Thursday, December 09, 2010

Upstate New York Foreclosure Mill Operation Continues To Attract Media Spotlight

Bloomberg News recently ran a less-than-flattering 'profile' on Buffalo, NY-based foreclosure mill law firm Steven J. Baum, P.C. that highlights some of the attention this outfit has recently attracted. A couple of excerpts:
  • Steven J. Baum’s New York foreclosure law firm has attracted lawsuits and fines for its actions during the housing crisis, with one judge likening its arguments to something out of theTwilight Zone.” As recently as last month, Baum’s firm, which one lawyer for homeowners said processes about half the foreclosures in New York state, was ordered to pay $14,532.50 in legal fees and costs and a $5,000 fine by Nassau County District Court Judge Scott Fairgrieve in Hempstead, New York.

  • The judge said that when Paul Raia refused to vacate a Garden City co-op after foreclosure, Baum’s firm filed an eviction petition that misidentified the lender. “Falsities were contained in five paragraphs out of only ten paragraphs in the entire petition,” Fairgrieve wrote in his Nov. 23 decision.(1)

***

  • New York State Supreme Court Justice Arthur M. Schack in Brooklyn called the firm’s explanations in one case “so incredible, outrageous, ludicrous and disingenuous that they should have been authored by the late Rod Serling.” [...] “Steven J. Baum PC appears to be operating in a parallel mortgage universe, unrelated to the real universe,” the judge wrote in that May decision.(2)Next stop, the Twilight Zone,” he said, quoting from Serling’s TV series about science fiction and the supernatural.

***

  • In January, Diana Adams, the U.S. trustee monitoring bankruptcy cases in Manhattan, reserved the right to seek sanctions against Baum’s firm in the bankruptcy case of a Bronx homeowner. The trustee accused Baum client JPMorgan of filing documents “that appear to be either patently false or misleading,” according to a court a filing recommending sanctions against the bank.

For more, see `Twilight Zone' Foreclosure Law Firm Draws Fine, Suits in New York Courts.

See also:

(1) Federal Home Loan Mtge. Corp. v Raia, 2010 NY Slip Op 52003 (Dist. Ct. Nassau Cty, 1st Dist., November 23, 2010).

See also Federal Home Loan Mtge. Corp. v Raia, 28 Misc 3d 1212, 2010 NY Slip Op 51287 (Dist. Ct. Nassau Cty, 1st Dist., July 22, 2010) for an earlier ruling in this litigation from Judge Fairgrieve that ultimately led to the sanctions imposed on the Baum law office in the latest ruling.

(2) HSBC Bank USA, N.A. v Yeasmin, 27 Misc 3d 1227, 2010 NY Slip Op 50927 (NYS Sup. Ct. Kings County, May 24, 2010).

See also Brooklyn Judge Journeys Through "The Twilight Zone" In Recent Ruling Slamming Standing Lacking Lender, Notorious Foreclosure Mill Law Firm.

In his ruling, Justice Schack gives this parting shot that merits some note if you're a plaintiff's attorney or stockholder in HSBC Bank contemplating a future stockholder derivative action against HSBC:

  • The Court can only wonder if this journey through the mortgage twilight zone and the dissemination of this decision will result in [Vice President Loan Documentation Thomas] Westmoreland's affidavit used as evidence in future stockholder derivative actions against plaintiff HSBC. It can't be comforting to investors to know that an officer of a financial behemoth such as plaintiff HSBC admits that "[a]n investigation of each and every loan included in a particular mortgage pool, however, is not conducted, nor is it feasible" and that "the fact that a particular mortgage pool may include loans that are already in default is an ordinary risk of participating in the secondary market."

Wells Fargo, Upstate NY Foreclosure Mill To Face The Heat In Explaining Dubious Documents Filed In Foreclosure Matter

Attorney Abigail Field writes at AOL's Daily Finance:
  • The banks' constant refrain during this mortgage mess is that the paperwork issues are mere technicalities -- nothing to be concerned about. The documents are all true, they assert, we just didn't honor the proper procedures.

  • But it doesn't take much digging into the issue to find a case like that of Tandala Mims of New York, which calls into question the whole foreclosure process and the systems that support it. In Mims's case, which will be argued again on Thursday, her lawyer, consumer bankruptcy attorney Linda Tirelli, argues that Wells Fargo should not be able to foreclose during Mims's bankruptcy because the bank's documents claiming ownership of the mortgage appear to be false in several ways.(1)

For more, see A Foreclosure Fiasco: The Case of Tandala Mims v. Wells Fargo.

(1) See In re Mims - Objection To Motion for Automatic Relief From Automatic Stay etc. etc. for bankruptcy attorney Linda Tirelli's motion setting forth the ostensible indicators of fraud in the filed foreclosure documents in the matter being litigated.

The motion features the activities of prolific robosigner John Kennerty; the outfit listed as representing the lender in this case is the notorious, Buffalo, NY-based foreclosure mill Office of Steven J. Baum, P.C.).

Report: LPS Shifted Robosigning Operations To Others In Response To Heat About Phony F'closure Docs Allegations; Notaries w/ Too Many Questions Axed

A recent investigative report by Reuters contains this excerpt reporting how foreclosure services outfit Lender Processing Services reacted to the heat brought upon on when it began being hit with allegations manufacturing bogus documents in foreclosure cases:
  • Reuters has learned that rather than stamping out the practice, LPS in December 2009 began transferring signing operations out of its own offices and into those of firms it has close relationships with. [LPS spokeswoman Michelle] Kersch confirmed that LPS sent personnel to work "at client locations to assist clients during this period."

  • For example, LPS arranged through a local employment service to hire about a dozen notaries, sending them to work at a new signing operation set up in the Jacksonville office of American Home Mortgage Servicing, one of LPS's biggest clients.

  • Records from county recorders' offices show that at least as recently as October, American Home Mortgage Servicing employees signed exactly the same type of questionable mortgages assignments that LPS staffers at DocX and in Minnesota had signed. These included assignments done on behalf of defunct companies like American Brokers Conduit, and after foreclosure actions already had been filed. Reuters obtained a partial list of the names of the LPS-hired notaries. Copies of mortgage assignments available publicly show that these notaries notarized many of these assignments, including ones signed on behalf of defunct companies.

  • In interviews, two of the notaries, who asked that they not be identified, said the American Home Mortgage Servicing office also set up a "robosigning" operation for affidavits, another type of document required in foreclosure cases. The employees who signed the affidavits were swearing that they had verified the facts listed in them, such as the specific amounts owed by homeowners.

  • But the two notaries, who said they were dismissed after raising questions with supervisors about the practices, said that each morning about a half-dozen American Home Mortgage Servicing employees in about an hour would sign some 200 affidavits received via LPS's computer system, without reading them, let alone verifying the facts they contained. "In that time, come on, you have not verified figures in 200 documents. That's impossible," one of the notaries said.

For the story, see Special report: Legal woes mount for a foreclosure kingpin (requires a five-page "click-through" to read the entire story; for those who prefer the entire story on one web page, TRY HERE, TRY HERE, or TRY HERE).

