Wednesday, February 09, 2011

Victimized Marine To Testify Today At Congressional Hearing Probing Allegations That JPMorgan Chase Ripped Off Active Duty Servicemembers

McClatchy Newspapers reports:

  • U.S. Marine Capt. Jonathon Rowles of Beaufort is to appear today before a congressional committee investigating allegations JPMorgan Chase repeatedly violated a federal law designed to protect active-duty military personnel from financial stress.(1)

  • Rowles has filed a lawsuit in federal court against a subsidiary of the nation's second-largest bank, alleging it violated the law during his recent deployment by threatening to foreclose on his home, requiring him to verify his active-duty status every 90 days for more than two years and aggressively seeking to collect more than he owed on a 2004 mortgage for a home in Colorado.

***

  • Rowles, a fighter-jet pilot stationed at Marine Corps Air Station Beaufort, and his wife, Julia, are scheduled to testify before the House Committee on Veterans Affairs, [his lawyer, Bill] Harvey said.

***

  • The House committee will investigate the bank's actions, said its chairman, U.S. Rep. Jeff Miller, R-Fla. "The Servicemembers Civil Relief Act has been in place for decades, and I cannot believe that one of the nation's largest financial institutions appears to be disregarding the protections offered by that law," Miller said in a Jan. 21 announcement of the hearing.

For more, see Marine to testify to bank misdeeds.

(1) The Servicemembers Civil Relief Act allows active-duty troops to receive mortgage-rate reductions and protects them from foreclosure.

Citigroup Folds By Settling Suits, Coughing Up Homeowner Legal Fees Arising From Dubious Loan Document Challenges In Consumer Bankruptcy Cases

Bloomberg reports:
  • Citigroup Inc., the third-largest U.S. bank, settled or lost at least five claims in 2010 brought by borrowers who accused the bank of filing fraudulent mortgage documents provided by a Texas firm.(1)

  • In the most recent settlement in December, a bankrupt homeowner in Wappingers Falls, New York, challenged Citigroup’s use of a mortgage “assignment,” which shows the transfer of ownership of a mortgage. It was signed by an employee at Orion Financial Group Inc., a Southlake, Texas, firm that provides document services to lenders.(2)

  • The document was “of fraudulent nature and questionable origin,” the borrower’s attorney, Linda Tirelli, wrote in an August objection to the bank’s claim at U.S. Bankruptcy Court in New York. Citigroup created and filed the assignment after proceedings began because it otherwise couldn’t prove its right to collect the debt, she wrote in an e-mail. The bank denied the allegations and didn’t admit liability in the settlement.

***

  • In the Wappingers Falls case, Citigroup said it was owed about $390,000 from a mortgage on a property in Chapter 13 bankruptcy. The bank filed an assignment prepared by Orion to back the claim. This document claimed another lender had assigned the loan to CitiMortgage on June 24, more than three weeks after the bankruptcy began.

  • In settling the borrower’s objections, the bank didn’t admit wrongdoing. It paid Tirelli’s $35,000 legal fees, reduced the mortgage principal by $29,000 and chopped the interest rate almost in half, to 3 percent.

***

  • A lender such as Citigroup may settle to avoid scrutiny of its foreclosure practices during litigation, said April Charney, a senior attorney with Jacksonville Area Legal Aid in Jacksonville, Florida, who instructs lawyers on representing consumers in foreclosure and bankruptcy cases.

  • They’re afraid of going through the process,” she said. A risk-based analysis may focus on the question, “Do I risk going in front of the judge and getting an order that is going to beam around the whole world?” she said.

For more, see Citigroup Settles Fraud Cases Tied to Texas Mortgage Assigner.

(1) Reportedly, Citigroup paid almost $82,000 in opponents’ legal costs when settling challenges to four bankruptcy claims that used Orion letters in 2010, according to agreements filed with federal bankruptcy courts in New York and Arkansas. According to the story, the bank reduced interest rates on the remaining debt by an average of 49 percent, while cutting the outstanding mortgage balance in three cases by a combined $55,000, the filings show and it still faces claims tied to an Orion-prepared assignment in a case at U.S. Bankruptcy Court in Aberdeen, Mississippi.

(2) Orion is based in Southlake, Texas, a city about 30 miles northwest of Dallas and provides “mortgage assignment, lien release and document retrieval services” to the mortgage industry, according to its website, the story states.

Foreclosure Mills, Attorneys Face Hot Water In Alleged Illegal Fee-Splitting Operation

AOL's DailyFinance reports:
  • An awful lot of attorneys are in deep trouble, two companies will be destroyed, two more will be deeply damaged and a venture capital firm faces big losses, if the allegations in a lawsuit updated Monday are true.

  • Jonathan and Darlene Thorne accuse the companies, LPS Default Solutions and Prommis Solutions, and their attorneys of having an illegal and fraudulent business model through which non-attorneys secretly practice law and illegally share legal fees.

  • Because many of these fees are for bankruptcy work and are ultimately paid by the debtor, the suit explains, the business model isn't just illegal -- it's also a fraud on the bankruptcy court system in violation of the bankruptcy code, rules and processes.

***

  • If the Thornes win their case, the business model of LPS Default Solutions and Prommis Solutions will be illegal, driving them out of business. [...] In addition, all of the thousands of attorneys that have contracted with the companies -- and thus shared fees with them -- could face discipline, including disbarment.

  • Finally, the owners of each, Lender Processing Services for Default Solutions and Prommis Solutions Holdings plus Great Hill Partners, could take massive financial hits. That's because, as the blog Naked Capitalism explained when the suit was originally filed, disgorgement is the typical remedy for illegal fee-sharing. Since every dollar of revenue both foreclosure subsidiaries have ever earned comes from allegedly illegally shared attorney's fees, the companies and their parents could have to pay it all back. It's hard to see how the highly leveraged LPS could repay the billions it has earned from its foreclosure subsidiary.

***

  • The root of the alleged business model is to do have non-lawyers perform lawyers' work for much less money, and then have real lawyers nominally sign off on the documents to disguise the fact that the lawyers aren't doing the work.

  • As little respect as the general public may have for lawyers, the legal profession does involve skill and a deep base of knowledge: Even legal tasks that look like empty-headed blank filling -- completing an assignment of mortgage, for example -- are not. Properly transferring the ownership of real property is crucially important, and the failure to do so in possibly millions of cases across the country could trigger yet another stage of the housing meltdown as clouded titles thwart sales or force down prices to account for the attendant risks.

For more, see Are Foreclosure Attorneys Illegally Outsourcing Legal Work to Non-Lawyers?

Texas Appeals Ct: Trial Judge's Refusal To Grant Continuance To Hospital-Bound, MS-Suffering, Pro-Se Renter In Eviction Action An Abuse Of Discretion

In Beaumont, Texas, The Southeast Texas Record reports:
  • Last Thursday, the Ninth Court of Appeals in Beaumont set aside an order evicting Sheila Barnes, who suffers from multiple sclerosis, from her Jefferson County apartment.

  • In July 2009, Barnes appealed a default judgment in a forcible detainer action sought by Stone Way L.P., court papers say. Court records show Barnes signed a lease for an apartment unit owned by Stone Way. During her occupancy, Barnes and management had various disagreements. Eventually, Stone Way filed a forcible detainer action, claiming Barnes violated the terms of her lease.

  • Judge Alfred Gerson [...] set the trial date for June 22, 2009. Barnes filed motions for continuance on health grounds. "There is evidence in the record that she suffers from multiple sclerosis and was experiencing health problems related to that condition prior to the June and July trial settings," states the Ninth Court's Jan. 27 opinion, authored by Justice David Gaultney.

  • "Barnes was hospitalized in June 2009 and again in July 2009. The record contains a June 1, 2009, letter from her neurologist indicating that Barnes was incapacitated by an 'exacerbation' of multiple sclerosis, that she was undergoing treatment, and that she was 'unable to attend any hearing at this time.'"

  • Court records show she spent most of June and July in hospitals in Beaumont and Houston. On July 16, 2009, Barnes, who was without counsel at the time, attended a hearing on her continuance motion, explaining she was ill.

  • However, Judge Gerson denied the motion, allowing the trial to proceed on July 22, 2009, which Barnes could not attend, court records show. "The trial court was informed that Barnes was in the hospital, and the trial judge indicated he was aware of that fact," the opinion states.

