Wednesday, May 25, 2011

State AGs: Banksters Face $17B+ In Potential Liability In Possible UDAP Suits If Foreclosure Fraud Settlement Isn't Reached

The Wall Street Journal reports:
  • State attorneys general told five of the nation's largest banks on Tuesday they face a potential liability of at least $17 billion in civil lawsuits if a settlement isn't reached to address improper foreclosure practices, according to people familiar with the matter.
  • The figure doesn't cover additional billions of dollars in potential claims from federal agencies such as the Department of Housing and Urban Development and the Justice Department. State and federal officials haven't proposed a specific comprehensive settlement figure, but Tuesday's discussions represented the first effort to formally quantify potential liability.

***

  • Banks have proposed a $5 billion settlement that would be used to compensate any borrowers previously wronged in the foreclosure process and provide transition assistance for borrowers who are ousted from their homes. Federal and state officials have dismissed that as insufficient. Some officials have pushed for a total price tag of more than $20 billion to resolve foreclosure-handling abuses that surfaced last fall.
  • State attorneys general from all 50 states and the District of Columbia announced investigations last fall. Tuesday's discussions highlighted the potential for lawsuits alleging unfair and deceptive practices [ie. "UDAP"] if a settlement isn't reached.
  • The U.S. Trustee Program, a part of the Justice Department that oversees bankruptcy cases, has asked for an additional $500 million to $1 billion in penalties, according to people familiar with the matter. Officials of the unit have raised questions in several cases over the authenticity of foreclosure documents.

***

  • The latest development comes as state and federal officials are intensifying their scrutiny of other parts of the mortgage machine. Attorneys general in California and New York have announced wide-ranging mortgage investigations.

For the story, see Banks Face $17 Billion in Suits Over Foreclosures.

"There Can Be No Settlement For Pennies On The Dollar!" Two Deed Recording Officials Tell Lead AG In 50-State Foreclosure Fraud Probe

Housing Wire reports:
  • Two Registers of Deeds asked Iowa Attorney General Tom Miller [] to postpone a settlement with the nation's largest mortgage servicers until the cost damage to land records is better understood.
  • John O'Brien, Register of Deeds of Southern Essex County in Massachusetts, and Jeff Thigpen, Register of Deeds of Guilford County in North Carolina, wrote a letter to the attorney general, stressing the need to appropriately settle terms with servicers based on the amount of damaged practices such as robo-signing caused.
  • "We need to take a long hard look at the damage that these banks have caused, not only to our economy but also to people's chains of title," O'Brien commented. "There can be no settlement for pennies on the dollar."

For more, see Registers of Deeds ask Iowa AG to postpone servicer settlement.

4 Sentenced In Straw Buyer Scam That Fleeced Banks, Then Used 'Rent To Own' Lure To Dupe Would-Be Buyers Into Paying On Homes That Ended In F'closure

In Raleigh, North Carolina, The News & Observer reports:
  • Triangle, state and federal officials say they used a relatively new state law to break up a mortgage fraud ring in the Triangle that bilked housing lenders across the state out of millions of dollars. Four people were charged with being part of the ring and were the first to be convicted under the N.C. Residential Mortgage Fraud Act of 2007.
  • Douglas Scott Allen, 37, his wife Renee Keiser, 44; Antonious Iskander, 27; and Matthew Garrett, 45, all were sentenced to prison as a result of their involvement in a mortgage fraud scheme with Saving Carolina, a company that operated in Wake and Durham counties, according to state Commissioner of Banks Joseph Smith Jr.(1)

***

  • Authorities say they participated in a scheme that involved the purchase of residential properties by illegitimate borrowers, who submitted false information about their employment and income to qualify for mortgage loans.
  • The properties were then rented to residents who hoped eventually to own the properties. The conspirators pocketed the cash but never repaid the loans, causing the properties to go into foreclosure, resulting in millions of dollars in losses to the home lenders.

For the story, see Four sentenced for mortgage fraud.

For the North Carolina Commissioner of Banks press release, see N.C. Commissioner of Banks and Wake County District Attorney Stop Mortgage Fraud Ring.

(1) According to the story:

  • Allen pleaded guilty to five counts of obtaining property under false pretenses and was sentenced to 44 to 62 months in prison;
  • Garrett pleaded guilty to one count of residential mortgage fraud and was placed on 18 months of probation and fined $5,000. Garrett's real estate license was suspended;
  • Iskander pleaded guilty to two counts of residential mortgage fraud and was placed on 18 months of probation and fined $2,000;
  • Keiser spent eight months in jail and was sentenced to time served after she pleaded guilty to residential mortgage fraud. rent skimming

$2,700 For Property Inspections Costing $9.60 Each Shows That Loan Servicing Abuses Continue Unabated

The New York Post reports:
  • On Wednesday, consumer defense attorney Linda Tirelli added another outrageous example of mortgage servicer misbehavior to her growing file of hundreds of such abuses against New York homeowners.
  • The overcharging by a servicer -- which manages mortgages day-to-day for lenders -- to bill a homeowner in foreclosure over $2,700 for property inspections that cost just $9.60 a pop came as federal and state regulators are investigating shoddy practices by servicers and big banks, which are often one and the same.

***

  • Tirelli asked for invoices, as mandated by federal bankruptcy law, but the bank's attorney told Tirelli he wasn't sending them until she started litigation. "That, to me, is abuse," Tirelli told The Post. "How are you supposed to face your creditor if your creditor is not going to substantiate his claim?"
  • Unsubstantiated claims are just one of the many forms servicer abuse takes. The most common, experts say, include:

    * Junk fees, which are inflated or erroneous charges for property inspections, property preservation fees, and broker price opinions.

    * Misapplied or rejected payments. Servicers are known for rejecting homeowners' checks or applying funds to the wrong account, generating late fees and penalties that put a struggling homeowner further in arrears.

    * Attorneys' fees. North Carolina consumer defense attorney O. Max Gardner III has documented instances of bankrupt mortgagees being billed for attorneys' fees paid by servicers, despite the court awarding a lower amount.

    * Dual-tracking, or assuring a homeowner that a trial modification is going well, while proceeding with a foreclosure essentially behind the homeowner's back.
  • Well-documented evidence of these abuses dates back many years, and millions of American homeowners have suffered questionable, if not illegal, foreclosures because of these practices. "Many foreclosures didn't follow the rule of law, and you can't take private property away from someone in this country without due process," said a spokeswoman for the Center for Responsible Lending, which conducted the study.
  • Most of New York's more than 40,000 families in foreclosure struggle without legal help, waiting for a long-delayed lifeline from regulators. Homeowners can find cautious new hope on three fronts.
  • The US Trustee's office is now investigating abusive servicing practices. The Department of Housing and Urban Development's inspector general undertook audits of five major banks, and is accusing them of defrauding taxpayers in foreclosures on government-backed home loans, according to published reports.
  • Also last week, New York State Attorney General Eric Schneiderman said he is investigating Bank of America, Goldman Sachs and Morgan Stanley's mortgage securitization practices.

For the story, see Mortgage servicer abuse facing state, fed probes.

$350K In Pilfered Proceeds From Client Home Sales Leaves Lawyer Facing Prison; 1-Year Buy-Down Sentence Reduction To Cost $169K In Upfront Restitution

In White Plains, New York, The Journal News reports:
  • A former real estate lawyer who operated out of Yonkers will go to prison after admitting that he stole more than $350,000 by pilfering checks given to him by well-to-do clients.
  • Bruce Mogavero, an Eastchester resident, pleaded guilty Friday in Westchester County Court in White Plains to two felony counts of second-degree grand larceny and one of first-degree scheme to defraud.
  • His prison term will depend on how much he can repay when he is sentenced. If he makes a lump-sum payment of $169,350, he would be sentenced to one to three years. If he cannot pay that amount, he would serve two to four years, according to the Westchester County District Attorney's Office. He will eventually have to repay all the money, and is to be sentenced Oct. 25.
  • According to prosecutors, Mogavero stole $270,000 between August 2008 and April 2010. The money came from proceeds of a house sale on Oakland Avenue in Tuckahoe. Mogavero had deposited a $455,000 check into an escrow account until the sellers reached a divorce settlement, but he dipped into the account for his own use.
  • Mogavero also stole $82,700 from a client selling an apartment on Bronx River Road in Yonkers. Mogavero was accused of stealing money from nine other clients from 2008 to Jan. 1 of this year.
  • In an interview with The Journal News last year, Mogavero, 55, said he borrowed the money so he could keep his business afloat to help struggling homeowners fight foreclosure. He said he helped more than 200 people stay in their homes, and had already repaid some money.(1)

Source: Lawyer who stole $350,000 from clients must pay -- with prison time and cash.

