Tuesday, February 15, 2011

Long Island Bankruptcy Judge Gives MERS A Hammering In Ruling Explaining That It Lacks Standing To Foreclose

In Central Islip, New York, The Wall Street Journal reports:
  • A federal bankruptcy court judge issued an opinion on Thursday offering a scathing critique of the Mortgage Electronic Registration Systems, or MERS, the electronic-lien registry system built by the housing-finance industry to facilitate the bundling and selling of pools of mortgages.

  • The decision by U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, N.Y., didn’t change the outcome of the borrower’s foreclosure proceeding. The foreclosure had been approved earlier by a state court, and the judge ruled that he didn’t have the authority to stop it.(1)

  • But that didn’t stop [Judge] Grossman from offering an opinion that he said would have a “significant impact” on the industry by calling into question the rules and procedures that MERS uses to transfer mortgages and handle foreclosures on behalf of the largest U.S. banks.

***

  • The opinion [] rejected any argument that MERS’s reach was so broad and deep that it should receive favorable treatment from the judiciary:

    The Court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States. However, the Court must resolve the instant matter by applying the laws as they exist today. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law.

For more, see U.S. Bankruptcy Judge Questions Legal Claims of MERS.

See also Bloomberg: Merscorp Lacks Right to Transfer Mortgages, Judge Says.

For the court ruling, see In re Agard, Case 8-10-77338-reg (Bankr. E.D.N.Y. February 10, 2011).

Thanks to Mike Dillon at GetDShirtz.com for the heads-up on the story and a copy of the court ruling.

(1) Judge Grossman indicates that his hands were tied to undo the foreclosure in this particular case, and then proceeds to explain why he felt compelled to give an analysis as to why MERS lacks standing to foreclose anyway, in the following excerpt (bold text is my emphasis):

  • The Debtor’s objection is overruled by application of either the Rooker-Feldman doctrine, or res judicata. Under those doctrines, this Court must accept the state court judgment of foreclosure as evidence of U.S. Bank’s status as a creditor secured by the Property. Such status is sufficient to establish the Movant’s standing to seek relief from the automatic stay.

***

  • Although the Court is constrained in this case to give full force and effect to the state court judgment of foreclosure, there are numerous other cases before this Court which present identical issues with respect to MERS and in which there have been no prior dispositive state court decisions. This Court has deferred rulings on dozens of other motions for relief from stay pending the resolution of the issue of whether an entity which acquires its interests in a mortgage by way of assignment from MERS, as nominee, is a valid secured creditor with standing to seek relief from the automatic stay. It is for this reason that the Court’s decision in this matter will address the issue of whether the Movant has established standing in this case notwithstanding the existence of the foreclosure judgment. The Court believes this analysis is necessary for the precedential effect it will have on other cases pending before this Court.

In concluding his ruling, he makes this observation:

  • This Court finds that MERS’s theory that it can act as a “common agent” for undisclosed principals is not support by the law. The relationship between MERS and its lenders and its distortion of its alleged “nominee” status was appropriately described by the Supreme Court of Kansas as follows: “The parties appear to have defined the word [nominee] in much the same way that the blind men of Indian legend described an elephant – their description depended on which part they were touching at any given time.” Landmark Nat'l Bank v. Kesler, 216 P.3d 158, 166-67 (Kan. 2010).

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

One of the constraints Judge Grossman cited for upholding the foreclosure judgment in this case, notwithstanding MERS' lack of standing to foreclose, was the application of the Rooker-Feldman doctrine, which is described in Wikipedia as follows:

  • The Rooker-Feldman doctrine is a rule of civil procedure enunciated by the United States Supreme Court in two cases, Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983). The doctrine holds that lower United States federal courts other than the Supreme Court should not sit in direct review of state court decisions unless Congress has specifically authorized such relief. In short, a federal court must not become a court of appeals for a state court decision.

'Leagle eagles' who don't find Wikipedia a satisfactory resource on this point and who have some time on their hands can check out Duke Law Journal: Allison B. Jones, The Rooker-Feldman Doctrine: What Does It Mean To Be Inextricably Intertwined?, 56 Duke L. J. 643 (2006).

See also Martin J. Bishop, Eleventh Circuit: Rooker-Feldman Doctrine Bars Post-Foreclosure TILA Recission Claim.

U.S. Trustee To Federal Judge: "Fidelity Operated An Affidavit-Execution Process That Systematically Caused The Execution Of False Affidavits!"

The U.S. Trustee's Office has recently filed a Post-Trial Brief in ongoing bankruptcy litigation in a U.S. Bankruptcy Court in New Orleans, Louisiana in which it asks Judge Elizabeth W. Magner to hammer the alleged foreclosure document manufacturing racket management firm Lender Processing Services, Inc., f/k/a Fidelity National Information Services, Inc. (“Fidelity”) with sanctions for allegedly:

  • [p]ermitt[ing] its officer, Dory Goebel, to give materially misleading testimony to the Court on August 21, 2008, and should be sanctioned. It is undisputed that important parts of Goebel’s testimony were untrue; the crux of the matter now is determining Fidelity’s level of culpability. The evidence proves that, at a minimum, Fidelity acted with indifference to the truth in permitting Goebel to give the misleading testimony. (See U.S. Trustee's Post-Trial Brief In Lieu Of Closing Argument, at page 1.)

In the following excerpt, U.S. Trustee describes to Judge Magner what it thinks of Fidelity (bold text is my emphasis) (Post-trial brief, at p. 21-22):

  • Fidelity operated an affidavit-execution process that systematically caused the execution of false affidavits. That Fidelity considered this a valuable service to its clients is made manifest in an article co-authored by Ms. Goebel appearing in Fidelity’s corporate newsletter The Summit. In the article, published in September, 2006, Fidelity trumpeted the efficiency and benefits that its “document execution” process offered to servicer clients. Trial Ex. 17.

    The Fidelity affidavits were false because, per Fidelity’s procedures, its affiant-employees: 1) did not sign in the presence of notaries; 2) did not take any steps to obtain personal knowledge of the averments contained in the affidavits; and 3) falsely represented the contrary, within the affidavits themselves, as to possession of requisite personal knowledge. Fidelity officers Scott Walter and Ms. Goebel testified in complete agreement that Ms. Goebel would not have executed her affidavit in the presence of a notary, and that Ms. Goebel would have obeyed Fidelity’s procedures in that respect. December 1 Tr. 246:6-12, 337:5-22, 332:3-4.

    Mr. Walter and Ms. Goebel also testified in complete agreement that Goebel would not have gained personal knowledge about the averments in her affidavit and, again, that Goebel’s execution of the affidavit without gaining personal knowledge would have been in compliance with Fidelity’s procedures in that respect. December 1 Tr. 248:1-8, 342:21-343:3. Logically, thus, Fidelity expected its affiants to swear, falsely, that they had gained that personal knowledge.

The U.S. Trustee's brief then goes on to give a damning example of this alleged misconduct.(1)

For more, see In re Wilson - U.S. Trustee's Post-Trial Brief (filed February 1, 2011).

(1) In bankruptcy litigation unconnected to this case, the following excerpt from a December, 2010 Reuters story (see Special report: Legal woes mount for a foreclosure kingpin) reports on Lender Processing Services (f/k/a Fidelity National Information Services) getting into a Pennsylvania bankruptcy judge's cross-hairs because of its business practices in connection with foreclosure actions:

  • 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."

