Thursday, April 21, 2011

State Appeals Court Orders Lee County Officials To Respond To Foreclosure Rocket Docket 'Indictment'

From the a press release issued by the American Civil Liberties Union:
  • Florida’s Second District Court of Appeal today ordered the state’s 20th Judicial Circuit to respond within 20 days to claims in an American Civil Liberties Union lawsuit that a special foreclosure court system systematically denies homeowners a fair chance at defending their homes against foreclosure.
  • The ACLU filed a lawsuit April 7 charging that the special “mass foreclosure docket” established in Lee County, FL in December 2008 operates under rules that differ substantially from those that govern the rest of the county’s civil cases. That docket was designed to speed through as many foreclosure cases as possible without providing homeowners facing foreclosure a meaningful opportunity to develop their cases or present defenses, according to the petition.
  • The following can be attributed to Rachel Goodman, an attorney with the ACLU Racial Justice Program:

    By ordering the circuit court to account for its practice of prioritizing speed over accuracy, which robs homeowners of their due process rights, the appellate court clearly recognizes that there are serious issues at play here. It is incumbent upon the courts to ensure that the rights of homeowners are protected and that they get a fair opportunity to protect their homes.”

Source: Florida Appellate Court Orders Lee County Officials To Respond To ACLU Lawsuit (Lawsuit Charges That “Mass Foreclosure Docket” Ignores Procedural Safeguards In Rush To Clear Cases).

See this Affidavit of attorney Todd Allen for some of the specifics of the 'indictment' describing how the rubber-stamping, 'rocket docket' judges ram through foreclosures in Florida's 20th Judicial Circuit. Essentially, Todd Allen blows the whistle on the rocket docket by detailing how he tried everything to work within the system before supporting a suit to end it.

MERS Takes Hit From California Bankruptcy Court On Standing To Foreclose On Homeowner

Housing Wire reports:
  • A California bankruptcy court says Mortgage Electronic Registration Systems cannot help a trustee establish legal standing to foreclose on a securitized mortgage unless the trustee already possesses an actual assignment of interest in the loan.
  • The case — Salazar v. U.S. Bank — comes out of California's Southern District U.S. Bankruptcy Court and is attracting attention from foreclosure attorneys as it seems to contradict another ruling, Gomes v. Countrywide.(1)

***

  • The bankruptcy court's decision is gaining attention from foreclosure attorneys in the state because it seems on the surface to contradict the Gomes v. Countrywide decision. In that case, the Court of Appeals of the 4th Appellate District said the language in a deed of trust gives MERS the authority to initiate a foreclosure.

***

  • [The Debtor's attorney, Francisco] Aldana[,] says the Salazar case is different from Gomes in that "in Gomes, the borrower, actually acknowledged that MERS can foreclose."
  • "In the Salazar case, MERS was the beneficiary at the time of inception," but by the time, the deed of trust was foreclosed, "MERS was no longer the beneficiary," Aldana said.
  • Comparatively, "in the Gomes case, MERS was the beneficiary at the same time," and the appellate court "did not want to interfere in a nonjudicial foreclosure."

For the story, see California bankruptcy court rules against MERS.

For the bankruptcy court ruling, see In re Salazar, ___ B.R. ___ (Bankr. S.D. Cal. April 11, 2011) (for publication).

(1) See California Appeals Court: Homeowner Can't File Lawsuit To Stop Foreclosure Process Based On Claim That Noteholder Did Not Authorize It.

BBB Says Steer Clear Of Nat'l 'Mass Joinder' Lawsuit Invites; Some Claim Offers Merely A Bogus End-Run Around Loan Mod Upfront Fee Prohibitions

From a press release from the Better Business Bureau:
  • The Better Business Bureau (BBB) warns homeowners to steer clear of mailings asking them to join national “mass joinder” lawsuits to force their mortgage companies to cut their loan payments. Michelle Corey, BBB president and CEO, says the mailings are a new twist on schemes to obtain up-front payments of $5,000 or more from homeowners struggling to pay their mortgages.

***

  • Several property owners in Boone County, Mo., recently got letters saying that their loans “may be eligible for national litigation aimed at fraudulent lender actions.” The letters listed no company name or return address. A nearly identical notice sent to a homeowner in Long Beach, Calif., came from the Litigation Settlement Department at 3829 Veterans Memorial Parkway, St. Peters, Mo.
  • Missouri secretary of state records list the St. Peters address as home to Diversified Financial Protection Agency and Capital Debt Management. The records list John Jacob Ehlinger as president of Capital Debt Management. John J. Ehlinger is registered agent and the only incorporator of Diversified Financial Protection Agency. Capital Debt Management filed for incorporation in October 2009; Diversified Financial Protection Agency filed on Feb. 16, 2011.
  • The BBB has issued two warnings on Ehlinger and Capital Debt Management since last summer. The company has an “F” grade with the BBB, the lowest grade possible.

***

  • Officials of Diversified Financial Protection Agency, Capital Debt Management, or both firms, apparently are now partnering with Mass Litigation Alliance of Hawthorne, Calif. The same toll-free phone number is on the Boone County and California solicitations and is one of several listed on a website for Mass Litigation Alliance.
  • Mass Litigation Alliance filed corporate papers with the California secretary of state on Feb. 14, listing Philip A. Kramer of Calabasas, Calif., as the company’s agent.Mass Litigation Alliance’s website describes Kramer as senior partner of Kramer & Kaslow, a Calabasas law firm with an “F” grade from the Los Angeles BBB.
  • Consumers have filed more than 30 complaints about the firm. Most allege the firm didn’t fulfill contracts for loan modification or foreclosure related services, that the firm misrepresented its ability to provide service, or that the complainant was unable to obtain refunds of advance fees.
  • The company has disputed the allegations and said contracts are based on hourly rates or flat fees, not on performance.

For the press release, see BBB Warns Homeowners: 'Mass Joinder' Lawsuit Mailings May Be Latest Advance Fee Mortgage Modification Scheme.

See also, State Bar Investigator: "Now We're Seeing The Loan Mod People Morph Into The Sue-Your-Bank People" As Scammers Circumvent Upfont Fee Prohibitions.

