn’t attempt to eject you over a certain term of years. Shek said this was a “conundrum” of Michigan law.

  • Santoni, a Kalamazoo County district judge brought in because both of Allegan County’s district judges recused themselves, didn’t agree with any of those arguments. “Adverse possession is not a defense to a criminal act and I find that legal argument without merit,” he said.

For more, see Watts case moves to circuit court.

'Ike' Victim Sues Loan Servicer Claiming Improper Withholding Of Insurance Proceeds Makes It Difficult To Complete Repairs To Hurricane-Damaged Home

In Galveston, Texas, The Southeast Texas Record reports:
  • Shirley Peebles seeks to recover from Green Tree Servicing insurance funds she claims are necessary for repairs to her property in Bacliff. Peebles and Green Tree Servicing were issued a check in the amount of $9,759 after Hurricane Ike inflicted damage to the complainant's property, according to a lawsuit filed Nov. 16 in Galveston County District Court.

  • Recent court documents state that the defendant maintained a security interest in the aforementioned property by way of a loan. Green Tree Servicing "has continued to hold a portion of the proceeds and has made it extremely difficult for (Peebles) to make repairs," the original petition says.

For more, see Bacliff woman wants insurance funds released so home can be repaired.

NH Attorney Peddling Loan Modifications Abandons Clients After Regulator Issues Cease & Desist Order

In Concord, New Hampshire, the Concord Monitor reports:
  • Closed firm fulfilled duties, he says. The website is still up, but the phone line has been cut off. Dan Dargon's law firm no longer exists. Not all of Dargon's clients got the memo, however. A month after the Dargon Law Firm shut its doors amid an investigation by the state into its loan modification practices, clients who say they were never informed of the firm's closure don't know what's happened to their cases.

  • "I never got a phone call, never got an e-mail - I didn't get mail," said Glen Whelden, 43, of Pelham, who paid Dargon $2,500 last year to get help lowering his monthly mortgage payments.

***

  • Dargon said [] clients have no reason to be angry with him. He said he's fulfilled the terms of their contracts, which specified that he would submit their loan modification requests to lenders but didn't guarantee specific results. "If they want to call somebody, call (Banking Commissioner) Peter Hildreth, or whoever that deputy guy is," Dargon said. "Ask them what they're thinking and how they're going to take care of them now. "Not to be rude about it," he added, "but this was not our fault."

  • Dargon said Gorham attorney Don Lader agreed to take on the 300 client files that were still active when Dargon closed the doors to his Concord office in September, months after the state Banking Department issued him a cease-and-desist order to stop modifying loans without a state license.

For more, see Irate clients want word from lawyer.

Nevada Regulator Clips Loan Modification Outfits Out Of $110K In Fines, Probe Costs In Unrelated Cease & Desist Orders

In Carson City, Nevada, the Las Vegas Sun reports:
  • A Las Vegas loan modification and foreclosure consulting business has been fined $50,000 by the state for mishandling the money of homeowners. The state Division of Mortgage Lending also issued a closure order against U.S. Loan Modification Services, owned by Jeff and Gail Strum, which was licensed in January.

  • The order, signed by Commissioner Joseph L. Waltuch, said the business didn't keep the money of its clients in a separate account as required by regulations and it converted the money from homeowners to its own use. The complaint said the Strums “withdrew moneys collected from homeowners from its bank account without being able to explain what the money was used for.”

  • It ordered the business to return the money collected from homeowners and for the Strums to hire a certified public accountant to reconcile the books. The Las Vegas business, after an appeal hearing, was also ordered to pay the division more than $15,000 to cover the cost of its investigation, lawyer time and administrative work.

  • The division also announced it has ordered a closure order and imposed a $15,000 fine on Pronto Solutions and Angela Gavilan. It directed the company to cancel all of its contracts with homeowners and refund them their money. Waltuch said the company has been operating without a state license. It did not request an appeal hearing.

  • The division imposed a $30,000 fine and ordered GSH 360 FM and Marsha Tolentino of Las Vegas to stop acting as a foreclosure and loan modification consultant. The order says GSH 360 and Tolentino never applied for a state license and is not a tax-exempt, nonprofit corporation as advertised. GSH 360 FM can ask for an appeal hearing.

  • It also ordered Mortgage Planners Advantage and Roy Donald to stop conducting its business as a foreclosure and loan modification consulting business without being licensed by the state. It also ordered the company to refund all the money it collected from homeowners. No appeal hearing was requested.

Source: Las Vegas loan modification, foreclosure firm fined $50,000.

For the Cease & Desist Orders and imposed fines, see:

Wednesday, November 24, 2010

Recent Bankruptcy Court Ruling Provides Evidence Supporting View That Many Mortgage Securitizations Are Invalid

Georgetown University Associate Professor of Law (and witness testifying in November 6, 2010 Congressional hearings on "Problems In Mortgage Servicing From Modification To Foreclosure") Adam J. Levitin writes in Credit Slips:
  • Last week the US Bankruptcy Court for the District of New Jersey issued an opinion in a case captioned Kemp v. Countrywide Home Loans, Inc. This case looks like the first piece of evidence in what might turn out to be the Securitization Fail or, in homage to Michael Lewis, The Big Fail.

  • Briefly, Countrywide as servicer filed a proof of claim for a mortgage in a bankruptcy case on behalf of Bank of New York as trustee for a securitization trust. The bankruptcy court denied the claim because there was no evidence that Bank of New York ever owned the mortgage. The mortgage note had never been negotiated or delivered to Bank of New York, despite the requirement to do so in the Pooling and Servicing Agreement (PSA) that governed the securitization of the loan. That meant that Bank of New York as trustee had no interest in the loan, so the proof of claim filed on its behalf was disallowed.

  • This opinion could turn out to be incredibly important. It provides a critical evidence for the argument that many securitization transactions simply failed to be effective because non-compliance with the terms of the transaction: failure to properly transfer the mortgage meant that the mortgages were never actually securitized. The rest of this post explains the chain of title issue in mortgage securitizations and how Kemp fits into the issue.

For more, see The Big Fail.

Go here for Professor Levitin's written testimony during the recent Congressional hearings.

Go here for the transcript of lender attorney's failed attempt at giving the judge a satisfactory explanation for the bank's screw-up in the Kemp case.

Central Florida Sale Leaseback Peddler Linked To 50 Ripoff Deals Gets 10 Years On Racketeering Charge; Targeted Cash-Strapped, High-Equity Homeowners

In Orlando, Florida, the Orlando Sentinel reports:
  • One after another, the victims explained the scheme in court: They needed loans. John Pavao reached out to them and offered help. They signed some documents. And the next thing they knew, they were losing their homes.

  • Those victims, several of them sick and elderly, faced Pavao at his sentencing [earlier this month], like ghosts from his past. The Windermere man once made the cover of Opportunist magazine, proclaiming, "All you need is a passion to succeed."