Judge Sigmund, in In re Taylor, Case No. 07-15385-DWS (Bankr. E.D. Pa., April 15, 2009), had to deal with numerous document and communications screwups because of the business model used by LPS, and which led her to make the observation that the case before her was "a textbook example of why the [LPS] procedures used by HSBC and its counsel in the name of minimizing collection costs is so problematic."

Judge Sigmund concluded her 58-page opinion in her 2009 ruling with this parting shot at Lender Processing Services, Inc., f/k/a Fidelity National Information Services, Inc. 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.

In the current case, I am interested to see how far Judge Magner goes beyond the level of excoriation Judge Sigmund dished out when hammering LPS/Fidelity.

Florida Foreclosure Mill Makes Major Payroll Dump After Fannie Pulled Its Cases From Firm Over Faulty Paperwork

In Broward County, Florida, the South Florida Sun Sentinel reports:
  • A Hollywood law firm that processes thousands of foreclosures for major lenders laid off almost half of its 568 employees Monday, days after the government-owned mortgage giant Fannie Mae pulled its files from the practice.

  • Ben-Ezra & Katz, in a memo released by a company spokesman, said the firm was "forced to take this action after Fannie Mae surprisingly terminated its relationship with the firm." In a notice sent five days ago, Fannie Mae officials said all exisiting foreclosures, mediations and bankruptcies needed to be transferred to other loan servicers by Tuesday, citing "document execution" issues.

***

  • Monday's layoffs echoed the massive job cuts that the law office of David J. Stern and public-traded affiliate DJSP Enterprises instituted after Fannie Mae and Freddie Mac, the other federal mortgage guarantor, dumped them. Fannie and Freddie comprised the bulk of Stern's business. About 700 Stern employees lost their jobs, according to regulatory filings.

  • Former staffers later sued, saying Stern's operations did not give them the 60-day notice required under the Worker Adjustment and Retraining Notification Act, or WARN, Act. A Ben-Ezra spokesman said WARN notices were sent on Monday to all employees.

For the story, see Foreclosure law firm lays off nearly half of its staff, after losing Fannie Mae.

Another Loan Servicer, "Trash-Out" Contractor Screw-Up To Blame For Premature Break-In & Winterizing Of Home Not In F'closure; Couple Says They'll Sue

The Buffalo News reports:
  • Confusion and miscommunication between M&T Bank Corp. and two contractors has caused embarrassment for the bank, after workers for one of the firms entered a delinquent mortgage customer's Pennsylvania home and caused tens of thousands of dollars in damages by mistake.

    The incident illustrates a growing risk for banks and loan servicers around the country as the mortgage and foreclosure crisis continues. Lenders and their contractors are struggling to keep up with the pace.

    And many borrowers are unaware of the rights that their lenders have after the mortgage is signed.

    "Probably a large percentage of borrowers never know what's in their mortgages unless things go wrong," said David Blackmon, a real estate attorney at Hogan Willig PLC in Amherst.

    In the Pennsylvania case, workers for Roman's Restorations entered the unoccupied State College home of Alicia and Dan Dorsey through the rear French doors last month, with instructions to do a visual inspection of the property and "winterize" the house.

    That just means shutting off the water, blowing any remaining water out of the pipes and putting antifreeze in them to prevent the pipes from freezing, bursting and flooding.

    It's a common procedure for Buffalo-based M&T and other lenders when a mortgage borrower is in default and a home is vacant. M&T even plows driveways and mows lawns of vacant homes.

    The Dorseys still own the 8-year-old home, but moved to Albany in 2007 and have been unable to sell their former house, whose value has plummeted well below their mortgage.

    They're still paying for utilities and maintenance, but fell behind on payments a few months ago. They're not in foreclosure, and have been negotiating a "short sale" with the bank. But since no one lives there, M&T wanted to ensure that the seven-bedroom home wouldn't suffer damage from the cold winter.

    Doing a 'trash-out'

    Banks and their contractors take such steps to stabilize properties all the time, without problems. But this time, something went wrong. The workers thought they were going into a home after a foreclosure sale, so they did a "trash-out," which means removing all personal belongings and changing the locks.

    The Dorseys had long since moved their belongings to Albany, but they had a buyer for the "short sale," slated to close on Feb. 15. As part of the sale agreement, they were working with the buyer to renovate and upgrade the kitchen with new appliances, counter tops and solid wood cabinets.

    The old appliances had been removed, and the new ones were sitting in the garage, waiting to be installed, along with the new cabinets and counter tops. So the workers took everything -- valued at tens of thousands of dollars, Dorsey said -- and tossed it into the back of a white box truck, unsecured and unprotected, and drove off.

    A neighbor called local police, who came to the house to investigate what appeared to be a burglary. The neighbor and the home buyer -- who each had permission from the Dorseys to come to the house -- joined officers, and found a notice from Safeguard Properties.

    Safeguard is a Cleveland-based property preservation and management firm that works with lenders nationwide to maintain vacant homes backing delinquent mortgages -- including in Western New York. The company inspects and maintains more than 1 million properties a month. M&T had hired Safeguard, which in turn contracted with Roman's Restorations to inspect the home.

    Police tracked down the belongings. Except for three items, everything was returned the next day, "in a huge heap in the garage," but "everything's damaged now," Alicia Dorsey said.

    In addition, she said, the workers had "walked with muddy boots all over" the house, scratched the hardwood floors and "dinged" the walls, and also took off curtains, rods and any hook fixtures, bending some of them in the process. The sump pump was ripped out and left on the hardwood floor, and the pink antifreeze leaked out and damaged the hardwood floors.

    Alicia Dorsey is demanding that the bank or Safeguard pay for all of the damages, upfront. "I want a check cut," she said. "We're talking over $100,000."

    And she says she's getting the runaround from M&T and Safeguard, even though they acknowledge a mistake occurred and have apologized. "This is the biggest debacle I have ever seen in my life," she said.

    The bank says it is looking into it.

    "This was an isolated incident involving a contractor in Pennsylvania, hired by a property preservation company to secure and winterize a vacant home," said M&T spokesman Chet Bridger. "We have been working with the property preservation company and attempting to work with the customer in an effort to fully investigate and understand the circumstances surrounding this situation and assist in resolving the customer's concerns in a fair and equitable manner."

    Mortgage rules allow it

    Homeowners have filed lawsuits or made complaints against Bank of America Corp., J.P. Morgan Chase & Co., National City Mortgage, U.S. Bancorp and even Fannie Mae, alleging trespassing and theft or destruction of property. And in most if not every case, Safeguard is the primary contractor.

    "We are sorry for the distress the homeowners experienced, and have been working with them ever since we became aware of the situation to resolve it," said Safeguard spokeswoman Diane Roman Fusco.

    "These events are rare among the properties across the country that we inspect, maintain and protect annually for banks and servicers."

    No criminal charges were filed in the Dorseys' case, but Alicia Dorsey, a safety engineering consultant, said the couple plans to sue.(1)

    "The bank is responsible because the bank sent marching orders to Safeguard to do this," she said. "The bank had no right to order that. We are not in foreclosure. We are paying all the taxes and fees and utilities. I obviously didn't give them permission to enter my home."

    The bank may not have needed permission. Under a standard mortgage document, a lender has the right to "enter on and inspect the property" in "a reasonable manner and at reasonable times," including the inside of a home if "it has a reasonable purpose." It must give notice before or at the time of such an inspection.

    Moreover, if a borrower doesn't keep his or her "promises and agreements" in the loan, including making payments, or if the borrower abandons the property, the lender "may do and pay for whatever is reasonable or appropriate to protect" its interest in the property.