  • "Stone Way presented its case, and the trial court rendered a default judgment in Stone Way's favor. Barnes was evicted from her apartment."

  • However, now the Ninth Court contends Stone Way did not meet its burden of proving undue delay and that the trial court abused its discretion by denying Barnes' motion for new trial, which was filed immediately following the judgment. "We reverse the default judgment and remand the case to the trial court for a new trial," the opinion states.(1)

  • Attorneys Jeffery T. Nobles and Polly B. Graham of the Houston law firm Haynes and Boone represent Barnes [in the appellate proceedings].(2)

Source: Appeals court sets aside order evicting sick woman from apartment.

(1) For the ruling, see Barnes v. Stone Way Limited Partnership, No. 09-09-00328-CV, 2011 Tex. App. LEXIS 553 (Tex. App. 9th Dist. Beaumont, January 27, 2011).

(2) Haynes and Boone is an international corporate law firm with more than 550 lawyers in 12 global offices and 30 major legal practice areas, according to its website.

Disappearing Mortgage Payoff Proceeds From Home Refinancing Leaves Another Another Family In Trouble As Sticky-Fingered Closing Attorney Sits In Jail

A recent story in the Milwaukee Journal Sentinel described the financial wreckage created by Peter Elliott, a now-disbarred Wisconsin attorney currently serving a 10-year federal prison sentence for embezzling more than $3.6 million from clients. The following excerpt describes one of Elliott's dirty deeds when acting in the capacity of a closing attorney handling a refinance:
  • When Nicole and Robert Wagner refinanced their home the previous year, Elliott - the closing attorney hired by National City Lenders - failed to use the new loan proceeds to pay off Wells Fargo, which wrote the original mortgage for their Hubertus home.

  • Elliott even made monthly payments to Wells Fargo for more than a year while the Wagners were making their monthly payments to National City, according to Nicole Wagner and court records. Today the Wagners have paid several thousand dollars to a new lawyer as they try to clean up the mess and fight off attempts by Wells Fargo to foreclose on their home.

  • Wells Fargo filed for foreclosure in 2009, a bid that was dismissed. In December, Washington County Circuit Judge Andrew Gonring rejected a motion to reopen the foreclosure.

  • Wagner said the case is on her mind each day and has emotionally drained all members of the family. Selling the home would be difficult, if not impossible, because two lenders may argue they have open mortgages on the property. "Nobody knows who owns it," Wagner said. "I don't know who owns it."

  • The problem has even affected her children, ages 7 and 9, who have wondered whether the family would have to move. "I keep thinking that this can't be true - there has to be something wrong, there is no way this is happening to us," Wagner said. "I never thought we would be sued or be in foreclosure  . . . I'm so depressed it's ridiculous."(1)

Source: Lawyers' clients kept in dark on past issues (Wisconsin keeps complaints about lawyers secret, sometimes at a high cost).

(1) In an associated report from the Milwaukee Journal Sentinel, see Convicted attorneys are still practicing (At least 135 attorneys with criminal convictions are practicing law today in Wisconsin - including some who kept their licenses while serving time and others who got them back before they were off probation, a Journal Sentinel investigation has found).

Tuesday, February 08, 2011

Ohio Appeals Court Snags Another Rubber-Stamping Trial Judge Screwing Over Pro Se Homeowners In F'closure; Reverses Lower Court Over Faulty Affidavit

From an entry on the website of Cleveland, Ohio-area foreclosure defense attorney Marc Dann:
  • Building on the landmark Wells Fargo v. Jordan Decision,(1) Ohio’s 8th District Court of Appeals (Cuyahoga County) ruled this week that an affidavit alleging that a foreclosure plaintiff held the note prior to filing of a complaint for foreclosure is not sufficient evidence to support a foreclosure judgment.

  • In Deutche Bank v. Triplett,(1) the court of appeals held:

    … Deutsche Bank’s affidavit of ownership, sworn out more than a year after the foreclosure complaint was filed, is insufficient to vest the bank with standing to file and maintain the action. Thus, if Deutsche Bank had offered no evidence that it owned the note and mortgage when the complaint was filed, it would not be entitled to judgment as a matter of law. Jordan, ¶¶ 22-23.(3)

Source: Affidavits Not Enough to Prove Ownership of a Mortgage Note.

(1) Wells Fargo Bank, N.A. v. Jordan, 2009-Ohio-1092 (Ohio App. 8th Dist., 2009).

(2) Deutsche Bank Natl. Trust Co. v. Triplett, 2011-Ohio-478 (Ohio App. 8th Dist. February 3, 2011).

(3) It should be noted that the recent 8th District (Cuyahoga County) appeals court ruling in Triplett was a reversal of a lower court screw-up allowing for the foreclosure judgment to be entered, a screw-up committed without regard to the binding precedent existing in this case to the contrary. Ohio appeals court Judge Patricia Ann Blackmon makes this observation in writing for the three-judge panel:

  • The case law in the 8th District is simple and clear; the putative mortgagee must own the mortgage at the time of the filing of the complaint, otherwise it lacks standing. Wells Fargo Bank, N.A. v. Jordan, Cuyahoga App. No. 91675, 2009-Ohio-1092.

It should also be noted that both this ruling and the court's 2009 ruling in Jordan were unanimous (3-0) reversals involving homeowners facing foreclosure who represented themselves (pro se) in court (although it's certainly possible that they may have had some anonymous, behind-the-scenes attorney assistance with procedural issues, crafting briefs, etc.). Kudos to the homeowners for recognizing the seemingly never-ending screw-ups by rubber stamping trial judges, and for doing something about it. Unlike the vast majority of homeowners who get screwed over in court, the homeowners here exercised their right to have an appellate court review, a right that most facing foreclosure are either unaware of, or lack the wherewithal to pursue.

Parade Of HAMP Lawsuits Seeking Class Action Status Continues; Banks Accused Of Stiffing Homeowners On Loan Modifications, Despite Pocketing TARP Ca$h

In Cleveland, Ohio, WKYC-TV Channel 3 reports:
  • On behalf of homeowners in Cleveland and Parma, attorneys filed two similar class-action lawsuits -- one against US Bank Home Mortgage and the other against Bank of America and BAC Home Loan Servicing, LP [Monday].

  • The lawsuits allege that both have failed to offer permanent loan modifications to eligible homeowners participating in good faith in the Home Affordable Modification Program.(1)

  • In statements [Monday], attorneys Marc Dann and James Douglass said the banks failed to offer permanent home loan modifications, despite both banks' entering into agreements with these homeowners and accepting federal funds to participate the program.

  • The class-action lawsuits allege that both banks failed to fulfill obligations under the federal Home Affordable Modification Program. [...] Both Bank of America and US Bank agreed to participate in the HAMP program when they accepted funds from the Federal government as part of the Troubled Asset Relief Program (TARP).(2)

For more, see Attorneys file class-action lawsuits against US Bank, Bank of America.

(1) According to a complaint filed in an unrelated lawsuit (at paragraph 5), "Though Bank of America accepted $25 billion in TARP funds and entered into a contract obligating itself to comply with the HAMP directives and to extend loan modifications for the benefit of distressed homeowners, Bank of America has systematically failed to comply with the terms of the HAMP directives and has regularly and repeatedly violated several of its prohibitions."

(2) For a sampling of other similar HAMP-related lawsuits brought against lenders & loan servicers for allegedly stringing borrowers along with empty loan modification promises, see:

Media Pounding Continues For Dethroned "Foreclosure King"

The Associated Press reports:
  • During the housing crash, it was good to be a foreclosure king. David Stern was Florida's top foreclosure lawyer, and he lived like an oil sheik. He piled up a collection of trophy properties, glided through town in a fleet of six-figure sports cars and, with his bombshell wife, partied on an ocean cruiser the size of a small hotel.

  • When homeowners fell behind on their mortgages, the banks flocked to "foreclosure mills" like Stern's to push foreclosures through the courts on their behalf. To his megabank clients [...] Stern was the ultimate Repo Man. At industry gatherings, Stern bragged in his boyish voice of taking mortgages from the "cradle to the grave." Of the federal government's disastrous homeowner relief plan, which was supposed to keep people from getting evicted, he quipped: "Fortunately, it's failing."

  • The worse things got for homeowners, the better they got for Stern. That is, until last fall, when the nation's foreclosure machine blew apart and Stern's gilded world came undone. Within a few months, Stern went from being the subject of a gushing magazine profile to being the subject of a Florida investigation, class-action lawsuits and blogger Schadenfreude that, at last long, the "foreclosure king" was dead.