Minnesota AG: Loan Modification Rackets Touted 'Attorney' & 'Charitable' Status To Dupe Homeowners Into Paying Illegal Upfront Fees

From the Office of the Minnesota Attorney General:
  • Minnesota Attorney General Lori Swanson [] filed lawsuits against two out-of-state companies that charged Minnesota homeowners up to $3,500 in unlawful fees to help them renegotiate their home mortgages. [...] The first lawsuit was filed against Balanced Legal Group of California and its attorney, Deepak Parwatikar, which charged homeowners up to $3,500 for supposed mortgage help. The second lawsuit was filed against Home Protection Coalition of Wyoming, which charged homeowners up to $2,300.

  • As regulators around the country have cracked down on widespread mortgage assistance scams, Attorney General Swanson said that her Office has seen an uptick of complaints involving companies that (1) tout their attorney status to build credibility to get people to sign up for their services, and (2) get people to sign up for expensive services by warning homeowners to hire them because there are other fraudulent companies that make false promises of mortgage help.(1)

For the Minnesota AG press release, see Attorney General Swanson Files Lawsuits Against Two Companies That Use The Threat Of Foreclosure Scams To Dupe Citizens Into Paying Thousands Of Dollars In Unlawful Fees For Supposed Mortgage Help (Attorney General warns citizens not to pay advance fees to companies for assistance in renegotiating their home mortgages).

(1) In connection with the lawsuit against Balanced Legal Group of California and its attorney, Deepak Parwatikar, the AG alleges that they peddles the following pitches on its website:

  • The banks have attorneys so you need to have a law firm on your side to protect your interests. Your home is one of your most treasured assets. DON’T use a non-attorney company that claims to work with attorneys to try and negotiate a solution concerning this treasured asset” and

  • BEWARE of brokers, ‘attorney based’, ‘attorney assisted’ and other boiler room type providers. Remember this is a relatively new industry and there is little regulatory control. The laws are constantly changing and these entities often skirt or break laws.”

Regarding the lawsuit against Home Protection Coalition of Wyoming, the AG alleges:

  • [I]n 2009, the United States Congress funded a campaign called the “Loan Modification Scam Alert” to warn homeowners of fraudulent modification scams. The lawsuit against Home Protection Coalition alleges that the organization falsely posed as 501(c)(3) corporation and mailed Minnesota homeowners solicitations that bear an almost identical logo to theLoan Modification Scam Alert.” Home Protection Coalition’s website also states as follows:

    Due to the current foreclosure crisis, a bill has been introduced to Congress. This bill allows Home Protection Coalition to offer assistance to homeowners through the Economic Foreclosure Stimulus Plan.

    This initiative may reduce your mortgage payment by as much as 40%. . . . Home Protection Coalition is a not for profit housing counseling agency that employs forensic mortgage auditors, paralegals, attorneys and highly skilled lender specific negotiators that will write a loan modification that fits your specific financial needs
    .”

  • To further deceive consumers, Home Protection Coalition calls its $2,300 fee a charitabledonation.” In addition to charging the company with violations of Minnesota’s mortgage modification laws which prohibit advance fees, the lawsuit alleges that the organization engaged in charitable solicitation fraud.

Wednesday, December 08, 2010

Long Island Judge Smacks Upstate NY Foreclosure Mill w/ $5K In Fines, Order To Pay $15K+ Legal Fees To Lawyer For Foreclosed-Upon Homeowner

In Hempstead, New York, a recent court ruling by Nassau County District Court Judge Scott Fairgrieve hammered the notorious foreclosure mill law office of Steven J. Baum, P.C. for filing what he (Fairgrieve) said were a number of sworn allegations that were false.

The following excerpts from Judge Fairgrieve's opinion reflect some of what went on in this action, an attempt to boot a local foreclosed homeowner (bold text is my emphasis, not in the original text):
  • At the hearing, the attorney for Baum repeatedly attempted to excuse the firm's past conduct on the basis that it is sometimes acceptable to swear to false statements if the statements are immaterial.

    Further, counsel exacerbated the situation by trying to evade questions concerning whether false statements had been made, apparently trying to appeal to a substantive difference between the terms "incorrect" and "false." Conversely, every statement in the petition was material to a determination by this court in this case.

    The misrepresentation of the material statements here was outrageous. If not for the false statements, this case could have been dismissed more easily for lack of standing. Baum has not convinced this court that they have acted professionally responsible either in submitting truthful documents or accepting accountability for their mistakes.

    ***************************** ***

    While it may be possible to overlook an error in one paragraph of a petition, despite thorough proofreading, overlooking falsities in five paragraphs is repugnant and will not be tolerated in this court. This is especially the case when falsities were contained in five paragraphs out of only ten paragraphs in the entire petition, one of the truthful paragraphs being that the petitioner's attorney correctly swore to counsel's own name. A brief proofreading of the petition before submission should have led to the production of a petition that was more than half correct.

    Willful carelessness of this sort will not be accepted. Also, substituting reasoned and considered statements for computer generated ones displaces the verifying attorney's responsibility to make even a cursory investigation into the truthfulness of the statements to which he swears.

    **********************************

    The attention and time of the Volunteer Lawyers Project have been unnecessarily diverted in dealing with the underlying case and Baum's behavior. Mr. de Winter appeared in the sincere interest of and commitment to justice. In this regard, this court finds it appropriate to award attorney's fees and costs of $14,532.50 to go to the benefit of the Volunteer Lawyers Project.

    Specifically, this represents attorney's fees at $250.00 per hour for 57.75 hours and $95.00 in costs. This court also imposes monetary sanctions on Steven J. Baum, P.C. in the amount of $5,000.00. This amount is appropriate for the foregoing reasons.

    Further, it has come to this court's attention that this is not the first time Baum has been unethical. In Ameriquest Mortg. Co., Baum fought the imposition of sanctions on substantially similar facts only three years ago. [Ameriquest Mortg. Co. v. Basevich, 16 Misc 3d 1104(A), 841 NYS2d 825 (2007).] Analogous to the facts here, in Ameriquest Mortg. Co. Baum faced sanctions concerning Baum's submission of incorrect documents in an attempt to bypass lack of standing. There the court declined to sanction Baum. The relief granted to Baum therein stood as a reminder to be more cautious in the future, especially concerning standing issues. It is apparent from this case, such a short time later, that Baum has failed to heed this command.
    (1)
For Judge Fairgrieve's ruling, see Federal Home Loan Mtge. Corp. v Raia, 2010 NY Slip Op 52003 (Dist. Ct. Nassau Cty, 1st Dist., November 23, 2010).

(1) See also NY Trial Judge: Buffalo-Based Foreclosure Mill Law Firm's Actions "A Dereliction Of Professional Responsibility!" for additional evidence that Baum has ostensibly failed to heed this command, and in which is reported that Suffolk County, New York State Supreme Court Justice Melvyn Tanenbaum has recently issued these short form copies of 30 recent orders excoriating the Baum firm over court filings in which "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").