  • But Pavao actually needed more than passion, prosecutors said. They said he needed a technique that exploited people in financial duress and at risk of foreclosure and robbed them of their homes in many cases and, especially, their equity in those properties. Officials familiar with the case said the so-called "equity-stripping" scheme is the kind of behavior that fueled the real estate crisis.

  • [... T]hat behavior caught up with Pavao when Circuit Judge Alan Apte sentenced the 44-year-old to 10 years in prison after he pleaded guilty to a single count of felony racketeering in late September. Financial-crimes investigators and the prosecution said Pavao's actions resulted in the loss of millions of dollars worth of property and equity across Central Florida.

***

  • Seniors and others who had lived in their homes for many years and had significant equity in those properties were especially vulnerable and prime targets. [...] Michelle Dygon, a financial-crimes investigator with the state, told the judge they identified 50 cases linked to the Pavaos, but focused on nine properties worth about $2 million. "They were conned. They were lied to. They lost their homes," Dygon said. "They were not aware they were deeding their property over. They had no intention of selling their homes or deeding their homes."

For more, see John Pavao: Windermere man sentenced to 10 years in property-fraud case.

Colorado Judge Slams Brakes On Foreclosure As Homeowner Claims Bank "Showed Up With A Forged Document" To Rule 120 Hearing In Attempt To Take Home

In Crestone, Colorado, Boulder Weekly reports on the successful effort of homeowner Wooddora Eisenhauer, 70, to get a judge at a Rule 120 hearing to slam the brakes on the bank some believe is the home lending industry's 'stagecoach to hell' - Wells Fargo, and an ostensibly illegal foreclosure attempt:
  • The third and current foreclosure involves her primary residence, a 650-square-foot, one-bedroom, one-bath home that Wells Fargo is attempting to foreclose on after buying the loan from Washington Mutual, Eisenhauer says. At her March 1 Rule 120 hearing, the administrative procedure held to determine whether a house can be foreclosed on and sold, she claims that Wells Fargo “showed up with a forged document.”

  • She and her attorney, Erich Schwiesow of the law firm Lester, Sigmond, Rooney and Schwiesow in Alamosa, argue that the first page of the promissory note clearly did not match the rest of the document, in part because it didn’t have the same fax stamp. In addition, they claim, the initials and signature on the document do not match Eisenhauer’s handwriting.

  • It was clear it was manufactured,” Schwiesow says, adding that a local judge agreed and denied authorizing the sale of the property. Wells Fargo initially filed a motion asking the judge to reconsider the decision, but dropped that motion [last] week.

For the story, see Twice bitten? Second Crestone resident claims fraud.

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

Tuesday, November 23, 2010

Countrywide Comes Clean, Admits Screw-Up In Failure To Convey Promissory Notes Into Mtg Securitization Trust; Says It Was Customary To Keep Possession

Naked Capitalism reports:
  • Testimony in a New Jersey bankruptcy court case provides proof of the scenario we’ve depicted on this blog since September, namely, that subprime originators, starting sometime in the 2004-2005 timeframe, if not earlier, stopped conveying note (the borrower IOU) to mortgage securitization trust as stipulated in the pooling and servicing agreement.

***

  • As we indicated back in September, it appeared that Countrywide, and likely many other subprime orignators quit conveying the notes to the securitization trusts sometime in the 2004-2005 time frame. Yet bizarrely, they did not change the pooling and servicing agreements to reflect what appears to be a change in industry practice. Our evidence of this change was strictly anecdotal; this bankruptcy court filing, posted at StopForeclosureFraud provides the first bit of concrete proof. The key section:

    As to the location of the note, Ms. DeMartini testified that to her knowledge, the original note never left the possession of Countrywide, and that the original note appears to have been transferred to Countrywide’s foreclosure unit, as evidenced by internal FedEx tracking numbers. She also confirmed that the new allonge had not been attached or otherwise affixed to the note. She testified further that it was customary for Countrywide to maintain possession of the original note and related loan documents.

For more, see Countrywide Admits to Not Conveying Notes to Mortgage Securitization Trusts.

For the court's ruling, see In re Kemp, Case No. 08-18700-JHW (Bankr. D. N.J. November 16, 2010) (for publication).

See also:

  • Seeking Alpha: Countrywide Never Sent Mortgages to Trust,
  • The New York Times: Trying to Put a Price on Bank Errors:

    In an opinion published last Tuesday, the chief judge, Judith H. Wizmur, cited testimony from an executive at Bank of America, which bought Countrywide. The lender’s practice, the executive said, was “to maintain possession of the original note and related loan documents.” Countrywide did this even though the pooling and servicing agreement governing the mortgage pool that supposedly held the note required that it be delivered to the trustee, the court document shows.

    If Countrywide’s practice was to hold onto the note, then investors in this pool and others may question whether the security was constructed properly and legally and may be able to require Bank of America to buy back their securities.

    Larry Platt, a partner at the law firm K & L Gates in Washington, spoke on behalf of Bank of America on Friday. He said the New Jersey decision did not constitute a basis for broad mortgage repurchase requests. “We believe the loan was sold to the trust even if there wasn’t an actual delivery of the note,” he said. “The risk of repurchase is going to depend on the unenforceability of the loan and we think the loan is enforceable. We think this is an aberration; Countrywide’s practice was to deliver the notes.”

NY Trial Judge: Buffalo-Based Foreclosure Mill Law Firm's Actions "A Dereliction Of Professional Responsibility!"

In Suffolk County, New York, State Supreme Court Justice Melvyn Tanenbaum has recently been giving the notorious, Buffalo-based foreclosure mill law Steven J. Baum, P.C. a real hammering.

Over the last month and a half or so, Justice Tanenbaum has denied a request to proceed with foreclosure sales in thirty (30) of Baum's cases. A sample of his 'standard' execoriation of Baum contained in his orders follows:
  • This Court has repeatedly directed plaintiff's counsel to submit proposed orders of reference and judgments of foreclosure in proper form and counsel has continuously failed to do so. The court provided counsel's office directly with copies of orders and judgments which would satisfy the requirements and counsel has responded by submitting correspondence addressed to the Court from non-attorney employees with improper and inadequate submissions. The court deems plaintiff's counsel's actions to be an intentional failure to comply with the directions of the court and a dereliction of professional responsibility.

Go here for the short form copies of each of Justice Tanenbaum's 30 orders excoriating foreclosure mill Steven J. Baum, P.C. (made available online courtesy of StopForeclosureFraud.com).

Loan Servicer Pockets Three Months Of Loan Modification Payments, Then Forecloses Home Out From Under Unwitting Borrower Anyway

In Ceres, California, KXTV-TV Channel 10 reports:
  • After struggling for more than a year to get their house payments reduced, Carol Ann Rangel received formal notification from Citimortgage in May that her family had been approved for a loan modification.

***

  • News10 first featured the Rangels in November, 2008, as they began the long process of seeking a loan modification. The letter from Citimortgage was dated May 20, 2010:

    Congratulations! You are approved to enter into a trial plan under the Home Affordable Modification Plan! This is the first step toward lowering your mortgage payments. If you make your new payments timely . . . we will not conduct a foreclosure sale.