For more, see The Rise and Fall of a Foreclosure King (The man who made millions foreclosing on houses could end up in the biggest house of all).

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

U.S. Supremes Asked To Review Case Involving Operation Of Hawaiian Non-Judicial Foreclosure Process Where Elderly Mentally-Impaired Widow Got The Boot

AOLs's DailyFinance reports:
  • Among the many state systems governing foreclosure in this country, Hawaii has particularly draconian -- and nonjudicial -- process. It's based on a law that dates back to 1874, a statute that was a key mechanism used to take land away from native Hawaiians and whose history is riddled with fraud. Although Hawaiian law also allows for judicial foreclosures, the nonjudicial process -- when no judge is involved in the proceeding -- is much more commonly used. But for those suffering under Hawaii's foreclosure system, the question is: Can there be any relief?

  • Suzanne Bonds is a Hawaii resident who was unbelievably exploited by the state's foreclosure process in 2004, but all her efforts to challenge what happened were rejected by Hawaii's courts. Now, her attorneys have asked the U.S. Supreme Court to intervene. Given the massive foreclosure tide swamping the nation, and the fact that the judiciary is regularly confronting fraud even in states where a judicial process is required for a lender to take a person's home, a hard look at the fairness of systems in the less-protective nonjudicial foreclosure states is crucial.

(Note: Unless otherwise linked, the information discussed below is drawn solely from the petition. No response brief has yet been filed.)

  • Bonds was in her early 70s in 1998, when she inherited her Hawaii home from her husband. In 2001, she took out a mortgage with Ameriquest Home Mortgage, a notoriously predatory lender. By early 2004, Bonds was 78 and in terrible shape: Physically and mentally ill, she suffered from "heart failure, dementia and advanced state of senility, and psychotic and bipolar disorders" according to her physicians.

  • Nonetheless in May, 2004 she was sent a letter saying that her property had been sold at public auction a month earlier. In her condition, she took no action until a concerned "care-giving church official" reviewed the letter and helped her get a lawyer. To add insult to injury, the bank sold the property for $634,900, a price at best half of what it was worth, meaning that the purchaser made an immediate and massive profit, while Bonds was stripped of substantial equity.

For more, see Foreclosures in Paradise: Will the Supreme Court Review Hawaii's Flawed System?

Monday, February 07, 2011

Foreclosure Mill Sleaze Continues; Bank Lawyers Look To Dodge Dubious Document Problem By Duping Trial Judges w/ Legal Maneuver That Doesn't Exist

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Scores of Palm Beach County homes were foreclosed on with faulty paperwork that banks are now trying to sidestep with a legal maneuver experts say doesn't even exist.

  • A Palm Beach Post review of court documents filed after last fall's robo-signing scandal found 116 Palm Beach County cases in which attorneys for banks have asked a judge to ratify a final foreclosure judgment even though flawed documents "may" have been used to foreclose on the property.

  • Nearly half of the homes - 48 percent - have been sold at foreclosure auction. Tampa-based Florida Default Law Group, being investigated by the state attorney general, filed all of those foreclosures. All but three of the homes auctioned were seized based on documents signed by Jeffrey Stephan, a renowned robo-signer.

  • They were spotted because lawyers filed "motions to ratify" the final foreclosure judgment - an unheard-of request apparently aimed at getting judges to uphold the original case, the amounts owed to the bank, and attorney fees. A judge's blessing on the back end could discourage challenges to ownership and title down the road.

  • Also, the motions could be intended to stave off complaints that the attorneys knew about robo-signed and forged documents but proceeded with foreclosures anyway. "They are trying to avoid a lot of big problems with those ratifications, including suits for malpractice, but it should not work," said Sarasota attorney Henry Trawick, an expert on Florida's judicial rules and author of Trawick's Florida Practice & Procedure.(1) "You can't ratify a final judgment that was based on fraud."

***

  • Palm Beach County Chief Judge Peter Blanc agreed there is no such thing in law as ratifying a foreclosure judgment. But an Orange County judge in September granted a motion to ratify a judgment and the sale of the home, which occurred at auction nearly a year earlier.

For more, see Lenders compound court errors.

(1) Henry P. Trawick, Jr. has been an attorney for more than 50 years, whose respected treatises cover Florida practice and procedure and the law of wills and estates. Trawick’s books are widely used by Florida lawyers and judges, and over the years he has become known in the state as “the dean of rules.”

Wisconsin Appeals Court: Affidavits Not Based On "Personal Knowledge" Sink Lender's Attempt To Score Summary Judgment In Foreclosure Action

A Wisconsin intermediate appeals court recently reached the relatively unremarkable, predictable, and certainly non-ground-breaking conclusion that affidavits filed by a foreclosing lender that are not based on the "personal knowledge" of the affiant are insufficient to establish a basis for summary judgment.

What does merit note is that, in reaching its ruling, it reversed the decision of Jefferson County Circuit Court Judge Jacqueline R. Erwin, the lower court judge who apparently didn't have a problem with these obviously flawed affidavits in deciding to allow the foreclosure to go forward. Unlike the vast majority of cases, the homeowner/couple here exercised their right to have an appellate court review, a right that most homeowners in foreclosure are either unaware of, or lack the wherewithal to pursue.

From the ruling (footnotes contained in the original text, bold text is my emphasis):
  • ¶ 13 The Bank submitted two affidavits to support its motion for summary judgment: one by an attorney for the Bank, and one by an agent for BAC Home Loans Servicing, L.P., f/k/a Countrywide Home Loans Servicing, L.P.

    ¶ 14 The attorney averred that Diane Cano executed a note secured by a mortgage on her property in July 2006; that an assignment of the mortgage to the Bank was recorded in June 2007; and that the Canos had failed to make the January 2007 and subsequent mortgage payments, leading the Bank to file this foreclosure action in April 2007. The attorney attached the following documents to his affidavit: the mortgage assignment; a statement of the Canos' mortgage payment history for September 2006 to May 2009 generated by Bank of America Home Loans on June 2, 2009, and indicating that the Canos' last mortgage payment was for December 2006; and a notice of default and acceleration Countrywide sent to Diane Cano in February 2007.

    ¶ 15 The BAC agent averred that he had access to the financial records for the Canos' mortgage; that Diane Cano executed a mortgage to Mortgage Electronic Registration Systems, Inc., acting as nominee for S&L Investment Lending, Inc.; and that the Canos had failed to make their January 2007 and subsequent mortgage payments. The agent did not attach any documents to his affidavit.

    ¶ 16 We conclude that the Bank's affidavits do not establish a prima facie case for summary judgment. Affidavits supporting a summary judgment motion must be based on personal knowledge and "set forth such evidentiary facts as would be admissible in evidence."
    [4] WIS. STAT. § 802.08(3). Nothing in the attorney's affidavit indicates that the attorney's averments as to the Canos' payment history are based on personal knowledge. To the extent that the affidavit relies on the attached payment history with Bank of America, we conclude that the affidavit does not set forth the facts necessary to establish a prima facie case that the bank's purported payment history would be admissible at trial.

    ¶ 17 As we explained in Palisades, an affidavit must establish a prima facie case that attached payment statements are admissible evidence under an exception to the hearsay rule to support a motion for summary judgment. See
    Palisades, 324 Wis. 2d 180, ¶ 11 & n.3; WIS. STAT. § 908.01(3) (defining "hearsay" as "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted") and § 908.02 (hearsay generally inadmissible). Here, the only arguably applicable exception to the hearsay rule is the exception for business records under WIS. STAT. § 908.03(6) (records "made at or near the time by, or from information transmitted by, a person with knowledge, all in the course of a regularly conducted activity, as shown by the testimony of the custodian or other qualified witness" are not excluded by hearsay rule). Thus, for the statement of the Canos' payments to support a motion for summary judgment, the affidavit must establish that the affiant "is qualified to testify that: (1) the records were made at or near the time by, or from information transmitted by, a person with knowledge; and (2) this was done in the course of a regularly conducted activity." Palisades, 324 Wis. 2d 180, ¶ 15. The attorney's affidavit contains no such averments.