(1) To the extent Mogavero fails to cough up the restitution cash, The Lawyers’ Fund For Client Protection Of the State of New York exists to protect legal consumers from dishonest conduct in the practice of law in the state, to preserve the integrity of the bar, to safeguard the good name of lawyers for their honesty in handling client money, and to promote public confidence in the administration of justice in the Empire State. It attempts to secure these goals by, among other things, reimbursing client money that is misused in the practice of law.

For similar "attorney ripoff reimbursement funds" that cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

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

Servicemembers Find Themselves Battling On Home Front As Well As In War Zones; Financial Struggles Make Maintaining Security Clearances Uncertain

In Las Vegas, Nevada, the Las Vegas Review Journal reports:
  • These soldiers and airmen have dropped bombs or have seen them explode in Iraq and Afghanistan, so they know firsthand the stress of fighting the nation's wars. Now they are battling a different kind of stress at home in the Las Vegas Valley -- the chronic stress that weighs on them from being at ground zero of the mortgage crisis.
  • When they get orders to move somewhere else, they have no choice but to go. In many cases, they face six-figure losses on their homes through short sales or foreclosure.
  • They also risk losing their security clearances, which could prevent them from flying warplanes and leading troops after they arrive at their new assignments. "This has been more stressful than my deployment," said Lt. Col. Eric Wishart, who is trying to sell a home worth 60 percent less than he paid for it. "And going to Afghanistan is no picnic."
  • Wishart is not alone. More than a thousand airmen at Nellis Air Force Base have been trapped in the mortgage crisis and are unable to refinance, according to a survey by Rep. Joe Heck, R-Nev. The survey found 740 airmen upside down on their mortgages don't qualify for the Pentagon aid program, another 263 can't sell their homes at a break-even price and some are renting them at a monthly loss.
  • Of the base's 8,932 personnel, 32 are in foreclosure and 98 have completed short sales or are in the process of completing one. After seeing this snapshot of what is happening at Nellis, Heck proposed an amendment to a defense bill to shed more light on the problem. While the bill doesn't provide funding for an assistance program, it would study the problem nationwide across all branches of the services.
  • "Service members become distracted by personal and financial issues, rather than focusing on their mission," Heck said earlier this month , noting that a soldier's ruined credit makes it difficult for them to maintain their security clearances.

For more, including the stories of a couple of the airmen, see When troops get orders to move, some risk losing houses.

Tuesday, May 24, 2011

NY AG Tacks On Three More Banksters To Target List In Mortgage Securitization Probe; Tags Four Bond Insurers With Subpoenas

Bloomberg reports:
  • JPMorgan Chase & Co., UBS AG and Deutsche Bank AG are being investigated as part of New York Attorney General Eric Schneiderman’s expanded probe of mortgage securitization, according to a person familiar with the matter.
  • Four bond insurers also were subpoenaed: Ambac Financial Group Inc., MBIA Inc., Syncora Holdings Ltd. and Assured Guaranty Ltd., according to the person, who couldn’t be identified because the probe isn’t public.
  • Schneiderman is seeking information on claims paid out during and after the economic crisis and any information or documents related to litigation or settlements with the banks, according to the person. The expanded investigation was reported earlier by the Wall Street Journal.
  • Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley were already part of the probe, the person said earlier this month. Schneiderman, who took office in January, is examining mortgage practices and the packaging and sale of loans to investors, according to the person. [...] Royal Bank of Scotland Group Plc is also one of the companies being investigated by the attorney general, the Financial Times reported.

***

  • Federal regulators and all 50 state attorneys general are scrutinizing how the biggest U.S. financial firms handle home loans. Last month, as states coordinated settlement talks with banks over foreclosure practices, Schneiderman said that any joint accord shouldn’t preclude individual states, such as New York, from continuing their own inquiries.

For more, see JPMorgan, UBS, Deutsche Bank Said to Be Added to New York Mortgage Probe.

Florida Appellate Courts Continue The Clean-Up; Another Lower Court Error In Rubber-Stamped Foreclosure Case Caught, Booted Back

Confronted with another screw-up by a state trial judge (this time, it was Charlotte County Circuit Judge Lee A. Schreiber) presiding over a home foreclosure action, a Florida appeals court once again found itself compelled to find error and kick the case back to the lower court for further proceedings.

Among the highlights here were:
  • a lender's attorney filing a motion for summary judgment prior to the homeowner filing an answer to the complaint,
  • the homeowner/couple withdrawing a motion to dismiss the day before the hearing and then filing an answer to the complaint, containing several common defenses, including a claim that the foreclosing entity had not provided the notice of acceleration that the standard language in the mortgage requires it to provide,
  • the trial court improvidently entering a summary judgment against the homeowner/couple even though nothing in the record refuted the homeowners' claim that they had not received the notice of acceleration.(1)

For the ruling, see Goncharuk v. HSBC Mortgage Services, Inc., 2D10-2629 (Fla. 2d DCA, May 20, 2011).

Representing the homeowner was Gregg Horowitz, Sarasota, Florida.

(1) The 3-judge appellate panel addressed this issue in the following excerpt (bold text is my emphasis):

  • Vasiliy and Marina Goncharuk appeal a final judgment of foreclosure entered after the trial court granted a motion for summary judgment in favor of HSBC Mortgage Services, Inc. We reverse. The procedural posture of this case and the disputed issue of fact that requires reversal of the summary judgment appear to be virtually identical to those in Sandoro v. HSBC Bank, USA National Ass'n, 55 So.3d 730 (Fla. 2d DCA 2011).

***

  • HSBC Mortgage seems to believe that the Goncharuks did something improper by waiting until the day before the hearing to withdraw their motion to dismiss and file an answer. At least in this context, we are aware of no rule of procedure that would prevent the Goncharuks from taking this step. Given that the answer contains no unusual defenses, nothing suggests that this step was taken for any improper purpose.

    As we explained in Sandoro and in several earlier cases, a plaintiff who moves for summary judgment before a defendant files an answer has a difficult burden.

    When a plaintiff moves for summary judgment before the defendant answers the complaint, the plaintiff "must not only establish that no genuine issue of material fact is present in the record as it stands, but also that the defendant could not raise any genuine issues of material fact if the defendant were permitted to answer the complaint."

    Sandoro, 55 So. 3d at 732 (quoting BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques,
    28 So.3d 936, 938 (Fla. 2d DCA 2010)). See also Howell v. Ed Bebb, Inc., 35 So.3d 167, 168 (Fla. 2d DCA 2010); Brakefield v. CIT Group/Consumer Fin., Inc., 787 So.2d 115, 116 (Fla. 2d DCA 2001).

    The plaintiff must essentially anticipate the content of the defendant's answer and establish that the record would have no genuine issue of material fact even if the answer were already on file. In Sandoro, the lender failed to address the notice of acceleration in its motion for summary judgment and accompanying affidavits. 55 So. 3d at 731-32. HSBC Mortgage failed to address the same issue in this case; therefore, we must reverse the final judgment of foreclosure and remand for further proceedings.

    Reversed and remanded.