  • Rangel provided News10 with banking statements showing electronic payments to Citimortgage in the amount of $723.15 on June 1, June 29 and July 29.

  • Rangel called Citimortgage on Aug. 30 because she had not received a coupon for the September payment. That's when she learned her home had been sold at auction 11 days earlier. "I never received a letter, never received a phone call, never received any notice that my home was being auctioned," Rangel said.

For more, see Ceres homeowner's loan modified; house auctioned anyway.

(1) This homeowners and others who are similarly situated could have a claim against the loan servicer to enforce its promise to hold off on foreclosure, even if not contractually obligated to do so. For more, see Court: "Promissory Estoppel" Could Make Lender’s Verbal Agreement To Halt F'closure Sale Enforceable, Even Absent Consideration For Promise To Stall.

Monday, November 22, 2010

Aggressive Lobbying Campaign Targeting Congress For Passage Of "Great MERS Whitewash Bill" In Full Swing

The Washington Post reports:
  • The financial services industry has launched an aggressive campaign on Capitol Hill to bolster the legality of the way companies have turned mortgages into securities and traded them across the globe in recent years.

  • The companies have opened wide their wallets for lobbying and are flying top executives to Washington for one-on-one meetings with lawmakers. They are holding briefings for key staffers, including an event last week that drew more than 60 aides. And they are blanketing Congress with white papers, memos and other documents that lay out their arguments.

  • The focal point of their efforts is Mortgage Electronic Registration Systems, or MERS, the controversial, privately run electronic database that is used by practically every lending institution and investment company to track the transfer of the ownership of mortgages as they are packaged into securities and traded at lightning speed around the globe.

***

  • The industry is seeking legislation that would effectively affirm MERS's legality and block any bill that would call into question what MERS does. MERS has spent more than $1 million in lobbying since fall 2008, when lower courts around the country began to rule against it. But MERS had kept its name under the radar until the recent uproar over foreclosures revealed broad problems in mortgage paperwork.

  • If successful on Capitol Hill, the industry could in one quick swoop make all lawsuits related to MERS across the country moot and remove one of the key uncertainties dangling over the mortgage industry. On the flip side, lawmakers could create a new federal registry, effectively killing MERS's business and forcing the industry to submit to greater oversight.

***

  • Some of the [consumer] advocates are referring to the idea as the "great MERS whitewash bill."

For more, see Aggressive lobbying defends mortgage-trading system.

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

NJ Federal Judge Upholds Ruling Awarding $690K To Homeowner Screwed Out Of $116K In Sale Leaseback Scam; OK's Add'l $34K For Victims' Attorney Fees

A January, 2010 ruling by a U.S. Bankruptcy Court judge (O'Brien v. Cleveland (In re O'Brien), 423 B.R. 477 (Bankr. D.N.J. 2010)) slamming a peddler of a sale leaseback, foreclosure rescue scam who stripped the home equity from a financially strapped homeowner was affirmed in all aspects earlier this month by U.S. District Judge Garrett E. Brown of New Jersey.(1)

According to a January 28, 2010 New Jersey Law Journal story reporting on the bankruptcy court ruling (see Real Estate Lawyer Liable for Damages for Role in Client's Mortgage Scam), the total damages awarded to the homeowners was $690,210,(2) even though they were only screwed out of $116,791.

In a subsequent U.S. Bankruptcy Court hearing, U.S. Bankruptcy Judge Raymond Lyons then approved an additional award for the victim-homeowners' attorney fees in the net amount of $33,932.50 for 81.5 hours of work and $627.50 in costs.(3)

For those involved in unwinding these types of scams, especially in cases where a state's equitable mortgage doctrine is successfully invoked (ie. which treats the substance of the arrangement as a secured loan, and disregards the 'masquerading' form of a sale leaseback - ie. "substance over form"), in order to then apply Federal and state consumer lending laws to the scam, the ruling makes for some good reading.

For Judge Brown's ruling, see Cleveland v. O'Brien, Civ. No. 10-3169 (GEB), (D. N.J., November 12, 2010).

(1) Specifically, the Bankruptcy Court found in favor of the screwed-over homeowners:
  • on the First Count of the complaint, for fraud, for damages in the amount of $116,791.49;
  • on the Second Count of the complaint, for violations of the New Jersey Consumer Fraud Act ("CFA"), for treble damages in the amount of $350,374.47;
  • as additional equitable relief for violation of CFA voiding the deed from Plaintiffs to Cleveland dated July 31, 2007;
  • on the Fourth and Sixth Count of the complaint, for violation of the Federal Truth In Lending Act ("TILA"), as amended by the Federal Home Ownership and Equity Protection Act ("HOEPA"), damages equal to the sum of all finance charges and fees in the amount of $240,875.32 plus statutory damages of $4,000;
  • for violation of TILA rescinding the transaction by voiding the deed from Plaintiffs to Defendant Frederick Cleveland dated July 31, 2007;
  • on the Fifth Count of the complaint, for violation of the New Jersey Home Ownership Security Act of 2002 ("HOSA"), N.J. STAT. ANN. § 46:10B-22, et seq., for statutory damages equal to the finance charges plus 10% of the amount financed being a total of $293,836.17;
  • on the Seventh Count of the complaint, breach of contract, for damages in the amount of $46,000 plus pre-judgment interest to be calculated at the federal rate from the date of filing of the complaint.

In an attempt to seek a reversal of the Bankruptcy Court ruling, the sale leaseback peddler presented the following issues on appeal:

  • 1. Whether the Bankruptcy Court erred in permitting Edward Hanratty, Esq. to testify as an expert witness regarding `mortgage foreclosure rescue scams' . . . .

    2. Whether the Court erred in considering the expert testimony and a purported expert report by Edward Hanratty, Esq. . . . .

    3. Whether the Court erred in finding in favor of Plaintiffs regarding their claim for fraud, and entering judgment: (a) avoiding Plaintiffs' deed to Cleveland and (b) awarding damages in the amount of $116,791.49.

    4. Whether the Court erred in finding in favor of Plaintiffs regarding their [CFA] claim, and entering judgment awarding treble damages to Plaintiffs in the amount of $359,374.47.

    5. Whether the Court erred in finding that the transaction between Cleveland and Plaintiffs constituted an equitable mortgage.

    6. Whether the Court erred in finding that the Plaintiffs did not act with unclean hands, and finding that Cleveland could not rely on such equitable defense with respect to the Court's findings.

    7. Whether the Court erred in finding, with respect to [TILA]: (a) that Cleveland is a `creditor' under TILA; (b) that the transaction between Plaintiffs and Cleveland constituted a `high interest loan' under TILA; (c) that Cleveland was required to make standard disclosures under TILA; (d) that Cleveland was required to make enhanced disclosures under [HOEPA], as incorporated by TILA; and (e) that Cleveland failed to comply with TILA and HOEPA's prohibition of certain terms.