Wednesday, April 20, 2011

Key To Fending Off Foreclosures - Get The Right Judge

In a recent column in Fortune Magazine, columnist Abigail Field writes:
  • Since last fall, the judicial system has been confronting foreclosure fraud across the country. As the scale of the problem became publicized, it's been increasingly hard for judges not to notice that the banks have consistently filed robo-signed documents and other problematic files in many of their foreclosure cases.
  • Not all judges are confronting the issues in the same way. Many are adopting procedures to stop any fraudulent behavior by the banks and are investigating questionable documents submitted in their cases. Other judges are turning a blind eye, at best.
  • Several state Supreme Courts have adopted procedures to stop fraud statewide, including New York, New Jersey, Florida and Maryland. For example, last October New York's chief justice started requiring the banks' attorneys to personally swear they had examined the banks' claims and verified that they were true. As a result, foreclosure filings plunged in New York, and many have been dismissed for failure to file the required certification.
  • In other states, groups of judges or even individual judges have adopted procedures to end the fraud. For example, last November, three Franklin County, Ohio judges, (John Bender, Kimberly Cocroft, and Guy Reece) adopted a New York-style procedure, and ordered attorneys representing foreclosing banks to verify the accuracy and authenticity of the their documents.
  • In bankruptcies, the problems surface when the bank asks the court for permission to foreclose. Some bankruptcy judges have been so frustrated with the problematic documents they have done deep investigations into the processes behind their creation.
  • The most recent example of this kind is a decision on April 6 by Judge Elizabeth Magner in Louisiana. Judge Magner investigated how the documents submitted by Option One were in fact created by a company called Lender Processing Services (LPS), and how LPS's practices were so bad, the documents constituted a "fraud perpetrated on the Court."

***

  • People in jurisdictions protected by these judicial efforts to stop foreclosure fraud should be grateful, because the consequences of foreclosure fraud can reach far past the individual homeowner. Most problematically, it leaves land records in jeopardy.
  • But not all homeowners are so fortunate. One of the most common types of fraud is when documents purport to show that the bank has the right to foreclose. If the bank is allowed to foreclose, but didn't really have the right to do it, the property's title becomes clouded. Clouded titles damage the real estate market in profound ways. The only way to limit the damage that already has occurred is to stop further fraud in its tracks.
  • Such is the case of a kangaroo court set up in Lee County, Florida. A recent ACLU lawsuit asks a Florida Appeals Court to declare the special mass foreclosure court in Lee County unconstitutional. As the suit details, the Lee County system emphasizes speed to such an extent that it prevents homeowners from having a chance to save their homes, regardless of bank fraud or any other legitimate defense.
  • Things are so bad, according to homeowner attorney Todd Allen's affidavit, which partially supports the ACLU lawsuit, three Lee County judges have apparently decided that being in default on your mortgage payments is indefensible, no matter what. Those judges routinely deny homeowners' requests to investigate the banks' evidence after asking if the homeowner is in default, and being told yes. It's the ultimate in judicial activism: the outcome is pre-determined by the judges' bias.
  • Lee County isn't blind to the problems its process creates. A few months ago, the clerk of the Lee County Courts admitted that clouded titles were a real problem but said it was one for the legislature to fix.
  • Lee County, Florida isn't the only place where judges aren't standing up to the banks' fraud. I've talked to various attorneys who say some, even many, of the judges they practice before don't want to hear about fraudulent documents.

For the story, see Fighting a foreclosure suit? Hope for the right judge (Many judges presiding over the countless foreclosure cases around the country are taking steps to stop fraud, but in a few key courts, the bench takes the opposite track).

More On Federal "Regulator" That Cut Banksters A Pass In Recent Foreclosure Fraud Settlement

From the opinion pages of The New York Times, author and op-ed columnist Joe Nocera writes:
  • Judging by last week’s performance, it sure looks as though the country’s top bank regulator is back to its old tricks. Though, to be honest, calling the Office of the Comptroller of the Currency a “regulator” is almost laughable. The Environmental Protection Agency is a regulator. The O.C.C. is a coddler, a protector, an outright enabler of the institutions it oversees.
  • Back during the subprime bubble, for instance, it was so eager to please its “clients” — yes, that’s how O.C.C. executives used to describe the banks — that it steamrolled anyone who tried to stop lending abuses.
  • States and cities around the country would pass laws requiring consumer-friendly measures such as mandatory counseling for subprime borrowers, or the listing of the fees the banks were going to charge for the loan. The O.C.C. would then use its power to either block or roll back the legislation.
  • It relied on the doctrine of pre-emption, which holds, in essence, that federal rules pre-empt state laws. More than 20 times, states and municipalities passed laws aimed at making subprime loans less predatory; every time, the O.C.C. ruled that national banks were exempt. Which, of course, rendered the new laws moot.
  • You’d think the financial crisis would have knocked some sense into the agency, exposing the awful consequences of its regulatory negligence. But you would be wrong. Like the banks themselves, the O.C.C. seems to have forgotten that the financial crisis ever took place.

For more, see Letting the Banks Off the Hook.

Michigan Lawmakers Propose Move To Slash Post-Foreclosure Redemption Period In Half

The Grand Rapids Press reports:
  • When Saxon Mortgage foreclosed on Thomas Price’s home of nearly 30 years, the disabled Vietnam veteran was able to raise $6,000 to regain his [...] house during a six month redemption period. It took the 61-year-old man — who suffers from an incurable respiratory illness — five months to raise that money. That would be two months too late under a new bill in the state House.
  • The state-mandated redemption period would be permanently shortened to three months from six under the bill.

For more, see Does proposed Michigan foreclosure law kick owners out too quickly?

Tuesday, April 19, 2011

Court Officials' Internal E-Mails Support Allegations Of An Out-Of-Control Foreclosure Rocket Docket

North Country Gazette reports:
  • Documents made public by the American Civil Liberties Union reveal a startling rush by judges in Lee County, FL to force as many foreclosure cases as possible through a specially created court system.
  • The documents, obtained by the ACLU through a public records request filed in October with judicial officials across Florida, provided part of the basis for a petition filed last week by the ACLU charging that the special “mass foreclosure docket” in Lee County systematically denies homeowners a fair opportunity to defend their homes against foreclosure.