Media Report: Storm Clouds Continue To Darken Over Accused Bogus F'closure Document Manufacturing Racket; Feds Impanel Grand Jury, Join Class Action

In Jacksonville, Florida, an invetigative report by Reuters on the alleged fraudulent foreclosure document manufacturing racket Lender Processing Services ("LPS") reveals that LPS' legal problems are more serious than the outfit's CEO Jeff Carbiener recently let on to Wall Street analysts in an October 29, 2010 conference call:

  • Questionable signing and notarization practices weren't limited to its subsidiary, called DocX, but occurred in at least one of LPS's own offices, mortgage assignments filed in county recorders' offices show.

  • And rather than halt such practices after the federal investigation got underway, the company shifted the signing to firms with which it has close business ties. LPS provided personnel to work in the new signing operations, according to information from an LPS spokeswoman and court records including an October 21 ruling by a judge in Brooklyn, New York.(1) Records in county recorders' offices, and in the judge's opinion, show that "robosigning" and preparation of apparently false documents went on at these sites on a large scale.

***

  • A spokeswoman for LPS confirmed to Reuters that it had helped other firms establish operations that performed the same function. [...] Interviews with key players and court records also show that pending investigations and lawsuits pose a bigger threat to the company than Carbiener let on.

***

  • The criminal investigation in Jacksonville by federal prosecutors and the Federal Bureau of Investigation is intensifying. The same goes for a separate inquiry by the Florida attorney general's office. Individuals with direct knowledge of the federal inquiry said that prosecutors have impaneled a grand jury, begun calling witnesses and subpoenaed records from LPS.

***

  • Meanwhile, the threats from four class action lawsuits filed in federal courts appear to be greater than the company has indicated, especially one filed in Mississippi. In a highly unusual move, a unit of the U.S. Justice Department has joined that suit as a plaintiff.

  • The lawsuit alleges that LPS extracted many millions of dollars in kickbacks from law firms through an illegal fee-sharing arrangement, in exchange for doling out lucrative foreclosure work to them. The lawsuit also charges that LPS illegally practices law and routinely misleads homeowners and federal bankruptcy judges.

***

  • Copies of LPS internal documents obtained by Reuters and testimony in lawsuits shed new light on the company's unusual dealings with its vast network of law firms. LPS relentlessly pressed them for speed. The result was almost instant filing of foreclosure documents, mostly prepared by clerical workers, not lawyers, according to court records, including deposition testimony by LPS officials. Several judicial opinions from around the country and evidence from investigations in Florida show that these documents often were riddled with inaccurate information about the amount homeowners owed, and were signed and notarized en masse without anyone at the firms checking the information in them.

***

  • In an April 2009 court decision, Diane Weiss Sigmund, a federal bankruptcy judge in Philadelphia, specifically faulted lawyers whose firm filed LPS-transmitted documents in court using clerical workers to sign the name of a lawyer who hadn't looked at them. In that case, it turned out that, contrary to the documents supplied via the LPS system, the homeowners weren't in default on their mortgage.

  • Referring to the LPS computer system, the judge stated, "the flaws in this automated process become apparent." She added: "An attorney must cease processing files and act like a lawyer."(2)

For more, see Special report: Legal woes mount for a foreclosure kingpin (requires a five-page "click-through" to read the entire story; for those who prefer the entire story on one web page, TRY HERE, TRY HERE, or TRY HERE).

(1) For Justice Arthur M. Schack's ruling, see OneWest Bank, F.S.B. v Drayton, 2010 NY Slip Op 20429 (NY Sup. Ct., Kings County, October 21, 2010).

(2) In re Taylor, Case No. 07-15385-DWS (Bankr. E.D. Pa., April 15, 2009), at page 32. Judge Sigmund concludes her 58-page opinion with this parting shot at robosigning foreclosure document processor outfits and the foreclosure mill law firms they hop into bed with:

  • At issue in these cases are the homes of poor and unfortunate debtors, more and more of whom are threatened with foreclosure due to the historic job loss and housing crisis in this country. Congress, in its wisdom, has fashioned a bankruptcy law which balances the rights and duties of debtors and creditors. Chapter 13 is a rehabilitative process with a goal of saving the family home. The thoughtless mechanical employment of computer·driven models and communications to inexpensively traverse the path to foreclosure offends the integrity of our American bankruptcy system. It is for those involved in the process to step back and assess how they can fulfill their professional obligations and responsibly reap the benefits of technology. Nothing less should be tolerated.

MERS: The Central Player Responsible For Clouding The Title To Millions Of Homes Through Destruction Of The U.S. Land-Record System?

Attorney Abigail Field writes at AOL's Daily Finance:

  • Petersen detailed how the banks, Fannie Mae, Freddie Mac and Ginnie Mae destroyed America's land-record system, a method of tracking property sales that's existed since colonial times. Instead, they put in place a system called "MERS" (for Mortgage Electronic Registration Systems) that's legally shaky, makes tracking mortgage-note ownership extremely hard and may be clouding the title of millions of properties.

  • But the MERS situation could be even worse than Petersen described to Congress: Millions of documents, including millions of foreclosure documents, may have been signed in MERS's name by people without the power to do so. A lack of authority would call into question the validity of all those documents. While the ramifications are uncertain, the bottom line is, as Petersen told me: "This issue injects yet another level of uncertainty into the already murky swamp of foreclosure nonsense."

For more, see MERS: The Mortgage Database That's Clouding Millions of Titles.

Vacant Foreclosed Home Hijacker Scraps "Adverse Possession" Defense; Cops Plea To Organized Fraud, Dodges Jail Time, Gets Two Years Probation

In Fort Lauderdale, Florida, Broward-Palm Beach New Times reports:
  • The State Attorney's Office has wrapped up its case against Mark Guerette, the guy written about in the New York Times and here on the Juice for his work leasing empty, foreclosed homes to families in need by way of an antiquated squatter's-rights law.

  • Guerette found around 100 foreclosed homes that had been neglected in Broward County, particularly North Lauderdale, and informed the banks that he intended to move in and start renting them out. He used "adverse possession," an old clause in the Florida Statutes that grants someone ownership of a neglected property if he takes care of it for seven years.

  • After multiple meetings with detectives and Broward prosecutors in which Guerette and his lawyer say they cooperated fully, he pleaded "no contest" to charges of organized fraud in the second degree. He was then adjudicated guilty without a trial and given two years' probation. Guerette says he wanted to avoid a trial because he needs to deal with his own foreclosure and take care of his two children. [...] As part of his plea deal, Guerette agreed not to file any more claims of adverse possession for two years.

For more, see Fraud Case Ends With Probation for Rogue Foreclosure Landlord Mark Guerette.

Norfolk Feds Score Guilty Plea From Foreclosure Rescue Operator Involving Sale Leaseback Equity Stripping Ripoffs

From the Office of the U.S. Attorney (Norfolk, Virginia):
  • Shanita Lacy, age 34, of Chesapeake, VA, pleaded guilty [] in Norfolk federal court to conspiring to commit mail and wire fraud in connection with a scheme to fraudulently obtain home mortgages.

***

  • According to court documents, Lacy admitted that, during 2007 and 2008, she conspired with others to fraudulently obtain eight mortgage loans worth $1,549,170. Through her Virginia Beach business known as Clean Slate Financial Services, Lacy targeted homeowners in financial distress with false promises of credit repair and action to enable them to save their homes from foreclosure.