    ¶ 18 The BAC agent's affidavit is similarly flawed. The agent avers that his knowledge of the Canos' default on their mortgage is based on his access to the financial records for the Canos' mortgage, yet no financial documents are attached to the affidavit. Even if we assume the BAC agent is referring to the statement attached to the attorney's affidavit, the agent's affidavit fails to set forth the necessary facts to establish a prima facie case for the admissibility of the statement. The agent's affidavit does not contain any facts to show that the agent is qualified to testify that the statement generated by Bank of America on June 2, 2009, was "made at or near the time by, or from information transmitted by, a person with knowledge," or that "this was done in the course of a regularly conducted activity."
    [5] Id. We conclude that the Bank has not established a prima facie case for summary judgment.[6] Accordingly, we reverse and remand for further proceedings.

For the ruling, see Bank of New York v. Cano, No. 2010AP477 (Ct. of App. Dist. 4, January 20, 2011) (unpublished) (go here for the "Google Scholar" version).

Employee At Alleged Loan Servicing Racket Says She Was Duped Into Helping Duo Hijack House Payments From Unwitting Borrowers

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:
  • Two men accused of scamming homeowners out of thousands of dollars are under arrest. Now, a co-worker who says she helped bring down the fraudulent scheme also says she had no idea she was helping rip people off.

  • The woman, who asked to be called "Stephanie", says she helped investigators arrest the two men accused of running Great Western Business Services. Authorities arrested 49-year-old Joseph Yorkus and 48-year-old James Bartczak for allegedly running the scam. "I feel the worst for these people that got scammed, and I feel bad that I was a part of it, even though I didn't know about it. I feel bad, because I was the one who actually did it," Stephanie said. "I feel really bad for the homeowners, because now the ones who did have their checks cashed, they're late on their mortgages." "I honestly have nothing to do with any kind of scam, except that I fell for their B.S.," she said.

  • Great Western Business Services is accused of crafting transfer-of-service letters and sending them to an unknown number of valley residents. The letter instructed homeowners to stop making mortgage payments to Bank of America and start sending payments to Great Western.

For more, see Two People Arrested for Alleged Mortgage Scam.

For the Nevada Attorney General press release, see Two Arrests Made In Mortgage Payment Theft Scam.

Sacramento Feds Score Another Guilty Plea In Ongoing Probe Into Foreclosure Sale Bid-Rigging Rackets

From the Office of the U.S. Attorney (Sacramento, California):
  • A real estate executive pleaded guilty [Friday] in U.S. District Court in Sacramento, California, to conspiring to rig bids and commit mail fraud at public real estate foreclosure auctions held in San Joaquin County, California, [...].

  • Richard W. Northcutt pleaded guilty to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County. The primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at non-competitive prices, the department said in court papers.

  • According to the court documents, after the conspirators' designated bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay. The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the price at the public auction and that at the second auction was the group's illicit profit, and it was divided among the conspirators in payoffs. According to his plea agreement, Northcutt participated in the scheme from September 2008 until October 2009.

  • To date, including Northcutt, four individuals have pleaded guilty in U.S. District Court for the Eastern District of California in connection with this investigation. On April 16, 2010, Anthony B. Ghio pleaded guilty to participating in a conspiracy to rig bids at public foreclosure auctions held in San Joaquin County. On June 24, 2010, John R. Vanzetti and Theodore B. Hutz also pleaded guilty in Sacramento to participating in the conspiracy.(1)

For the U.S. Attorney press release, see California Real Estate Executive Pleads Guilty to Bid Rigging at Public Foreclosure Auctions.

Go here for other posts & links on bid rigging at foreclosure and tax sale auctions.

(1) Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division's San Francisco Office at 415-436-6660 or visit www.justice.gov/atr/contact/newcase.htm, the U.S. Attorney's Office for the Eastern District of California at 916-554-2700, or the FBI's Sacramento Division at 916-481-9110.

Sunday, February 06, 2011

Tanking R/E Market, Fla Appeals Court Leave Ex-Hubby Holding The Bag On Marital Split-Up Deal After Failing To Complete Buyout Of Wife's Share Of Home

The following facts are taken from a recent ruling from a Florida appeals court:
  • For reasons unspecified in the ruling, Husband (hereinafter referred to as "Hubby") & Wife are desirous of terminating a presumably unsatisfactory, unfulfilling marriage.

  • The couple own a home with an approximate fair market value set at $950K, with an approximate mortgage balance of $603K.

  • On August 8, 2008, the couple enter into a split-up agreement where, among other things, Hubby agrees to cough up $185K (with minor adjustments) to pay Wife in exchange for her entire share of the marital home, and further agrees to refinance the existing mortgage.

  • Wife agrees to deed her share of the marital home to Hubby, and escrows a deed to him for that purpose, subject to Hubby following through with his end of the bargain.

  • The object of the deal, according to the court, was "(1) to bring about an unconditional payment of $185,000 to the former wife; (2) achieve an ownership transfer of the property to the former husband; and (3) relieve the former wife of any further financial responsibility for the property contemporaneously with the transfer."

So far, so good. Pretty standard stuff. Buy her out and send her on her way. Then:

  • Shortly after August 8, 2008, according to the court, "the Florida real estate market entered into one of its periodic downward adjustments, for which it has become famous since the time of the Great Depression."

  • Because of this apparently forseen "downward adjustment" in the real estate market, Hubby decides to stiff Wife out of the entire $185K pile of cash he promised to fork over and 'forgets' to refinance the home to take her off the hook on the existing mortgage as promised.

  • Instead, Hubby unilaterally tries to list the house for sale with a Realtor, but Wife, who still lived in the home with the couple's minor child, refused to cooperate, according to Hubby.

  • Rather than amicably cooperate with Hubby, Wife opted to file a motion for contempt and enforcement of the buyout deal, specifically for the coughing-up of the $185,000 pile of cash she was expecting to pocket (and, at least psychologically, possibly may have already spent, maybe with a new boyfriend) and the refinancing of the house.

  • Hubby then attempts to wiggle his way out of the deal, telling the trial judge that, because of the recent "downward adjustment" in the real estate market, he has not been able to refinance the marital home solely under his name and thus has not been able to pay the cash owed Wife pursuant to his deal with her.

  • An apparently sympathetic trial judge essentially tells Hubby "'OK, my friend, you're off the hook & out of the deal!" - finding that there was (in these exact words) "an impossibility of performance due to changes in the economy" in declaring the deal void.

  • Possibly in view of Wife's alleged lack of coperation with Hubby, the trial judge turns to Wife, who is still in the home with the couple's minor child, and proceeds to hammer her by giving her the boot, ordering the property be appraised and that it immediately be listed for sale with the net proceeds split between her & Hubby.

  • Wife then responds, possibly by telling the judge, "No Way, Honey! - I got a binding contract with that miserable, good-for-nothing 'snake' and I won't let him slither out of it - I Shall Appeal!!!"

  • If, in fact, she responded in this manner, she was certainly true to her word - she proceeded to file a timely appeal.

In short, the Florida appeals court agreed with Wife, reversing the first-class shtupping-over the trial judge imposed upon her. The three-judge panel possibly may have then turned to Hubby, smiled at him, and said (although not necessarily in these exact words), "Not so fast, Buster. That was a nice try, but guess what? You're back on the hook!"

For the appeals court's ruling, and its reasoning, see Ferguson v. Ferguson, No. 3D10-479 (Fla. App. 3d DCA, February 2, 2011).

Washington State Foreclosure Trustee Slammed For $98K+ Damages For "Extreme & Outrageous" Conduct In Jerking Around Financially Strapped Homeowner

A Federal Court of Appeals recently affirmed two lower court rulings slamming foreclosure trustee Jeff E. Jared for over $98,000 in damages for committing the tort of outrage in connection with his conduct in jerking around delinquent borrower/homeowner John P. Keahey when carrying his duties related to the Washington State public sale process.

From the ruling (footnotes appearing in the original text omitted; bold text is my emphasis; other emphasis and alterations are contained in the original text):

I. “Extreme and OutrageousConduct

  • The tort of outrage requires the proof of three elements: (1) extreme and outrageous conduct, (2) intentional or reckless infliction of emotional distress, and (3) actual result to the plaintiff of severe emotional distress. See Kloepfel v. Bokor, 66 P.3d 630, 632 (Wash. 2003) (en banc).

    Jared contends that the first element was not established. He does not contest the underlying factual findings of the bankruptcy court, but argues that those facts do not support the court’s finding that Jared’s conduct was “extreme and outrageous.” We reject his contention.