***

  • Among the documents made public are internal emails sent among Lee County foreclosure court officials. One of the emails outlined the court’s specific numerical goal for clearing foreclosure cases, which the court had not previously made public. According to a court administrator, “our goal for this project is to “dispose of” the number of cases filed each month “plus 1,040 additional cases.”
  • In another email from September 2010, one judge says she “uniformly” denies motions to continue foreclosure cases in instances where homeowners argue there is additional discovery that needs to be undertaken or they are pursuing a settlement agreement.
  • And in an August 2010 email, one judge reports to another his concern that particular plaintiffs’ attorneys are “getting burned out” by the pace of the foreclosure court’s docket and asking for ways in which judges might “give them some relief or help them in some way.”

For more, see Florida Judges Rushing Foreclosures.

Fast-Thinking Cop Stops Illegal Foreclosure Boot Of Unwitting Renter, Family; Eviction Notice To Ex-Owner Failed To Name Tenants

In Providence, Rhode Island, The Providence Journal reports:
  • You can’t do it this way. You can’t just show up at a family’s door and tell them to get out with no notice. It’s thuggery. But it almost happened. If not for some fast moving lawyers who know the territory and a compassionate cop, Angela Martinez and her three children and granddaughter would have been out on Lenox Avenue in Providence Tuesday morning.

***

  • [Providence Police Capt. David] Lapatin arrived at 31 Lenox Ave. Tuesday morning to find a constable, a moving crew and police officers overseeing an eviction that he quickly figured out should not be happening.
  • Basically, it was an eviction notice sent to the owner of the house but not in the name of the tenant,” said Lapatin. “It’s pretty clear. You have to get them out separately.”
  • He told the movers, who looked as if they really didn’t want to be there, to stop what they were doing. He told the constable and the police the eviction was off.
  • Lapatin is also a lawyer and has done some work in landlord-tenant disputes. He knows the territory. And he said that since the landlord does not live in the house, an eviction notice to him is not an eviction notice to his tenants.

For more, see A cruel attempt to put a family on the street.

Unfavorable Engineering Report Citing Structural, Foundation Problems Leads To Midnight 'Eviction' For 300+ Condo Residents

In Fort McMurray, Alberta, The Edmonton Journal reports:
  • Seven Fort McMurray condominium complexes have been condemned and residents will not be allowed to return to pick up belongings. A letter to more than 300 residents [] said it was highly unlikely that anyone would be allowed to ever enter the buildings.
  • The decision came after an on-site remediation team of engineers and construction specialists found evidence of further structural deterioration, additional risks and fire code contraventions. In addition, the roofs have started to fail, the letter said.
  • This is an extremely dangerous environment,” Al Penner, spokesman for the Condominium Corp., said in the letter. “Do not consider attempting to access your unit to remove your treasured belongings.”
  • The 168-unit complex was evacuated in the late evening of March 11 after a structural engineering report issued earlier that day detailed the foundation problems. Penner [said] the structural problems will be exacerbated by the spring thaw. Plans for short-term stabilization were abandoned, he said.
  • It’s not yet clear if the company will tear down the buildings or if the city will order them demolished. The apartments on Penhorwood Street have had ongoing problems since they were built in 2004.
  • Residents were given brief access on March 16 to gather belongings from the building after signing liability waivers.

Source: Seven Fort McMurray condo complexes condemmed (Residents will not be able to pick up belongings).

See also, Why a young mom was evicted from her Fort McMurray condo at midnight (Structural concerns forced 300 people from their Fort Mac condos in March. How did this happen, who is at fault and what are the lessons for Alberta?).

Monday, April 18, 2011

More On "Bottom Of the Barrel" Mortgage Loan Servicing Practices

The New York Times reports:
  • ONE too many times, this court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry. With each revelation, one hopes that the bottom of the barrel has been reached and that the industry will self correct. Sadly, this does not appear to be reality.”
  • This trenchant take comes courtesy of Elizabeth W. Magner, a bankruptcy court judge in the Eastern District of Louisiana. In an April 7 opinion involving a couple whose bank tried to foreclose on them even though they were current on their mortgage, you can sense Ms. Magner’s frustration with financial institutions that administer home loan payments and records.
  • Ms. Magner is just one of many judges overseeing cases involving troubled borrowers, of course. But because her judicial duties seem to have made her an expert on mortgage servicing, Ms. Magner’s views could not be more timely and important. This is especially true, given that state attorneys general seem intent on striking a settlement with servicers before they have conducted a comprehensive and thorough examination of industry practices.
  • By presiding over a variety of cases involving borrower abuse, Ms. Magner has probably done more investigating than some of the attorneys general who are so eager to cut a deal with the banks.

***

  • THE use of a robo-signer in the Wilson matter seemed to be the last straw for Ms. Magner. In sanctioning Lender Processing, she wrote: “The fraud perpetrated on the court, debtors and trustee would be shocking if this court had less experience concerning the conduct of mortgage services.”
  • She added: “Serious problems persist in mortgage loan administration. But for the dogged determination of the United States Trustee’s office and debtors’ counsel, these issues would not come to light and countless debtors would suffer.”
  • For those who argue that servicing errors encountered by troubled borrowers are rare mistakes, Ms. Magner’s rulings should be required reading. “The deference afforded the lending community has resulted in an abuse of trust,”(1) she wrote in the Wilson ruling. Truer words were never spoken.
For more, see Homework Regulators Aren’t Doing.

(1) Judge Magner's further comments in her ruling on this abuse of trust also bear repeating (see In re Wilson, Case 07-11862 (Bankr. E.D. La. April 6, 2011) (p. 21-22, 25):

  • The abuse begins with a title. In this case, Ms. Goebel was cloaked with the position of "Assistant Secretary,” in a purposeful attempt to convey an experience level and importance beyond her actual abilities. Ms. Goebel is an earnest young woman, but with no training or experience in banking or lending. By her own account, she has rocketed through the LPS hierarchy receiving promotions at a pace of one (1) promotion per six (6) to eight (8) month period. Her ability to slavishly adhere to LPS’ procedures has not only been rewarded, but has assured the development of her tunnel vision. Ms. Goebel does not understand the importance of her duties, and LPS failed to provide her with the tools to question the information to which she attests.

