Friday, February 18, 2011

Maine Class Action Accusing Bank Of Manufacturing Foreclosure Documents Gets The Boot; Judge Says Each Homeowner Must Pursue Claims Individually

In Portland, Maine, Bloomberg reports:
  • Ally Financial Inc.’s GMAC mortgage unit won’t have to face much of a lawsuit by Maine homeowners seeking damages over what they said were the company’s wrongful foreclosure practices.

  • U.S. District Judge D. Brock Hornby in Portland, Maine, granted GMAC’s request to dismiss two claims in the complaint, according to a decision yesterday. He will probably throw out the remaining claim, Thomas Cox, a lawyer for the homeowners, said in an interview.

***

  • If false documents are used in foreclosure cases, homeowners can seek to vacate the judgment in their particular cases, Hornby wrote. They can’t file new lawsuits, according to the decision. “A contrary ruling would mean that the outcome of every lawsuit could produce a later lawsuit by the unhappy loser, seeking damages on account of the outcome of the former lawsuit and claiming that it resulted from false testimony or false affidavits,” Hornby wrote.

  • Cox called that a “hollow remedy” because most homeowners can’t afford defense attorneys. [...] The Maine homeowners, who filed the lawsuit last year seeking class-action status, accused GMAC of filing false documents in foreclosure cases. They said a GMAC employee signed sworn affidavits without verifying the accuracy of the information. The homeowners sought damages and in December unsuccessfully tried to stop GMAC foreclosure sales in Maine.

For the story, see GMAC Won’t Face Much of Maine False Foreclosure Documents Suit.

OCC Chief To Senate Banking Committee: Most Mortgage Servicers Have Proper Documentation, Legal Standing To Foreclose

Firedoglake reports:
  • In a Senate Banking Committee hearing just now, Acting OCC head John Walsh gave an update on the investigation into servicer practices, which was the subject of several news reports today. Here, in essence, was what he said:

    • “Federal banking agencies have concluded investigations on servicers found critical deficiencies and shortcomings that violate state and local foreclosure laws.”

    • However, they found that in most cases, loans were seriously delinquent and that the servicers had the proper documentation and the legal standing to foreclose.

  • Let’s stop right there. This investigation started at the end of 2010. It would be impossible for them to look at every single delinquent loan, which number in the millions, assess the situation for all of them, assess all the documentation, and conclude that most of the cases were operating on a generally legal basis. The courts certainly haven’t found that, and they had many more months to make the assessment.

  • This is a ridiculous statement that cannot possibly be backed up with comprehensive evidence. In fact, the Wall Street Journal says that the review sample was 2,800 foreclosures. Out of millions. And bank regulators who may not be well-versed in specific real estate law in every state made the investigation.

For more, see OCC’s John Walsh Attempts Whitewash of Servicer Abuse.

Florida Couple To Pursue Foreclosure Mill For Alleged Inflated Fee Squeeze

In Central Florida, the Sarasota Herald Tribune reports:
  • A North Port couple says a Florida law firm charged them unwarranted and excessive fees as they tried to save their home from foreclosure, and their attorneys believe the firm did it to hundreds of other troubled homeowners, too.

  • Last week, David and Kayleen Keyser filed a complaint in their foreclosure case against Kahane and Associates law firm in Plantation, the latest in a string of class actions from Gulfcoast Legal Services(1) in Sarasota that target unfair collection practices in foreclosures.

  • On Wednesday, Kahane abruptly dropped the foreclosure case against the Keysers, which cancelled out the Keysers complaint. Gulfcoast attorneys say it was on the eve of the lender having to produce the underlying invoices for the fees.

  • That means the truck driver and grocery store manager can remain in their house where they raise three children without paying the mortgage, for now. The lender or firm would have to pay court costs to file foreclosure again. "I don't expect the foreclosure suit to be refiled anytime soon," Gulfcoast attorney Elizabeth Boyle said.

  • But it does not mean the Keysers will stop pursuing their class-action suit. Gulfcoast plans to refile the lawsuit as early as today in a new case, trying to discover if hundreds of other homeowners faced the same inflated and unsubstantiated fees from Kahane since 2006.

For more, see North Port pair fights fees in foreclosure skirmish.