  • Lacy then oversaw the sale of the homes at inflated prices to straw buyers, who Lacy helped to obtain mortgage loans based upon falsified income and down payment data. At or soon after the closings, Lacy liquidated and made off with the homeowners’ equity. Soon thereafter, the straw buyers defaulted on the mortgage loans and the homes were foreclosed upon.

For the U.S. Attorney press release, see Chesapeake Woman Pleads Guilty to “Foreclosure Rescue” Mortgage Fraud Scheme.

Tuesday, December 07, 2010

Bank of America In Middle Of Another Mortgage Servicing Screw-Up; Promises To Give Back Home It Now Admits Was Foreclosed On In Error

In Jamaica, Queens, author and New York Times' columnist Joe Nocera gives his account of another Bank of America foreclosure fiasco resulting in the wrongful foreclosure of the home of 73-year old Lilla Roberts, and the subsequent efforts to fight back with the help of her attorney, Elizabeth Lynch with MFY Legal Services.(1) Combined with some 'media heat', Bank of America and Fannie Mae ultimately acknowledged that foreclosing on Ms. Roberts home had been a mistake.(2)

He concludes his column with this less-than-optimistic observation:

  • Let’s face it: Ms. Roberts got a break. Because she had a dogged lawyer, who had the wit to get a New York Times columnist interested in her case, a terrible mistake was uncovered. As a result, an unjustified foreclosure may well be reversed. But it has to make you wonder how many other people have lost their homes because of similar mistakes. I can’t bear to venture a guess. It’s too sickening to contemplate.
For the story, see A Happy Ending to a Raw, but Common, Tale.

(1) MFY Legal Services is a not-for-profit law firm in New York City that provides free legal advice, counsel and representation to low-income New Yorkers on a wide range of civil legal issues, including housing, public benefits and entitlements, employment, mental health and adult home issues, consumer problems, and adoptions by foster care parents.

(2) According to the story, the notorious Buffalo, NY-based foreclosure mill law firm of Steven J. Baum, P.C. participated in the foreclosure process, and which, at one point, tried to get Ms. Roberts to waive her legal rights as a condition for a loan modification agreement.

Disbarred South Florida Title Attorney Gets 70 Months For Looting $2.7M From Escrow Account; Cash Intended To Pay Off Mortgages In R/E Closings

The South Florida Sun Sentinel reports:
  • Disbarred Boca Raton attorney James B. Hayes was sentenced Friday to 70 months in federal prison for stealing clients' funds. Hayes, who pled guilty in September to making false statements on residential real estate settlement documents, was also ordered to pay more than $2.7 million in resititution.

  • According to a release from U.S. Attorney Wilfredo Ferrer, Hayes, 57, a title attorney, withheld funds from clients and mortgage lenders during real estate transactions. The money was supposed to be used to pay off loans and cover transaction costs. The Florida Bar suspended his license to practice law last spring, but it found Hayes continued to practice law until he was permanently disbarred in August.

Source: Boca Raton attorney who stole $2.7 million from clients' funds jailed 70 months.

For the U.S. Attorney (Miami, Florida) press release, see Title Lawyer Sentenced For Stealing Trust Funds (Among those ccoperating in the investigation were The Florida Bar and title insurance companies Attorneys Title, Old Republic and Chicago Title).

Buyer Of Foreclosed Home Illegally Gives Unwitting Tenants The Boot Without Prior Notice, Ignoring Federal Protections Against Foreclosure Evictions

In Mableton, Georgia, WXIA-TV Channel 11 reports:
  • It should not have happened: A family's belongings in heaps; and the family -- Patrick Duff, Sasha Davis and their now 10-day-old daughter Mia -- evicted from their rented house in Mableton on Thursday morning, without any warning, they say, insisting they did not know that their landlords had lost the home in a foreclosure on the Cobb County Courthouse steps. "The rug was yanked out from under us," Duff said on Thursday.

  • "It says to me that something is very awry," Karen Gandolfo, an Atlanta mortgage and foreclosure consultant, said on Friday. "It says to me that there's the possibility that due process wasn't served."

***

  • Maggie Kinnear of Atlanta Legal Aid told 11Alive News that what happened to Duff and Davis "should not happen anymore," because of the federal law signed by President Barack Obama in May, 2009 called the "Protecting Tenants At Foreclosure Act." She said the law was meant to prevent evictions of tenants when the landlords lose the houses in foreclosure.

  • "If the tenant has a lease," which Duff and Davis did, from February, 2010 until February, 2011, "the law says they cannot be evicted after the foreclosure, they can stay on the property until the lease expires." If the buyer of the foreclosed house is not a financial institution or private investor, if it is someone who intends to move into it and live in it, then the tenants' lease is null and void, but "they must receive 90 days' notice to vacate," Kinnear said.(1)

***

  • Duff and Davis said about the only contact they've had with the [foreclosed landlords] in recent weeks was on Thursday afternoon, a few hours after the eviction, when the[y] gave them their deposit back, a check for $1,600 -- their first and last months' rent.(2)

For the story, see Family Evicted Despite Law Protecting Tenants From Landlord's Foreclosure.

(1) According to the foreclosure deed recorded in this matter, the foreclosure sale took place on October 5, 2010, and the property was purchased by an outfit called REO Funding Solutions, LLC.

(2) While failing to tell the family the home was in some stage of foreclosure wasn't a very nice thing to do on the part of the now-foreclosed landlord, the Federal Protecting Tenants At Foreclosure Act takes the former owner off the hook for any responsibility for illegal evictions in violation of the statute and places it on the purchaser at the foreclosure sale, and any subsequent purchasers. The attention given in this story to the former landlords for failing to inform the tenants of the foreclosure (but who at least refunded the family of their security deposit) should be redirected to the lowlife(s) who now own(s) the home, and, if applicable, the snoozing judge who rubber-stamped the eviction proceeding without regard to the legal rights under the Federal law of any non-owner-occupants in possession of the home.

'Zombie Debt' Buyer Slammed For $300K+ In Damages, $100K+ In Consumer's Attorney Fees For Pursuing Lawsuit On 'Stale' Debt

Buried in a story on explosion of debt collection lawsuits by 'zombie debt" buyers, which recently appeared in The Wall Street Journal, contained these excerpts:
  • Once debt buyers sue to retrieve debt, they are subject to state laws that impose a statute of limitations, often between five and seven years after the borrower stops making loan payments.

  • In 2007, CACV, a unit of debt collector SquareTwo Financial Corp., sued Timothy McCollough in state court in Montana to recover $3,800 on a credit card from J.P. Morgan Chase & Co., and another $5,500 in interest, collection costs and $480 in lawyer's fees.

  • Mr. McCollough wrote to the court in March 2008, explaining that he had been living on Social Security income since suffering a head injury in 1990. He says that he hadn't made any payments or used the credit card for more than eight years, putting his account beyond the state's statute of limitations for debt collection. He asked the court to dismiss the suit, saying: "This is the third time they have brought me to court on this account. Do I have to sue them so I can live quietly in pain?"

  • In April 2009, a judge awarded damages of $310,000 plus $108,000 in legal fees and costs to Mr. McCollough.