***

  • In this case the lender and LPS cloaked Ms. Goebel with a title that implied knowledge and gravity. LPS could have identified Ms. Goebel as a document execution clerk but it didn’t. The reason is evident, LPS wanted to perpetrate the illusion that she was both Option One’s employee and a person with personal and detailed knowledge of the loan. Neither was the case.

State Bar Investigator: "Now We're Seeing The Loan Mod People Morph Into The Sue-Your-Bank People" As Scammers Circumvent Upfont Fee Prohibitions

In Sacramento, California, The Sacramento Bee reports:
  • Sacramentans struggling to keep their homes increasingly are suing their lenders for fraud, even though judges rarely rule in their favor. Desperation has led some of these homeowners to pay thousands of dollars to people who are not lawyers to help prepare their cases. Others hire attorneys in lawsuit mills that aggressively solicit for clients. "It's the new scam," said Tom Layton, an investigator for the State Bar of California.
  • The number of lawsuits filed by individuals against banks and mortgage companies in the Sacramento region has more than doubled, rising to about 250 in the last six months, up from about 115 from the same period two years ago, according to a Bee review of court records in Sacramento and Placer counties.
  • Many of the lawsuits are filed by frustrated owners tired of dealing with banks that repeatedly transfer calls or reject loan modifications after a successful trial. But homeowners don't always know what they're getting into when they go to court. Some unscrupulous operators, Layton said, are charging large fees for little work.
  • The Legislature barred lawyers and non-lawyers alike from charging upfront fees to file a loan modification; however, there is no ban on collecting such fees for preparing a lawsuit.
  • "Now we're seeing the loan mod people morph into the sue-your-bank people," Layton said.

***

  • Jim Towery, the State Bar's chief trial counsel, said people without a law license should not be preparing lawsuits. "It is illegal," he said. "It falls under the category of the unlicensed practice of law."(1)

For more, see Sacramentans sue lenders to save homes – but few succeed.

(1) See also: Loan Modification and Mass Joinder Lawsuit Scams:

  • These charlatans align themselves with unethical and inexperienced attorneys who pay them generous referral fees for signing up clients attorneys. They get these clients to pay thousands of dollars upfront to join mass joinder plaintiff lawsuits without ever meeting an attorney.
  • They get these people to pay by guarantying that these lawsuits will be successful. They tell these clients that no mortgage payments are to be made during the several years that it will take for the lawsuit to wind through the court system. They promise balance reductions to below market value. They give their word that the attorneys have already won similar cases and have saved hundreds of family homes through these lawsuits. They are quite convincing as they explain how lenders are afraid of the negative publicity that these mass joinder plaintiff lawsuits generate.

Sale Leaseback Foreclosure Rescue Peddler Gets 10 Years After Jury Finds Guilt On Charges Of Obtaining Goods By False Pretense

In Horry County, South Carolina, The Horry Independent reports:
  • A Lexington, N.C., man was sentenced to 10 years in jail and fined $500 for each of two counts of obtaining goods by false pretense [] after an Horry County jury found that he had been involved in questionable mortgage transactions.
  • Robert Steve Jolly, 61, [...] will serve the two sentences concurrently. An Horry County jury was unable to agree on a third charge of practicing law without a license and was declared hung on that issue.
  • Several Horry County homeowners testified in a two-day trial that they turned to Jolly for help with their mortgages, but ended up with nothing but trouble. Jolly’s attorney Wesley Locklair told the jury that what Jolly did was not criminal and his intentions were not to cheat or defraud distressed homeowners. “He was trying to assist in saving their home from banks with bad lending practices,” Locklair said.
  • The case went to the jury late Wednesday after Jolly took the stand in his own defense. At one point Jolly was named as a defendant in 45 mortgage foreclosure cases.

Source: Jolly gets 10 years.

See also The Sun News: Three more caught in Myrtle Beach area mortgage fraud:

  • Jolly had been operating a foreclosure rescue scam since March 2007, according to a lawsuit filed against him by the state attorney general's office. At least 45 people were taken in by the scam, court records show.
  • Jolly told home owners that he could suspend foreclosure proceedings if they would sign their home over to him and then start making monthly payments to him, according to court documents. Jolly, however had no authority to stop the foreclosures. Instead, he kept the monthly payments for himself as the foreclosures proceeded.

***

  • "Mr. Jolly instructed that if I would sign my properties to him he would take over ownership, avoid foreclosure, rent the properties back to me at a rate I could afford based on my income and offered to sell the properties back to me in the future if and when I could afford them," [one homeowner] said.

Sunday, April 17, 2011

W. Texas Feds Score Conviction In Flipping Scam Targeting Home Sellers w/ Phony Foreclosure Rescue Promises, Homebuyers w/ Bogus Owner Financing Deals

From the Office of the U.S. Attorney (Midland, Texas):
  • United States Attorney John E. Murphy announced that in Midland [], a federal jury convicted 34-year-old Marcus Rosenberger in connection with an estimated $190,000 fraudulent real estate scheme. Rosenberger was convicted of one count of conspiracy to commit mail and wire fraud, one count of mail fraud and ten counts of wire fraud.
  • For approximately one year beginning in March 2009, Rosenberger and 35-year-old Jason Heath Morrison of Midland, operated a real estate investment venture under the company name of Vanguard Properties which focused on property "flipping."
  • Jurors found that during the conspiracy, Rosenberger and Morrison identified at least ten properties that were in residential foreclosure and scheduled to be sold at auction within weeks. They approached owners with a plan to avoid the consequences of foreclosure and preserve the owners’ credit ratings by relinquishing the property to the defendants.
  • In exchange for relinquishing the property, the defendants promised to pay off the existing property lien. Unbeknownst to the property owners, Rosenberg and Morrison never paid the existing liens. Instead, they placed ads in the Midland Reporter Telegram to sell the property under an owner-finance agreement.
  • They concealed from the buyers the fact that the properties had existing liens. The buyers made down payments–$5,000 to $10,000–and made subsequent monthly payments to the defendants.
  • The homes ultimately went into foreclosure on the undisclosed liens and were sold at auction. The original homeowners were left with a foreclosure on their credit and the new buyers, without homes and the money they paid for the houses.
  • In January, Morrison pleaded guilty to the same charges.(1) Both Morrison and Rosenberger face up to 20 years in federal prison per count and restitution. Morrison is scheduled to be sentenced on May 26, 2011; Rosenberger, June 29, 2011.
  • This investigation was conducted by the Midland Police Department. Assistant United States Attorney Austin Berry is prosecuting this case on behalf of the Government.