(1) Gulfcoast Legal Services is a non-profit corporation providing free legal aid to income eligible residents of the greater Tampa Bay area. We have offices in Pinellas, Manatee, Sarasota and Hillsborough Counties.

C. Florida Man Charged For Allegedly Hijacking Title, Possession Of Vacant Homes In Foreclosure, Then Ripping Off $30K By Renting To Unwitting Tenants

In Pasco County, Florida, The Tampa Tribune reports:
  • Pasco County deputies arrested a 43-year-old man Friday and accused him of collecting $30,000 in rent money on properties he didn't own. George Allen Ola Jr., of 8831 Garden Party St., is charged with scheme to defraud. He posted a $10,000 bail and was released shortly after his arrest last week. Ola couldn't be reached for comment on Monday.

  • Investigators said Ola entered a contract with Bay Vista Realty in May to lease the properties he said he owned. Ola provided Bay Vista with notarized copies of quit claim deeds that were filed with the Pasco County clerk of court.

***

  • Neither the homeowners nor lien holders authorized the homes to be leased, according to an arrest report. The renters were told to mail their rent in the form of money orders or cashier's checks to a P.O. Box in Tampa owned by Ola, the report states.

  • The issue was first reported to the Pasco County Sheriff's Office in August, an incident report states. A Pinellas County attorney representing one of the homeowners called the office and told a deputy that a family was living in his client's home while his client was living in Brazil.

For more, see Land O' Lakes man charged with renting out homes he didn't own.

Would-Be Buyers Screwed Over In Rent-To-Own Racket Involving Homes In F'closure Complain To Local Prosecutor; Ripoff Is Treated As A Civil Matter

In Umatilla, Florida, WFTV-TV Channel 9 reports:
  • Several families claim a Central Florida company offering rent-to-own homes, never told them the properties were in foreclosure. After moving in, they say, serious repairs were ignored and they lost all their money. Dozens of signs dot Central Florida front yards reading 'Rent to own homes by Otto Beyer Enterprises' and many families who called lived to regret it.

  • "Termites came right through the walls and right into our furniture." Stephanie Hayes claims the Leesburg home fell down around her family. According to Stephanie she invested 3 thousand dollars in down payment and repairs when a bank foreclosure forced them out. Stephanie called Otto Beyer Enterprises. "We told her we put all this money into the house and never once did you tell us its in foreclosure and she said that's just too bad."

  • Courthouse records show Beyer Enterprises owns at least 70 homes but it's in bankruptcy and many of the homes are in foreclosure. Tisha Liptart invested in a home then was forced out because of a foreclosure. "You don't think people would do that to you."

  • The families told us serious repair issues were neglected. That seems minor compared to what happened at a home the company owned near Silver Springs that burned to the ground.

  • Five children died in the house last November. The state fire marshal is investigating. The agency listed a space heater, cigarettes, and the home's wiring as possible causes. Published reports quote a former tenant who claimed he had electrical problems when he lived there.

  • At it's office near Leesburg we attempted to ask company managers about it's rent to own history. The company said because of the fatal fire its been advised not to answer any questions. But later its attorney said tenants could have stayed longer, and did not pay their rent.

  • "If we didn't like it we could walk out and we lost the money," said Stephanie Hayes. Some families say they complained to the state attorney claiming the company knew they could be forced out when it took their cash. But so far it's remained a civil matter.

Source: Families Claim To Lose Thousands In Foreclosure Rental Homes.

Thursday, February 17, 2011

MERS To Members: Don’t Foreclose In Our Name!

Housing Wire reports:
  • Mortgage Electronic Registration Systems, or MERS, told its members Wednesday not to foreclose on residential mortgages in its name. The electronic registry of mortgage records built by Fannie Mae, Freddie Mac and the nation’s major lenders more than a decade ago has been under increasing fire by homeowners, prosecutors, politicians and others.

  • The drumbeat against MERS became louder last fall as robo-signing — the signing of foreclosure affidavits of indebtedness en masse, without proper review — surfaced. The robo-signing scandal caused several large servicers to temporarily halt foreclosures as they reviewed their procedures, and prompted an investigation of lenders and their servicing shops by all 50 attorneys general. A proposed settlement could involve some of the nation's biggest servicers.

***

For more, see MERS to members: Don’t foreclose in our name.