Failure To Search Title Leads To F'closure For Homeowner Despite Making All Payments; Builder Failed To Pay Off Existing Lien In Owner-Financed Sale

In Weslaco, Texas, KRGV-TV Channel 5 reports:
  • A sign of the future connected to pain of the past. Behind the plastic and metal of the auction sign is an experience too sad for Nelda Rodriguez to bear. "There I go again," said Rodriguez as she wiped her tears. This home was her dream. It was her escape from violence. "It's just one thing after another after another," said Rodriguez. Rodriguez said her ex husband abused her.
  • She moved here to get away. A year later she gets this a notice. "The attorney to Compass Bank said this house is not mine," said Rodriguez. The notice said she didn't own the home and the true owner is in foreclosure. "I have my receipts and I was paying everything I was suppose to be paying," said Rodriguez. She called CHANNEL 5 NEWS for help. We investigated.
  • We pulled records on the property and the home. Turns out, Compass Bank is right: Rodriguez doesn't own this home. She owner-financed it through a construction company. "I feel real bad. In a way, I feel dumb because I let this happen to me," said Rodriguez.
  • Dunlyn Homes, L.L.C., the construction company, owned the house Rodriguez moved into. They had financed the building of the home through the bank. The bank claimed it had not been paid and demanded payment in full. Dunlyn Homes wasn't able to meet that obligation. The bank foreclosed on the house.
  • We tracked down the man in charge of the company. Juan Noriega was president of the construction company at the time Rodriguez bought her house. Noriega agreed there was a lien on the home, but he claimed it was a mistake. He says the bank agreed to extend the loan and take his payments. He claims he made them.
  • "Texas State Bank said don't worry about it. Just rent it or owner finance the houses, whatever you do as long as you take the payment. We'll worry about it in a couple of years," said Noriega over the phone.

For more, see Owner Financed Home Foreclosed.

California AG Announces Formation Of 25-Person Strike Force To Target Mortgage, Foreclosure Ripoffs Of Any Size

The Los Angeles Times reports:
  • California Atty. Gen. Kamala Harris, saying that years of unscrupulous lending still haunts the state, is creating a 25-person task force to target mortgage fraud of any size — from small operations that preyed on troubled borrowers to corporations that sold risky loans as safe investments.(1)

***

  • Creation of the state's Mortgage Fraud Strike Force, [...] comes as other states turn up the heat on the lending industry. New York Atty. Gen. Eric Schneiderman is seeking records from three major Wall Street banks as part of a broad investigation into the mortgage crisis. Also, a months-long investigation by all 50 state attorneys general into the foreclosure practices of the nation's five largest mortgage servicers is continuing.

For more, see California creating mortgage fraud task force (The team of 17 lawyers and eight special agents from the state Department of Justice will pursue corporate fraud, scams and fraudulent lending practices, Atty. Gen. Kamala Harris says).

Thanks to Deontos for the heads-up on the story.

(1) Reportedly, the team of 17 lawyers and eight special agents from the state Department of Justice will pursue three major areas, Harris said in an interview:

  • Corporate fraud, including instances in which bundled mortgages were sold as securities to the state or its pension funds under false pretenses. Harris said her office plans to prosecute some cases under California's False Claims Act, which she described as "one of those very powerful tools that California uniquely has … to pursue, in essence, what are false claims that are submitted to the state."
  • Scams, including instances in which consultants, lawyers and others took fees from people in foreclosure, saying they would help the homeowners get loan modifications or other remedies, but delivered nothing.
  • Fraudulent lending practices, including deceptive marketing, failure to fully disclose loan terms and qualifying people for loans who couldn't afford the terms.

Process Server Bagged For Filing Affidavit Asserting 'Sewer Service' On Dead Homeowner Facing Foreclosure?

In Broward County, Florida, the South Florida Sun Sentinel reports:
  • Some homeowners trying to defend themselves against foreclosure have said the lender didn’t properly serve them. And in one recent case, the homeowner wasn’t properly served because he was dead, Sunrise lawyer Andrew Dinnerstein said.
  • Dinnerstein, who’s representing the family of the deceased, said in court papers that a representative of process server ProVest served the homeowner on April 21, 2011. But the homeowner had passed away Aug. 4, 2010. Dinnerstein is not identifying the man to protect the family's privacy.
  • ProVest falsified a document, saying it properly served the defendant when it didn't, Dinnerstein said. "It's equivalent to perjury," he said. "The system is being abused to such an extent that people aren't even being served properly."
  • When a homeowner is deceased, the lender must ask the court to assign an administrator to the case and then serve foreclosure papers to the administrator, Dinnerstein said. He will seek sanctions against the lender and ProVest. A ProVest spokesman did not immediately respond to a request for comment Monday.
  • The company already is under investigation by the Florida Attorney General’s office for allegations of false returns of service under oath and forged signatures of process servers.

Source: Deceased homeowner served with foreclosure papers.

Monday, May 23, 2011

Ohio Appeals Court Reverses Another Lower Court Error In F'closure Action; Nixes Bankster Affidavit Based On Computer 'Screenshot' Of Account Details

Lexology reports:
  • In Deutsche Bank National Trust Company v. Hansen, 2011 WL 899625 (Ohio App. 5 Dist., 2011), borrowers defending a foreclosure action successfully challenged whether a bank's representative could testify in an affidavit concerning the amount due based on a screen shot when the bank's representative could not explain how such information was collected and compiled. Based on such facts, the borrowers argued the bank could not qualify the screen shot under the business record exception to the hearsay rule.
  • The borrowers argued that the trial court erred in admitting the screen shot as evidence of the amount due and sought to strike the affidavit of the bank representative, asserting that it was not based on her personal knowledge.
  • The bank representative testified at her deposition that she did not know who entered the information into the computer to generate the amount owed, nor did she know how such information was collected and compiled. The borrowers argued that while her affidavit states that it was based on personal knowledge, the bank representative's deposition testimony reflected that while she saw a screen shot of the balance due, she could not explain how that figure was arrived at by the bank.

***

  • The Court of Appeals for Fairfield County determined that the bank's representative did not have personal knowledge as to how the bank arrived at the balance due as viewed on the screen shot. The borrowers argued the screen shot is hearsay and did not meet the exception for a business record because there is no evidence of its origins or the circumstances surrounding its existence.

For more, see Court erred in admitting screen shot as evidence of amount due for purposes of granting summary judgment (Rule 803(6) of the ohio rules of evidence, business records hearsay exception, construed) (requires paid subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link for the story).

For the ruling, see Deutsche Bank Natl. Trust Co. v. Hansen, 2011-Ohio-1223 (Ohio App. 5th Dist. March 10, 2011).

Representing the homeowner were Benjamin D. Horne, Peggy P. Lee, and Luke Feeney of Southeastern Ohio Legal Services,(1) Lancaster, Ohio.

(1) Southeastern Ohio Legal Services is a non-profit law firm that, within its coverage area, gives legal help without attorney fees to people with low income and limited savings and assets, and also serves organizations of low-income people.

Option To Convert From Non-Judicial To Judicial Process Now Possible For Hawai'ian Homeowners Facing Foreclosure

From the Office of the State of Hawai'i Judiciary:

For more, see New Court Rules to Convert Non-Judicial Foreclosures to Judicial Foreclosures.

Defending A Foreclosure Defense Case Pro Bono? Don't Forget The Contingency Risk Factor When Sticking Losing Lender With Tab

A recent ruling by a Florida appeals court held that a homeowner successfully fending off a foreclosure action is entitled to clip the losing foreclosing entity for a recovery her attorney’s fees as a prevailing party under subsection 57.105(7), Florida Statutes (2009), after the lower court granted a motion to dismiss a mortgage foreclosure action and dismissed the case without prejudice. (Nudel v. Flagstar Bank, FSB, No. 4D10-3001 (Fla. App. 4th DCA, May 18, 2011).(1)

Although the ruling was silent on a sometimes-related point, a court case cited therein briefly addressed the issue regarding the application of a contingency fee multiplier (in those cases where winning counsel took the case on a pro bono or contingency fee basis) when calculating the amount of the homeowner's legal fee tab that the losing lender will ultimately be stuck with. This multiplier reflects "a contingency bonus to the basic fee award in cases that the [client] was unlikely to win, to give lawyers for non-paying clients an incentive to take risky as well as sure cases."(2)

In that case, the court approved the use of a contingency fee multiplier of 2.5 in determining the amount of the homeowner's legal fees that the improperly foreclosing lender was hammered with.
While this point only merited a brief mention in that ruling, I mention it here as a reminder to those private attorneys, non-profit law firms, and others who take, or are considering taking, foreclosure defense cases on a pro bono basis, that a mechanism exists in Florida law (by the way, Florida is not unique in this(3)) allowing winning counsel, not only to collect legal fees from the foreclosing lender in a successful foreclosure defense (generally based on the number of hours spent on the case multiplied by an hourly rate, subject to court approval), but to enhance the earned legal fee by a contingency fee multiplier, thereby potentially making it worth one's while taking on these types of cases, at least occasionally.(4)

While not a guarantee to make the winning attorney rich beyond his/her wildest dreams, I'm sure the extra cash will come in handy.(5)

For the court ruling, see Bank of New York v. Williams, 979 So.2d 347 (Fla. 1st DCA 2008).