For the U.S. Attorney press release, see Federal Jury In Midland Convicts Odessa Man In Connection With Real Estate Fraud Scheme.

(1) Regarding Morrison's January guilty plea, the press release is silent as to whether he scored a 'squeal deal' with the Feds, where he would agree to finger Rosenberger at trial for the latter's role in this racket in an attempt to 'buy down' some prison time to be handed out at a future sentencing hearing.

NC Man Pleads Guilty In Mortgage Fraud, Rent-Skimming Ripoff That Unloaded Builder's Inventory Onto Wanna-Be 'Rent-To-Own' Homebuyers w/ Crappy Credit

In Raleigh, North Carolina, WTVD-TV Channel 11 reports:
  • The suspected ring leader of a rent to own scam pleaded guilty to multiple charged Friday. ABC11 Eyewitness News I-Team Troubleshooter Diane Wilson exposed the scam when it first happened more than a year ago. The multi-million dollar mortgage scheme ripped off Triangle residents and banks.
  • Douglas Scott Allen pleaded guilty Friday to five counts of obtaining property under false pretenses of more than $100,000. The charges relate to a rent-to-own scam with a company Allen owned called Saving Carolina. In all, investigators say the scheme happened throughout the Triangle and involved 16 houses that Saving Carolina found buyers for.
  • "There was an act of fraud to obtain the mortgage loan, specifically false verification of employment, false verification of income to entice the loan or banks or loan officers to approve the loan to allow the mortgage to be closed and property be purchased," the prosecutor told the court Friday.
  • Prosecutors say once Allen got the home financed, Saving Carolina would find renters and promise them the dream of home ownership through rent to own. "We don't have perfect credit; this was a program that helped people," victim Sherry Williams said. "We thought it was a great opportunity to own a house."
  • Saving Carolina put Williams in a Raleigh home and despite Williams making monthly rent payments to Saving Carolina; she received a foreclosure letter in the mail. She learned her rent payments weren't being made to the mortgage company. The bank foreclosed on the home she dreamed of owning and she was forced to move out. "It's heart breaking, it really is," Williams said. "The kids love it. We love it."

***

  • Despite the scheme being multi-million dollar, investigators say the people behind Saving Carolina didn't make all that money -- it was the banks that lost big. Prosecutors say Saving Carolina made money by getting kickbacks from builders whose houses they used and by collecting those rent payments.
  • A judge sentence Allen to a minimum of almost four years to a maximum of six years behind bars. Allen still has 11 charges pending in Durham relating to the rent to own deal. Besides Allen, three other have been convicted for their involvement.

For the story, see Suspected scam ring leader pleads guilty.

Lawsuit: Chase Gave WV Couple A Loan Modification 'Jerk-Around' After Squeezing Them For Retroactive Charges On Force-Placed Insurance

In Huntington, West Virginia, The West Virginia Record reports:
  • A Lesage couple is suing JPMorgan Chase Bank and Chase Home Finance after they claim the bank breached its contract with them.
  • Denise Ash and Matthew Ash purchased their home in 2003 for $91,000, which was financed with a loan through First Franklin Financial Corporation, according to a complaint filed March 24 in Cabell Circuit Court. The couple claims the loan was ultimately assigned to JPMorgan Chase Bank and the servicing of the loan was assigned to Chase Home Financial.
  • In the summer of 2010, Chase Home Financial informed the Ashes that it would be raising their payments from $680 to $1,190 for repayment of force-placed insurance over the previous two years,(1) according to the suit.
  • The couple claims they contacted Chase because they were concerned about being able to afford the new payment and a representative suggested they apply for a loan modification and stated that the couple should not may any payments until the loan modification was processed.
  • In August 2010, the Ashes were denied their loan modification request. Unable to pay the total amount of the arrears, they requested any other loss mitigation assistance, according to the suit. The Ashes claim in January they received a second offer to consider them for a loan modification, so they sent Chase the documentation it requested. On Feb. 24, Chase's foreclosure trustee informed the Ashes that their loan was accelerated in advance of a foreclosure sale.
  • The Ashes claim the defendants breached their contracts and duty of good faith by exercising their discretion under the contract in bad faith.

According to the lawsuit, the defendants breached their contracts and duty of good faith:

  1. by discouraging the Ashes from making payments on the loan;
  2. by representing to the Ashes that hardship assistance was forthcoming;
  3. by exercising their discretion in bad faith in refusing to provide the Ashes with a loan modification as represented; and
  4. by referring the couple's home to foreclosure.

The Ashes are seeking actual, compensatory and punitive damages and civil penalties, and are being represented Bren J. Pomponio and Daniel F. Hedges.(2)

Source: Lesage couple sues Chase for breach of contract.

(1) For more on the loan servicing industry's force-placed insurance racket, see South Florida Homeowners Seek Class Action Status In Lawsuit Tagging Loan Servicer Over Dubious, Force-Placed Insurance 'Gravy Train'.

(2) Both attorneys are associated with Mountain State Justice, a non-profit public interest law office that provides free legal services in their areas of practice to qualifying, low-income West Virginians, and whose work currently focuses primarily on combating predatory lending and abusive debt collection techniques through individual and class action lawsuits.