    "The loan documents are pretty standard from state to state, and they ... give the lender the right to enter the property and inspect it," said Michael Piette, a real estate attorney and partner at Jaeckle Fleischmann & Mugel LLP in Buffalo, which has represented M&T. "The lender has a right to protect their interests in the property. They become greater in the event of a default or if the property has become abandoned."

    And since the Dorseys were in default, even though they weren't in foreclosure and the property wasn't abandoned, M&T and Safeguard had the right to enter the house to inspect and winterize it, with proper notice, lawyers said.

    Still, lawyers say, having the right doesn't mean they have to exercise it, although Fannie Mae and Freddie Mac often require it of banks that are servicing their loans. In this case, for example, the Dorseys and others question why M&T would treat the home as abandoned and enter it, when the bank was in communication with the borrower over the sale, and when the borrower was paying for utilities and maintenance.

    "That is a pretty egregious violation of someone's right to possess property," said Diane Tiveron, managing partner at the Hogan Willig law firm. "You've got to assume that M&T knows that they're trying to work this out. If the bank wants to do something more, then they should go into court."

    Meanwhile, the Dorseys fear the impending home sale is now jeopardized. That would leave the parents of four children back where they started, with a loan they can't afford and a home they can't sell.

    "I'm completely broke because of keeping my house going for three years," Alicia Dorsey said. "Because of what M&T did, we are going to lose the potential buyer of this house. How can we put a price on that?"

Source: Contractors' missteps cause embarrassment for M&T (Workers damage borrower's home).

(1) For examples of filed lawsuits involving illegal "trash-out" / lockout cases, see:

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

Monday, February 14, 2011

Foreclosure Document Mill Faces Scrutiny For Allegedly Committing Perjury In Consumer Bankruptcy Case

AOL's Daily Finance reports:

  • It's a Louisiana bankruptcy case involving a single foreclosure that best illustrates the problems with the banks' outsourcing their mortgage default work to LPS or similar entities. [...] In that Lousiana case, involving the bankruptcy of Ron and La Rhonda Wilson, LPS is facing sanctions for allegedly committing perjury during a hearing held to find out why the bank -- Option One -- twice asked the bankruptcy court for permission to foreclose when the debtors were current on their mortgage. LPS insists it did not intend to mislead the court.

For the rest of the story, see When Banks Outsource Foreclosures, Nothing Good Happens.

Head Of Florida Foreclosure Mill Ordered Into Court To Explain Dubious Document Filings In Recently-Dismissed Suit

The Palm Beach Post reports:

  • On Thursday, Fannie Mae cited document "execution issues" as the reason it terminated the law firm. Ben-Ezra & Katz becomes the second south Florida law firm making a mass exodus from the foreclosure business. The Plantation law firm of David J. Stern began dumping thousands of its Fannie Mae cases late last year after evidence of robo-signing and other faulty documents became known.

***

  • Miami-Dade Circuit Judge Maxine Cohen Lando expressed her displeasure Friday in a case that involved a property in Homestead with a $265,134 foreclosure judgment issued in July. Lando said the so-called original note and original mortgage were filed months after the bank said those documents were lost.

  • "That in itself is a fraud upon the court," Lando wrote in an order to show cause as to why she should not hold Ben-Ezra & Katz attorneys in contempt. But, she added, the action "pales in comparison" to the fact that the mortgage and note are to a different property in Lehigh Acres, and that the documents are improperly signed and notarized. Lando said her verbal contempt finding on Friday would be followed by a written order.

  • Although Marc Ben-Ezra, 44, was not the direct attorney handling the case, the homeowner's attorney Maria Mussari said the judge ordered the owner or head of the firm to appear. Ben-Ezra has no disciplinary history with the Florida Bar . The judge dismissed the foreclosure case and banned the lender from refiling it.(1)

***

  • Fannie Mae set a deadline of Tuesday for servicers to find new firms to handle the Ben-Ezra & Katz cases. But finding replacement lawyers has proven to be frustrating. Statewide, Ben-Ezra & Katz has handled at least 18,000 cases, according to Legalprise, a West Palm Beach data analysis firm.

For the story, see Lawyer held in contempt over 'fraud' in foreclosure filing.

For Judge Lando's ruling, see Central Mortgage Co. v. Gonzalez Del Real.

Thanks to Brian Davies for the ruling.

(1) No doubt Ben-Ezra is preparing to invoke what some judges have facetiously referred to as the "pure heart and empty head defense" in an attempt to minimize any possible sanctions.

See, e.g.:

  • In re Rivera, 342 B.R. 435, 460 (Bankr. D. N.J. 2006), stating that the "pure heart and empty head defense" was unavailable to a law firm facing Rule 11 sanctions in a bankruptcy case that resulted in the imposition of a $125,000 fine on the firm in connection with the chronic filing of unreviewed paperwork in foreclosure actions.

  • Warner v. Hillcrest Medical Center, 914 P.2d 1060 (Okla. Ct. Civ. App. 1995), stating:

    "Whether or not the acts of an attorney are done in good faith is no longer the test. "`[T]he new test represents an intentional abandonment of the subjective focus of [§ 2011] in favor of an objective one.' `Simply put, subjective good faith no longer provides the safe harbor it once did.' `There is no room for a pure heart, empty head defense under [§ 2011].'" First National Bank and Trust Company of Vinita v. Kissee,
    859 P.2d 502, 512 (Okla. 1993) (footnotes omitted). "Rule 11 requires lawyers to think first and file later, on pain of personal liability." Stewart v. RCA Corp., 790 F.2d 624, 633 (7th Cir. 1986).

Fannie Gives Florida Foreclosure Mill The Boot Over Faulty Paperwork Issues

The Palm Beach Post reports:

  • Federal mortgage giant Fannie Mae has cut ties with a second South Florida law firm handling its foreclosure cases, requiring an immediate transfer of those files to other attorneys and likely causing more turmoil in the state's foreclosure courts.

  • The termination of its relationship with the Fort Lauderdale firm of Ben-Ezra & Katz, P.A. was announced today in a notice to loan servicers. The notice says payments to the firm should be stopped immediately and gives servicers a Feb. 15 deadline to find new firms to handle the Ben-Ezra & Katz files.

***

  • The move by Fannie Mae follows its November firing of David J. Stern's Plantation-based law firm, which is one of four so-called "foreclosure mills" under investigation by the Florida attorney general's office.

For more, see Fannie Mae fires second South Florida law firm.

For a recent hammering administered by a Miami judge on Mr. Ben-Ezra's firm in a recent case, see Central Mortgage Co. v. Gonzalez Del Real.

Florida Appeals Court Nixes Use Of "John Doe" Defendants In Lawsuit Absent Statute Authorizing Otherwise; More Hot Water For Foreclosure Mills?

A Florida appeals court recently affirmed a lower court ruling disallowing the practice of filing "John Doe" complaints by a plaintiff when the names of certain potential defendants are unknown. From the ruling:
  • We affirm the order granting the motion to quash service of process as to defendant Krieger-Martin (one of the “unknown John Does”). Krieger-Martin was not named in the style of the complaint, nor was she referenced in any allegation contained in the body of the complaint.