(1) In re Agard, Case No. 810-77338-reg (Bankr. E.D.N.Y. February 10, 2010). For a discussion on Judge Grossman's ruling, see Another Way Banks Make Everyone Pay: The MERS Mortgage Mess.

Florida Homeowner Sues Over Bank's Illegal Break-In; Use Of Paperwork By Lender's "Jack-Booted Thugs" To Intimidate Cops Into Inaction A Major Concern

In Orange County, Florida, WOFL-TV Channel 35 reports:
  • Nancy Jacobini is a homeowner and has been for awhile. For two decades, she has been in the same house, which makes what happened on September 28th, 2010 so bizarre.

  • "It was about 5:30 p.m. It was a very rainy, dark, dreary day. I was in the front bedroom lying down on the bed with the light on. All of a sudden I heard someone trying to put their hand on the door handle. At that point I knew I was in trouble. I immediately grabbed my cell phone, went to the bathroom, locked my door and called 911. I was scared. Very scared. Cause I could hear the aggressiveness at the door. I panicked. Maybe he followed me. Maybe he's a sex offender. I had no idea," remembers Jacobini.

  • Orange County deputies showed up at the house. They found a locksmith changing the hardware on Nancy's front door. He was sent by Nancy's bank: JP Morgan Chase.
    "The bank broke into my home for no darn good reason," says Jacobini.

  • "Americans need to wake up, because if we don't stop them from doing this now, what's to stop them from kicking everybody's doors down?" asks Matthew Weidner, Nancy's attorney.

  • Weidner filed a federal lawsuit on Friday against the bank. He says he receives, on average, six calls a week from people complaining about these so-called "real estate repo men." [...] These jack-booted thugs can intimidate police who come out to the scene and often times, all that's required to make the police go away is for the jack-booted thugs to show a piece of paper from the bank," says Weidner.(1)

For more, see Lawsuit filed in local bank break-in case.

(1) For examples of other 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:

FTC Rule Banning Upfront Fees For Loan Modification Services Goes Into Effect

The Federal Trade Commission recently announced:
  • As of January 31, 2011, companies that offer to help homeowners get their loans modified or sell them other types of mortgage assistance relief services are no longer allowed to charge up-front fees. Under the rule, a mortgage assistance relief company may not collect a fee until the consumer has signed a written agreement with the lender that includes the relief obtained by the company.

***

  • Attorneys are generally exempt from the rule if they provide mortgage assistance relief services as part of the practice of law, are licensed in the state where the consumer or dwelling is located, and comply with state laws and regulations governing attorney conduct related to the rule. To be exempt from the advance fee ban, attorneys must also place any advance fees they collect in a client trust account and abide by state laws and regulations covering such accounts.

For more, see FTC's Mortgage Assistance Relief Services Advance Fee Ban Takes Effect.

Subtle 'Under The Radar' Foreclosure Sale Bid Rigging Racket, Or Mere "Familiarity With Competitors' Business Models?"

In Denver, Colorado, The Denver Post reports:
  • Though fewer and fewer properties are left to be picked over at weekly county foreclosure sales — most are kept by banks — the leftovers aren't generating the rabid bidding wars one might expect. Instead, the handful of private investors who regularly attend the weekly public-trustee sales are landing properties for just $1 over a bank's minimum bid to keep them — and without any competing bids.

  • And even though six or seven investors will have registered to bid on a single property, more often than not, just one will make the $1 offer and win the auction, according to bidding records.

  • Some investors say it's because the properties simply aren't worth more than that, while others say they're just not interested in a buying battle that can needlessly run up the auction price — ultimately eating away any profits.

***

  • Yet not once in the past several months of sales has a private individual — someone not in the foreclosure-buying business — been able to land the same deal, foreclosure sales records in several counties show.

  • Despite appearances, several investors said there's no mystery in how the sales have worked out — and public trustees agree — that it's merely the result of familiarity. They've done it so often against the same opponents that when they walk into a sale, they have a fair picture of who's likely to bid on which properties and how much they're willing to pay.

***

  • To prevent any rigging of bids, buyers are prohibited from using body signals that could be deemed collusive in nature during the auction — winks, nods or any other motion to convey a message.

  • "Anything that would compromise the fairness of the system is simply not allowed," Adams County Public Trustee Carol Snyder said. "We'd like to believe it doesn't happen, but there's nothing we can say about what happens outside our doors."