    The bankruptcy court based its finding of outrageousness on numerous misdeeds committed by Jared in the attempted foreclosure proceedings, including the following:

    Jared “had no idea how to conduct a non-judicial foreclosure sale[,] . . . did just about everything wrong,” and “signaled to Mr. Keahey with each and every communication that Mr. Keahey would never be able to keep his house.”

    Jared stipulated to having breached his fiduciary duty to Keahey as a trustee under Washington’s Deed of Trust Act (the “DOTA”). See Wash. Rev. Code Ann. §§ 61.24.010(4).

    Although “there was no . . . interest due under the note,” Jared demanded a 10 percent interest charge, amounting at first to $36,000—a “huge amount[] to people like Keahey.” He likewise demanded payment for incorrect and excessive property tax, insurance, and utility charges.

    Jared arranged for the foreclosure sale to take place in the parking lot of his condominium, rather than a public place, as required by the DOTA. Jared later testified that he opted for the parking lot because he “was going to personalize it, make it nice for the bidders, . . . [to] boutiquify it.”

    Even “[w]hen the claimed defaults were cured, Mr. Jared immediately claimed new defaults entitling him to restart the foreclosure process and charge additional fees and costs for his own benefit.” By continually and unjustifiably varying the amount of debt owed, he unjustly prevented Keahey from exercising the right to cure for a period of three years
    .


    On this record, we conclude that “reasonable minds (such as the one exercised by the trial judge) could conclude that, in light of the severity and context of the conduct, [the defendant’s conduct] was beyond all possible bounds of decency, . . . atrocious and utterly intolerable in a civilized community.” Robel v. Roundup Corp., 59 P.3d 611, 620 (Wash. 2002) (emphasis original) (internal quotation marks and citations omitted). We therefore affirm the finding of outrageousness.

For the ruling, see Jared v. Keahey (in re Keahey), No. 09-60000 (9th Cir., Jan. 31, 2011) (unpublished).

Thanks to Deontos for the heads-up on this court ruling.

Federal Judge OKs Trial For MD Man Seeking Damages After Being Victimized By Rogue Refinancing Leading To Foreclosure Despite Never Missing A Payment

In Baltimore, Maryland, The Baltimore Sun reports:
  • After years of crushing defeats and frustration, a Baltimore federal judge's ruling is giving new hope to a Columbia taxi owner who lost his house to foreclosure despite never missing a mortgage payment.

  • U.S. District Judge Richard D. Bennett ruled Monday that Kwaku Atta Poku, a Ghanian immigrant who lost his Columbia home to foreclosure in 2005 and was evicted the next year, is entitled to a trial on his allegations that his 2001 refinancing loan was mishandled because his first mortgage was never paid off by the bank that gave him a new loan.

  • "Thank God. Finally, somebody …" Atta Poku said when a reporter told him Tuesday about the judge's ruling. "I'm hoping something good will come out of that." A win in court later this year could help him recover financially; Atta Poku is seeking up to $34 million in damages and compensation.

For more, see Man who never missed a mortgage payment but lost home gets a trial (Atta Poku's first mortgage wasn't properly paid off after refinancing).

Two Pinched In Real Estate Ripoff Targeting Haitian Immigrants Who Unwittingly Signed Over Title To Homes In Equity Stripping Refinancing Scam

In Delray Beach, Florida, The Palm Beach Post reports:
  • Police allege two Delray Beach-based real estate brokers swindled unknowing Haitian immigrants, many of whom were financially naive or with language barriers, and some even illiterate. The two men are alleged to have created fake property transactions and mortgages in the homeowners' names, then let the properties fall into foreclosure, costing legitimate lending institutions millions of dollars, police said.

  • Alex Byron Little, 36, of suburban West Palm Beach, and Jean Pedro Jean Baptiste, 50, of Port St. Lucie, were booked into the Palm Beach County Jail Tuesday. Each is charged with four counts of fraud of at least $50,000, and one count of white collar crime against the elderly of at least $50,000.

***

  • According to the Delray Beach Police report, the two, along with Boca Raton title attorney Stephen Beyer, ripped off at least six separate individuals or couples in 16 fraudulent mortgage transactions on nine properties in the Delray Beach, Boynton Beach and Royal Palm Beach areas.(1)

  • The fake mortgages total $3.58 million. "All the properties purchased (or) refinanced by the duped clients fell into foreclosure," [Delray Beach detective Casey] Thume wrote in the report.

***

  • In case after case, the report alleged, Little and Jean Baptiste forged signatures of homeowners, some of whom couldn't read or write, or rushed owners into signing documents without reading them, and then notarized them. In one case, Baptiste signed a man's name eight months after he died, the report said.

  • People who believed they were getting new mortgages actually were unknowingly selling their homes to others, some of them relatives and friends of Jean Baptiste and Little. In one case, a woman had to bring a check to a closing to cover shortfalls, the report said.

For the story, see 2 Delray Beach-based real estate brokers accused of swindling Haitian immigrants.

(1) According to the story, Beyer, the closing attorney, has at least temporarily dodged a bullet as the Palm Beach County State Attorney has opted not to charge him, founder and president of First National Title Co. in Boca Raton and a licensed attorney in Florida since 1971. According to the police report, Beyer told police he closed about 100 real estate deals for Jean Baptiste between 2003 and 2007 but that most were conducted in Creole and he had believed all of them were legitimate, the story states. "There's insufficient evidence to proceed against him at this time," Assistant State Attorney Angela Miller, head of the office's white collar crime division, reportedly said. Beyer reportedly is still licensed and in good standing, and the bar is not investigating him, Florida Bar spokeswoman Karen Kirksey said.

Don't be surprised if one or both of the suspects, in an attempt to save their own asses, decide to belly up to the prosecutor's office, throw Beyer 'under the bus', and implicate him in this alleged racket in an obvious and not uncommon attempt by suspects to shave some time off any possible prison sentence by dragging everyone else involved down into the mud with them.

Further, don't be surprised if the victims of the alleged scam look to The Florida Bar's Clients' Security Fund, Florida's attorney ripoff reimbursement fund, in an attempt to recoup reimbursement for some of their losses, to the extent it is determined that Beyer either new or should have known what was going on, regardless of whether criminal charges are brought against him.

For similar funds established to reimburse clients who have suffered a loss due to the dishonest conduct of attorneys in other states and Canada, see:

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

While the alleged victims are at it, they should also seek possible recovery resulting from the conduct of the two Florida real estate brokers as well from the Florida Real Estate Recovery Fund, which provides reimbursement for eligible claims for losses up to $50,000 per claim due to the escapades of Florida real estate licensees. However, a victim has to first sue the broker in court, obtain a money judgment, and then, to the extent the victim can't satisfy the money judgment from the broker's assets, a claim can be made to the recovery fund for the unrecovered portion of the judgment (the preferred practice is to file a claim with the recovery fund within the 2-year time limitation for such claims, pending the obtaining of a money judgment in court). Further, "Payments for claims based upon judgments against any one broker or sales associate may not exceed, in the aggregate, $150,000." F.S. 475.484(4). For more information on the Florida Real Estate Recovery Fund, see:

Saturday, February 05, 2011

Bank Rejects Full Price Short Sale Offer, Prefers To F'close Instead; Fannie, Loan Servicer Mum, Despite Homeowner-Signed Waiver Allowing Comment

In Vancouver, Washington, KATU-TV Channel 2 reports:
  • Stacy Baker fought for two years to sell her father’s house and to keep it from being auctioned off, but lost the fight even after her real estate agent said an offer was made to the bank that met its own conditions.

***

  • Baker’s real estate agent, Aaron Signor, first tried to sell the house for about what was owed, but at $179,000 it didn’t sell. Over the following months, they lowered the price and got an offer at $134,000. But Flagstar Bank, which services the mortgage on the house, rejected the offer, saying the house was worth $150,000.

***

  • But then just days before the Baker house was set to be auctioned off, Signore said he brought Flagstar a viable $150,000 non-FHA offer, which is just what Flagstar asked for. “Even the processor at the lender – Flagstar Bank – she thought, ‘Hey, you got an offer full price, we’ll get the foreclosure stopped; we’ll make it go away; we’ll have a sale.’ She calls me back and says, ‘sorry.’”