    In the absence of a statute authorizing such a procedure, the filing of a “John Doe” complaint is not sufficient to commence an action against a real party in interest. Grantham v. Blount, Inc., 683 So. 2d 538 (Fla. 2d DCA 1996).(1) The complaint failed to give this ostensible defendant actual notice that a lawsuit was being commenced against her. Liebman’s attempted service of process upon this individual (in which the summons described the person to be served as “unknown John Doe #5”) cannot serve to satisfy this notice requirement. Gilliam v. Smart, 809 So. 2d 905, 909 (Fla. 1st DCA 2002) (“The service of process on an individual cannot be used to broaden the scope of the pleadings to add a defendant who is not named as a party in the complaint.”)
    .

Unless there is a statute authorizing this "John Doe" procedure in a foreclosure action, does this mean more hot water for the foreclosure mills who may have improperly loaded up their lawsuits against homeowners with "John Doe" defendants (possibly in an attempt to inflate the process server fees these cases generate)? How about an additional cause of action in a countersuit against them for a possible violation of the Federal Fair Debt Collection Practices Act?

For the ruling, see Liebman v. Miami-Dade County Code Compliance Office, No. 3D10-43 (Fla. App. 3d DCA, February 9, 2011).

(1) From Grantham v. Blount, Inc., 683 So. 2d 538 (Fla. 2d DCA 1996) (bold text is my emphasis):

  • Some states have statutes or rules of civil procedure that permit a plaintiff to file a fictitious or "John Doe" pleading if the true name of the defendant is not known. Once the true identity of the defendant is ascertained, the plaintiff then files an amendment naming the defendant. This amendment relates back to the date the original complaint was filed. See Mass. Gen. Laws Ann. ch. 223, § 19 (West 1995); Ala. R. Civ. P. 9(h) and 15(c)(4). See generally Joel E. Smith, Annotation, Relation Back of Amended Pleadings Substituting True Name of Defendant for Fictitious Name Used in Earlier Pleading So as to Avoid Bar of Limitations, 85 A.L.R.3d 130 (1978); Note, Designation of Defendants by Fictitious Names—Use of John Doe Complaints, 46 Iowa L.Rev. 773, 776 n.15 (1961) [hereinafter 46 Iowa L.Rev.]. Florida is not one of these states.

    In the absence of a substantive or remedial statute permitting John Doe actions as a method to extend the limitations period, the legislature requires this court to consider whether the English common law permitted such actions on July 4, 1776. § 2.01, Fla. Stat. (1995). We have found no English common law authorizing John Doe pleading in this fashion.

(2) From Gilliam v. Smart, 809 So. 2d 905 (Fla. 1st DCA 2002) (bold text is my emphasis):

  • In Florida, the filing of a "John Doe" complaint, without more, does not commence an action against a real party. See Grantham, 683 So.2d at 538.

Sunday, February 13, 2011

Listing R/E Agent Conceals Purchase Offer To Client/Owner Of Bldg In F'closure, Then Buys Property At Auction, Flips It To Original Prospective Buyer

In Denver, Colorado, KUSA-TV Channel 9 reports:
  • The Colorado Division of Real Estate is investigating a Jefferson County real estate agent following a 9Wants to Know investigation into a transaction where a Realtor didn't bring an offer to the seller and then turned around and bought the building at a foreclosure auction.

  • 9Wants to Know discovered Realtor Mark Dyson bought a property he listed at foreclosure, turned around quickly and sold it to a buyer who had made two previous offers before the building went to foreclosure.

  • One of those offers was not presented to the seller even though state law requires a seller's agent to present all offers. "I should have presented the offer, that was my mistake," Dyson told 9Wants to Know. "My mistake."

  • Dyson signed a real estate contract to sell Carol Price's building which housed her dance clothing store at 1825 Youngfield St. in Golden. Her property, which also included 1819 and 1821 Youngfield St. was headed toward foreclosure. [...] Dyson agreed to be Price's real estate agent on Sept. 21, 2010.

  • Weeks went by with no offers until Nov. 23, 2010 when Dustin Jansson made an offer for $250,000 though his Keller Williams real estate agent A.J. Stiffler. Dyson presented the offer to Price and she countered with $289,000, according to Price. Price said she never heard anything more about the deal and figured it was dead.

  • A 9Wants to Know investigation discovered there was another offer Price didn't know about. Jansson made a second offer the day before Price's property went to the foreclosure auction for $268,000, but Price said her Realtor didn't tell her about that offer.

  • Dyson admitted to 9NEWS he didn't present the offer because he didn't believe there was enough time to stop the property from going to the foreclosure auction. "It doesn't make any difference. It makes absolutely no difference at all in anything," Dyson said. "There was no way. She was losing her property the next morning."

***

  • Dyson said he tried his best to sell Price's property, but it went to the foreclosure auction on Dec. 1, 2010. He said there was not enough time to stop the foreclosure. [...] Price said she learned later in the day that Dyson, the Realtor who she hired to sell her property before it went into foreclosure, had bought the property at the auction.

***

  • The day Price's property went on the foreclosure auction block, Dustin Jansson - the same man who made the other two offers -- made an offer to buy the property from Dyson, according to Jansson's Realtor. The two eventually struck a deal and Dyson sold the property to Jansson for $265,000. "It just doesn't seem right," Price told 9Wants to Know about the whole deal.(1)

For the story, see State investigation looks into real estate agent's deal with himself.

(1) An attempt to undo these transactions by the foreclosed homeowner may be viable if she can prove that there was a fiduciary relationship between her and the real estate broker. In such a case, she may have a strong basis for bringing a lawsuit against him and the subsequent purchaser for, among other things, the imposition of a constructive trust. The purpose here would be to have a court declare that, because of the real estate broker's fiduciary duty to his client (the property owner), the real estate broker took title to the foreclosed property as trustee for her benefit, and not for himself in his individual capacity. If this attempt to undo the deals are successful, the real estate broker would probably be entitled to a lien on the property (ie. an equitable lien / equitable mortgage,) for the amount he shelled out at the foreclosure sale.

With regard to the rights of the subsequent purchaser of the property, such a purchaser could defeat the finding of a constructive trust and equitable mortgage or lien as it applies to him, but only if he qualifies for status as a bona fide purchaser (ie. he lacked both: (a) actual knowledge of the prior dealings between the broker and the foreclosed homeowner, and (b) notice - either actual, constructive, or implied - of those earlier dealings or of any legal or equitable right the foreclosed owner may have in the property).

Since the foreclosed homeowner remained in possession of the property throughout the relevant period (go here for Colorado case law on the effect of persons in possession of real estate on the rights of bona fide purchasers), and because the subsequent purchaser would be hard-pressed to establish that he didn't know that the real estate broker had some existing business relationship with the foreclosed property owner prior to the foreclosure sale (he made purchase offers through the broker, then acting as listing broker for the subsequently-foreclosed owner, prior to the public auction), the subsequent purchaser may not be able to qualify as a bona fide purchaser, in which case he would be rendered unable to defeat the claims of constructive trust and equitable mortgage. In this event, his purchase from the real estate broker would be treated, not as a conveyance of title to the subject real estate, but rather, it could be recharacterized as an assignment of the equitable mortgage / lien.

Obviously, the foregoing is much easier said than done, and would probably require the services of an attorney experienced in litigation and real estate law, and be well-acquainted with the common law doctrines / equitable remedies under the law of:

Seeking legal assistance from the local, neighborhood attorney whose experience in real estate law may be limited to doing simple, single family home real estate closings would probably not be someone to seek counsel from on the above situation, other than to get a referral to someone who knows what she/he is doing by going into court to file a lawsuit challenging these transactions.