Source: Boom in Debt Buying Fuels Another Boom—in Lawsuit.

Monday, December 06, 2010

Pittsburgh Bankruptcy Chief Sanctions Lying Lawyer, Foreclosure Mill Firm For Filing Manufactured Docs; Orders Both To Report To Disciplinary Board

In Pittsburgh, Pennsylvania, the Pittsburgh Tribune Review reports:
  • The chief bankruptcy judge for Western Pennsylvania sanctioned an attorney and her Philadelphia law firm for filing deceptive documents in a foreclosure proceeding and then lying about them in a case against a Monroeville woman.

  • The firm filed copies of three key letters created after the fact and never sent to the homeowner or her lawyer, U.S. District Judge Thomas O. Agresti ruled. Under Agresti's order last week, attorney Leslie A. Puida and the firm Goldbeck, McCafferty and McKeever must report to the Disciplinary Board of the state Supreme Court, which could impose penalties.(1)

  • Puida could not be reached. The firm did not respond to a request for comment [last week]. A partner in the firm told the judge it initiated practices and procedures to avoid a recurrence.

For more, see Judge sanctions attorney, law firm in Monroeville case.

In related stories, see:

(1) Under Judge Agresti's order, the court declined to slam the firm with monetary sanctions (the Trustee suggested the firm cough up $50K), "[g]iven the magnitude of the financial loss which GMM has already experienced in the form of attorney fees and lost client revenue as a result of this matter" (around $400K in out-of-pocket expenses which will not be reimbursed by insurance coverage), saying that banging them for more cash "could jeopardize the continued operation of GMM, possibly threatening the livelihoods of innocent employees who had nothing to do with the violations addressed in the Rule."

Likewise, Judge Agresti declined to impose monetary fines on Puida or suspend her from practicing in the bankruptcy court in the state's Western District (the Trustee suggested one year), for reasons that can be described as practical (and possibly humanitarian) as set forth in his order.

Judge Agresti's ruling is the latest in the ongoing litigation involving Countrywide Home Loans, and alleged fabricated evidence, suspected forgeries, and requests for allegedly improper fees or payments from bankrupt homeowners filed in this and other cases he has overseen in the U.S. Bankruptcy Court in Pittsburgh. See:

(2) The following comment to the ABA Journal story was left by William A. Roper, Jr. which merits attention:

Widespread Unauthorized Practice Of Law Under Cover Of Philadelphia Foreclosure Mill To Throw Title To Foreclosed Homes Into Question?

Attorney Abigail Field writes at AOL's Daily Finance:
  • Two Pennsylvania cases, one state and one federal, have exposed new types of document problems in foreclosure cases. One of the cases has potentially transformative consequences for thousands of troubled Pennsylvania homeowners.

  • At the center of each is the same law firm: Goldbeck McCafferty & McKeever (GMM). A lawsuit filed by Patrick Loughren against GMM details how the firm allowed -- and perhaps still allows -- nonlawyers in its firm to file and prosecute thousands(1) of foreclosures. As long as a lawyer supervises foreclosure filings, and at least reads them before they're submitted to the court, that is acceptable.

  • But Loughren is suing because all three named partners of GMM, Joseph Goldbeck, Gary McCafferty and Michael McKeever, have admitted under oath -- during depositions last September and in a separate case in December 2009 -- that no attorney ever read the filings.(2) The partners made clear that the practice has gone on for the past several years.

***

  • [L]oughren's complaint is so detailed, and the partners' admissions so damning, that if this case is decided on the merits, it's hard to see how Loughren could lose. If Loughren does win, the consequences could be far-reaching: All current foreclosure actions filed by GMM could be dismissed on the grounds that lawsuits filed by nonlawyers are a "nullity," meaning they don't count. That's hundreds, potentially thousands, of cases across Pennsylvania.

  • All completed foreclosures that were brought using this method could also be called into question for the same reason, and given that the practice has been going on for years, a Loughren win could throw into question the title to thousands of Pennsylvania properties. In addition, any homeowners who paid legal fees to the banks and GMM during their foreclosures could get that money back.

***

  • Although the practice of having nonlawyers file suit wasn't at issue in that case, learning of it upset U.S. Bankruptcy Court Judge Thomas Agresti [in an unrelated case] so much he wrote in his Oct. 5, 2010 order:(3)

    "During the trial the Court also became aware of some apparently routine practices at GMM that raise issues that cannot be ignored. McKeever testified to a procedure at his firm whereby foreclosure complaints are prepared and filed by non-attorneys and never reviewed by an attorney, even though the "signature" of an attorney appears on the document. . . . Even though these actions are not being filed in this Court. . .concern for our sister courts in this Commonwealth compel the Court to at least make publicly known what it learned during the trial. Furthermore, often these fundamentally flawed foreclosure actions, form the basis for related relief in this Court should the state court defendant subsequently file a bankruptcy petition. Therefore, the Court is concerned about the continuation of this practice by GMM."

For more, see Thousands of Pennsylvania Foreclosures Could Be on Shaky Ground.

See also, ABA Journal: Law Firm Accused of UPL, After Admittedly Filing Foreclosures Without Attorney Review.

(1) Robinson v. Countrywide Home Loans, Inc. et al. (W.D. Pa. Motion to Compel - filed Oct. 8, 2010).

(2) Loughren v. Lion, et al. (Court of Common Pleas, Allegheny County, Pennsylvania - Complaint In Equity).

(3) DeAngelis v. Countywide Home Loans, Inc., et al. (In re Hill) (Bankr. W.D. Pa. Oct. 5, 2010 - Memorandum Opinion And Order sanctioning Countrywide).

Westchester County Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff Leads To Six Convictions, One Acquittal; One Mistrial

In Westchester County, New York, the Westwood-Washington Township Patch reports:
  • Westwood resident Wilma Shkreli, also known as Wilma Gecay, will be sentenced Tuesday for her role in a $1.4 million mortgage fraud scheme in Westchester County, N.Y. Shkreli, 33, pled guilty in April to one count of Grand Larceny in the Second Degree, a class C Felony, according to the Westchester County District Attorney's Office. She could now be sent to New York state prison for between 1 1/3 and three years. She also faces a fine of $34,000.

  • Four other defendants in the case pled guilty. One defendant was found guilty at trial, another was acquitted and a third proceeding was declared a mistrial.(1)

***

  • Charges came after a nine-month investigation by the District Attorney's Office and the New York State Banking Department's Criminal Investigations Bureau. The defendants allegedly defrauded four families and two mortgage lenders in Westchester County out of $1.4 million from March 2004 to January 2007.

  • According to officials, the defendants convinced property owners facing foreclosure to sign over their homes with the option of re-purchasing them in one to two years. The investigation found four families that were victims: from Croton-on-Hudson, Yorktown Heights, Cortlandt Manor and the City of Mount Vernon, all in Westchester County, N.Y.(2)

Source: Westwood Resident To Be Sentenced In New York Mortgage Fraud Case (Wilma Shkreli faces up to three years in prison).

See also, The Journal News: 1 convicted, 1 exonerated, 1 mistrial in mortgage-fraud trial (when link expires, TRY HERE and TRY HERE).