  • Signor was so confused, he began digging deeper and found the loan on the Baker house was held not by Flagstar but by Fannie Mae, which is another government-sponsored organization. It buys loans from banks with the goal of adding “stability to the housing and mortgage markets.” It’s that quasi-governmental enterprise that, along with Flagstar Bank, said, “No,” to allowing Stacy Baker to sell her father’s house. “Why would they foreclose on a home when they have exactly what they just said, “Yes,” to in their hand and opt to foreclose instead?” Signor asked.

  • Baker signed a waiver so Fannie Mae could speak to a reporter, but the organization still declined to do so, leaving the taxpayer wondering what is going on; instead, Amy Bonitatibus, spokeswoman for Fannie Mae, said in a statement: “Fannie Mae’s top priority is to keep borrowers in their homes. … Unfortunately, foreclosure is the only option when all other foreclosure alternatives have been considered and exhausted.”

  • Fannie Mae told a reporter to speak to Flagstar. The bank’s senior manager, John Matthews, said, “We as a bank would have no comment on a specific file with you. I appreciate your investigative efforts, but this matter would not be for public discussion.”

For the story, see Realtor, home seller baffled when bank rejects its own offer.

City Steps In, Coughs Up $250K To Rebuild Seven Backyards Gobbled Up By 'Rogue' Canal As Evacuated Townhouse Residents Get Green Light To Return Home

In Sunrise, Florida, WFOR-TV Channel 4 reports:
  • A handful of residents in a Sunrise community are rejoicing tonight. Nearly 8 weeks after being evacuated from their homes when part of their backyards collapsed into a canal, repairs are completed at Spring Tree Cove West and residents are able to return home.

***

  • A total of seven townhouses were evacuated and declared unsafe. For weeks, residents didn’t know if the homes sustained significant damage and when or if they’d be able to return home.

***

  • There is debate over who owns the land — Broward County or the Spring Tree Cove West homeowner’s association. While that is sorted out, the city of Sunrise spent $250,000 to repair the canal bank with rock, sand, dirt and soil. The city plans to put up fencing in the backyard. Each home had to be certified as safe by a structural engineer before the city would allow residents to move back in.

***

  • I’m ecstatic that the city responded in such a forceful way,” said Mayor Mike Ryan. “Our entire effort is getting in touch with the residents and celebrating getting them back in their homes. It proves that government can do things right occasionally.”

For the story, see Evacuated Sunrise Residents Allowed Back Home.

Indiana Man Dies During Foreclosure Eviction; Six Hour Police Standoff Begins With Gunshots, Ends In Flames

In Winchester, Indiana, The Star Press reports:
  • Authorities have identified the man who died in a police standoff Monday night that ended in fire. The man was William T. Stein, 54, 2251 N. Randolph County Road 350-E, according to Randolph County Coroner Duane Petry. Authorities, however, aren’t yet certain exactly how Stein died and are awaiting an autopsy report from forensic pathologist Paul Mellen at Ball Memorial Hospital.

  • Sheriff’s deputies were called to Stein’s home Monday afternoon to stand by while a bank representative changed the locks on the house, which was in foreclosure proceedings. When deputies knocked on the front door, two gunshots were fired through the door from the inside, missing the deputies.

  • The resulting standoff lasted six hours, until police heard two more gunshots from inside the house; the house then caught fire. Police believe Stein started the fire.

Source: Fatal Randolph County standoff suspect ID'd.

Novice Online Foreclosure Auction Buyer Wins Bid, Gets Soaked On Underwater Home Subject To Existing $220K Mortgage Lien

In Orange County, Florida, the Orlando Sentinel reports:
  • OK, maybe it was too easy. With just a few clicks of the mouse, Orlando accountant John Dey bought a Lake Nona-area house that was auctioned off during one of Orange County's new, online foreclosure auctions. And get this: In the kind of deal espoused by get-rich-quick authors, he paid just $20,000 for a house worth close to $200,000.

  • But as more than two dozen Florida counties have opened their foreclosure auctions in the past year to bidders from around the world via the Internet, inexperienced auction bidders such as Dey are learning the hard way that these troubled properties can be, well, troubled.

  • The houses may be embroiled in property-line disputes, riddled with ownership complications or saddled with outstanding debt. For Dey, it was a lesson that cost him $20,000 for a house he'll never really own.

  • The realauction.com website, which Dey used to pursue the 6-year-old house, included warnings about the risks associated with foreclosure-auction properties. He noticed that only one other bidder was competing against him. But he and his wife, a real-estate agent, had researched the house and carefully read the legal documents that would grant them ownership should they win the auction.

  • "I said, 'This is great deal,' " said Dey, emphasizing that he is a certified public accountant. "They make it nice and easy to put a deposit down. They have the foreclosure judgment. I said, 'This is better than being at the courthouse steps, because you've got everything at your fingertips.' "

  • And, as he said, there was Clerk of the Court Lydia Gardner's smiling face planted on the auction website, in a way that seemed to sanction the online-bidding process. Still, Dey became increasingly nervous about the deal during the bidding. He weighed his lack of experience and decided to back out of the bidding as soon as the price hit $20,000. But by then it was too late. The other bidder opted out.

  • Immediately after the purchase, he went to the courthouse and plowed through the foreclosure case file for his new acquisition — only to learn that the house came with a $220,000 mortgage lien from Wells Fargo.

  • It was actually the North Shore at Lake Hart Homeowners Association that had foreclosed on the property, for more than $7,000 in legal and delinquency fees.

***

  • Dey said it was nice that the court system wanted to speed up and expand access to the auction process by moving it from a room inside the Orange County Courthouse to the Internet, but the site should be more bold about warning of the problems online investors may encounter.(1)

For the story, see Online foreclosure auctions: Proceed with care.

(1) While I'm all for protecting consumers in consumer transactions, there's a limit to how much protection you can smother people with. The incident described in this story illustrates, in my view, where the line of protection should be drawn. Buying a house at a foreclosure sale auction is not a consumer transaction. It's not even an investment transaction. It's a business transaction, and if one doesn't know anything about the business of buying property at a foreclosure sale auction, one should do himself/herself a favor and either pay the price and get an education on this business, or simply stay away. The title problem reported in this story with the existence of a prior lien is merely one of the myriad of nasty surprises that might await. If a screwed-over novice in this type of deal is searching for someone at whom the finger of blame can be pointed, looking into the nearest mirror will promptly conclude that search.

Illegal "Overthrow" Of "Hawaiian Kingdom" At Center Of Foreclosure Rescue 'Program' Peddled To State Homeowners; 300 'Believers' Take The Bait

In Honolulu, Hawaii, KITV-TV Channel 4 reports:
  • A legal argument based on the overthrow of the Hawaiian Kingdom, used unsuccessfully to fight foreclosures in the 1990s, is now being used once again, even though the man who promoted the theory 15 years ago was convicted of a felony.

  • David Keanu Sai is back in the public eye 11 years after being put on probation after telling people that they could walk away from mortgages because of the way the Kingdom of Hawaii was overthrown. Hundreds of people fighting foreclosure have invested in that claim again -- partly because Sai now has a University of Hawaii doctoral degree to back his argument.

  • Kale Gumapac, founder of Laulima LLC and Hawaiian Alliance LLC, advertises on Craigslist that he has a way to stop the foreclosure process. “It doesn't put the banks in trouble and it doesn't put the borrower in trouble,” Gumapac said. “And it's worked. That's what I am trying to tell the Legislature.”

  • Gumapac said he has about 300 paying customers he is helping attack the title of their properties. “They can only foreclose if the title is clear,” he said. The title attack is based on research by Windward Community College lecturer David Keanu Sai. He argues that the overthrow of Queen Liliuokalani and the violation of executive agreements between the Queen and the U.S. government mean that all land title issued in Hawaii since 1893 are illegal and mortgages null and void.

For more, see Foreclosures Face Sovereignty Claim (Company Using Title Challenge To Stop Foreclosures).

76-Year Old Woman Slams Sheriff's Office With $500K Claim After Botched Foreclosure Eviction Targeted Wrong Home

In Hillside, New Jersey, NJToday.net reports:
  • A 76-year-old Hillside woman has filed a claim for damages against Union County, alleging that officers of the county sheriff’s department illegally entered her home and removed the entire contents because they had the wrong address of a foreclosure.