Representing the homeowner in this case was James A. Kowalski, Jr., Jacksonville, Florida.

(1) See also, Fla. Appeals Court: Homeowner Entitled To Nail Bank For Prevailing Party Legal Fees After Lender Voluntarily Dismissed F'closure Case w/out Prejudice.

(2) The Yale Law Jounal: The Contingency Factor In Attorney Fee Awards.
(3) See, for example:
  • Nebraska: Eicher v. Mid America Financial Investment Corp., 270 Neb. 370, 702 N.W.2d 792 (2005), where the Nebraska Supreme Court, in slamming an equity stripping, sale leaseback peddler with a prevailing party attorneys fee award of $378,000 payable to the lawyers representing a dozen homeowners who had their home titles ripped off in a foreclosure rescue scam, applied a multiplier of 1.3 in calculating the award (the foreclosure rescue operator was found to have violated the Nebraska Consumer Protection Act).

  • Illinois: Gambino v. Boulevard Mortg. Corp., 398 Ill. App. 3d 21, 922 NE 2d 380 (Ill. App. 1st Dist., 6th Div. 2009) (Appeal denied by Gambino v. Blvd. Mortg. Corp. (W.W. Funding, L.L.C.), 2010 Ill. LEXIS 909 (Ill., May 26, 2010)), where an Illinois Court of Appeals approved use of a contingency multiplier of 3 to the lodestar attorney fee calculation to arrive at a total fee award of $595,574 in a case where an elderly property owner successfully sued in a quiet title / slander of title action in an effort to undo a real estate equity scam perpetrated by his nephew and a gang of others involving a purported sale leaseback (coupled with a repurchase option) of property and the recording of forged land documents. The appeals court noted that the trial judge found the use of a multiplier of 3 to be "imminently reasonable."

  • Washington State: Pelascini v. Pace-Knapp, No. 63758-4-I (Wash. Ct. App. Div. 1, Feb. 14, 2011) (Reported at Pelascini v. Pace-Knapp, 2011 Wash. App. LEXIS 422 (Wash. Ct. App., Feb. 14, 2011)), where a Washington State appeals panel awarded $134,425 in attorney fees including a lodestar multiplier of 15 percent to a homeowner who successfully sued after getting ripped off in a sale leaseback, equity stripping racket. The sale leaseback peddlers were found to have violated the state Consumer Protection Act.

  • New Jersey: Rendine v. Pantzer, 661 A.2d 1202 (N.J. 1995), where, in approving a one-third enhancement of the lodestar calculation (ie. a multiplier of 1.333), the New Jersey Supreme Court made this holding on the use of contingency fee enhancements, generally, in state court litigation in New Jersey (bold text is my emphasis):

    We hold that the trial court, after having carefully established the amount of the lodestar fee, should consider whether to increase that fee to reflect the risk of nonpayment in all cases in which the attorney's compensation entirely or substantially is contingent on a successful outcome. We understand and carefully have evaluated the various objections advanced to contingency enhancements, including the often-repeated admonition that "[t]hese statues were not designed as a form of economic relief to improve the financial lot of [attorneys]." Dague
    , supra, 505 U.S. at 563, 112 S.Ct. at 2642, 120 L.Ed.2d at 457 (quoting Delaware Valley I, supra, 478 U.S. at 565, 106 S.Ct. at 3098, 92 L.Ed.2d at 456).

    Both as a matter of economic reality and simple fairness, we have concluded that a counsel fee awarded under a fee-shifting statute cannot be "reasonable" unless the lodestar, calculated as if the attorney's compensation were guaranteed irrespective of result, is adjusted to reflect the actual risk that the attorney will not receive payment if the suit does not succeed. The reasoning underlying our holding often has been explained, and most effectively in simple terms. As the late Judge Charles Wyzanski once observed:

    No one expects a lawyer to give his services at bargain rates in a civil matter on behalf of a client who is not impecunious. No one expects a lawyer whose compensation is contingent upon his success to charge, when successful, as little as he would charge a client who in advance had agreed to pay for his services, regardless of success.

    [
    Cherner v. Transitron Elec. Corp.
    , 221 F. Supp. 55, 61 (D.Mass. 1963).]

    See also
    Blum
    , supra, 465 U.S. at 903, 104 S.Ct. at 1551, 79 L.Ed.2d at 905 ("Lawyers operating in the marketplace can be expected to charge a higher hourly rate when their compensation is contingent on success than when they will be promptly paid, irrespective of whether they win or lose.") (Brennan, J., concurring); Berger, supra, 126 U.Pa.L.Rev. at 324-25 ("The experience of the marketplace indicates that lawyers generally will not provide legal representation on a contingent basis unless they receive a premium for taking that risk."); 2 Derfner & Wolf, supra, ¶ 15.01[2][c], at 15-16 ("Most courts realize that where payment of a fee is contingent on success an attorney should receive a larger overall fee than where payment is guaranteed regardless of outcome....") (footnote omitted).

  • Texas: Dillard Department Stores, Inc. v. Gonzales, 72 S.W.3d 398 (Tex. App.-El Paso 2002), where, in doubling the attorney's usual rate (ie. a multiplier of 2), a Texas appeals court made the follwing observation on the use of fee enhancement multipliers in Texas litigation (bold text is my emphasis):

    Texas courts consistently allow the use of a multiplier based upon the contingent nature of a fee under Texas statutes allowing recovery of attorney's fees. Guity v. C.C.I. Enterprise Co.
    , 54 S.W.3d 526, 529 (Tex.App.-Houston [1st Dist.] 2001, no pet.); Borg-Warner Protective Services v. Flores, 955 S.W.2d 861, 870 (Tex.App.-Corpus Christi 1997, no pet.); Crouch v. Tenneco, 853 S.W.2d 643, 648 (Tex.App.-Waco 1993, writ denied).

    Moreover, we note that at least one state court has specifically rejected the U.S. Supreme Court's ban on a contingency multiplier in interpreting its own state anti-discrimination statute. See
    Rendine v. Pantzer
    , 276 N.J.Super. 398, 648 A.2d 223, 254 (1994) (holding that trial judge correctly considered contingent nature of fee in doubling the lodestar, rejecting Dague after extensive discussion), aff'd as modified, 141 N.J. 292, 661 A.2d 1202 (1995). Considering this, we cannot find the trial court acted without reference to guiding principles.
(4) The appeals court's brief mention approving the use of the multiplier follows:
(5) For those attorneys, law students, paralegals and other fans of the law who find something counterintuitive about an attorney for a prevailing party being able to score attorney fees from the losing litigant in pro bono cases (I suppose that refering to these cases as contingency fee, rather than pro bono, would be more apt), there's really nothing new about it, believe me. See, for example:

Recently-Elected Ohio AG Caves In Lawsuit With Mortgage Servicer; Settlement Requires Outfit To Do What It Should Have Already Been Doing Anyway

From the Office of the Ohio Attorney General:
  • Ohio Attorney General Mike DeWine and Ohio Department of Commerce Director David Goodman [] announced an assurance of voluntary compliance (AVC) with Carrington Mortgage Services, LLC to resolve a 2009 lawsuit and to provide relief to Ohio homeowners facing foreclosure.

***

  • The Attorney General, the Ohio Department of Commerce and Carrington Mortgage Services agreed to mortgage servicing standards that will apply to all Carrington Mortgage Services-serviced Ohio loans. The servicing standards include:

    1 - Borrowers who complete a loan modification application will be assigned a single point of contact with Carrington Mortgage Services.

    2 - Carrington Mortgage Services will implement a specific timeline for all loan modification requests.

    3 - Carrington Mortgage Services will temporarily suspend foreclosures when a borrower completes a loan modification application and will implement an internal review process for denied loan modifications.

For the Ohio AG press release, see Attorney General DeWine and Ohio Department of Commerce Announce Settlement with Carrington Mortgage Services.

Go here to view signed agreement.