(1) The other defendants in this racket:

  • Amerigo DiPietro, Brewster, N.Y.: Pled guilty Aug. 23 to three counts of Grand Larceny in the Second Degree, one count of Scheme to Defraud in the First Degree and one count of Conspiracy in the Fourth Degree. DiPietro faces five to 15 years in state prison and a forfeiture order of $243,795. He will be sentenced Jan. 31, 2011.
  • Doreen Swenson and Herbert "Phil" Hall, Tarrytown, N.Y.: Pled guilty May 4 to one count of Grand Larceny in the Second Degree. The husband and wife who posed as foreclosure rescue specialists were sentenced to two to six years in state prison Aug. 5.

The following attorneys were also prosecuted in this matter:

  • Attorney David Reback, Rye Brook, N.Y.: Pled guilty July 23 to four counts of Grand Larceny in the Second Degree, one count of Scheme to Defraud in the First Degree and one count of Conspiracy in the Fourth Degree. He faces five to 15 years in state prison and a forfeiture order of $50,000 and will be sentenced Jan. 31, 2011.
  • Attorney Eileen Potash, Fresh Meadows, N.Y.: Convicted Nov. 29 on one count of Conspiracy in the Fourth Degree. Potash faces 1 1/3 to three years in state prison and will be sentenced Feb. 28, 2011.
  • Attorney Frank Corigliano, Newtown, Conn.: Was acquitted of the charges against him following a jury trial.
  • Attorney Mildred Didio, New York, N.Y.: Remains charged with two counts of Grand Larceny in the Second Degree, one count of Scheme to Defraud in the First Degree and one count of Conspiracy in the Fourth Degree. Her case resulted in a mistrial Nov. 30 and will reportedly be retried, according to this story.

(2) For earlier reports on this story, see:

2 Sale Leaseback Peddling Cops Accused Of Consumer Fraud Violations; "Equitable Mortgages" Required Disclosures Under TILA, HOEPA: Arizona AG

In Phoenix, Arizona, Courthouse News Service reports:
  • Two men defrauded 140 homebuyers by acquiring title to their homes through so-called "sale-leaseback," then selling the homes elsewhere for hefty profits, the Arizona attorney general says. The state says Lee Brent Shaw and Mark P. Tallman and their companies, Better Choice Investments and Better Solutions, stripped their victims of their equity and their homes.(1)

  • "This case involves an equity stripping scheme that defrauded over 140 Arizona homeowners, ultimately causing them to lost both their home and their home's equity," the complaint states. "Defendants obtained the homes through a foreclosure rescue scheme aimed at vulnerable, often low-income homeowners facing imminent foreclosure. In what is known as a sale-leaseback, defendants took title to the homes after the payment of the arrears on the homeowner's mortgages, in exchange for allowing the homeowner to stay in the property as a tenant. This transaction, also known as an equitable mortgage, violates Arizona law,"(2) the state attorney general says in Maricopa County Court.

  • The state claims that no homeowners were told that their home would be immediately sold to an investor, nor that that if a trustee's sale took place "they would be entitled to excess proceeds," nor were they given the required information by the Homeowners Equity Protection Act or the Truth in Lending Act.(3)(4)

For more, see State Busts Sale-Leaseback Home Scheme.

For the lawsuit, see State of Arizona v. Shaw, et al.

(1) Earlier media reports identify this duo as police lieutenants with the Phoenix Police Department. See:

(2) In a recent New Jersey case involving only one sale leaseback deal (see 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), substantially all of the court-awarded damages granted to a homeowner-couple were attibutable to actual damages for the stripped equity of $116,791.49 (which was then tripled to $350,374.47 pursuant to the applicable state consumer fraud statute), and $293,836.17 in statutory damages for violations of the Federal Truth In Lending Act, Federal Home Ownership and Equity Protection Act, and a state consmer lending law.

I wonder if anyone at the Arizona Attorney General's office has attempted to calculate the financial exposure that this duo faces resulting from the 100+ ripoffs they've been accused of perpetrating.

For the treatment of sale leaseback arrangements as equitable mortgages, see generally:

(3) The pair was also accused of acting as unlicensed mortgage brokers and mortgage bankers.

(4) In this case and others (assuming the scammed homeowner can't establish that the conveyance is absolutely void, such as in the case involving forged land documents - in which case all subsequently acquired interests in the home are also absolutely void) where the scammed homeowner retains and maintains continued, undisturbed possession of the home after signing the 'ripoff' documents conveying title to another, a strong case can arguably be made that a successful attempt to void the title conveyance to the scammers could also lead to the voiding of any subsequent mortgage placed on the home, even if the lender had no actual knowledge of the scam and claims to have the protection of the recording statutes as a bona fide purchaser.

In Arizona, (as well as in most other jurisdictions), any purchaser of real estate, or lender acquiring a security interest therein, has a duty to conduct a physical inspection of the realty, 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 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 could potentially:

  • leave the purchaser's or lender's interest in the property subject and subordinate to any legal rights and equities that the scammed victim can establish, and

  • disqualify the subsequent purchaser or lender from the protections accorded a bona fide purchaser or bona fide encumbrancer.

See, for example, Bianconi v. Smith, 3 Ariz. 320; 28 P. 880 (1892):

  • "Common, ordinary business prudence would have suggested some investigation as to the source of appellee's title, and some inquiry as to who was in possession, before purchasing the property; and appellant's neglect of these indicated either gross carelessness or a degree of credulity not usually exhibited by men of ordinary experience."

and Keck v. Brookfield, 409 P.2d 583 (Ariz. App. Ct. 1965):

  • A purchaser of land in possession of one other than the holder of the record title is compelled to inquire of the possessor by what title he holds possession, or he will be held to have taken subject to whatever rights a proper inquiry would disclose that the possessor had. Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574, 577, 296 P. 260 (1931).

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 Arizona, (for which there is case law dating back over a century), 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 strategies to attacking this type of scam in litigation brought on behalf of the screwed-over homeowner, see:

Trio Charged In Foreclosure Rescue Scam Involving Fractional Interest Deed Transfers, Abuse Of Bankruptcy Process Affecting $750M In Mtgs, 1500 Homes

In Southern California, the Los Angeles Times reports:
  • Federal prosecutors have accused three Southern California residents of running a massive foreclosure rescue scam that used phony bankruptcy filings to stall foreclosures of nearly 1,500 homes, involving $750 million in mortgages.
  • The three suspects allegedly found homeowners on the verge of foreclosure and promised to ward off the proceedings for fees usually amounting to $1,500 a month.
  • Prosecutors said the suspects secretly assigned partial ownership of the participating homes to fictitious people and filed bankruptcies using the fake names, forcing lenders to delay foreclosures for months or in some cases years.
  • Irving Cohen, 74, of Van Nuys and Robin Phillips, 53, of Claremont have agreed to plead guilty to bankruptcy fraud charges, according to the U.S. attorney's office of the Central District of California. A third suspect, Darwin Bowman, 74, of Van Nuys was indicted in September and is awaiting a Feb. 8 trial at the federal courthouse in Los Angeles.
***
  • The homeowners, who responded to advertisements placed by the suspects, did not know about the false bankruptcies or that fractional ownership of their homes had been transferred to fictitious people, prosecutors said. "The defendants in this case exploited bankruptcy rules as they methodically victimized lenders in their scheme and targeted vulnerable homeowners while enriching themselves," said Steven Martinez, assistant director in charge of the FBI's Los Angeles office, which investigated the case.
For more, see 3 Southern Californians accused of running foreclosure rescue scam (The suspects allegedly used phony bankruptcy filings to stall foreclosures of nearly 1,500 homes, involving $750 million in mortgages).