    8. Whether the Court erred in finding in favor of Plaintiffs regarding their claim(s) under TILA and HOEPA, awarding damages in the amount of $242,875.32, along with attorneys' fees and costs, and rescinding the transaction between Plaintiffs and Cleveland.

    9. Whether the Court erred in finding in favor of Plaintiffs regarding their claim under [HOSA], awarding damages in the amount of $293,836.17.

    10. Whether the Court erred in finding in favor of Plaintiffs on their breach of contact claim, awarding damages in the amount of $46,000 plus prejudgment interest.

    11. Whether the Court erred in granting Plaintiffs an award of attorneys' fees in the amount of $33,932.50, plus costs in the amount of $627.50 for violations of [CFA, TILA, and HOSA].

(2) The following excerpt in Real Estate Lawyer Liable for Damages for Role in Client's Mortgage Scam explains the breakdown of the $690,210 damages award (alterations added, bold text is my emphasis, not in the original text):

  • The O'Briens' [actual] damages were the difference between the new mortgage of $646,000 and the amount paid to benefit the O'Briens [ie. $529,209 - presumably, the outstanding balance of any existing mortgage that was paid off during the execution of the scam, as well as any other liens on the home or other expenses legitimately owed by the victim-homeowners], $116,791, which [U.S. Bankruptcy Judge Raymond Lyons] tripled to $350,374.

    Lyons also found the sale-leaseback was an equitable mortgage and violated laws governing mortgages: New Jersey's Homeowner Security Act and two federal laws, the Truth in Lending Act and the Home Ownership and Equity Protection Act.

    Cleveland failed to make disclosures required under TILA and HOEPA and the loan included a prohibited balloon payment, resulting in a right to rescind and damages of $240,875 in finance charges and fees, plus $2,000 in statutory damages, held Lyons.

    The sale-leaseback agreement contained excessive late fees barred by HOSA, resulting in statutory damages of $293,836, an amount that includes the $240,875 awarded under TILA and HOEPA, plus punitive damages.

    Lyons added $46,000 for Cleveland's breach of his agreement to pay that sum for the Chapter 13 balance, bringing the damages to $690,210.

(3) In re O'Brien, (Bankr. D. N.J., May 18, 2010).

Elderly Chicago Woman Recovers Home Of 40 Years Swindled In Sale Leaseback Foreclosure Rescue Scam; Disgraced Peddler Faces No Criminal Charges

In Chicago, Illinois, WLS-TV Channel 7 reports:

  • A woman who nearly lost her South Side residence in a mortgage rescue scheme gets to keep the home she has lived in for the last 40 years. The man who operated the mortgage company is now banned from working in the mortgage business in Illinois for life. Lessie Towns launched a fight in court to keep her home. She won and her case [and] triggered a new law to better protect homeowners.

***

  • Five years ago Towns was facing foreclosure, and she signed what she thought was a refinancing agreement that would keep her in her home. That agreement, state investigators say, was with Oak Brook-based Trust One Mortgage and its President Paul Shelton.

  • "Mr. Shelton was essentially coordinating a mortgage-rescue scheme, whereby he would be [convincing] home owners to eventually sign over their homes," said Brent Adams, Illinois Department of Financial and Professional Regulation secretary. "Those homes would be sold to a straw buyer and effectively flipped at a higher appraised value." Towns continued to live in her home completely unaware it had been sold twice to straw buyers who failed to pay the mortgage. Then, one evening, sheriff's police come to evict the owner.

***

  • Towns got mad, went to court, and earlier this year won a settlement that allows her to stay in her home.(1)

For the story, see Victory for South Side victim of mortgage fraud.

For earlier WLS-TV reports on this story, see:

(1) This story is illustrative of how a homeowner scammed in a sale leaseback foreclosure rescue scam can retain ownership of his/her home, even if the home is subsequently sold or mortgaged to an unwitting third party.

In this case, the scammed homeowner retained and maintained continued possession of her home after signing the 'ripoff' documents conveying title to another. In Illinois (as well as in most other jurisdictions), any subsequent purchaser of the home, or lender acquiring a security interest in the home, has a duty to conduct a physical inspection of the home, and where a physical inspection of the property would reveal an adverse interest or where there is a party in possession other than the record title owner, the subsequent purchaser or lien claimant has a duty to inquire of the possessor as to his interest and is charged with knowledge of the facts discoverable from such an inquiry or inspection.

Failure to make such inspections or inquiries will disqualify the subsequent purchaser or lender from the protections accorded a bona fide purchaser or bona fide encumbrancer, and accordingly, will leave any interest in the property acquired by them subject and subordinate to any legal rights or equities in the premises the occupants in possession thereof can establish.

For more on the duty of a subsequent purchaser or encumbrancer to conduct inspections and make the appropriate inquiries of persons in possession of real estate in Illinois (for which there is case law dating back 150+ years), see:

In other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

For some insights on the various legal theories and startegies to attacking this type of scam in civil litigation brought on behalf of the screwed-over homeowner, see:

NY Appellate Court Tells Trial Judge: Cancelling Mortgage, Note Because Of Lender's "Repugnant, Shocking & Repulsive" Conduct Goes A Bit Too Far

The New York Law Journal reports:
  • A judge who blasted a lender's "repugnant, shocking and repulsive" conduct in trying to foreclose on a Long Island home exceeded his authority when he canceled the mortgage on the property, a state appeals court has ruled. After IndyMac Bank obtained a foreclosure judgment against Diana J. Yano-Horoski, who took out a $292,500 mortgage in 2004, the East Patchogue homeowner requested a settlement conference with the bank.

  • In a decision last year, Supreme Court Justice Jeffrey A. Spinner in Suffolk County criticized an IndyMac representative for what he called her "opprobrious demeanor and condescending attitude" during the conference, and said she had made it "abundantly clear that no form of mediation, resolution or settlement would be acceptable to the bank."

***

  • Blasting IndyMac for its "egregious" conduct, he concluded that monetary sanctions would not benefit Ms. Yano-Horoski, and took the unusual step of canceling the debt and discharging the mortgage (NYLJ, Nov. 23, 2009).

***

  • Last week, the Appellate Division, Second Department, held in an unsigned ruling that the "severe sanction…was not authorized by any statute or rule…nor was the plaintiff given fair warning that such a sanction was even under consideration." "The reasoning of the Supreme Court that its equitable powers included the authority to cancel the mortgage and note was erroneous, since there was no acceptable basis for relieving the homeowner of her contractual obligation to the bank," the panel wrote in its unanimous unsigned ruling in IndyMac Bank, F.S.B. v. Yano-Horoski, 2010 NY Slip Op 08532 (App. Div. 2nd Dept., November 16, 2010).(1)

For the story, see Panel Upsets Ruling That Canceled Mortgage.

(1) After getting hammered in the lower court (during which the lender was represented by the foreclosure mill law firm Steven J. Baum, P.C.), the lender rolled out a couple of heavyweight law firms (4 attorneys named for the filing of one brief) to win reversal of the earlier ruling. The homeowner, unrepresented by counsel in the lower court, remained unrepresented on appeal.