Sacramento Feds Squeeze Guilty Plea In Upfront Fee 'Rescue' Ripoff That Peddled Phony Foreclosure Defense Legal Services

In Fresno, California, Central Valley Business Times reports:
  • George Eggleston has pleaded guilty Friday in Fresno federal court to running a mortgage foreclosure rescue scheme, says U.S. Attorney Benjamin Wagner. Mr. Eggleston also agreed to the forfeiture of property and proceeds obtained as a result of such violations, including a personal money judgment in the amount of $364,899. He entered the guilty pleas to three counts of wire fraud and one count of mail fraud.

  • According to court documents, Mr. Eggleston, a Las Vegas, Nev., resident, targeted property owners who were facing foreclosure and offered to rescue them. Using the business names of Nexxus and Global Legal Associates, he advertised on his website and also got referrals from others individuals who marketed his services.

  • Mr. Eggleston induced property owners to enter into a contract called the “Nexxus Engagement,” the terms of which required property owners to sign an “Offer and Agreement” and pay Nexxus a monthly fee of $1,000 for 60 months. The terms of this agreement also required the clients to sign a power of attorney giving Nexxus authority to negotiate with lenders and file lawsuits on their behalf.

  • He admitted that he told his clients that by using and managing attorneys, Nexxus and Global Legal Associates could negotiate with lenders and file lawsuits against lenders thereby stopping the foreclosure action. But he did not provide the services, did not manage attorneys, and did not stop foreclosure actions. Instead, he used the money from the clients for his personal expenses.

For the story, see Guilty plea in foreclosure rescue scheme (Promised legal help to stop foreclosures, but used clients’ money for his own expenses).

San Diego Prosecutions Of Local Foreclosure Rescue Ripoff Group Concludes As Mastermind Gets Six Years In Sale Leaseback, Rent Skimming Scam

In San Diego, California, KFMB Radio 760 AM reports:
  • The ringleader of a scheme in which Filipino homeowners struggling to make mortgage payments were urged to transfer property titles into a bogus trust was ordered Thursday to spend six years in prison and make restitution of $71,000.

  • Edmundo Rubi, 53, pleaded guilty last month to five felony counts, including grand theft and perjury, stemming from the Ponzi scheme. The defendant also pleaded guilty to attempted foreclosure consultant fraud and using a scheme to defraud with the offer of the sale of a security. Another 49 counts were dismissed.

  • Deputy District Attorney William La Fond told Judge Louis Hanoian last month that Rubi convinced more than 20 people to "quitclaim" more than 30 properties into his fraudulent trust, telling them that he would maximize their investment through his expertise, which he didn't have.

***

  • Co-defendant Joseph Mariano Encarnacion pleaded guilty to helping Rubi in the scheme and was sentenced to four years behind bars. Husband-and-wife real estate agents Ben and Gloria Hebron also admitted their roles and were sentenced to probation and ordered to give up their real estate licenses.(1)

For the story, see Ringleader of mortgage Ponzi scheme sentenced to six years behind bars.

(1) See Pair Dodges Jail, Get Probation For Participation In San Diego-Area Foreclosure Rescue Scam That Conned 22 Homeowners To Sign Over 34 Home Titles for an earlier post on the convictions of Rubi's confederates.

Bay Area Grand Jury Indicts Four In Alleged Foreclosure Rescue Racket; Filed Fraudulent Documents In Bogus Attempts To Stall Legal Process: DA

In Oakland, California, KGO-TV Channel 7 reports:
  • A Las Vegas man has been arrested on a 29-count indictment of defrauding residents of Alameda County in a mortgage rescue scheme. 7 On Your Side has been conducting an investigation of its own into the accusations for two months.

***

  • "The allegations are they conspired to commit a real estate fraud scheme in which they offered to save the victim's homes from foreclosure, in fact were not doing that, but in fact, they were just filing false documents under the false promise of saving the homes," said Alameda County Deputy District Attorney David Lim.

  • The Alameda County grand jury has handed down a 29-count indictment against Alan David Tikal, who is doing business as KATN Trust. Tikal alone faces all 29 counts and is under arrest in a Las Vegas jail. If convicted, he could get nearly 22 years in prison for real estate fraud, mortgage security fraud, and filing false documents.

  • Three other individuals face similar charges, but far fewer counts. Those three are Bruce Blankenhorn, who faces seven felony counts, Luis De Leon, who faces three felony counts, and Linda Voss, who faces one felony count.

***

  • The Oregon Department of Justice confirms that this summer it ordered Tikal to repay $5,000 to four victims. The department has since referred the matter to its criminal division. Also last year, the Office of the Comptroller of the Currency warned that Tikal was inaccurately trying to present himself as a private banker.

For the story, see Mortgage fraud suspect indicted on 29 counts.

For an in-depth story on this alleged racket, see The Modesto Bee: Man jailed in Stanislaus realty scam (He awaits extradition; officials say he peddled phony foreclosure):

  • "If there's a way for the bleeping banks to put me in jail, I would already be there," Al Tikal boasted in a recent Webinar, trying to land more clients anxious to keep their homes.

***

  • In his Webinar, Tikal referred to 1930s events resulting in banks relying on "vague promises from the government" backing transactions, as opposed to gold. A similar "vapor money theory" three years ago brought prison terms of more than 20 years each to two Bay Area businessmen.(1) In the Webinar, Tikal said he issues "bankers' acceptances" and said he is a private banker with "access to enormous lines of credit in the banking industry."

(1) For examples of court rulings nixing the "vapor money theory" defense in foreclosure actions (the rulings do a good job of collecting cases from around the country that have kiboshed this defense), see:

  • Wells Fargo Bank, NA v. Ward, 2006-Ohio-6744 (Ohio App. 10th Dist. 2006),
  • Barnes v. Citigroup, Inc., Case No. 4:10CV620 JCH (E.D. Mo. Eastern Div. 2010),
  • Jo El Nero: Ali v. Vericrest Finance, No. 10 C 4613 (N.D. Ill. Eastern. Div. 2010): In this case, the homeowner also asserted the "Moor" defense; that he “is an Ancient one of the Indigenous Aboriginal, Muurs/Moors with Ancestral Ties to these lands with all beneficial interest as Titulus . . . .

By the way, before anyone begins bashing the attorneys who represented the homeowners in these cases, note that each homeowner was self-represented (ie. pro se).

Trial Begins For "Sovereign Citizen" Accused In F'closure Rescue, Loan Reduction Scam; Judge Rejects "Diplomatic Immunity/Moor Defense" As "Gibberish"

In Memphis, Tennessee, WMC-TV Channel 5 reports:
  • "Heartache, pain & trouble" -- one pastor's description of what's floating in the wake of Charles McKuhn. Testimony in the Bartlett man's federal fraud trial began in earnest Tuesday as he faced charges of running a debt-reduction/foreclosure rescue scheme that spanned nine states.

  • Last March, a federal grand jury indictment charged McKuhn and his company, Taurian Worldwide, Inc. (TWI) with bilking more than $500,000 from churches and individuals in the wire-transfer lending scheme. The indictment said between June 2007 and June 2009, McKuhn schemed to defraud "...various individuals and institutions, by representing himself as a legitimate debt reduction service, and international private banker, able for a front-end fee to reduce the debt owed by individuals and institutions and establish lines of credit and secured loans for building projects."

  • In testimony Tuesday, pastors from churches in Alabama, Tennessee and Virginia said McKuhn, who holds no credentials in banking or finance, claimed TWI held a federal bond that could be used to underwrite pay-offs of their churches' delinquent mortgages. "He said he had a 'blanket bond' through the Federal Reserve that could be used to pay down the debt," said Bishop James W. Johnson of Birmingham, AL. Johnson testified his home church is Christ Temple Holiness Church of the Apostolic Faith in Opelika, AL.