Sunday, May 22, 2011

Foreclosure Judgment Vacated; AZ Appeals Court: Law Firm "Harmed The Integrity Of The Judicial Process & The Administration Of Justice"

A a 3-judge panel of the Arizona Court of Appeals recently vacated a judgment in a foreclosure action, pointing to the improper handiwork of Mesa, Arizona law firm Maxwell & Morgan in obtaining the judgment on behalf of its client, a homeowners' association, as one reason for its ruling.(1)

An excerpt:
  • ¶44 Here, the HOA's attorneys committed a fraud upon the court that justified setting aside the default judgment under Rule 60(c)(6).

    First, the lien foreclosure complaint stated that there were two deeds of trust on the property but did not disclose that one of them was a first deed of trust. The complaint referred to § 33-1807(A) regarding creation of an assessment lien, and § 33-1807(H) regarding attorneys' fees but did not refer to § 33-1807(B)(2) which plainly subordinates the assessment lien to a first deed of trust. The complaint falsely stated that the assessment lien had priority over all other liens.

    Second, the judgment of foreclosure that the HOA lawyers presented to Commissioner McCoy to enter did not reflect that there was a first deed of trust on the property, nor did it refer to § 33-1807(B)(2) but merely stated that the assessment lien had priority over all other liens and falsely stated that the default judgment foreclosed all other liens, including the first deed of trust.

    Third, although the complaint alleged that the CC&Rs gave the HOA a lien on the property which was perfected upon recordation, it did not refer to section 7.9 of the CC&Rs, which gave the first deed of trust priority over the assessment lien.

    Finally, to obtain the default judgment, the attorney representing the HOA at the default hearing avowed to the court that the allegations set forth in the complaint and the proffered judgment of foreclosure were true and correct.

    These material omissions and misrepresentations made in an ex parte proceeding prevented the commissioner from reaching an informed and impartial decision regarding entry of the default judgment, made it impossible for the court to properly perform its function of adjudicating the case in a fair and lawful manner, and harmed the integrity of the judicial process and the administration of justice.

For the entire ruling, see Cypress On Sunland Homeowners Association v. Orlandini, Nos. 1 CA-CV 10-0142, 1 CA-CV 10-0235 (Consolidated) (Az. App. Div.1 Dept. B, May 19, 2011).

(1) According to footnote 3 of the ruling, the record reflected that the lower court judge provided a copy of his ruling to the State Bar of Arizona for consideration of possible ethical violations. Pursuant to their ethical obligations, the 3-judge appellate panel similarly are providing the State Bar with a copy of this opinion.

"See No Evil, Hear No Evil" Broward County Chief Judge Knew Exactly What He Was Doing After All!

In Fort Lauderdale, Florida, Broward/Palm Beach New Times reports:
  • If you're a foreclosure defense lawyer doing work in Broward County, there are lots of reasons to think Chief Judge Victor Tobin doesn't side with homeowners. In his tenure at the top of the county's legal system, he has instituted rules that make it tougher on homeowners to fight foreclosures and resisted changes that would protect them from cases being rushed through the system.
  • The widespread belief that he's biased toward banks seemed supported this week when Tobin announced that he'll be leaving the bench for a job at the law offices of Marshall C. Watson, one of the largest foreclosure firms in the state. It's a move that angers foreclosure defense lawyers who say it appears as if Tobin established a system that will favor his new position. Worse, Tobin may have been negotiating his new job while creating rules that will benefit him later.(1)

***

  • Tobin's reign at the top of the judiciary included several "administrative orders" changing the way the county handles foreclosures, many of them favoring lawyers representing the banks. The most contested of them forbids foreclosure sales from being cancelled ten days before the auction is set to take place. That means homeowners who strike a last-minute deal with the bank to save their home have no choice but to watch their house go to the highest bidder. [Foreclosure defense attorney Mike] Wasylik says the rule solidified "the perception that Broward is a place where it's easier for banks to litigate."
  • Last summer, Tobin added to the pro-bank rules by instituting what's referred to as the "rocket docket." It requires foreclosure judges to move hundreds of cases a day with almost no discussion. Judges simply have no time to consider complex paperwork filed by foreclosure defense attorneys, says Fort Lauderdale lawyer Jason Weaver.

***

  • And just two weeks ago, Tobin instituted another rule hampering homeowners who want to fight foreclosures. Previously, attorneys representing homeowners could schedule online what's called a "special set" hearing. The hearing allows homeowners' attorneys to make complex legal arguments that can't be heard during the rocket docket. Tobin's new rule required that a hearing be set during the rocket docket in which attorneys must ask for a longer hearing.
  • Homeowners typically have little money to fight foreclosures, and the extra bureaucracy means they must pay their attorney to appear at a hearing simply to ask for another hearing, says lawyer Margery Golant. "In Broward, defendants have fewer rights and fewer due process options," Golant said.

***

  • Judges in Palm Beach and Miami-Dade counties have worked to protect homeowners facing bogus foreclosures, attorneys say. Miami-Dade Circuit Judge Jennifer Bailey, for instance, famously threw out 15,000 foreclosure cases for filing irregularities, served on a statewide taskforce on mortgage foreclosures, and was recognized with a community service award for her work protecting homeowners from bogus cases.

For more, see Before Joining Foreclosure Firm, Broward's Chief Judge Created a System That Favors Banks.

For earlier posts on Judge Victor Tobin, see:

(1) Tobin appears to be the latest addition to the line of judges of questionable conduct passing through the Broward County, Florida court system. See:

See also, Victims-Of-Law: Judging the Judges, a summary of stories on the antics of some of the members of the judiciary throughout the State of Florida.

Criticism Of Florida's F'closure Rocket Docket, Jurists Called Out Of Retirement To Rubber-Stamp Judgments Brings Heat To Pair Representing Homeowners

The ABA Journal reports:
  • Two Florida lawyers who criticized mass foreclosures found themselves under investigation by the state bar for their comments. The bar dropped one probe and was expected to drop the second after former ABA President Talbot "Sandy" D'Alemberte intervened on the lawyers’ behalf, the Daily Business Review reports. D’Alemberte is also a former president of Florida State University.
  • "We saw possible implications for free speech," D'Alemberte told the publication.
  • One of the complaints stemmed from a CNN interview with foreclosure defense lawyer Chip Parker of Jacksonville, the story says.(1) He told the network, "Foreclosure courts throughout the state of Florida have adopted a system of ramming foreclosure cases through the final judgments and sale—with very little regard to the rule of law." He also complained of "an attack upon the citizens of the state of Florida by retired judges."
  • The other foreclosure lawyer, Matthew Weidner of Tampa, was investigated for “exercising free speech in the courtroom," the story says.
  • So far the Florida Bar has received 58 complaints against foreclosure defense lawyers and closed 29 without charges. The bar has received 272 complaints against foreclosure plaintiff lawyers and closed 46 without charges.

Source: Criticism of the Foreclosure Process Brought Bar Probe of Two Fla. Lawyers.

(1) See Daily Business Review: Lawyers investigated for criticizing system:

  • Parker learned he was under scrutiny in a letter from Bar counsel Shanell Schuyler last Dec. 3. The letter, obtained by the Review, includes a link to Parker's CNN interview and advises him to explain his on-camera statements in writing by Dec. 20 in light of The Bar's Rule of Professional Conduct 4-8.2 prohibiting lawyers from making false or reckless comments about court personnel.
  • "I was shocked," Parker said. "I said, 'This is a joke, right?' I have a First Amendment right to free speech. I've said a lot worse and been more pointed in my speech in the past. CNN actually toned down my comments."
  • Parker responded to The Bar by quoting Oliver Wendell Holmes Jr., the late associate justice of the U.S. Supreme Court, saying his criticism was "consistent with the great traditions of American lawyers."
  • Parker said he hasn't been told who filed the complaint due to confidentiality rules, but he heard it was an offended judge.

Florida Rocket Dockets May Screech To A Halt As Statewide Court System Suffers From 'Empty Pockets'; Homeowners Rejoice, Blighted Communities Weep

The Palm Beach Post reports:
  • Florida's courts are out $6 million after state lawmakers chose not to extend a one-time stipend aimed at reducing a foreclosure backlog. The reduction means less manpower to process foreclosure cases and is already having repercussions in Palm Beach County where Circuit Judge John Hoy canceled a July foreclosure hearing citing fiscal constraints.
  • "Because of the lack of funding by the Florida Legislature, judges are unavailable to preside over foreclosure trials beginning July 1, 2011," Hoy wrote in a May 11 order. Court budgets operate on a fiscal year that runs July 1 through June 30.