Clueless Robosigner Backpeddles From Statements Made In Videotaped Deposition; Now Claims To Have Known Significance Of Documents He Cranked Out

In Central Florida, a recent ABC Action News story on foreclosure document mill Nationwide Title Clearing had this excerpt regarding company employee Bryan Bly, a prolific robosigner who distinguished himself recently in a videotaped deposition in which he admitted that he didn't have a clue as to the significance of the paperwork he was cranking out:
  • In a videotaped deposition earlier this month, one of the company's processors Brian Bly, was asked, "What is an assignment of mortgage?” His response? “I have no idea."

  • Despite not even knowing what an assignment of mortgage actually is, he signs thousands of them a day. "I would say 5,000," Bly testified.

  • Bly isn't charged with anything. In a statement to ABC Action News, Bly says he wants to correct his testimony saying, "I know exactly what the purpose and types of documents are that I have signed."

For the story, see INVESTIGATION: Questions mount about documents used in foreclosures.

Go here for Nationwide Title Clearing's statement to the media on the distribution of the videotaped depositions on the Internet.

Sunday, November 21, 2010

Compensation Fund Proposal An Attempt To Buy Off State AGs, Keep Them From "Digging Deeper & Uncovering More Rot In The Mortgage System": Legal Expert

Buried in a recent New York Times story on the ongoing foreclosure scandal is this excerpt describing one legal expert's view of the banking industry's latest attempt to sweep their wrongdoing under the rug:
  • For 18 months, the Obama administration has promoted modifications that would keep families in their homes over foreclosures that would kick them out. The programs have had some success but ultimately have done little to stem the tide.

  • The banks’ act was to put their tail between their legs, act contrite before Congress and change nothing,” said Adam Levitin, an associate profesor of law at Georgetown University who testified before Congress on Tuesday and will testify again on Thursday.

  • The banks hope to buy off the attorneys general with money, perhaps to establish a compensation fund for victims, Mr. Levitin said. That, he said, would prevent attorneys general from “digging deeper and uncovering more rot in the mortgage system. My fear is that the banks’ calculus is correct.”

Source: Foreclosure Fix Is Seen as Distant.

RICO Suits May Pose Big Problem For Banks In Robosigner Scandal As Class Actions Begin To Pile Up

Bloomberg News reports:
  • Foreclosure-fraud class action lawsuits are starting to pile up against major banks across the U.S., threatening a besieged industry with billions more in potential losses.

***

  • The class actions, which could be expanded nationally, seek damages for homeowners whose properties were illegally foreclosed upon by banks using fraudulent documents. Suits have been filed in Maryland, New Jersey and Massachusetts that target Bank of America Corp., Wells Fargo & Co., HSBC PLC and JPMorgan Chase & Co. In Florida and Maine, Ally Financial, formerly known as GMAC Mortgage, is also being targeted.

  • Perhaps an even bigger threat are the lawsuits that contend the banks' foreclosure machinery amounted to a racketeering enterprise. One such case, an Indiana lawsuit against Bank of America, was filed under civil Racketeering Influenced and Corrupt Organizations or RICO laws, which allow damages to be tripled.(1)

For more, see Foreclosure class actions pile up against banks.

(1) For the Indiana RICO suit, see Davis v. Countrywide Home Loans, Inc., et al.

See also:

Sewer Service, Inflated Process Server Billings A Possibility For Recent Foreclosed Home In Which Dead Body Was Discovered In Garage

In Cape Canaveral, Florida, WESH-TV Channel 2 reports:
  • Authorities have not yet been able to positively identify a body that was found in a foreclosed Brevard County townhome, but the remains are believed to be that of the owner, Kathryn Norris.

  • Court records paint a muddy picture of a foreclosure case that moved quickly with little regard for what may have happened to Norris. "It's the typical sloppiness we see when it comes to the server process," said Orlando attorney Matt Englett, who represents homeowners in foreclosure cases. Englett reviewed Norris' foreclosure documents with WESH 2 News.

  • The foreclosure on Norris' property was filed in February and ended just days ago with the sale of the townhome for $68,000. The new buyer, on his first inspection of the property after the sale, discovered the remains in the passenger side of a vehicle in the townhome's garage. Up until Norris' disappearance, sometime around September of 2009, records show she was up to date on her mortgage payments.

  • Foreclosure documents in the case show a number of irregularities. For example, a company called ProVest submitted an affidavit of diligent search and inquiry which stated that it found no records of a drivers license or a vehicle in Norris' name. However, the Brevard County Sheriff's Office confirmed that the vehicle in Norris' garage was registered to her. ProVest was working for the Florida Default Law Group, which was working for Wells Fargo in the foreclosure case.

  • Other documents show ProVest charged more than $854 for research, including billing for trying to reach two tenants, even though Norris lived alone. "Judges have allowed these banks and these attorneys to skate and skirt around the process, and that's why we're experiencing these problems," said Englett.

For the story, see Foreclosure Docs Questioned After Body's Discovery (Body Found By New Owner On Thursday).

In a related story, see Woman Found Dead In Foreclosed Home (Neighbors Say Owner Missing For More Than A Year).

Disbarred Attorney Cops Plea To Ripping Off Clients, Lenders; $128K Score In Owner Finance Scam Among Swindles

From the Office of the U.S. Attorney (Greenbelt, Maryland):
  • Frank P. Jenkins II, age 45, of LaPlata, Maryland, pleaded guilty [last week] to wire fraud and mail fraud in connection with a scheme to defraud clients of his law practice and lenders in real estate transactions.

***

  • Jenkins admitted that from about 2006 through 2009, he caused clients to transfer money into bank accounts that he controlled, then embezzled the funds for his own purposes, rather than fulfilling his fiduciary obligations to his clients. [...] According to the plea agreement, Jenkins also made false statements to his clients as to his handling of estates and civil litigation and to lenders. Jenkins also provided his clients with fraudulent documents, including deeds and deeds of trust relating to property. Jenkins admitted that he forged the signatures of his clients, including on a consent decree requiring the clients to pay $150,000 to settle a breach of contract suit.

  • In June 2009, Jenkins applied for a loan to refinance a property that he fraudulently told the lender he had purchased. In fact, Jenkins had entered into a contract to purchase the property, misrepresenting to the owners of the property that he would file a deed of trust and promissory note. Jenkins did record the deed showing he had purchased the property, but did not record the deed of trust.

  • Jenkins received a check for $128,654.19 from the lender based on the fraudulent loan application. The deed Jenkins filed was subsequently rescinded and restored to the original owners, who were also awarded $150,000 each in compensatory and punitive damages, as well as attorney’s fees, by the Circuit Court for St. Mary’s County.

For the entire U.S. Attorney press release, see Former Charles County Attorney Pleads Guilty To Defrauding Clients And Lenders (Losses Totaled Between $1 Million and $2.5 Million).