Nevada AG Bags Real Estate Agent In Alleged $115K Senior Citizen Ripoff Involving Forged Foreclosure Deed

From the Office of the Nevada Attorney General:
  • The Nevada Attorney General’s office [] announced the arrest of a local realtor, Christopher Brown, who works for Better Homes and Garden Desert Properties in connection with a scam relating to foreclosure auction sales.
  • The State alleges that Mr. Brown filed a fraudulent and forged Trustees Deed Upon Sale with the County Recorder transferring a property to an elderly victim prior to the actual foreclosure sale.
  • The victim had paid cash to purchase the property at auction. The State alleges instead of purchasing the property, the elderly victim’s payments were diverted by Mr. Brown for his personal use. The alleged victim is a senior citizen who lost over $115,000 based on the fraudulent promises by the Defendant.

For the Nevada AG press release, see Attorney General's Office Announces Arrest In Mortgage Fraud Theft Scam.

HUD Backs Off On Position Allowing Lenders To Foreclose On Surviving Spouses Of Deceased Reverse Mortgage Borrowers

The New York Times reports:
  • In the face of a lawsuit from the AARP Foundation, the Department of Housing and Urban Development has backed off an apparent policy change that was putting some widows and widowers on the brink of foreclosure.
  • The dust-up involves reverse mortgages, financial products that allow older Americans with a decent amount of home equity to tap some of that equity if they are at least 62 years old. Unlike a home equity loan, where you have to pay the money back, with a reverse mortgage the bank pays you, say in a lump sum or in monthly payments. Once you no longer live in the home, you or your executor (if you’re dead) sells it and pays the bank back.
  • The foundation and Mehri & Skalet, a law firm, sued HUD in the wake of a policy letter in 2008 that seemed to state that widows or widowers who were not listed on a spouse’s reverse mortgage would have to repay the full amount of the deceased spouse’s mortgage. They’d have to do so even if the home was worth less than the outstanding loan.
  • Not long after, some surviving spouses found themselves unable to pay off the loans or get a new mortgage for the outstanding balance on the old reverse mortgage. As a result, they ended up in foreclosure proceedings. The foundation had sued on behalf of three of them.
  • In a letter it released [last] week, HUD rescinded the 2008 letter. And while this week’s letter didn’t say so specifically, Jean Constantine-Davis, a senior attorney for AARP Foundation Litigation, reports that the lenders will now halt foreclosure proceedings against its three plaintiffs for the time being. A HUD spokesman did not return a call seeking comment.
  • The lawsuit is not over, though. The foundation hopes that a judge will confirm that HUD cannot ever force a widow, widower or heir to pay a reverse mortgage lender more than a home is actually worth, whatever the balance may be on the mortgage.

For more, see Good News for Spouses of Reverse Mortgage Holders.

Saturday, April 16, 2011

Payment Of Inflated 'Doc Stamps' On Court-Ordered Central Florida Foreclosure Sales May Be Skewing Prices, Hiding Investor Profits

In Orlando, Florida, the Orlando Sentinel reports:
  • Properties purchased through Orange County Clerk of Courts foreclosure sales at one price are appearing in the county Property Appraiser's Office records at a higher price, often tens of thousands of dollars more, according to an Orlando Sentinel review of 16 recent purchases.
  • The discrepancy illustrates inherent flaws in a system that apparently allows investors buying up distressed properties to inflate the sale price of their real estate by paying a slightly higher state tax on the sale, commonly known as "documentary stamp tax." The disparity in prices has gone unnoticed by the three county government bodies with a role in the sale and recording process — until now.
  • By having higher sale prices on record with the Orange County Property Appraiser's Office, investors looking to later unload the properties could mask their profits when they sell the real estate to new buyers.
  • It's not clear how widespread the bogus sale prices are, but the implications are vast in a county that saw nearly 18,000 foreclosure cases last year alone. The phony sales prices could be skewing appraisals being done in those neighborhoods and influencing bank lending practices as well, said Orange County Property Appraiser Bill Donegan.

***

  • The amount of that tax is supposed to reflect the sale price, but in the cases reviewed by the Sentinel, the payments exceeded what the buyers should have paid. [...] Investors spending a few hundred more on the doc stamps on the front end could artificially inflate the sales prices by tens of thousands of dollars — and they have.

For more, see Foreclosure auctions: Are bogus prices hiding profit?

For story update, see Foreclosure auctions: Bogus-price issue appears to be limited to sales in Orange.

Judge Suspends HOA's Denial Of Access To Pool, Other Amenities Affecting 96 Condo Owners Where Only Six Were Delinquent In Maintenance Fees

In Boynton Beach, Florida, the South Florida Sun Sentinel reports:
  • Quail Run condo owners in Boynton Beach on Tuesday gained access to their clubhouse, pool and other amenities after the master association changed the locks. The master association had imposed a 2 1/2-month lockout for all owners, although only a few were in default of their maintenance dues.
  • Circuit Judge Timothy McCarthy signed off on the temporary injunction order Thursday, and the master association on Tuesday changed the locks back to allow most of the 96 condo owners entry into the facilities. About six are in foreclosure and have failed to make their dues.

For more, see Judge orders locks removed from Boynton Beach condo's pool and clubhouse.

Changing Nature Of NYC Foreclosure Crisis: Affected Renters In Multi-Family Buildings On Upswing

In New York City, Crain's New York Business reports:
  • The housing crisis continues to take a toll on multifamily rental properties in the city, with Brooklyn being one of the boroughs the hardest hit. Multifamily rental properties with five or more units, buildings that house nearly half of all New Yorkers, drew more foreclosure notices in the last two years than any period since the early 1990s, according to a Tuesday report. New York University's Furman Center for Real Estate and Urban Policy published the report, “State of New York City's Housing and Neighborhoods 2010.”
  • What struck us was the changing nature of the foreclosure crisis in the city,” said Ingrid Ellen, faculty co-director of the center. “People talk mostly about single-family housing, but we're seeing a rise in the number of multifamily properties that are seeing foreclosures.”
  • In the past five years, more than 2,100 multifamily rental properties received foreclosure notices, potentially affecting more than 44,000 households, according to the report.