See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a report describing fractional interest deed transfer and other foreclosure scams involving the abuse of the bankruptcy courts.

Go here for other posts on fractional interest deed transfer, foreclosure rescue bankruptcy scams.

Sunday, December 05, 2010

"Concern For Our Sister Courts In This Commonwealth" Cause PA Bkptcy Judge To Ring Warning Bell Regarding Unreviewed F'closures Filed By Non-Lawyers

In an October 5, 2010 order issued from a U.S. Bankruptcy Court in Pittsburgh, Pennsylvania, Chief Judge Thomas P. Agresti expressed his concerns over certain dubious practices by Philadelphia-based foreclosure mill law firm Goldbeck, McCafferty and McKeever ("GMM") in the following excerpt:
  • During the trial the Court also became aware of some apparently routine practices at GMM that raise issues that cannot be ignored. McKeever testified to a procedure at his firm whereby foreclosure complaints are prepared and filed by non-attorneys and never reviewed by an attorney, even though the “signature” of an attorney appears on the document. 12/8 Tr. at 83-84.

  • This would seem to be a violation of the Pennsylvania Rules of Civil Procedure, which provide that the signature of an attorney on a document filed with a Pennsylvania court is a certification that the document has been read by the attorney. See Pa.R.Civ.P. 1023.1(c).

  • Even though these foreclosure actions are not being filed in this Court and thus do not expose GMM to sanctions, concern for our sister courts in this Commonwealth compel the Court to at least make publicly known what it learned during the trial. Furthermore, often these fundamentally flawed foreclosure actions, form the basis for related relief in this Court should the state court defendant subsequently file a bankruptcy petition. Therefore, the Court is concerned about the continuation of this practice by GMM.(1)

For Chief Judge Agresti's order, see DeAngelis v. Countywide Home Loans, Inc., et al. (In re Hill) (Bankr. W.D. Pa. Oct. 5, 2010 - Memorandum Opinion And Order sanctioning Countrywide).

In a related story, see Thousands of Pennsylvania Foreclosures Could Be on Shaky Ground.

(1) Judge Agresti's ruling is the latest in the ongoing litigation involving Countrywide Home Loans, and alleged fabricated evidence, suspected forgeries, and requests for allegedly improper fees or payments from bankrupt homeowners filed in this and other cases he has overseen. See:

Improper Invocation Of Court Jurisdiction, Grant Of Void Judgments Of No Concern To Some Judges In Unchallenged Foreclosure Actions

In Central Florida, Sarasota Herald Tribune columnist Tom Lyons writes:
  • Circuit Judge Lee Haworth says a judge has to be neutral in foreclosure cases, and can't act as a defense attorney when there isn't one. But does being neutral really mean a judge must be gullible when there is no one in court to point out obvious problems with documents filed by a bank?(1)

  • I'm not convinced neutrality forces judges to ignore major and possibly fraudulent errors in mortgage transfer documents, especially when foreclosure mills have become infamous for filing them.

***

  • Aside from it being impractical to scour documents in every foreclosure case, [Haworth] says it's improper for judges to question such evidence [of dubious documents] even when they notice it, unless a defense lawyer or defendant raises the issue. Haworth knows some judges -- ones he describes as more activist than he is -- disagree. "Each judge makes their own call," he said.(2)

For more, see Being neutral doesn't mean being gullible.

(1) See The Tampa Tribune: Judges fulfill proper role in state's foreclosure crisis for a similar position expressed by another Florida chief judge, J. Thomas McGrady, the chief judge of the Sixth Judicial Circuit of Pasco and Pinellas counties.

(2) Said another way, Judge Haworth's position is that trial judges have absolutely no obligation to determine whether:

  • a plaintiff in a lawsuit has properly invoked the jurisdiction of the court,
  • a controversy between the parties named in the lawsuit does, in fact, exist, and
  • the necessary parties to the alleged controversy have been brought before the court

unless those issues have been specifically raised by a defendant.

Foreclosing lenders' failure to properly establish that it had the right to bring the foreclosure action appears to lead to the conclusion that such an action lacks subject matter jurisdiction, and the judgment rendered therein is null, void, and with no effect.

See Cone v. Benjamin, 157 Fla. 800; 27 So. 2d 90 (Fla. 1946) for one example of legal precedent in Florida supporting the proposition that, with respect to the effect it may have on real estate, a judgment in favor of a party invoking the jurisdiction of the court (plaintiffs in foreclosure actions, for example) who had no right, title or interest in the real estate, nor any duty to perform with reference thereto, is without jurisdiction, and is null and void, and wholly without effect. The relevant excerpts from the Florida Supreme Court ruling in this case follow (bold text is my emphasis, not in the original text):

  • Our view is that the decree in the chancery suit, in so far as it directly affected the real estate, or any right or title therein, was void, because the complainant administrator, who invoked the jurisdiction of the court, had no right, title or interest in the real estate, nor any duty to perform with reference thereto. See 39 Am. Jur. 858-863; Lovett v. Lovett, 93 Fla. 611, 112 So. 768.

***

  • For the reason above pointed out, we hold that, under Section 4898 C.G.L. of 1927, the said chancery decree was ineffective as against these appellants insofar as it authorized the administrator, under the supervisor and director of the County Judge, to distribute the personal property to the known heirs of the husband, and that it was wholly without effect on the title to the real estate.

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

In the above-referenced case, Lovett v. Lovett, 93 Fla. 611, 112 So. 768 (Fla. 1927), the Florida Supreme Court discusses what it is for a court to have "subject matter jurisdiction" in a particular case, and concludes its discussion with this summary (bold text is my emphasis, not in the original text):

  • So that, when it is said that a Court has jurisdiction of the subject-matter of any given cause, if these words are to be given their full meaning, they imply, generally speaking, (1) that the Court has jurisdictional power to adjudicate the class of cases to which such case belongs; and (2) that its jurisdiction has been invoked in the particular case by lawfully bringing before it the necessary parties to the controversy, and (3) the controversy itself by pleading of some sort sufficient to that end; and (4) when the cause is one in rem, the Court must have judicial power or control over the res, the thing which is the subject of the controversy. This, is a general way, is what we mean when we say that a Court has "jurisdiction of the subject-matter and the parties" to a cause.

Where the party invoking the jurisdiction of the court by filing the foreclosure action fails to establish that it had any right, title or interest in the real estate, or any duty to perform with reference thereto, it seems clear that neither:

  • the necessary parties to the controversy have been lawfully brought before the court, nor
  • the Court has "judicial power or control over the res, the thing which is the subject of the controversy"

two of the prerequisites for having subject matter jurisdiction over the case that are necessary for rendering valid judgments.