(1) The Client Protection Fund of the Bar of Maryland was created to help reimburse clients for money they may have lost because of misappropriation or embezzle­ment by their attorneys.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

R/E Scammer Dodges Restitution Order; Judge Says Ripoffs Too Complex To Figure Out Who Gets What; "Owner-Finance" Sellers Among Those Left Holding Bag

In Marco Island, Florida, the Marco Eagle reports:
  • A 64-year-old Marco Island businessman serving 2½ years in a federal prison for mortgage fraud won’t have to pay restitution to his victims — unless they sue and win. U.S. District Judge John Steele ruled [] after Chief Assistant U.S. Attorney Douglas Molloy and Assistant U.S. Public Defender Russell Rosenthal agreed that due to mortgage transfers, the government is unable to identify the total loss or what people, banks or lenders lost money because of Douglas Lee Carter Sr.

  • In a two-page order following a restitution hearing [], the judge said determining that would involve complex issues and cause delays, outweighing the need for mandatory restitution.

***

  • His record of land deals in Collier Circuit Court is six pages long, with more than $30 million in foreclosures, lawsuits, judgments and dissatisfied sellers and buyers dating to 1984, so the FBI was asked to investigate.

  • In most cases, Carter signed promissory notes, stopped paying sellers after financing homes for more than they were worth, then pocketed the difference. Although some sellers were indicted, most were innocent victims who lost millions.

***

  • Victims say attorney John P. White of Naples, who handled most of his deals, is now under investigation. He was suspended from practicing law for 21 days by the Florida Supreme Court in November after the victims in this federal case filed a complaint and he was charged with dishonesty, fraud and misrepresentation; he pleaded to general misconduct. However, a pending complaint by a former employee says he continued taking clients after the Supreme Court ordered him not to, which was 30 days before his suspension went into effect.

  • He now works with attorney E. James Kurnik II at Naples Law Group PL, operating a loan modification and foreclosure defense business. White couldn’t immediately be reached for comment.

For the story, see Judge rules Marco Island man in prison for mortgage fraud won’t have to pay restitution.

Saturday, November 20, 2010

Central Florida Woman Threatened With Foreclosure Says She Was Scammed Out Of Her Deed By Sale Leaseback Peddler; Now Sues To Recover Title To Home

In Orange County, Florida, WFTV-TV Channel 9 reports:

  • An Orange County woman thought she was being rescued from foreclosure, only to realize she was scammed out of the deed to her home. Now, she's fighting to get her home back. Claudina Mills worked two jobs to try to keep her Azalea Park home, but in 2007, the bank threatened to put it into foreclosure. She thought Tim Moore and the company Goodbye Foreclosure was the answer.

  • Mills signed a contract she thought would allow her to lease her home from Goodbye Foreclosure until she got back in good financial standings with the bank, but what she didn't realize is she signed the deed of her home over to the company.

  • "Back in 2007 this was extremely popular and what they would do is get it deeded to them and ultimately sell it at a higher amount and make a profit and kick the homeowner out," Matt Englett of KEL Attorneys said.

  • Englett thinks that's what Moore had planned to do with Mills' home, but then the market collapsed and he couldn't sell the house for more than what was owed on the mortgage. Mills is now suing to get her name back on the deed and get out of foreclosure.

***

  • Her attorney said it's a breech of contract. Goodbye Foreclosure was supposed to pay off her mortgage and never did. [...] Englett says their chances in court are excellent, but he says the right thing for Goodbye Foreclosure to do is sign Claudina Mills' deed back over to her out of court.(1)

For the story, see Woman Says She Was Scammed Out Of Deed To Home.

(1) For some insights on the various legal theories and startegies to attacking this type of scam in civil litigation brought on behalf of the screwed-over homeowner, see:

Title Mix-Up Leads To Home Sale Out From Under Now-Homeless Kansas City Senior

In Kansas City, Missouri, WDAF-TV Channel 4 reports:
  • An elderly woman was evicted [last month] from the house she's lived in for more than 10 years on Kansas City's east side, but not because she was behind on her mortgage or because of foreclosure.

  • Norma Rozzelle could only watch and cry as sheriff's deputies removed her belongings from her home. The 70-something-year-old woman lived in the home for more than 10 years and claims to be the rightful owner.

  • "The house has been paid for since 1989," Rozzelle said. "It belonged to Elbertdine Madison, and she deeded everything over to me." But when Rozzelle's friend and roommate Elbertdine Madison passed away in 2005, Rozzelle's attorney said the transfer of the deed was never recorded properly. As a result, relatives of Madison staked a claim to the house and a long protracted probate battle over her estate ensued.

  • A court eventually determined Madison's relatives to be the rightful owners, and unbeknownst to Rozzelle, they sold the house on the courthouse steps for a little more than $13,000. "I would describe this situation as someone has taken total advantage of this mother," said Spencer Lamar Booker. "There's complex problems here of paperwork miscommunications. The legal administrator is not contacting her properly. She has something that was put up on her doorstep that says landlord tenant. She clearly has the warranty deed to this house."

  • The new owner, Realty AQ, offered to sell the home to Rozzelle for $60,000. Rozzelle refused, still believing she is the rightful owner. Now she doesn't know where she'll live. The Bethel AME Church is collecting Rozzelle's belongings and will put her up until she can find someplace else to live. She has vowed to fight on, saying she does have a warranty deed showing she's the legal owner of the house.

Source: Property Deed Mix Up Evicts Elderly Woman from Home of 10 Years.

Court Tacks $55K In Homeowner's Attorney Fees Onto $41K Damage Award Against Home Contractor Found Liable For Substandard Work

In Jefferson County, Texas, The Southeast Texas Record reports:
  • A Jefferson County jury recently found that a contractor failed to honor his agreement with local resident Fred Pouncy, awarding the man $41,270 in damages and his attorney, David W. Starnes, an additional $55,000.

  • As the Southeast Texas Record previously reported, Pouncy filed a lawsuit against Jesse and Bonnie Blankenship of Blankenship Welding on Dec. 30, 2008, alleging the substandard building the company constructed prevented him from obtaining windstorm insurance. The case went to trial on Oct. 25 and ended four days later, with jurors finding that the Blankenships committed fraud and deceptive trade practices(1) and breached their contract with Pouncy.

For more, see More than half of 96K verdict awarded to attorney.

(1) In Texas, successful lawsuits brought for violations of the Texas Deceptive Trade Practices Act entitle the winning consumer to have a court tack on his/her legal fees onto any damage award granted by a court, as was done in this case.

An important note here is that it is not all that uncommon for the attorney fee award in these types of consumer cases to exceed the damages awarded to the consumer. The beauty of some of these consumer protection laws (if you're the screwed over consumer, that is) is that experienced consumer protection attorneys who are used to working on a contingency fee basis are out there and will take on cases over seemingly small amounts, provided, of course, that there are strong facts and ample proof that the applicable consumer protection law was violated (and, of course, there is(are) a defendant(s) having deep enough pockets to cough up the cash for the legal fees in a successful suit). Consumer litigators experienced at bringing actions under the Federal Fair Debt Collection Practices Act are particularly known for bringing suits over small damage claims.