***

  • The impact of such findings is widespread, affecting both tenants, who may have to vacate the foreclosed buildings, and the community. “Physical conditions are deteriorating in these buildings that are distressed,” Ms. Ellen said.
  • Those buildings receive an average of 21% more violations during the quarter when the formal notice is filed, and 15% more violations during the two quarters before and after a foreclosure notice compared to all other quarters. “Collectively, it's very costly if these buildings go to foreclosure.”

For more, see Foreclosure crisis shifts to multifamily buildings (Report says more than 2,100 multifamily rental properties received foreclosure notices, potentially affecting more than 44,000 households; Brooklyn hit hardest).

In related stories, see:

Alone, Broke & Target Of Seattle-Area Real Estate Profiteers

In Seattle, Washington, The Seattle Times reports on a local homeowner who's broke, alone, living without heat or utilities, believed by helpful neighbors to be of diminished mental health, on the verge of losing his mortgage-free home at a foreclosure sale for unpaid real estate taxes, and being circled by the vultures real estate investors looking to snag his house on the cheap.

  • Alan, 59, inherited this house free and clear after his father died six years ago. That makes him fortunate. But now he's broke and alone. He owes $4,100 in back utilities, more than $26,000 in property taxes and about $25,000 to the IRS. Unless he pays his 2008 property taxes — some $7,800 — by month's end, he faces foreclosure. That makes him desperate.
  • Strangers have been circling the neighborhood recently, photographing Alan's neglected house with its peeling trim, mossy blinds and rotting curtains. They know there's a good chance that King County will foreclose on the property to collect back taxes. For those real-estate investors, Alan's plight is a business opportunity.
  • One pony-tailed investor — a man who once bought an apartment building on the cheap from a 90-year-old woman with dementia — befriended Alan and appeared close to buying his house until a family lawyer warned Alan to stay away from him.
  • Meanwhile, neighbors are trying to get Alan help so that he can safely stay in his house.

For the rest of Alan's story, see Alone, broke and target of profiteers (A vulnerable man who many would call a hoarder has been living without heat or utilities in an affluent North Seattle neighborhood, where neighbors worry about his welfare and strangers have been circling in anticipation of King County foreclosing on his home for unpaid property taxes).

For a story update, see Desperate man finds he's not alone (Seven days ago, Alan was facing almost certain foreclosure on his North Seattle home where he lived without running water, heat or electricity. Today, there is light and heat in the house, and, soon, he'll have running water, too):

  • A stranger read about his plight in last Sunday's Seattle Times, and paid Alan's tax bill — all $26,000 of it. The only things known about the stranger: he's a man, and he wants to remain anonymous, even to Alan.

The Risks Of 'Senior Housing' For The Elderly & Infirm Seeking To Age In Peace In Their Final Years

A recent story in the Los Angeles Times shines some light on how the crappy economy and foreclosures are affecting the elderly and infirm who thought they would be living out the rest of their lives in the peace offered by continuing care retirement communities and other forms of senior housing:
  • "California's foreclosure crisis has severely impacted some of the most vulnerable tenants in our state — seniors who live in residential-care facilities," says state Sen. Mark Leno (D-San Francisco). "These residents had no warning that they were about to lose their homes, and their families and caretakers were left in a panic to find immediate emergency housing."
  • The situation is all the worse because of the health issues faced by many of those evicted. "Being uprooted like that is a horrifying situation for older adults, many of whom are frail and confused," says Shelley Woolery, who has been involved in two cases in her role as ombudsman program coordinator with the Council on Aging in Orange County.
  • Bankruptcies, foreclosures and other financial difficulties are inflicting new worries on residents and their families who thought they had secured their futures in a retirement community or other form of senior housing, ranging from "55+" developments to nursing homes. The problems confront older Americans at every income level.

***

  • Facilities range from independent-living apartments to skilled nursing facilities, allowing residents to "age in place." People typically move in when they are in good health and active; the promise, and the appeal, is that they won't need to move elsewhere if their health declines.
  • In addition to the steep buy-in, residents pay monthly maintenance fees. The entrance fee is usually said to be refundable to residents or their heirs if they move or die. But that can change if a facility goes out of business.
  • When a few facilities declared bankruptcy in recent years, the U.S. Senate Special Committee on Aging got involved and requested a study by the Government Accountability Office. Last summer, the GAO issued a report saying that investing in a continuing-care community involves "considerable risk" and urging state regulators to "be vigilant in their efforts to ensure adequate consumer protections for residents."(1)

***

  • In addition to placing a consumer's investment at risk, the current financial squeeze could cause a resident's monthly dues to spiral upward, the report said. Another problem with continuing-care retirement communities: Some consumers have found it difficult to retrieve buy-ins after leaving.
  • Elder-law specialists blame the economy: Seniors can't sell their homes, so they don't have the funds to move into the developments; that in turn limits the money the facilities have on hand to pay back those who are moving out.

For more, see Elderly and facing eviction (Foreclosures are affecting senior housing too, leaving residents and their investments at risk).

(1) For the GAO report, see Older Americans: Continuing Care Retirement Communities Can Provide Benefits, but Not Without Some Risk (go here for report summary).

Friday, April 15, 2011

Banksters Score Pass In Preliminary Settlement w/ Bank Regulators; Still Face F'closure Risk As Deal Not Expected To Affect Ongoing Probe By State AGs

The Washington Post reports:
  • Three federal agencies announced agreements with the nation’s largest mortgage servicers Wednesday that aim to stem shoddy foreclosure practices. But the plans do not immediately impose financial penalties on the companies or force them to reduce the mortgage debt for troubled borrowers.
  • The deals require the mortgage servicers to identify and compensate borrowers who suffered financial harm, but the details have not yet been decided.

***

  • Some lawmakers and consumer groups said the enforcement actions are weak and won’t fix the problems that surfaced last fall. By then, news reports and lawsuits showed that mortgage servicers were using fake documents, forged signatures and other shortcuts to quickly evict families from foreclosed houses. The revelations prompted many of the nation’s largest lenders to temporarily halt foreclosures and sort through the mess.
  • The three regulators that reached the deal Wednesday — the Office of the Comptroller of the Currency, the Federal Reserve and the soon-defunct Office of Thrift Supervision — have at times been cast by those critics as being too friendly to the industry.
  • State attorneys general, the Justice Department and several federal agencies are trying to negotiate a separate settlement with the banks, which sources say might force the companies to pay at least $20 billion in fines. That money would then be used to slash the mortgage debt of borrowers who owe more than their houses are worth.
  • The OCC said its deal would not undermine the broader settlement being negotiated by the attorneys general. “I would not only hope that they would dovetail, but I think the two really need to mesh,” said John Walsh, acting comptroller of the currency.