***

  • "We see each other at the sales week after week, and you get to know what each other buys," said John Veno, owner of Colorado Res Works LLC. "I might not know their names, but I know their companies." The key, Veno said, is knowing the business model of his competitors, something that becomes evident over time.

For more, see Mysterious lack of bidding wars plagues foreclosure auctions (Among the few bidders at county foreclosure auctions, some nab houses for a dollar more than the minimum bid).

Go here for other posts & links on bid rigging at foreclosure and other real estate-related auctions.

Wednesday, February 16, 2011

New York Moves To Provide Attorneys For All State Homeowners In Foreclosure By Year End

The New York Times reports:
  • New York court officials outlined procedures Tuesday aimed at assuring that all homeowners facing foreclosure were represented by a lawyer, a shift that could give tens of thousands of families a better chance to save their homes.

  • Criminal defendants are guaranteed a lawyer but New York will be the first state to try and extend that pledge to foreclosures, which are civil matters. There are about 80,000 active foreclosure cases in New York courts. In more than half the cases, only the banks have lawyers.

  • It’s such an uneven playing field,” the state’s chief judge, Jonathan Lippman, said. “Banks wind up with the property and the homeowner winds up over the cliff, on the street. It doesn’t serve anyone’s interest, including the banks’.” A lawyer for every defendant will also serve the courts’ interests, the judge said, by making proceedings more efficient.

  • Under the procedures, which will be put in place in Queens and Orange counties in the next few weeks and across the state by the end of the year, any homeowner in foreclosure who does not have a lawyer will be supplied one by legal aid groups or other pro bono groups. Legal aid groups are expected to have foreclosure offices in the courts to handle the influx.

For more, see New York to Assure Legal Aid in Foreclosure Cases.

South Florida Foreclosure Mill Takes Another Staff Hit; Can 96 More Employees

In Plantation, Florida, the South Florida Sun Sentinel reports:
  • Another 96 people who work for a company that provides paperwork services to the operations of mortgage foreclosure attorney David J. Stern in Plantation were laid off Tuesday, a company spokesman said.

  • That was about two-thirds of the remaining work force at DJSP Enterprises, a publicly traded company that serves Stern's law firm, said DJSP spokesman Chris Simmons. A notice of the layoffs filed with the state indicates that about 50 company employees remain.

For more, see 96 more layoffs at Plantation office of Stern affiliate.

NH Feds Charge Real Estate Agent In Alleged Scam That Targeted Homeowners Facing Foreclosure With Sale Leaseback, Equity Stripping Ripoffs

In Concord, New Hampshire, the Nashua Telegraph reports:
  • A Nashua real estate agent is charged with swindling distressed homeowners and mortgage lenders with a home refinancing scam. Assistant U.S. Attorney Michael Gunnison filed a charge of aiding and abetting mail fraud against Richard Winefield, 32, of 6 Short Ave., Nashua, on Feb. 8.

  • The charge states that Winefield joined in the scheme "already in progress" in 2006, but doesn't name any alleged co-conspirators, and Gunnison could not be reached for comment this week. Winefield's lawyer, Peter McGrath of Concord, did not return a call from the Telegraph Monday, and Winefield himself declined to comment on the case. A waiver of indictment and plea hearing has been set for March 1, suggesting that Winefield has already struck a plea deal.

***

  • The scam involved finding distressed homeowners, and offering to help them avoid foreclosure by having the homeowners sign over their properties to one of Winefield's companies, which would then rent the house to the homeowner for two years. The homeowner would then have the option to buy back the property, at a pre-arranged price, typically around 30 percent over what it would cost to pay off the homeowner's mortgage, the charge states.

  • "In reality, after taking title to the homes of the distressed homeowners, the scheme participants paid off the existing mortgages by obtaining new, usually significantly larger, mortgage loans on the properties, and they immediately converted the additional borrowed money to their own use," Gunnison wrote. "This stripped most or all of the available equity from the properties and left the properties encumbered with larger mortgages."

  • The homeowner's rental payments went toward payments on the new, bigger loans, the charge states. To get those larger loans, Winefield and his partners arranged "sham transactions" and straw buyers, who included relatives, friends and strangers, who posed as buyers of the properties, the charge states.