The story is silent as to whether the homeowner's attorney took the case on a contingency fee basis, and if so, whether there was any contingent fee risk multiplier (see generally, The Yale Law Jounal: The Contingency Factor In Attorney Fee Awards) applied when calculating the $55,000 legal fee.

For a survey of state consumer protection laws throughout the U.S., see National Consumer Law Center: CONSUMER PROTECTION IN THE STATES: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

For informative articles from The Florida Bar Journal on how these attorney fee "tack-ons" work in Florida for violations of its consumer protection law (ie. the Florida Deceptive & Unfair Trade Practices Act - "FDUTPA", see:

TX Couple Sue To Recover Home Sold Out From Under Them In F'closure; Say Lender's Broken Loan Mod Promises Violate State Deceptive Trade Practices Act

In Jefferson County, Texas, The Southeast Texas Record reports:
  • In hopes [to] keep the bank from taking their home, Groves residents Keith and Julia Keen have filed suit against Sun Trust Mortgage. [...] In April, the Keens could no longer afford to pay their mortgage and contacted U.S. Mortgage Solutions to apply for relief under the Obama Home Affordability Program.

  • In their suit, the Keens claim Sun Trust told them they would review a new loan agreement structured by U.S. Mortgage Solutions, but on Sept. 28 Sun Trust opted to foreclose on the property "in spite of repeated representations that the paperwork was being reviewed."

  • On Nov. 4 Sun Trust filed a forcible entry and detainer action to evict the plaintiffs from their home, court papers say. The Keens maintain that they would have brought their loan current if Sun Trust would have told them from the onset that it had no intention of modifying the loan agreement.

  • The Keens are accusing Sun Trust of deceptive trade practices(1) and are willing to pay $10,000 to bring the loan current if the court halts the foreclosure, court papers say. They are represented by Beaumont attorney Thomas Roebuck Jr. of Roebuck Thomas Roebuck & Adams.

Source: Groves couple claims it was deceived by loan modification agreement, sues mortgage company.

(1) For those of you wondering how a couple who have already had their home sold out from under them in a foreclosure sale can afford to pay an attorney for legal services in a case like this, note that in Texas, a successful lawsuit alleging acts or omissions that constitute violations of the Texas Deceptive Trade Practices Act will allow a judge to tack on the homeowner's attorneys fees to any damages and/or other relief awarded to the homeowner, to be paid by the losing defendant.

"Zombie Debt" Buyers Cancel $9.5M+ In Consumer Debt In Settlements With WV AG; Lawyer Accused Of Threatening Suits To Collect Time-Barred Obligations

From two press releases from the Office of the West Virginia Attorney General:
  • West Virginia Attorney General Darrell McGraw [last week] announced settlement agreements with three unlicensed collection agencies that will result in $1,277,648.33 in cancelled debts for 161 West Virginia consumers and $15,337.50 in cash refunds.

  • The Attorney General’s Consumer Protection Division had opened an investigation against the companies – Trailhead Capital, LLC, a debt buyer based in Chicago, IL; Hollis Cobb Assoc., Inc., Trailhead’s affiliated collection agency in Norcross, GA; and Troy Capital, LLC, a debt buyer based in Las Vegas, NV – after receiving complaints that revealed the three businesses were collecting debts in West Virginia without a license and surety bond as required by state law. Records also showed that the debts the companies were attempting to collect were primarily charged-off credit card accounts originally owed to Chase, Wells Fargo Bank, and GE Capital.

  • In West Virginia, businesses that purchase defaulted debts for collection, as Trailhead and Troy Capital did, cannot avoid being licensed and bonded by hiring other agencies to assist them in collecting the debts.(1)

For more, see Attorney General McGraw Recovers $1.25 Million From Three Unlicensed Collection Agencies.

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

  • West Virginia Attorney General Darrell McGraw [] announced a settlement with Laurence A. Hecker, a New Jersey lawyer, and several out-of-state debt collection agencies that Hecker represents known as the APM Companies resulting in more than $7.9 million dollars in cancelled debts for West Virginians.(2)

***

  • McGraw’s office began investigating Hecker and the APM Companies in 2006 after receiving complaints from West Virginia consumers who reported they were threatened with lawsuits and excessively pressured to pay alleged debts. To further embellish the lawsuit threat, Hecker sent letters to consumers on his law office stationery to demand payment of the debts. The Attorney General’s investigation revealed that the majority of the collection attempts were for "time-barred" debts, i.e., debts so old that the statute of limitations to sue had expired and lawsuits were therefore barred by law.

For more, see Attorney General McGraw Recovers $7.9 Million for West Virginians from NJ Lawyer Hecker and APM Collection Agencies.

(1) The West Virginia AG observed: "Debt buyers often take overly aggressive collection actions that include the filing of lawsuits – even when they have little proof of the debts they seek to collect from consumers."

(2) McGraw’s Consumer Protection Division entered into an agreement with Hecker and his two affiliated Pennsylvania collection agencies, APM Financial Solutions, LLC, and Account Portfolio Management, LLC. The settlement requires the cancellation of $7.9 million dollars in charged-off credit card debt that Hecker and the APM Companies attempted to collect from 1,922 West Virginia consumers. The companies also paid $45,000 toward customer refunds and consumer education and agreed to delete the debts from credit records.

L.A. Extends "Boot Ban" For Tenants In Foreclosure Evictions Thru End Of 2011

In Los Angeles, California, KABC-TV Channel 7 reports:
  • Los Angeles lawmakers have made a move to protect renters from becoming victims of the foreclosure crisis. The Los Angeles City Council has voted to extend a moratorium that protects renters from being evicted when their home or apartment is foreclosed on and a new owner takes over. The council's president says the ordinance protects as many as 10,000 families from eviction.

  • "They can still be kicked out for the normal reasons like not paying rent, breaking the rules, but if they're paying their rent and playing by the rules, the new owner, usually a bank, can't kick them out of a home or apartment they've been a good tenant in," said L.A. City Council President Eric Garcetti. The eviction ban will be in effect at least through the end of 2011 and does not affect rent-controlled properties.

Source: Eviction protection extended for L.A. renters.

NYC Homeowner Targets Former Owners Dead For 100 Years In Lawsuit To Quiet 'Cloudy' Title

In Elmhurst, Queens, the New York Post reports:
  • A Queens woman is "summons"-ing the dead -- suing the former owners of her Elmhurst home, who died a century ago. Miriam Castro, 61, has summoned Charles Simonson, Wilder Pallez and their descendants to court to verify past ownership of the property her $700,000 house is built on.

  • Chances are they won't answer -- absent a psychic. Castro, who bought the house in 1992, was denied a title-insurance policy last winter because the chain of ownership, dating back to the 1870s, was unclear. "It's certainly not the kind of lawsuit you see very often," said a source familiar with the case.(1)

Source: Qns. homeowner sues dead people.

(1) The type of lawsuit typically employed to clear up a 'cloudy' title problem on real estate is known as an action to quiet title, although I am informed that in some places, an action for declaratory relief is also a possibility.