***

  • While homeowners in foreclosure may rejoice at having more time to negotiate a loan modification, attempt a short sale or just go mortgage-free, communities struggling with abandoned and run down homes may have to wait longer for relief.

For the story, see Fewer judges will be hearing Florida foreclosures as state money runs out.

'Go Forward' Says Utah Federal Judge In Order Denying Bankster Attempt To Dismiss Homeowner Foreclosure Challenge As Lawyers Don't Know Who Owns Note

In Salt Lake City, Utah, The Salt Lake Tribune reports:
  • U.S. District Judge Dee Benson left open a legal window Wednesday for two South Jordan residents facing the loss of their house, one of the first cracks in federal court for Utahns trying to save homes from the wave of foreclosures swamping the state.
  • Benson declined to grant a motion to dismiss the lawsuit brought by Michael and Dana Geddes to halt the foreclosure on their home while they try to negotiate a loan modification. That means the couple and their attorney can proceed with gathering testimony and documents to try to prove their contention that the foreclosure process to which they’re being subjected does not comply with Utah and federal laws.

***

  • Federal judges in Utah have generally been hostile to lawsuits by homeowners who say that, in the process where mortgages were packaged and resold to groups of investors, traditional property recording practices and laws were bypassed and that, as a result, foreclosures were proceeding illegally.
  • Benson conducted a 90-minute hearing in the Geddes lawsuit in which he intently grilled both sides over various legal questions. But what seemed to sway him was the admission by attorneys for the foreclosing entities that they were not sure who actually owned the couple’s mortgage note.

For more, see Judge sides with homeowners in foreclosure suit (Federal court: Judge rules owners can seek evidence to halt loss of S. Jordan home).

Saturday, May 21, 2011

Foreclosed, Short-Selling Arizona Homeowners Face Deficiency Judgments When Property Size Exceeds 2.5 Acres

In Cave Creek, Arizona, KTVK-TV Channel 3 reports:
  • Kimberly and her husband decided to short sale their home and after securing a buyer, Kimberly's lender, M & I Bank, sent a letter saying the short sale and purchase amount were approved. "They just recently, in the last couple of weeks, they approved the short sale and we were like "Yeah!"
  • But inside the approval letter was a little paragraph from M & I Bank stating they had the right to sue Kimberly and her husband for the rest of the money reportedly being forgiven.
  • In Kimberly's case, her $500,000 mortgage was approved to be short sold for around $250,000 but M & I claims it would sue Kimberly for the remaining $250,000 short fall.
  • Dean Wegner has been in the real estate industry for years and is a frequent contributor to 3 On Your Side. He says Kimberly's problem lies in a little-known clause in the [Arizona] state law that says if property is more than 2.5 acres then the lender can and will sue homeowners for any balance left over. Kimberly's property is five acres.

***

  • Remember, it’s not just for homeowners who are short selling. If you own more than 2.5 acres and are losing the home to foreclosure, financial institutions will probably sue you for the balance after the auction.

For the story, see Short selling: You better not own more than 2.5 acres.

NYC Pols, Housing Officials, Advocates Express Ire As Local Bank Continues Dumping Delinquent Debt Secured By Violation-Riddled Apartment Bldgs

In The Bronx, New York, Crain's New York Business reports:
  • In the latest in a series of note sales on distressed properties by New York Community Bank, it has unloaded the mortgage on three foreclosed Bronx buildings riddled with code violations, and once again drawn the ire of city officials, politicians and housing advocates.
  • In the last year, the bank has sold the mortgages on three dozen buildings “that had significant distress on them,” said RuthAnne Visnauskas, deputy commissioner for development at the city's Department of Housing Preservation and Development.
  • There's obviously nothing wrong with a bank selling a mortgage, but to have 36 buildings with significant code violations have mortgages sold…there should be more involvement on the side of bank to make sure violations are getting corrected and that they don't let it slide just to get it off their books,” Ms. Visnauskas said. “It doesn't feel like the right responsibility nexus.”

For more, see Bronx debt sale triggers storm of protest (Sale of notes on three foreclosed Bronx buildings riddled with code violations blindsides city officials who had been working to find buyer able to fund repairs).

Sacramento DA: Local Man Pocketed Illegal Upfront Fees In Running Loan Modification Racket

From the Office of the Sacramento County, California District Attorney:
  • District Attorney Jan Scully announced [] the arrest of 56 year-old Rodney Andrews of Elk Grove. Andrews operated Andrews Investment Group, which offered loan modification services. It is alleged that in conducting loan modification services, Andrews collected illegal upfront fees.
  • In 2009, the California Legislature passed a law prohibiting this type of conduct to prevent individuals from preying on vulnerable borrowers facing foreclosure or unaffordable mortgage payments.
  • Anyone with further information regarding Rodney Andrews and Andrews Investment Group is asked to contact the Sacramento County District Attorney’s Office Real Estate Fraud Unit at (916) 874-9045.

Go here for the Sacramento County DA press release - Rodney Andrews.

Jury Slaps S. California Woman With Financial Elder Abuse, Felony Grand Theft, UPL Convictions In $30K Foreclosure Rescue Ripoff Of Senior Couple

In Santa Barbara, California, the Santa Barbara Independent reports:
  • A Santa Barbara jury [] found Denise D'Sant Angelo guilty of embezzling $30,000 from an elderly couple whose home was about to go into foreclosure. The bespectacled fraudster, convicted last year of lining her pockets with money meant to save housing for a group of nuns, convinced the husband and wife she was skilled in the ways of financial and legal maneuvering and could save their home if they paid her.
  • She didn't, and Deputy District Attorney Brian Cota proved in court that D'Sant Angelo used the money to pay for her rent and other personal expenses.(1)

***

  • Judge Frank Ochoa granted Cota's request that D'Sant Angelo's bond be forfeited and she be immediately taken into custody. He argued she's a threat to the public and showed herself willing to continue scamming people while out on bail. Ochoa agreed, and D'Sant Angelo was lead out of the courtroom in handcuffs shortly after the jury was dismissed.
  • Cota said immediately after the verdicts were read it was telling that the jury, after deliberating for only three hours, reached a unanimous decision after listening to D'Sant Angelo tell her side of the story on the stand for four days. During closing remarks, Cota called D'Sant Angelo a “textbook case of a con artist, plain and simple,” and that she “gained [the victims'] confidence in order to steal their money.”

For the story, see Nun Scammer Found Guilty of Financial Elder Abuse (Jury Convicts Denise D'Sant Angelo on 12 Felony Counts).

(1) According to the story, the jury convicted D'Sant Angelo on:

  • six counts of felony financial elder abuse,
  • six counts of felony grand theft,
  • one count of misdemeanor unlawful practice of law,
  • the special allegation that she committed the crimes – spread out over the course of a year-and-a-half – while she was out on bail during her prior embezzlement case.

If she receives the maximum sentence this time, D'Sant Angelo faces 11 years in prison.

Texas Man Bagged For Allegedly Pocketing Cash, Passing Himself Off As Lawyer Providing Foreclosure Rescue Services

In Williamson County, Texas, KXAN-TV Channel 36 reports:
  • A Williamson County man is arrested after allegedly fraudulently posing as an attorney. The Williamson County Sheriffs office was contacted after Ray Echavez filed several documents with the Williamson County Clerk’s Office. Clerks in the office did not believe that Echavez was a lawyer.
  • Deputies contacted the man named in the document. According to the affidavit, the victim said that he met Echavez through a realtor and agreed to pay $2,500 for help in stopping the foreclosure of his Cedar Park home. The victim said he received legal advice and even appeared in court with Echavez, where a judge refused to grant an application for a restraining order against the foreclosure company.
  • The victim also said there was paperwork where his signature was forged. Investigators also believe that Echavez at one point called deputies attempting to impersonate the victim. Echavez is charged with falsely holding oneself out as a lawyer, a third degree felony.

Source: Man posing as attorney arrested (Man allegedly paid $2500 for legal advice).