  • Johnson and two other pastors testified they paid McKuhn and TWI cash installments -- one as much as $85,000 -- to either secure a line of credit to pay off their mortgages or to have TWI assume the loans and "discharge" the debt. Johnson testified he even signed on to be a representative of TWI and recruit other pastors. Each testified McKuhn took their money, did nothing -- and the banks foreclosed on their properties.

  • McKuhn is representing himself, often asking witnesses meandering and confusing questions on cross-examination. U.S. District Court Judge Jon P. McCalla appointed Memphis attorney Sam Perkins to be McKuhn's "elbow" counsel, but McKuhn has ignored Perkins throughout testimony. "He wouldn't talk to me," said Perkins. "I have no indication at all on where he's going or how I can assist him."

  • In previous court appearances, McKuhn argued the federal courts can't prosecute him because he's a sovereign American Moor whose allegiance is to his Moroccan-African heritage, not to the United States. "I'm demanding common law jurisdiction as a Native American Moor," McKuhn said in court last summer. "I do not consent to this proceeding. I'm not a 14th Amendment citizen. This court does not have jurisdiction in this case."

  • The U.S. Constitution's 14th Amendment provides that "All persons born or naturalized in the United States and subject to the jurisdiction thereof, are citizens of the United States." According to investigators' case records, McKuhn is a naturalized American citizen. A certificate of birth abroad indicated he was born in 1977 to his American parents at a U.S. Army hospital in Germany. A 2007 state department document confirmed McKuhn is a U.S. citizen.

  • McCalla told McKuhn his "Moor defense" is a tired, misguided strategy tried by countless defendants in district courts nationwide. "What (McKuhn's) talking about is gibberish," said McCalla from the bench in the July proceeding. "I don't think I have any choice but to take him into custody. Since he has no respect for the law of this country, I can't be certain that he won't (flee the country)." McKuhn has been in the custody of U.S. marshals ever since.

  • Blake Ballin, McKuhn's former attorney, said the diplomatic immunity/Moor defense is a sign McKuhn is under tremendous pressure.

For more, see Pastors testify at debt/foreclosure fraud trial.

For a story update, see Debt/foreclosure scam artist found guilty:

  • [A] federal jury found Charles McKuhn guilty on seven counts: two counts of mail fraud, four counts of wire fraud and one count of money-laundering.

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

For the details of the criminal charges, see U.S. v. McKuhn.

Saturday, February 12, 2011

Lawsuit: Daddy Duped Me Into Deeding Him My Home!

In New York City, the New York Post reports:
  • Maurice Cohn, who ran Cohmad Securities, a Bernie Madoff-linked investment firm, has been sued by his daughter for allegedly duping her into signing over her house to a trust he controlled, The Post has learned. "It's ironic," said Jersey lawyer Todd Conn, who represents Karen L. Cohn, "but this guy, to use a legal term, is one of the nastiest f---s I've ever met. He's a tyrant. He blames everyone else for everything, including Bernie Madoff."

Source: Madoff pal sued by kin.

Chase Coughs Up The Cash, Dodges Possible Asset Seizure After Paying Homeowner's Legal Fees In Illegal Foreclosure Case

A recent Bloomberg story reported that JP Morgan Chase may have been facing an asset seizure for court-ordered legal fees owed to El Paso, Texas attorney Richard Roman for work he did in successfully representing a local homeowner who had her home foreclosed out from under her despite having a temporary restraining order in effect (see JPMorgan Faces Texas Sheriff in Showdown Over Eviction Case Fees).

In a follow-up to that story, El Paso Inc. reports:
  • On Friday, Roman was notified by the Sheriff’s Department that Chase – or someone – had paid his $5,000 fee by cashier’s check. “They sent it to the Sheriff’s Department, but we won’t get it for another three weeks,” he said.

For the El Paso Inc. story, which also reports on the background story that led to the local court ordering payment of the attorney fee, see Foreclosure nightmare (Homeowner fights big banks and eviction).

Handyman Pinched For Allegedly Targeting Trusting 82-Year Old Woman In $490K Home Repair Ripoff

In Palm City, Florida, WTSP-TV Channel 10 reports:

  • Detectives with the Martin County Sheriff's Office arrested Harry B. Patterson [...] after an investigation revealed that between December 2007 and June 2009, Patterson was hired to perform work at the victim's home in Palm City, but ended up doing very little or none of the work, much of it having to be redone because it was deemed hazardous. Police say Patterson also billed the victim several times for the same invoices.

  • The victim told police that Patterson repeatedly came to her home suggesting work that her home needed done, and since she wasn't knowledgeable and he seemed to know what he was talking about, she trusted him to do the work and that it was needed. The victim said Patterson regularly brought over his wife and daughter to visit her and that she enjoyed the company and it made her feel more trusting of Patterson.

  • Investigators determined in one project to repair a seawall, replace insulation and remove mold, Patterson charged the victim more than $107,000 for $10 worth of cement patch and hour's work.

  • Patterson was charged with grand theft from a victim over the age of 65, which is a first-degree felony. If convicted, Patterson faces a possible 30 years in prison. Patterson was booked at the Martin County Jail and released on Thursday after posting $150,000 bond.

Source: POLICE: Contractor charged homeowner $107,000 for $10 seawall patch job.

Go here for the details of the allegations against Patterson in the police Complaint Affidavit.

Foreclosure Defense Grows As A 'Do-It-Yourself' Project

In Albuquerque, New Mexico, The New York Times reports:
  • In New Mexico, New York, Florida and the 20 other states where foreclosures require a judge’s approval, homeowners in default have traditionally surrendered their homes without ever coming to court to defend themselves. (In the 27 other states, including California, Nevada and Arizona, homeowners have a much harder time contesting a foreclosure even if they want to.)

  • That passivity has begun to recede. While many foreclosures are still unopposed, courts are seeing a sharp rise in cases where defendants show up representing themselves.

***

  • In New Mexico, this is where the hourlong workshops come in. [...] Young and old, solo and in couples, the homeowners in [director of the nonprofit Fair Lending Center Angelica] Anaya Allen’s class were all in breach, clutching special-delivery packages from their lenders announcing that the machinery was now engaged to evict them. They took notes, asked questions — is the courthouse the building on Fourth Street with the blue roof? — and were resolute if not quite eager for battle.

***

  • Louis McDonald, the chief judge for New Mexico’s 13th Judicial District, welcomes the influx of homeowners defending themselves, known as pro se defendants. “They really want to stay in their houses,” he said. “Some of them have fairly legitimate defenses.”

  • But the law grows more complex as the cases proceed, and foreclosure still looms for those who do not grasp its intricacies. “The system is failing those who can’t afford representation,” [Judge] McDonald said.

For the story, see Foreclosed Homeowners Go to Court on Their Own.

Florida HOAs Pick Up Pace On Lien Foreclosures; Reach Workouts With Unit Owners Seeking Payment Plans While Booting The Deadbeats

In Broward County, Florida, The Miami Herald reports:
  • It’s not only lenders who are clogging the courts with foreclosures. Leaders at condo and homeowners associations say they have been forced to foreclose; many have then rented out the property. They need cash to pay for maintaining common areas and providing services.