For more on actions to quiet title (especially for those in Texas, since this work cites profusely to Texas case law), see this Quiet Title Handbook.

Friday, November 19, 2010

Fed Proposal Will Pull Rug Out From Under Homeowners Enforcing "Truth In Lending" Rights When Fighting Illegal Loans: Consumer Advocates

From a press release from the National Consumer Law Center:
  • Hundreds of consumer, civil rights, legal services, community and labor groups and private and public interest attorneys representing homeowners, along with the coalition Americans for Financial Reform, urged the Federal Reserve Board to withdraw a proposed rule that would destroy a key legal tool to unwind illegal loans and avoid foreclosure.

  • "We are astonished that, with the nation facing its greatest foreclosure crisis since the Great Depression, the Board's proposal would eliminate the single most powerful legal tool that homeowners currently have to stop wrongful foreclosures, the federal right to rescind an illegal loan," said Margot Saunders, Counsel to the National Consumer Law Center.

  • "The proposed rule not only weakens protections against predatory lending and foreclosures, but it would give lenders more freedom to provide inaccurate information about the cost of their loans," said Michael Calhoun, President of the Center for Responsible Lending.

For more, see Fed Proposal Would Eviscerate Homeowners' Most Powerful Remedy to Stop Foreclosures of Illegal Loans (Hundreds of consumer, civil rights groups, homeowner attorneys sign letter demanding withdrawal of proposed rule).

Go here for the letter from hundreds of consumer advocates, attorneys, etc. sent to the Board of Governors of the Federal Reserve System.

Massachusetts Foreclosure Rescue Operator Gets 2-2.5 Years As Mastermind In Fraud Scam; Sale Leaseback Deals Among Ripoffs Run On Desperate Homeowners

From the Office of the Massachusetts Attorney General:
  • An Oxford man has been sentenced to State Prison after pleading guilty in Worcester Superior Court for his role in a complex scheme in which fraudulent documents were used to defraud homeowners and mortgage lenders in numerous real estate transactions involving distressed properties in the Worcester County area,(1) Attorney General Martha Coakley’s Office announced [].

  • Allen Seymour, age 42, pled guilty to charges of Forgery (4 counts), Uttering (8 counts), Inducing a Lender to Part with Property (12 counts), and Larceny by False Pretenses. After the change of plea, Superior Court Judge James R. Lemire sentenced Seymour to serve two years to two and a half years in State Prison, followed by five years of probation. Seymour’s State Prison sentence will begin following the completion of a federal prison sentence on an unrelated matter. Judge Lemire also ordered Seymour to pay restitution in the amount of $750,000 to the victims. While on probation, Seymour is prohibited from working in the real estate industry.

For the Massachusetts AG press release, see Oxford Man Pleads Guilty, Sentenced to State Prison in Connection with Orchestrating Complex Mortgage Fraud Scheme.

(1) According to authorities, Seymour targeted properties in danger of foreclosure. He personally approached the owners of these properties and presented a variety of rescue options. For those homeowners who merely wished to sell their property to avoid foreclosure, Seymour offered to purchase the property for the amount owed to the foreclosing lenders. For the several homeowners who wanted to remain in their homes, Seymour presented rescue plans which ranged from “lifetime leases” and “reverse mortgages” to a simple refinance. Some of these homeowners were told they would need to transfer title of the property to an “investor,” and some were not. Seymour had some homeowners sign innocuous documents to begin the process. These innocuous pages were then discarded and substituted with pages purporting to grant Power of Attorney from the homeowner to an associate of Seymour.

MD Closing Agent Cops Plea To Pocketing Real Estate Closing Cash Meant For Existing Mtg Payoffs; Title Insurance Underwriter Left Holding $3.7M Bag

From the Office of the U.S. Attorney (Baltimore, Maryland):
  • Anthony V. Weis, age 45, of Phoenix, Maryland, pleaded guilty [] to wire fraud in connection with a mortgage fraud scheme to defraud lenders of approximately $3.7 million in just eight months.

***

  • According to Weis’s plea agreement, Weis was the president and a shareholder of Maple Leaf Title LLC (MLT), a real estate title agency located in Towson, Maryland. Weis directed MLT employees in 13 real estate closings conducted between February and September 2009 to withhold the payoff checks from institutions that held the existing mortgage loan notes on the properties. In each instance, the settlement statement sent to the borrower’s lender falsely represented that the payoff was being made.

  • In an effort to conceal the fraud scheme, Weis caused monthly mortgage payments to be made to the banks holding the mortgage notes. Believing that the bank had been paid off as a result of the settlement, the borrower stopped making monthly payments on that mortgage. And since that lender was receiving monthly payments, it had no reason to notify the borrower of any delinquency. However, because Weis was unable to send checks in every case where he had misappropriated the payoffs from escrow, a number of MLT clients received delinquency notices for non-payment of the mortgage note. A few were threatened with foreclosure and were forced to hire attorneys to prevent being ejected from their homes.

  • Because the existing mortgages had not been paid off, the liens against the property were not removed and a title free of pre-existing liens and claims (clear title) could not be passed to the new lender and borrower. An insurance company had issued title insurance policies to the borrowers guaranteeing clear title. As a result of Weis’s criminal conduct, the title insurance company ultimately paid out $3.7 million to financial institutions that held mortgage notes.

For the U.S. Attorney press release, see Towson Title Agency Operator Pleads Guilty in $3.7 Million Mortgage Fraud Scheme (Failed to Make $3.7 Million in Pay Offs to Mortgage Lenders Holding Liens on 13 Properties).

NJ Scammer Used Forged Documents To Pocket $700K In Mortgage Proceeds On Elderly Woman's Home; Senior Now Faces Foreclosure

In Ocean Grove, New Jersey, WCBS-TV Channel 2 reports:
  • A New Jersey woman was scammed out of all of her money after being duped by a woman she met at church. [... Nancy] Yobbagy worked hard, saved her money, and expected to retire on the Jersey Shore. Now, though, her house is in foreclosure and all of her money has been lost to a scam artist.

***

  • Yobbagy trusted that woman, Zina Martin, to invest her money. They met at church, and Yobbagy eventually handed over her modest pension, as well as that of her husband. Yobbagy received statements every month showing impressive returns of 15 percent and more, but those statements were false. Prosecutors said Martin spent the money on herself, and it didn’t stop there.

  • I got a call from a bank saying, ‘you’re in default on your mortgage,’” Yobbagy said. “I said, ‘you must have the wrong number, because my mortgage is paid.’” Yobaggy hired a lawyer who said Zina Martin forged the paperwork for two mortgages – adding up to about $700,000 – and then let them go into default.

  • She caused this house to go into foreclosure,” Yobbagy’s attorney, Richard DeVita, said. "Nancy has lost every cent of every dollar she’s ever worked for.”

For the story, see NJ Woman Victim Of Scam Artist She Met In Church (Nancy Yobbagy, 78, says a scam artist she met at church stole her life savings).