Foreclosure Fraud Complaints Targeting Attorneys Flood Florida Bar

The South Florida Sun Sentinel reports:
  • Complaints about foreclosure fraud are pouring into The Florida Bar, with four times more cases pending today than six months ago, as property owners trying to save their homes increasingly take on their banks and their lenders' lawyers.
  • The Bar, which regulates lawyer conduct in Florida and most states, has opened 202 foreclosure fraud grievance investigations since November, with 226 now pending. Such complaints target lenders' attorneys, some of whose practices process thousands of foreclosures a month.
  • These practices, nicknamed "foreclosure mills," have faced accusations by homeowners and state regulators of allegedly submitting false or misleading paperwork, and having employees "robo-sign" piles of documents without verifying them.

***

  • Yet among the 46 foreclosure fraud cases closed so far, none have resulted in any sanctions against attorneys — including David J. Stern, whose Plantation operation once employed more than 1,000 people. Stern, who is the target of a civil investigation by the Florida attorney general, also has a Bar complaint against him that was opened last year.

***

  • Bob Jarvis, a law professor at Nova Southeastern University, said the lack of Bar disciplinary action — such as disbarments and suspensions regarding foreclosure fraud — will "lend credence to those who say the Bar is incapable and someone else should regulate lawyers."

For more, see Foreclosure fraud complaints flood Florida Bar but no lawyer reprimands so far.

Chicago-Area Lawmaker Suspects House Speaker's Procedural Move To Kibosh Automatic Homestead Property Tax Exemption Renewal For Cook County Seniors

In Chicago, Illinois, the Chicago Tribune reports:
  • A measure to save senior citizens in Cook County the hassle of reapplying each year for a property tax break is languishing at the Capitol, and its fate may be sealed because House Speaker Michael Madigan opposes it.
  • Senior homeowners used to get the special tax exemption automatically renewed, but the General Assembly ended that practice last year as part of a broader tax relief package.
  • This year, some lawmakers tried to go back to the old way, allowing nearly 300,000 homeowners 65 and older to get the benefit without filling out a form every year. The idea passed the Senate 54-0.
  • But when the bill made it to the House, it got shunted into a three-member subcommittee. There, two of Madigan's top lieutenants — downstate Democratic Reps. Frank Mautino, of Spring Valley, and John Bradley, of Marion — voted against it. That was a partisan political maneuver aimed at smothering the legislation, according to sponsoring Rep. Sidney Mathias, R-Buffalo Grove. "I suppose that way only two people have to say they voted 'no.' And they were, if I recall, not from Cook County. So, yes, that's why they have all revenue bills in subcommittee rather than have the full committee to vote on it," Mathias said.

***

  • New county Assessor Joe Berrios, who fears up to 90,000 seniors are on the verge of losing tax breaks because they haven't reapplied this year, said he will try to persuade Madigan, a longtime political ally, to change his mind. Berrios, who doubles as county Democratic chairman, said he plans this week to lobby Madigan, the longtime Illinois Democratic Party chairman who usually can pass or kill a bill at will.

For more, see Push to make senior tax break automatic stalls in House (Speaker Michael Madigan opposes benefit for Cook County seniors).

Ex-Foreclosure Mill King Says Servicers Stiffed Him Out Of $34M+

Housing Wire reports:
  • Foreclosure king no more, David J. Stern is fighting back against former clients whose business once elevated him to one of the richest and most well-known default services lawyers in the country.
  • The fight is taking place largely in state and federal courtrooms via 25 lawsuits where Stern alleges that the biggest names in the mortgage industry owe him more than $34 million in unpaid invoices. The fight includes at least two major mediation cases, as well.

For more, see David J. Stern launches legal battle against nation's biggest mortgage servicers.

See also, Broward/Palm Beach New Times: David J. Stern Employs Gigantic Balls and Asks for Money in Possibly Shady Cases his Firm Handled.

Friday, May 20, 2011

Sacramento-Area Foreclosure Rescue Operator Gets 32 Months For Role In Fractional Interest Deed Transfer Bankruptcy Scam

In Sacramento, California, The Sacramento Bee reports:
  • Charles C. Jamison assured potential customers he was a foreclosure stopper, someone who could, for a fee, save their homes from trustee sales. It worked for a while, until federal fraud stoppers stepped in. The 30-year-old Citrus Heights resident pleaded guilty in February and was sentenced Tuesday to two years and eight months in prison.

This is the scheme to which he admitted:

  1. Distressed homeowners in the Sacramento region received fliers in which Jamison, using an alias, promised he could, through a program he called "Stop Now," halt an impending sale.

  2. The charge: $1,000 a month, and he claimed that included mortgage payments.

  3. Between July 2007 and May 2009, he persuaded desperate people to take desperate measures. Via notarized and recorded grant deeds, they transferred partial interests in their homes to fictitious entities created and controlled by Jamison.

  4. Under the names of those entities, he then filed petitions in the U.S. Bankruptcy Court in Sacramento, resulting in automatic stays of foreclosure proceedings.

  5. The lenders were delayed in foreclosing on properties in default, while being forced to pay lawyers to contest the sham bankruptcies.

  6. According to a written plea bargain, "a reasonable estimate of the loss to the financial institutions cannot … be determined." Prosecutors and Jamison agreed his gain from the rip-off was between $120,000 and $200,000.

Source: Man gets prison term in foreclosure rip-off.

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

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

San Bernardino DA: Foreclosure Rescue Operator Took Illegal Upfront Fees, Duped Homeowners Into Signing Over Deeds, POAs In Sale Leaseback Ripoffs

From the Office of the San Bernardino County, California District Attorney:
  • On Tuesday, May 10, 2011, Investigators from the San Bernardino County District Attorney’s Office Real Estate Fraud Prosecution Unit arrested Yunuen Medina, 26, of Corona, California near her residence.
  • Medina worked for Home Recovery Trust, which operated an illegal loan modification business. The scheme involved taking upfront fees from the victims, having them sign Specific Power of Attorneys, in some cases Quitclaim Deeds, placing their properties into the Michael Martinez Trustee, and having the victims then make monthly payments, payable to "Home Recovery Trust."
  • On Wednesday, April 20, 2011, the founder and owner, Luis Miguel Macias was arrested and currently remains in jail. Since his arrest, numerous victims have come forward from Riverside, Los Angeles, Ventura Counties, and from as far north as Reno, Nevada. This is an ongoing criminal investigation and more arrests are expected.
  • Macias’ victims are usually Spanish speaking and unaware of the California Loan Modification Law, under California Civil Code, § 2944.7, which went into effect October 11, 2009. Medina has a no bail INS hold.

For the San Bernardino County DA press release, see Corona Woman Arrested for Real Estate Fraud.

Rockland County Clerk Offers Free Scam Alert In Move To Minimize Use Of Forged Land Documents To Steal Houses, Equity Out From Under Local Homeowners

In Rockland County, New York, The Journal News reports:
  • A new program can help alert Rockland County residents about potential scams that target their home and property. Called PropertyCheck, the software program is available through the County Clerk's Office. It works by alerting residents via email whenever a property transaction is recorded in their name, County Clerk Paul Piperato said.
  • "It's about trying to protect our residents," Piperato said. "A person may be unaware that this is going on. This helps them find out."
  • Rockland County District Attorney Thomas Zugibe said the new program could have helped prevent recent incidents when forged deeds and mortgages were filed in an unsuspecting property owner's name.
  • "All too often, property owners are unaware or surprised when a lien is filed on their property, or other illegitimate documents are filed in their name," Zugibe said. "Had this tool been in place over the past few years ... that never would have happened."
  • Rockland County Executive Assistant District Attorney Gary Lee Heavener said there are dozens of types of property scams. A lot of scams can be prevented if a property owner quickly finds out about a transaction in his name, which can also allow authorities to get involved sooner, Heavener said.
  • In some cases, a scammer will apply for and receive a mortgage and even pay the mortgage for several years to prevent discovery of the crime, Heavener said. Years can go by until the unsuspecting property owner receives a lien or foreclosure notice. "No one knows about it until someone knocks on the door," Heavener said.
  • But it can take months or years to straighten out all the legal paperwork in such cases as the rightful property owners work to clear their name and credit with banks and other lenders, even though they did nothing wrong, Heavener said.(1)

For more, see Rockland offers free scam-alert service for property owners.