  • In the document, obtained by Tina Renna of The County Watchers, Ozzie Leak claims that Union County Sheriff Ralph Froelich’s officers entered her home on Nov. 3, 2010 and removed the household contents. Leak is seeking $500,000. She charges that the sheriff’s officers destroyed property, including items of sentimental value, caused emotional distress and mental anguish and left her unable to provide housing for family.

For more, see Sheriff’s Officers Accused Of Emptying Wrong Home In Botched Foreclosure.

Group Cops Guilty Pleas In Debt Collection Racket; Used Phony Law Enforcement Claims To Strong-Arm $6.7M+ From 1000+ Victims Around The Country

From the Office of the U.S. Attorney (Buffalo, New York):
  • U.S. Attorney William J. Hochul, Jr. announced [] that Timothy E. Arent, 38, of Buffalo, New York, pleaded guilty [...] to mail fraud and tax evasion charges. The charges carry a maximum penalty 25 years in prison and a $500,000 fine.

  • Assistant U.S. Attorney MaryEllen Kresse, who is handling the case, stated that from October 2006 through October 2009, Arent and his partner, Neil G. Wieczkowski, engaged in a fraudulent debt collection scheme. The two illegally purchased debtor information from two former employees of Capital Management Services, a Buffalo debt collection business, and thereafter used the information to coerce the victims into paying fictitious debt.

  • These former employees, Thomas Rice and Andrew Jon Pytlewski, have pleaded guilty to stealing the debtor information and are awaiting sentencing in February 2011. Neil Wieczkowski, meanwhile, pleaded guilty to mail fraud and tax evasion on January 7, 2011 and will be sentenced in April 2011.

  • Regarding defendant Arent, the Government’s evidence revealed that Arent claimed to be a law enforcement officer with the ability to arrest the victims if they did not immediately make a substantial payment on the alleged debt owed.

  • During a three year period, Arent and Wieczkowski received approximately $6.8 million in checks written by over 1,000 victims from across the country. The scheme netted Arent almost $5.7 million which he used to pay the mortgage and remodeling costs on a $500,000 West Ferry mansion, pay the salaries of co-defendant Wieczkowski, a full time handy man, and a full time housekeeper, and to purchase such luxury items as antiques, furniture, jewelry, furs, artwork, high end vehicles, vacations and an in-ground pool.

For the U.S Attorney press release, see Fourth Person Convicted In Illegal Debt Collection Scheme.

For an earlier press release on this racket, see Debt Collector Pleads Guilty To Mail Fraud And Tax Evasion.

Sovereign Citizen Movement & "Paper Terrorism"

In Talledega County, Alabama, a recent story in The Daily Home contained this excerpt describing how those who subscribe to the Sovereign Citizen movement have been known to engage in "paper terrorism" and create chaos in the real estate title recording system:
  • According to Southern Poverty Law Center spokesman Mark Potok, sovereign citizens organizations [...] began proliferating in the 1990s. They are closely related to the common law courts movement, Potok said.

  • These people believe that the government controls them through the way they write their names and things along those lines,” he said. “They often practice what is referred to as ‘paper terrorism’ by filing liens on their enemies’ property, bizarre tax documents and Uniform Commercial Code forms that don’t really mean anything. The beliefs of the different sovereign groups vary, but a lot of them buy into the ‘redemption scam.’ They believe that if you file the correct documents, in the right order, with the right words you can redeem your ‘government account,’ which could be worth anywhere from $60,000 to $20 million. They believe government is inherently wicked, and that they have been enslaved, but if they spell their names with colons and dashes and file the right paperwork they can be set free. Of course, all of that is nonsense. Their beliefs have no foundation in any law at all, let alone the laws of the United States.”

  • In addition to harassing their enemies with bogus liens and fake court documents, some sovereign citizens also have been involved in stealing houses by filing pseudo-legal documents on foreclosed houses. Copies of these fake documents are frequently pasted onto the windows of these houses, Potok said.

For the story, see 2 arrested on felony warrants from South Carolina.

Go here for other posts on rackets involving so-called sovereign claims.

Low Income Tenants Find Themselves Stuck In Legal Cracks Of Mess Left By Private Equity Slumlords; Clueless Investors Wash Their Hands Of Bad Bets

In The Bronx, New York, The Huffington Post reports:
  • First, a heating pipe broke in the adjacent apartment, sending a powerful blast of steam into his home along with an unrelenting stench. Then, chunks of the ceiling started falling into his bathroom, and black mold began creeping up the walls. Cockroaches thrived in the suddenly tropical apartment. In December, mice popped up from the gaps between the walls and the baseboards.

  • But each time Sergio Cuevas sought the attention of the landlord, hoping to arrest the deterioration of his apartment in the Bronx, he got nowhere. It was like the management company had ceased to exist.

  • This was not the result of another derelict slumlord, but rather an example of a lesser-explored aspect of the national foreclosure epidemic: Cuevas and some 400 other tenants living in ten apartment buildings in a working poor stretch of the Bronx have found themselves stuck in the legal cracks of the American real estate reckoning, their homes claimed by no one. When trouble arises, there is effectively no landlord to call.

  • The investors who bought their buildings at the height of the real estate bubble, hoping to flip them for quick profit or jack up stabilized rents, have washed their hands of a bad bet.

  • The bank that has initiated foreclosure says it does not yet have legal title, meaning it lacks responsibility. The court-appointed receiver who controls the property says he doesn't have enough money to attend to the burgeoning problems.

  • The scene here in the Bronx is emblematic of a growing national problem. In apartment buildings scattered in low-income neighborhoods from New York to Phoenix to San Francisco, families with scant resources and uncertain legal rights are literally watching their ceilings crumble and their floors collapse as they wait and hope for a resolution.

For more, see The Latest Victims Of The Foreclosure Crisis: Low-Income Apartment Renters.

Friday, February 04, 2011

BofA Backpeddles On Post-Foreclosure Eviction Threat After Being Hit By Local Media Spotlight

In Stone Mountain, Georgia, WXIA-TV Channel 11 reports:
  • [Homeowner Paulette] Davenport says she got a call from Bank of America saying that the foreclosure was a mistake -- then just a few days another call saying it wasn't an error and the bank had already foreclosed. It wasn't long before the Sheriff showed up. She tried to get some answers.

  • "I have called and spoken to many different people at Bank of America. They all tell me it's too late, 'Call me back in two weeks.' I would spend hours on the phone. They keep transferring me to different places, different numbers, continuously. No help, nothing," Davenport said.

  • What was Paulette Davenport to do? Her 16-year-old son, Travis Davenport, took over and sent the 11Alive Help Desk an e-mail. [...] After 11Alive's Bill Liss contacted Bank of America, the bank withdrew the eviction order. They said that Davenport and her family will stay in the house as the bank sorts through months of paperwork. "I just want to keep my home for me and my family," she said.

  • That's the next goal for 11Alive's Help Desk on behalf of Davenport -- getting Bank of America to rescind the foreclosure once and for all, and modify the loan.(1)

For the story, see Getting an Eviction Lifted for an Army Vet in Foreclosure.

(1) What we apparently have here is the operation of what columnist Joe Nocera referred to in a recent New York Times' story (see Shamed Into Altering a Mortgage) as the Heisenberg Journalism Principle: the process of reporting a story can sometimes affect the behavior of those being reported on (a 'parallel' of the Heisenberg Uncertainty Principle in physics).

State Regulator Seeks $50K Fine Against Suspected Las Vegas Loan Modification Racket For Allegedly Playing Fast & Loose With Clients' Trust Funds

In Las Vegas, Nevada, the Las Vegas Sun reports:
  • The state is seeking to levy a $50,000 fine against a Las Vegas couple in the foreclosure and loan modification business, accusing them of mishandling their clients’ money. The state Division of Mortgage Lending has filed a complaint to revoke the license of Jeff and Gail Strum, operators of US Loan Modification Services, [...].

***

  • Under a 2009 law, [foreclosure] consultants are allowed to collect their fees up front and install them in a trust account. They were authorized to take the money out as they performed the service. An examination of the business found the money the Strums collected wasn't placed in a trust fund in a licensed bank or credit union as required by law. They also failed to keep records for each homeowner. The couple is accused of co-mingling these funds and using the money for their personal affairs without an explanation of how it was spent.(1)

For the story, see State seeks $50,000 fine against Las Vegas couple in loan business.