***

  • The actions taken by the three agencies are based on the findings of an interagency review last year that discovered “significant problems” from a sampling of foreclosure actions by those companies.
  • The companies violated federal and state laws, mishandled foreclosure documents and failed to properly oversee the foreclosure attorneys working on their behalf, the review concluded, contradicting past claims by the industry.
  • Consumer advocates and some lawmakers reacted negatively. Rep. Maxine Waters (D-Calif.) said the enforcement actions are “disappointing – but not surprising – given the history of our nation’s banking regulators” who have been accused of being too soft on the institutions they oversee.

For the story, see Regulators, mortgage servicers agree on reforms.

In a related story, see Reuters: Analysis: U.S. banks still face big foreclosure risks (U.S. banks still face severe consequences from allegations of pervasive mishandling of home foreclosures, despite reaching a relatively mild settlement with the bank regulators).

Cuomo 'Stops Payment' On Funds For NYS Foreclosure Prevention Service Program

In Albany, New York, The Albany Business Review reports:
  • Gov. Andrew Cuomo’s veto of $1.5 million to pay for foreclosure prevention services in New York shocked housing advocates who say the program is vital to help struggling homeowners. Cuomo’s veto means the Foreclosure Prevention Services Program will shut down at the end of this year, the advocates said.

***

  • Housing advocates had hoped for $15 million in the state budget to continue the program, but were only able to get $1.5 million set aside by Democrats who control the Assembly. Cuomo vetoed the funding. Cuomo wrote: "This item passed by the Legislature, to which I object and do not approve, is a new appropriation, but is improperly characterized as a reappropriation. Accordingly, this item is disapproved."

For the story, see Cuomo vetoes pay for foreclosure prevention services.

In a related story, see New York Law Journal: New York Legal Aid Groups Brace for Life After Cuts in LSC Funds.

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

Military Man Gets 11th Hour Stay Of Foreclosure Sale As Court-Appointed Attorney Gets Slammed For Failure To Notify Client Of Legal Action

In Clearwater, Florida, The Tampa Tribune reports:
  • United States Coast Guardsman Keith A. Johnson returned last year from serving in a defense role overseas to find his bank had foreclosed on his home. It was set to be auctioned off at the courthouse the next day.
  • It was a shock because Johnson was never notified of the foreclosure lawsuit against him, court documents show. The lender, Wells Fargo Bank, also failed to notify his wife, even though court records show it had sent her numerous letters about a modification request – up until a few weeks before a judge granted the foreclosure.

***

  • In this case, Wells Fargo told the court it couldn't find Johnson to tell him about the suit. So the lender's attorney, in accordance with the Servicemember Act, asked the judge to appoint a guardian ad litem to represent Johnson. The St. Petersburg firm representing Wells Fargo, the Law Office of Douglas C. Zahm, recommended Tampa attorney Jay D. Passer, and the court approved the appointment.
  • However, three months later, Passer said he also couldn't locate Johnson. He told the court the plaintiff's pleadings "appear to be in compliance" with state law, court records show. That report was key to allowing the foreclosure to proceed.
  • "That report waived the service member's rights even though the attorney didn't speak with him one time," said Col. John S. Odom, Jr., a nationally-recognized military lawyer whose book, A Judge's Guide to the Servicemembers Civil Relief Act, is expected to be released later this year by the American Bar Association.

***

  • "An attorney ad litem is supposed to defend the person just as though they were being paid $1 million a day to do it," [Sarasota attorney and Florida legal treatise author Henry P. Trawick, Jr.] said. "I think it's ridiculous that they couldn't find him, but even then, the attorney should have tied it up in court until his client returned."

***

  • St. Petersburg foreclosure defense attorney Matt Weidner represents Johnson and said it would have been easy to find him. "All he had to do is walk up to the Coast Guard gate in Clearwater and say, "I need to find this guy,'" Weidner said. "The military knows where their people are. I don't think his level of inquiry is sufficient for even a civilian."

***

  • Meanwhile, Johnson waits on this day in court. He was granted an emergency injunction to stop the sale of the home. For now, Johnson is living in the home, but Wells Fargo's judgment still stands.

For more, see Military man returns from war to find home foreclosed.

Clearwater Cops Pinch Pair Suspected Of Using Forged Land Documents To Hijack Title To Real Estate & Pocketing Proceeds From Subsequent Sales, Rentals

In Clearwater, Florida, the St. Petersburg Times reports:
  • Two Clearwater women are accused of forging documents to fraudulently sell or rent homes in foreclosure, then pocketing the proceeds, authorities said.
  • Clearwater police arrested Silvia N. Lopez-Mateos, 37, of 618 Snug Island, and Adriana Abreu, 43, of 943 Narcissus Ave., on Monday. Lopez-Mateos, whose alias is Lina Maria Alverez, was charged with grand theft, fraudulent use of personal identification and violation of probation on a grand theft conviction out of Palm Beach County. Abreu, who also goes by the name Andriana Cortes, was charged with scheme to defraud, grand theft and several counts of sale of security by unregistered dealer.
  • Clearwater police said employees at Integrity Title on Belcher Road contacted them and said they had been scammed out of $113,000 by a woman who forged a quitclaim deed to acquire a home, sold it and kept the proceeds.
  • Detectives learned that Lopez-Mateos was working with Abreu and that the two had fraudulently purchased at least eight homes, then sold or rented them for profit, police said. Detectives suspect there may be more victims, said Clearwater police spokeswoman Elizabeth Watts.
  • On Monday, when the two women went to another title company, Advantage Title on Belcher Road, to collect a $23,000 check for another property they obtained illegally, detectives closed in on them, police said.

For more, see Two women accused of selling homes they didn't own.