(1) Typically, it's up to the victimized homeowner to file a civil lawsuit known as a quiet title action, in which he/she has the burden of proving that the rogue land documents are forgeries, in order to remove any 'clouds', or claims (either legitimate or purported) on the title and otherwise clear up the mess and reclaim his/her home title.

Fla. Appeals Court: Homeowner Entitled To Nail Bank For Prevailing Party Legal Fees After Lender Voluntarily Dismissed F'closure Case w/out Prejudice

In a relatively short and sweet ruling reversing another lower court screw-up in a foreclosure case, a Florida appeals court held that a defendant is entitled to recover her attorney’s fees as a prevailing party under subsection 57.105(7), Florida Statutes (2009), after the court granted a motion to dismiss a mortgage foreclosure action and dismissed the case without prejudice.

While, on its face, there doesn't seem to be anything particularly ground-breaking about this ruling in that it appears to merely reaffirm and reinforce long-standing law in Florida,(1) it nevertheless serves as a valuable reminder that:
  • Homeowners should not hesitate to hammer lenders with a claim for reimbursement of their legal fees after being forced to defend themselves in a foreclosure action where he/she successfully fends off a foreclosure action - particularly if the foreclosing plaintiff lacked standing to file the lawsuit in the first place,
  • Foreclosure defense attorneys who are not already seeking reimbursements from banks for their legal fees on behalf of their clients after successfully scoring a dismissal of a foreclosure action (either with or without prejudice) had better start doing so, if for no other reason, to minimize their malpractice exposure for failing to assert all possible claims their clients may have against the rogue lender/loan servicer, and
  • Non-profit law firms which take these cases on a pro bono basis should also submit a claim for legal fees (if they are not already doing so), applying a reasonable hourly billing rate to the amount of time spent defending these cases (hopefully, this could provide a modest source of revenue to help keep their operations going, in light of the budget cuts being made by the Federal and state governments and others who provide sources of funding for their operations). Further, they should also seek approval of the use of a contingency fee risk multiplier in calculating their fees (see Bank of New York v. Williams, 979 So.2d 347 (Fla. 1st DCA 2008), approving a contingency fee multiplier of 2.5 in determining the tab for homeowner's legal fees that the improperly foreclosing lender was belted with).
Representing the homeowner was Enrique Nieves, of Ice Legal, P.A., Royal Palm Beach, FL.

For the ruling, see Nudel v. Flagstar Bank, FSB, No. 4D10-3001 (Fla. App. 4th DCA, May 18, 2011).(2)
(1) See Landry v. Countrywide Home Loans, Inc., 731 So. 2d 137 (Fla. 1st DCA 1999) (bold text is my emphasis):
  • The general rule is that "when a plaintiff voluntarily dismisses an action, the defendant is the prevailing party." See Thornber v. City of Ft. Walton Beach, 568 So. 2d 914, 919 (Fla. 1990). Further, "it is well established that attorney's fees are properly awarded after a voluntary dismissal where such award is provided for by statute or agreement of the parties." See Century Construction Corp. v. Koss, 559 So. 2d 611, 612 (Fla. 1st DCA 1990), review denied, 574 So. 2d 141 (Fla. 1990). See also Boca Airport, Inc. v. Roll-N-Roaster of Boca, Inc., 690 So. 2d 640, 641 (Fla. 4th DCA 1997), review dism'd, 698 So. 2d 543 (Fla. 1997)("for purposes of a prevailing party attorney's fees statute, a voluntary dismissal by the claimant makes the opposing party a 'prevailing party' as to the issue of entitlement to fees").
In addition, in Florida, where an agreement allows for an attorney fee award to one of the contracting parties (a one-sided attorney fee provision), state statute mandates an award of prevailing party attorney's fees to the other party under the reciprocity provisions of section 57.105(7), Florida Statutes; Landry, supra. (Mortgages almost always contain a provision that allow a lender to tack on its legal fees to the amount owed by the borrower when bringing litigation to enforce its rights. Accordingly, by reason of section 57.105(7), the homeowner likewise would be entitled to a recovery of his/her attorney's fees from the losing lender).

Further, foreclosure mill law firms and other attorneys bringing foreclosure actions on behalf of lenders that get summarily kiboshed due to a lack of standing could be ordered to ante up part of the homeowner's legal fees out of their own pockets by reason of section 57.105(1), Florida Statutes:
  • Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee, including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and the losing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:

    (a) Was not supported by the material facts necessary to establish the claim or defense; or
    (b) Would not be supported by the application of then-existing law to those material facts.
This tool could possibly act as a deterrent to foreclosure mills and other attorneys bringing cases when they lack the proper paperwork at the time they file their legal actions.

(2) From the court ruling (bold text is my emphasis):
  • Additionally, Nudel was entitled to recover her attorney's fees. The mortgage between Nudel and Flagstar entitled Flagstar to reasonable attorney's fees for enforcement. By operation of subsection 57.105(7), the contractual provision also allows attorney's fees to Nudel if she is the prevailing party. See § 57.105(7) ("If a contract contains a provision allowing attorney's fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney's fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract.").

    Nudel is the prevailing party within the meaning of subsection 57.105(7). This court has held that a plaintiff's voluntary dismissal makes a defendant a "prevailing party" in the dismissed action even where the plaintiff refiles the case and prevails. In Alhambra Homeowners Ass'n v. Asad, 943 So.2d 316, 317-18 (Fla. 4th DCA 2006), an association sued some of its homeowners, but voluntarily dismissed its lawsuit without prejudice before a summary judgment hearing. The association subsequently re-filed the suit after unsuccessful mediation talks. Id. at 318. In the other, dismissed action, the homeowners moved for prevailing party attorney's fees. Id. The circuit court found the homeowners to be the prevailing parties and awarded them fees. Id.

    Following Thornber v. City of Fort Walton Beach, 568 So.2d 914 (Fla. 1990), this court affirmed. Id. at 318-20. We held that the homeowners were "entitled to recover attorney's fees under a statute awarding fees to the prevailing party in litigation after the plaintiff took a voluntary dismissal without prejudice." Id. at 317. This was so "even though the plaintiff subsequently refiled the identical lawsuit and ultimately prevailed." Id.

    For the purpose of determining a "prevailing party" under section 57.105(7), we see no reason to distinguish between a voluntary dismissal without prejudice and a court's involuntary dismissal without prejudice. This same conclusion was reached in Bank of New York v. Williams, 979 So.2d 347 (Fla. 1st DCA 2008), where the first district affirmed an award of prevailing party attorney's fees on facts similar to those in this case. There, the bank sued the defendant to foreclose a mortgage. Id. at 347. The defendant moved to dismiss because the bank failed to show that it owned the mortgage and promissory note and, thus, it lacked standing to sue. Id. The court dismissed a complaint and amended complaint without prejudice; "[w]hen the Bank declined to file a second amended complaint, the trial court dismissed the amended complaint with prejudice." Id. The bank did not appeal this order, but instead instituted a new foreclosure action. Id. In the first action, the court awarded the defendant prevailing party attorney's fees and costs. Id.

    On appeal, the bank argued that, "because the same factual and legal issues raised in the dismissed action [were] also the subject of the new litigation, [the defendant] [could] [not] be the prevailing party." Id. at 347-48. Relying on a voluntary dismissal without prejudice case, State ex rel. Marsh v. Doran, 958 So.2d 1082 (Fla. 1st DCA 2007), the first district rejected the bank's argument. Id. at 348.

    "The refiling of the same suit after the voluntary dismissal does not alter the appellees' right to recover prevailing party attorney's fees incurred in defense of the first suit." Id. (quoting Doran, 958 So. 2d at 1082 (citing, inter alia, Alhambra Homeowners Ass'n, 943 So. 2d at 319)). Accordingly, the court held that the defendant was the prevailing party and affirmed her award. Id. We agree with Williams and conclude that Nudel was a prevailing party entitled to recover attorney's fees.
(It should be noted that, in Bank of New York v. Williams, 979 So.2d 347 (Fla. 1st DCA 2008), noted above, the court also approved the use of a contingency fee multiplier of 2.5 in determining the amount of the homeowner's legal fees that the improperly foreclosing lender was hammered with.)