(1) If the allegations are true, this duo should consider themselves lucky that criminal prosecutors aren't breathing down their necks, charging them with the crime of misapplication of entrusted funds/theft by misapplication (or some similar-sounding charge), which happens to be a felony in many places. See, e.g., Former Laywer is Sentenced for Forgery, Contempt of Court and Misapplication of Entrusted Funds, where, among other things, two settlement checks ($24,998.17; $7,500.00) belonging to clients of a now-disbarred New Jersey attorney (who practiced law for 30+ years) somehow found their way into the latter's personal bank account, as opposed to his trust account (in violation of New Jersey Supreme Court Rules) which resulted in the exposure of those funds to a substantial risk of loss.

Buffalo Feds: Rogue Housing Counselor For Local Non-Profit Agency Ripped Off $200K From Dozens Needing Help Fighting Foreclosure

In Buffalo, New York, The Buffalo News reports:
  • A woman hired to help struggling Western New Yorkers save their homes from foreclosure has been accused of lying and stealing their money so she could gamble at local casinos. Lori J. Macakanja, 35, of Dunkirk, was fired last year as a housing counselor for HomeFront Inc., a not-for-profit agency on Delaware Avenue in Buffalo.

  • The U.S. Attorney's Office claims Macakanja stole about $200,000 from about 100 clients who went to the agency for help in fighting foreclosures. She was charged Friday with felony counts of mail fraud and falsifying documents.

***

  • Officials at HomeFront dismissed Macakanja and cooperated with the investigation after learning of the crimes, and none of the agency's other employees have been accused of wrongdoing, authorities said. Brian M. Cacciotti, CEO of HomeFront, told The Buffalo News on Friday that Macakanja's actions were totally out of step with the agency's procedures and its mission. "These were the willful acts of a rogue employee," Cacciotti said. "Our mission is to help people."

For more, see Fired housing counselor charged in scam (Accused of diverting funds meant for averting foreclosure to own uses, including gambling).

Defaults On Reverse Mortgages Spike As Elderly Fail to Keep Up With Property Tax, Homeowner's Insurance Payments

The Orlando Sentinel reports:
  • Thousands of older homeowners in Florida who tapped the equity in their paid-off homes to boost their income now face the possibility of foreclosure as the number of defaults on such "reverse mortgages" skyrockets.

  • More than 30,000 U.S. homeowners are in "technical default" on their reverse mortgages and could lose their homes because they have failed to pay their property taxes or property-insurance premiums, according to a new research report based on the latest government data.

For more, see Seniors find dark side to reverse mortgages (Growing reverse-mortgage defaults put homeowners at risk of foreclosure).

Thursday, February 03, 2011

Use Of Voluntary Dismissal To Dodge Scrutiny After Failed Attempt To Dupe Court By Producing, Filing Dubious Docs At Issue In Recent Foreclosure Suit

In West Palm Beach, Florida, the South Florida Sun Sentinel reports:
  • A South Florida homeowner who is fighting a mortgage foreclosure could end up reshaping state law. An appeals court on Wednesday asked the Florida Supreme Court to consider Roman Pino's case as a matter of "great public importance," a move legal experts say could result in reforms in foreclosure cases where there is evidence of fraud in the way documents were handled by lenders, mortgage servicers and law firms.(1)

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  • If the case is taken up by the Supreme Court and results in a decision in favor of the homeowner, legal experts who specialize in foreclosure law say the case has the potential to affect thousands of foreclosures across the state where there are allegations of document fraud.

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  • Pino hired Royal Palm Beach attorney Thomas Ice, whose law firm has been at the forefront of uncovering forged and fraudulent foreclosure documents. The bank alleged in its foreclosure complaint that it was the owner of the mortgage note through an assignment from another lender, but didn't include the assignment as part of the foreclosure complaint, according to the appellate decision. Ice's attorneys moved to dismiss the complaint, arguing that the bank needed the assignment in order to foreclose.

  • Then the bank's attorney, from the law offices of David J. Stern in Plantation, filed an amended complaint and attached an assignment that had not been recorded in land records and "which happened to be dated just before the original pleading was filed," the appeals court wrote.

  • Ice wanted to try to prove Pino was the victim of fraud, but the judge would not allow him to go forward because the bank voluntarily dropped the foreclosure action. The appeals court agreed with the judge, but because of the importance of the issue, sent the case to the state's highest court in Tallahassee. One appellate judge, Gary Farmer, disagreed, saying he thought the trial judge could have kept the case open so Ice could pursue his claim of fraud.(2)

  • Ice said Wednesday that the bank dismissed the foreclosure just as his attorneys were set to take depositions of Stern employees to discover how the assignment was created. Stern's firm is one of four foreclosure law firms in the state under investigation by the Florida Attorney General's Office for document fabrication.

  • The case illustrates a problem that is playing out in cases around the state, where problematic documents are discovered, and the foreclosure is dismissed only to be later refiled with different documents, Ice said.

  • That is what happened to Pino. The bank refiled the foreclosure in August 2009, and that case is now going forward. "This seems to be a prevalent problem in foreclosures," Ice said. "That is why [the appellate judges] want the Florida Supreme Court to rule on it. This is going to be significant to thousands of cases across the state."

For the story, see Case involving alleged foreclosure fraud headed to Florida Supreme Court.

For the Florida appeals court ruling, see Pino v. The Bank of New York Mellon, 4D10-378 (Fla. App. 4th DCA, February 2, 2011) (en banc).

(1) Although the 12-member appeals court, in a 9-1 ruling (with one recusal and one retirement (Judge Farmer) subsequent to the hearing and prior to the issuance of the ruling) affirmed a lower court ruling in favor of the foreclosure mill, it obviously felt that it should be the state Supreme Court that should take a long, hard look at this issue and make the ultimate decision as to how to proceed when dealing with the dubious practices engaged in by foreclosure mills. In this regard, the court majority observed:

  • We conclude that this is a question of great public importance, as many, many mortgage foreclosures appear tainted with suspect documents. The defendant has requested a denial of the equitable right to foreclose the mortgage at all. If this is an available remedy as a sanction after a voluntary dismissal, it may dramatically affect the mortgage foreclosure crisis in this State.

(2) In support of the homeowner's position in this case, the following excerpt gives a taste of the vigorous, six-page dissent originally authored by the since-retired Judge Gary Farmer (concurred with and formally filed by Judge Mark E. Polen) (bold text is my emphasis):

  • This issue is one of unusual prominence and importance. Recently, the Supreme Court promulgated changes to a rule of procedure made necessary by the current wave of mortgage foreclosure litigation. See In re Amendments to Rules of Civil Procedure, 44 So. 3d 555 (Fla. 2010). In approving one amendment, the court pointedly explained:

    [R]ule 1.110(b) is amended to require verification of mortgage foreclosure complaints involving residential real property. The primary purposes of this amendment are (1) to provide incentive for the plaintiff to appropriately investigate and verify its ownership of the note or right to enforce the note and ensure that the allegations in the complaint are accurate; (2) to conserve judicial resources that are currently being wasted on inappropriately pleaded ‘lost note’ counts and inconsistent allegations; (3) to prevent the wasting of judicial resources and harm to defendants resulting from suits brought by plaintiffs not entitled to enforce the note; and (4) to give trial courts greater authority to sanction plaintiffs who make false allegations.” [e.s.]

    44 So. 3d at 556. I think this rule change adds significant authority for the court system to take appropriate action when there has been, as here, a colorable showing of false or fraudulent evidence. We read this rule change as an important refutation of BNY Mellon’s lack of jurisdiction argument to avoid dealing with the issue founded on inapt procedural arcana.

    Decision-making in our courts depends on genuine, reliable evidence. The system cannot tolerate even an attempted use of fraudulent documents and false evidence in our courts. The judicial branch long ago recognized its responsibility to deal with, and punish, the attempted use of false and fraudulent evidence. When such an attempt has been colorably raised by a party, courts must be most vigilant to address the issue and pursue it to a resolution.

I suspect that this dissent may be the now-retired Judge Farmer's 'going-away' present to the citizens of Florida (usually, it's the guy going away who gets, not gives, the 'going-away' presents); it was his way to prod the state Supreme Court into hearing this case and help kick-start their analysis of the issues. If the Florida Supreme Court takes this case and ultimately reverses, don't be surprised if this Judge Farmer-authored, Judge Polen-filed dissent is incorporated, either in whole or in part, into the state high court's analysis. (Kudos to Judge Polen for going on the record and acknowledging the fine work of his now-retired colleague when filing the dissent).