  • For years, many community associations rarely foreclosed. But that changed when the real estate crisis swept throughout South Florida more than three years ago and the rate of unpaid maintenance fees grew dramatically.

***

  • Don Urquhart and other association leaders routinely start foreclosure proceedings if owners don’t arrange to pay delinquent dues. Urquhart and other association leaders, however, say they will work with owners who try to catch up. “We will extend them time. It’s been a win-win,” Urquhart says. “We have avoided legal costs and they got back on their feet.”

  • Association leaders, though, have to remain tough against those who won’t try to pay, he adds. The reason is simple: Someone has to pay to keep the lights on, the grass mowed. Urquhart’s association has already imposed a special assessment on the owners who have been paying – to cover for those who aren’t.

  • Now some associations are even trying to beat banks to the courthouse to foreclose first on properties owned by deadbeat owners. The upside: They can get months – if not a year or two – of rent before the banks formally foreclose.

For more, see Homeowner associations step up foreclosure filings (Strapped for money to pay for property maintenance, many associations are foreclosing on owners who don’t pay fees, then renting the units to bring in cash).

Lawsuit: Contractor Pocketed Cash & Failed To Complete Crappy Job; Homeowner: Forced To Pay Extra To Stiffed Subs To Avoid, Release Mechanics' Liens

In Galveston, Texas, The Southeast Texas Record reports:
  • A Harris County man claims that an incomplete construction project at his Galveston residence cost him $40,000 in economic and consequential damages, recent court documents say. Mark T. Adlam filed suit against contractor Michael Bomer, alleging Bomer failed to perform under and breached the contract both parties entered in December 2009.

***

  • Adlam faults the defendant for not finishing the task despite being fully paid for labor and materials. "The work was never completed, and much of the work that was performed was defective," the suit states. It insists that "the defendant failed to pay its vendors, and the plaintiff was forced to pay invoices to prevent or release liens on the property."

Source: Homeowner sues contractor for not finishing $40K project.

Houston Man Seeks TRO To Nix Demolition Order On Recently-Purchased Condemned House; Says He Sank Nearly All His Savings Into "Historic" Home

In Beaumont, Texas, The Southeast Texas Record reports:
  • Houston resident Aaron Conley has filed a request for a temporary restraining order to stop the city of Beaumont from demolishing a home "with historic roots" he recently acquired. [...] In his petition, Conley says he purchased the home, [...] in Beaumont, on Jan. 26 "to save it from demolition and to (restore) the home to its past historical roots."

  • The city had already condemned the structure and slated it for demolishment before Conley made the purchase. Conley says he's invested nearly all his savings into the home and will suffer immediate and irreparable injury unless the court issues an injunction against the city.

Source: Man seeks TRO to stop city from demolishing historic Beaumont home.

Sheriff's Deputies Make Meth Bust In Home Facing Foreclosure; Tenant, Two Others Face Multiple Charges

In Cornville, Arizona, The Daily Courier reports:
  • Yavapai County Sheriff's deputies arrested three people Sunday in Cornville on charges including possession of drug paraphernalia after they found methamphetamine, meth pipes and an improvised explosive device inside a home and a blue Chevy Blazer.

  • Deputies answered a call about a burglary in progress at a home [...] that neighbors knew was in foreclosure, and found Susan Quade, 48, of Cornville, Tana Elliott, 31, of Glendale, and Craig Gast, 49, of Phoenix getting ready to leave in the Blazer. Deputies then took them into custody, said Dwight D'Evelyn, spokesman for the Yavapai County Sheriff's Office.

  • When deputies called the homeowner, they learned that Quade was renting the home. Deputies found several meth pipes inside the home, and Quade told them she and her friends were getting ready to use meth when deputies arrived, D'Evelyn said.(1)

For the story, see Deputies arrest three after finding meth, explosive device.

See also The Arizona Republic: 3 arrested in Cornville after deputies find meth, explosive device.

(1) Hopefully for the current owner (or a new owner if the house is foreclosed), any property damage to the home that may have resulted by meth contamination is minimal, thereby possibly minimizing the cost of the necessary decontamination. See San Francisco Chronicle: Homes once used as meth labs can leave an invisible legacy.

Go here for earlier posts on the lasting legacy left in homes due to the production or use of methamphetimine. meth lab

Human Remains Found By Real Estate Investor In Recently-Purchased Foreclosed Home Believed To Be Former Owner Who Went Missing 15+ Years Ago

In Tate County, Mississippi, The Examiner reports:
  • Charlie Williams, 62, who lived in Senatobia, Mississippi disappeared over 15-years-ago, in August of 1995. His wife, children and grandchildren never knew what happened to him. Then two months ago, Charlie's wife passed away. The house went into foreclosure and was bought by an investor.

  • The investor hired construction workers to begin renovating the house and when the workers were tearing up the floor, they found remains in a hole in the floor at the front of the house. The Tate County Sheriff's Department was called.

  • "Right now we're in the process of trying to confirm the identity of this person," said Sheriff Brad Lance. Tamika Jackson believe that the bones are the remains of her uncle. The medical examiner will determine how Charlie died and will confirm the identity with DNA. Deputies talked with neighbors and they all remembered when Charlie went missing and have all came to the conclusion that the remains are of Charlie.

Source: Remains of man who went missing 15-years-ago found under his house.

Friday, February 11, 2011

Mortgage Bond Insurer's Suit Suggests Bank Secretly Pocketed Payments On Sour Loans Prior To Default

The New York Times reports:
  • Banks have been fighting with disgruntled bond investors and insurers for months, arguing that they do not need to buy back soured mortgages they placed inside securities before the financial crisis. Now, it turns out, some of those banks may have secretly collected partial payments on those same mortgages several years ago and pocketed that money.

  • At least that is a theory being pursued by plaintiffs’ lawyers in some of the largest mortgage bond lawsuits, in which banks are accused of filling mortgage bonds with loans that did not belong there. The theory surfaced in a recently unsealed lawsuit against a mortgage unit at Bear Stearns, the failed investment bank that is now part of JPMorgan Chase.

  • In the suit, the Ambac Assurance Corporation, which insured some mortgage bonds created by Bear Stearns, contends that the bank was partly compensated by loan originators for mortgages that became delinquent shortly after they were packaged into securities. Bear Stearns’s mortgage desk kept the payments, according to the suit, rather than apply them to the bonds that contained the delinquent loans.

***

  • At Bear Stearns, there seems to have been some knowledge of the failing loans, according to the Ambac case. Ambac says there is evidence of more than 100 early-default settlements for batches of loans that soured quickly. An example in that case describes an $11 million payment for one batch of loans. For another batch of “at least 12 loans,” there was a $2.6 million payment.

  • Ambac’s case was filed in federal court, but a judge there ruled this week that the case belonged in a different jurisdiction. Erik Haas, a lawyer for Ambac, said the company planned to refile in state court.

  • JPMorgan Chase, which bought Bear Stearns three years ago, said Ambac was a sophisticated investor that knowingly took risks in its deals.

***

  • Tracing such payments is tricky because of the large number of players in the mortgage machine: mortgage originators sold loans to banks, and then the banks packaged them into mortgage bonds to sell to mortgage investors. The originators did not generally communicate with mortgage investors, so neither side knows exactly what Wall Street’s middlemen did with the money or side agreements.(1)

For more, see New Questions Raised in Mortgage Financing.

(1) According to the story, Ambac’s lawyers at first did not know the extent of the payments at issue, but the company filed an amended complaint describing them after learning some new information from the producer of a coming documentary about Bear Stearns, "Confidence Game" (go here to watch the movie trailer).