Recent Bankruptcy Court Ruling Provides Ammunition For Both Financially Strapped Borrowers, Mortgage-Backed Security Investors

Bloomberg News reports:
  • Testimony by a Bank of America Corp. employee in a New Jersey personal bankruptcy case may give more ammunition to homeowners and investors in their legal battles over defaulted mortgages. [...] In the case, U.S. Bankruptcy Judge Judith H. Wizmur on Nov. 16 rejected a claim on the home of John T. Kemp, ruling his mortgage company, now owned by Bank of America, had failed to deliver the note to the trustee. That could leave the trustee with no standing to take the property, and raises the question of whether other foreclosures could similarly be blocked.

***

  • Wizmur’s ruling is being scrutinized by lawyers for borrowers seeking to stall repossessions as a way to press lenders to modify their debt. Attorneys for homeowners have already won cases by calling into doubt the legitimacy of affidavits used to take back properties. “If this is correct, many, many, many foreclosures already occurred in which this plaintiff didn’t have the note,” said Bruce Levitt, the South Orange, New Jersey, attorney representing Kemp. “This could affect thousands or hundreds of thousands of loans.”

***

  • The Kemp case is also being examined by lawyers for investors in mortgage-backed securities. Owners of the bonds have been cooperating in an effort to force sellers to take back loans, saying they were misled about their quality. The Wizmur ruling may give investors an additional opportunity to push for mortgage buybacks on grounds that the bonds weren’t created in keeping with securitization contracts. “It may mean investors who think they bought mortgage- backed securities bought securities that aren’t backed by anything,” said Kurt Eggert, a professor at Chapman University School of Law in Orange, California.

For more, see BofA Mortgage Morass Deepens After Employee Says Notes Not Sent.

Judge Slams 'Zombie Debt' Buyer In Class Action Over Phony Robosigned Affidavit Filed In Credit Card Collection Lawsuit

The Wall Street Journal reports:
  • Employees in Encore [Capital Group']s Midland [Funding] subsidiary work with outside law firms to file debt-collection suits. Midland has a proprietary computer system called "You've Got Claims" that generates unsigned affidavits. In these documents, which are signed and submitted to the court, employees attest that borrowers owe the amount of debt that Midland is suing to collect.

  • In a deposition filed as part of a civil lawsuit against Midland, employee Ivan Jimenez testified that he signs 200 to 400 affidavits a day. The percentage of documents checked for accuracy against other records is "very few and far between," he says. "As far as what I deal with, they just come from the printer as far as where we get them."

  • U.S. District Judge David A. Katz ruled last year that the debt-collection company violated federal and Ohio laws by trying to collect $4,516.57 in credit-card debt using a phony affidavit. The company certified that the debt was genuine "based entirely" on the printout, rather than personal knowledge of the debtor, the judge concluded.

  • He refused a request to throw out the lawsuit, which won class-action status. Judge Katz wouldn't comment on specifics of the case, though he says it shows that lawyers for borrowers should "be more diligent in looking to the underlying documentation" for debts being pursued by collectors.(1)

Source: Boom in Debt Buying Fuels Another Boom—in Lawsuits.

(1) Presumably, the Federal law violated here was the Fair Debt Collection Practices Act. I'm surprised there isn't a flood of class action 'sightings' alleging 'Fair Debt' violations involving robosigned affidavits in the context of mortgage foreclosure actions.

Florida Bar Considers Whether Foreclosure Defense Lawyer Taking Mortgage On Home The Subject Of Legal Action To Secure Fees A Violation Of Ethics Rule

In South Florida, the Daily Business Review reports:
  • Foreclosure defense attorney Peter Ticktin has told the Florida Bar that he has not done anything wrong by signing agreements that give him the right to take on mortgages on his client’s houses if he wins their foreclosure cases. The Bar launched an investigation of Ticktin after the New York Times reported earlier this month that his firm, the Ticktin Law Group, was obtaining second mortgages as payment from homeowners fighting foreclosure lawsuits [see Taking On a Second Mortgage to Pay the Foreclosure Lawyer].

  • Ticktin said the Bar mailed him a copy of the article asking him to "explain" the matter. Last week, Ticktin sent a letter to the Bar drafted by his attorney, Kevin Tynan, claiming the method he uses to receive payment to defend clients from foreclosure is a "simple contingency fee." "If he wins and defeats the efficacy of a mortgage, he is entitled to a share of that win," said the letter addressed to Florida Bar counsel Theodore P. Littlewood.

  • Francine Walker, a spokeswoman at the Florida Bar, said in an email the mortgages potentially violate a rule regulating The Florida Bar that states: "A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client."

  • The rule provides an exception stating lawyers may "acquire a lien granted by law to secure the lawyer’s fee or expenses; and contract with a client for a reasonable contingent fee."

***

  • According to the letter by Tynan, the only issue "that may be of concern" to the Bar is whether Ticktin’s retention agreement "to acquire a proprietary interest in the cause of action," violates the rules of professional conduct. According to Tynan, it does not.

For more, see Attorney Defends Taking On Mortgages as Contingency Fee.

Saturday, December 04, 2010

The 'Piling On' Continues For S. Fla. Foreclosure Mill As Fired Workers File Suit, Seek Class Action Status For Getting The Axe Without Proper Notice

In Plantation, Florida, The Miami Herald reports:
  • Four former employees of the Law Firm of David J. Stern and its' related foreclosure processing company -- DJSP Enterprises, have filed a federal lawsuit claiming they were not given proper notice before being fired. The employees allege Stern violated the Worker Adjustment and Retraining Notification Act, or WARN, which mandates that employers give employees 60 days notice before being terminated.(1) [...] Attorneys for the employees are asking for the case to be given class action status.

For more, see Former employees suing prominent Broward attorney.

(1) The Worker Adjustment and Retraining Notification Act (WARN) protects workers, their families, and communities by requiring most employers with 100 or more employees to provide notification 60 calendar days in advance of plant closings and mass layoffs. Employees entitled to notice under WARN include managers and supervisors, as well as hourly and salaried workers. WARN requires that notice also be given to employees' representatives, the local chief elected official, and the state dislocated worker unit.

Troubles Faced By Unraveling S. Florida Foreclosure Mill A Blessing For 100s Of Homeowners As Some Cases Involving Law Firm Put On Indefinite Hold

In Central Florida, the St. Petersburg Times reports:
  • Hundreds of mortgage mediation cases in the Tampa Bay area and other parts of Florida have been put on indefinite hold because of growing problems at a law firm that once represented many of the nation's biggest banks.

  • Beset by allegations of sloppy and fraudulent documentation, the David J. Stern Law Firm has lost some of its lender clients and must withdraw from their foreclosure cases. Until the banks hire new lawyers, efforts to mediate agreements with homeowners in those cases cannot continue.

  • The delay is a mixed blessing for the homeowners. They will be able to stay in their houses longer, though likely at the cost of mounting interest and late fees. But the need to withdraw from so many cases marks another chapter in the stunning decline of the Stern firm, which once handled a fifth of all Florida foreclosures and made its founder a multimilllionaire.

For more, see Mortgage mediation cases on hold as fraud allegations unravel David J. Stern Law Firm.