  • The straw buyers purported to pay princely sums for the properties, and Winefield arranged appraisals to match the inflated prices, the charge states. "The scheme participants falsely and fraudulently prepared mortgage applications identifying the straws as borrowers, and submitted the applications to lenders chosen by the scheme participants," the charge states.

  • The straw buyers were assured they would never need to pay off the mortgages, despite being named as the borrower, the charge states, and the loan applications were replete with false information. Gunnison charges that Winefield personally solicited homeowners, determined sales prices for the sham sales, attended closings and at times acted himself as a straw buyer.(1)

For the story, see Nashua man charged in foreclosure finance scam.

For the criminal complaint, see U.S. v. Winefield.

(1) See Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals for other incidents that led to criminal prosecutions in sale leaseback deals.

California Man Gets 22 Year After Copping Guilty Plea For Running Ponzi Scheme, Fraudulent Sale Leaseback Equity Stripping Ripoffs

In Los Angeles, California, the Contra Costa Times reports:
  • A Downey man whose financial fraud schemes preyed on blue-collar Latinos throughout the Southland was sentenced Monday to 22 years in federal prison for what a federal judge said was a case "close to my heart."(1)

  • Juan Rangel, 47, who is already behind bars awaiting sentencing for a 2009 conviction for bribing a Bank of America branch manager, pleaded guilty last October before U.S. District Judge S. James Otero to one count each of mail fraud and money laundering.

  • In a three-hour hearing in Los Angeles federal court, about a dozen of Rangel's victims tearfully told Otero of losing their homes, their savings, and their health to a Ponzi scheme that took in nearly $30 million as well as a scam that preyed on homeowners facing foreclosure. [...] Otero recommended Rangel be deported back to Mexico after he is released from prison. A restitution hearing was set for May 6.

  • According to a signed plea agreement with prosecutors, Rangel was expected to be sentenced to 15 years in prison, but Otero departed from the deal and added another seven years to the sentence. Outside court, Bowman told the crowd it was the victims' statements that made the difference.

  • In the mortgage fraud scheme, Rangel and others targeted Spanish- speaking homeowners who were at risk of losing their homes and offered to help them avoid foreclosure, Bowman said. Rather than assist them, however, Rangel took titles to their homes and drained the remaining equity out of the properties, the prosecutor said.

  • As part of that scheme, Rangel arranged to sell the homeowners' properties, usually without their knowledge, to third-party straw buyers, according to Bowman. He then applied for loans in the straw buyers' names and, using a variety of falsified documents, duped mortgage lenders into approving more than $10 million in bogus loans, the prosecutor said.(2)

  • The indictment also charges Javier Juanchi, 42, of Sherman Oaks, a vice president at Financial Plus, and Pablo Araque, 40, who owns Downey-based tax preparation and bookkeeping company A-One Tax Pros. Juanchi and Araque, who were charged in the mortgage fraud only, are scheduled to face trial in March before Otero.(3)

For the story, see Downey man gets 22 years in $30M Ponzi scheme.

(1) According to the story, Judge Otero said the Rangel case "comes close to my heart," since he grew up in the blue-collar Hollenbeck neighborhood, just blocks from the downtown courthouse. "I'm familiar with the hard work that most of you put forward to achieve the American Dream," the judge reportedly told the victims after they presented their impact statements to the court. "He has stolen your dreams, your futures (and) your health, both emotional and physical," the judge reportedly said.

(2) See Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals for other incidents that led to criminal prosecutions in sale leaseback deals.

(3) By 'rolling' first and copping a guilty plea, Rangel beat Juanchi and Araque in the "race to the prosecutor's office" to snag the best plea deal. See United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) for one Federal judge's observation (made in the context of drug conspiracy cases) on the so-called "race to the courthouse/prosecutor's office" that frequently takes place during the early stages of these "multi-target" criminal probes and prosecutions:

  • In practical terms, drug conspiracy cases have become a race to the courthouse. When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed.

Don't be surprised if Rangel's plea deal requires him to 'throw his buddies under the bus' if they refuse to cop plea deals and insist on going to trial. And if it doesn't, don't be surprised if Rangel "bellies up" to the prosecutor and tells what he knows about his former colleagues in an attempt to shave a few years off his 22-year prison sentence.

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).