Foreclosed Home Buyers May Face Nasty Surprises

Attorney Richard Gaudreau writes in The Huffington Post:
  • Buyers of property at foreclosure are looking for a bargain, but that risk now must include the possibility that the title will be defective. One unsuspecting family purchased a home at foreclosure, intending to sell it to their daughter, only to have a title company question whether they acquired good title after they'd already invested $100,000 in renovations. (Nightmare in Land Court, Mass. L.J.)

  • In the wacky world of securitized mortgages, who owns the mortgage is a 'shell game' worthy of the most accomplished back-street hustler. How securitized mortgages caused the collapse of the American economy is an oft-told tale that needn't be repeated here. Suffice it to say that during the housing bubble lenders packaged thousands of mortgages together into each securitized trust, selling shares off to Wall Street investors much like selling shares of stock.

  • Since banks no longer intended to hold their own mortgages, the incentive to avoid 'bad mortgages' gave way to greed because these now would be someone else's problem.

For more, see Foreclosure Sale -- Buyer Beware!

(1) Richard Gaudreau is a consumer bankruptcy lawyer admitted to practice in New Hampshire and Massachusetts.

Beware Of Bank 'Steamrolling' Tactics When Buying REOs

Maine attorney Robert E. Danielson writes in The Portland Press Herald reports:
  • With a significant number of "repos" – or real estate being offered for sale by lenders who have recently foreclosed – potential buyers need to be aware of the risks inherent in purchasing such properties.

  • In addition to the typical due-diligence items, such as title, financing and inspection, repos are also subject to additional issues, such as whether the foreclosure was conducted properly; possession issues and third-party liens; warranty of title or lack thereof, and a seller-dictated process that is clearly one-sided.

***

  • Repo sellers who acquired title involuntarily (i.e., through foreclosure or by a deed in lieu of foreclosure) are usually unwilling to convey it by warranty deed since they do not wish to warrant title to a new buyer. Therefore, such a seller may make the sale conditional on the buyer's accepting a quitclaim or release deed.

***

  • In addition to the conveyance issues noted above, sellers frequently impose conditions in the purchase-and-sale agreement that severely limit the buyer's right to terminate the contract.

  • Repo sellers often require that the buyer use their form contract, which allows the seller to determine the type of title to be delivered (see above) and limits the scope of services the seller must perform.

  • Furthermore, many form contracts require that the buyer use the seller's title company to examine the title records and to accept the title insurance proffered by the company. It may seem obvious that this is not a good practice for the buyer, but with the pressure of the sale, the lure of a good price and the opportunity to close quickly, many buyers will be swayed to commit to a contract before realizing that they have few or no options if a title issue arises.

For the story, see Be prepared for the risks of 'repo' buy.

Pennsylvania Man Pinched In Alleged Foreclosure Rescue, Rent Skimming Ripoff; Home Seller Still Faces Loss Of Home, Unwitting Tenant/Family Faces Boot

In Jackson Township, Pennsylvania, WNEP-TV Channel 16 reports:
  • A businessman from the Stroudsburg area has been charged in a mortgage scheme. Investigators said he offered to help a couple who were losing their home to foreclosure but instead, he rented the property to someone else.
  • George Torres and his family came to the Poconos from New York for a better life. They moved into a home they were told they could rent then buy. Now the man who put them in the home is accused of scamming the family out of thousands of dollars. Torres, his wife, their children and extended family moved into the Jackson Township home last May.

***

  • [Torres said] Michael Price helped him find a place for him and his family to live. Now, Price has been arrested and accused of scamming Torres, the renter, and the couple who own the home.

  • Authorities said Price is the owner of "We All Win Real Estate Solution" in Stroudsburg. The business is not a licensed real estate agency or mortgage company. According to investigators, Price agreed to buy the home at 300 Pennbrook Road that was facing foreclosure. He offered to pay the owners $140,000.00, but the owners never got any money.

  • Instead, Price leased the house to the Torres family and promised to help them buy it. The Torres' moved in, paid rent and soon after, a strange visitor appeared on their doorstep. "A few months later, a lady winds up at the door asking us who we were. I asked her why she's asking that and she says, 'I'm the owner of this house'," said Torres.

  • Now, the Torres have 10 days to move out of the house. "We wanted something great. We wanted a nice home. We put all our money into it, now we have nothing," said Torres.(1)

  • Newswatch 16 contacted the homeowner, but she has no comment. The home in Monroe County is still in foreclosure and scheduled for a Sheriff's sale in November. Investigators now say they are expecting more possible victims to step forward.

For the story, see Man Accused in Real Estate Scam in Poconos.

(1) See Pocono Record: Stroudsburg businessman charged in mortgage solution scam:

  • Torres gave [real estate agent Gayle] Dimas a total of $5,250 in prepayments, which he was told were a deposit plus the first and last months' rent and which was then deposited into Price's personal PNC Bank accounts. After moving into the house, Torres and [Ivonne] Davila spent $26,000 of their own money in property repairs with the understanding that We All Win would help them gain property ownership.

Cops Hunt Florida Man Facing Felonies For Allegedly Hijacking Possession Of Vacant Home In Foreclosure, Then Pocketing Rent From Unwitting Tenant

In Palm Bay, Florida, WFTV-TV Channel 9 reports:
  • A man is accused posing as a landlord and illegally renting properties that are in foreclosure, Palm Bay detectives said Monday. Detectives said they are searching for 50-year-old Dewey Moore, Jr. He faces felony charges involving burglary and grand theft. Judge David Silverman signed an arrest warrant last week that carries a $75,000 bond once served.

  • Investigators said that on January 25, the owner of a property on Yager Street called police to remove squatters living in the home, which is in foreclosure. When officers arrived at the home, they said the people inside produced a written contract, stating they have been renting the property since October 2010 from Moore, who said he was the landlord for the owners.

  • The residents also gave officers receipts, showing payments made directly to Moore every month since October. Investigators said the property owners did not know about Moore and did not authorize anyone to rent their vacant home.

  • "He basically broke into the home, changed the locks and posed as a landlord," District Detective Mark Fell said. "Fortunately, we have been able to work with the property owner and the victims who will be able to continue to rent the property pending the foreclosure."

  • Detectives believe Moore may have other properties in which he has illegally gained access to for the purpose of fraudulently renting. Anyone with information on Moore's location or with similar contact involving Moore should contact the Central Florida Crimeline at 1-800-423-TIPS.

Source: Cops: Fake Landlord Rented Out Foreclosed Homes.

Thursday, February 10, 2011

Chase Appears At Congressional Hearing, Apologizes For Screwing Over 4,000+ Active Duty Servicemembers In Foreclosure, Admits Finding More Problems

The Wall Street Journal reports:
  • A J.P. Morgan Chase & Co. executive, at a U.S. House hearing Wednesday, apologized for wrongly foreclosing on military families and overcharging thousands for mortgages, as lawmakers weigh whether new legislation is needed to help prevent military personnel from losing their homes and getting hit with high interest rates.

***

  • Chase initially found it overcharged at least 4,000 military personnel in active service and took the homes of 14. [...] In January, after conducting an internal audit, Chase acknowledged its mortgage errors. However, Chase's testimony Wednesday shows the firm has now found more problems--it said it overcharged 4,500 active-duty military members and wrongly foreclosed on 18.

For more, see J.P. Morgan Apologizes for Military Foreclosures (requires paid subscription; if no subscription, GO HERE, then click appropriate link for the story).