"Strategic Defaulters" - Savvy Homeowners Choosing To Cut Their Losses On Underwater Homes

The Arizona Republic reports:

• Many of the people who have been walking away from mortgages over the past few years don't fit the standard profile. Cash-strapped? Unemployed? Financially unsophisticated? Low-income?



• None of those descriptions seem to apply to most "strategic defaulters" - homeowners who have chosen to cut their losses on properties that dropped in value, just as they might sell an old car with mounting repair bills or dump stock in a company that just reported a loss.



• "Many are financially savvy people with higher credit scores and higher income," said Tracy Bremmer, director of decision analytics at credit-bureau Experian, which has studied the issue to help lenders identify people who might be default candidates. "They often own multiple properties, with larger original loan amounts."



• Strategic defaulters, in other words, seem to know what they're doing. In fact, they're often angling to buy the foreclosed home across the street at a bargain price before abandoning their own property, Bremmer said. "They'll open a new mortgage before defaulting on the existing loan," she said.

***

• Defaulting on a loan - that is, missing payments - will hurt your credit score. But many strategic defaulters apparently don't worry about this or consider it a lesser evil. [...] Still, strategic defaulters tend to keep current on other obligations such as credit cards and auto loans. In fact, this tendency to keep making other payments is how Experian sorts out strategic defaulters from more distressed borrowers. "They're skipping out on their mortgages but paying everything else," she said.(1)

For the story, see 'Strategic defaulters' tend to be affluent, savvy homeowners.

(1) See Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis for more on the phenomenon of strategic defaulting:

• This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences.



• Moreover, these emotional constraints are actively cultivated by the government and other social control agents in order to encourage homeowners to follow social and moral norms related to the honoring of financial obligations - and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision.



• Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility.

Minnesota Appeals Court Slams Hammer On Foreclosure Redemption Scheme Involving Use Of Sham Note & Mortgage By Property Owner To Squeeze Co-Owner

The Minnesota Court of Appeals recently refused to allow a 'foreclosure redemption' scheme whereby one co-owner of real estate attempted to screw his co-owner out of the equity in the subject property that had gone through foreclosure proceedings through the use of:

• a sham mortgage, and
• an "improper side agreement" with the 'creditor' holding the sham mortgage to redeem the subject foreclosed real estate

with the intended effect of extinguishing his unwitting co-owner's interest in the property.

The point here is that, had the cunning co-owner redeemed the property directly, he would have (under the law) also been treated as having redeemed on behalf of his unwitting co-owner as his co-tenant. The adroit-thinking co-owner thought he could avoid his obligation to his co-owner by instead surreptiously redeeming through a third/straw party (the 'creditor' holding the sham mortgage).

The 'creditor's attempt to assert that there was no improper side agreement with the bad actor, claiming she was an innocent unwitting party, an "unwilling accomplice," fell on deaf ears as the Minnesota appeals court pointed out that "even if a creditor is an "innocent" third party, relief may be available as long as that creditor is participating in a sham scheme with a devious cotenant and an improper result is obtained."(1)

The case makes for interesting reading, but probably only if you are in the business of undoing real estate equity ripoffs in Minnesota, and possibly in other states where the owner of a partial interest in real estate tries to screw his/her co-owners out of their interests through the use of a redemption scam used after a foreclosure sale due to an unpaid mortgage loan, municipal real estate taxes, or mechanics' and judgment liens.(2)

For the ruling, see Blat v. Takita, No. A10-2217 (Minn. App. July 5, 2011) (unpublished).

(1) In support of this proposition, the appeals court cites Hall v. Hall, 173 Minn. 128, 131, 216 N.W. 798, 799 (1927), a case where the Minnesota Supreme Court concluded that a foreclosure redemption scheme among remaindermen was improper because it eliminated the ownership interest of the life tenant, not because of the state of mind of the redemptioner who was given the sham note and mortgage in order to redeem the property. (Editor's Note: The fact that the Hall case dates back to 1927 is a clear indicator that this particular type of racket is nothing new - it's been around a pretty long time. It just doesn't seem to get litgated all that much - maybe because the victims of this scam don't know what hit them, or how to undo them.)

(2) See generally, Nelson, Grant S., The Foreclosure Purchase by the Equity of Redemption Holder or Other Junior Interests: When Should Principles of Fairness and Morality Trump Normal Priority Rules?, 72 Mo. L. Rev. 1259 (2007) (contains heavily-cited discussion on foreclosure redemption schemes involving junior lien 'squeeze-outs' by the owner of the property in foreclosure).

Fla. Lawyer Gets 210 Months For Running Ponzi Scheme Preying On Elderly, Servicemembers w/ Investments In Phony Mortgages, Predatory & Usurious Loans

From the Office of the U.S. Attorney (Miami, Florida):

• [A] federal judge sentenced attorney and C.P.A. Lorn Leitman, 61, of Miami, Florida, to 210 months’ incarceration for his role in a 10-year Ponzi scheme. In an unusual decision, the court departed upward from a sentencing guideline range of 121-151 months, commenting, “this case is exceptional.”



• A federal grand jury charged the defendant with violating the mail fraud statute for defrauding elderly victims and retirees, among others, through the operation of a Ponzi scheme which sought investments in either phantom residential mortgages or a separate venture burdening U.S. military personnel with predatory and usurious loans.

***

• Several victims appeared in court to address the impact of the fraud. As one victim explained, losses from the Ponzi scheme forced the end of his retirement and his return to work. He commented, “my dreams are dead.”



• The court explained that the decision to sentence above the guidelines resulted from the defendant’s conduct preying upon his closest friends, fellow servicemen, the elderly and retirees, and noted that the defendant breached codes of conduct applicable to members of the Florida Bar and certified public accountants. In addition to the enhanced sentence, the court ordered the defendant to pay $3,308,435.03 in restitution to victims.

For the U.S. Attorney press release, see Ponzi Scheme Defendant Receives 17 1/2 Year Sentence.

San Bernardino Investigators Bust Six In Alleged Swindle That Stole Title To Vacant Land Out From Under Owners & Peddled It To Unwitting Buyers

From the Office of the San Bernardino, California District Attorney:

• A $2.1 million dollar fugitive arrest warrant has been issued by the San Bernardino County Superior Court for Salvador Anzo Sr. Between November 2007 and January 2009 Anzo Sr., 44, along with additional suspects Salvador Anzo Jr., 22, Marlen Medina, 26, Jennifer Costa, 37, Yvette Costa, 36, and Milton Figueroa, 23, allegedly conspired to sell vacant land they did not own in the Hesperia area of San Bernardino County. Anzo Sr. recruited the others to assist by using their personal bank accounts to receive the proceeds of the fraudulent land sales.(1)



• According to investigators from the San Bernardino County District Attorney’s Real Estate Fraud Unit, the suspects advertised the sale of vacant land in the "Pennysaver" which is how they met the unsuspecting buyers.



• The actual owners of the land were alerted to the sale of their property when their property tax payments were returned to them. In San Bernardino County, the suspects are alleged to have sold 22 separate pieces of property with the total loss to the victims estimated at approximately $980,000.00.

***

• "A lot of these victims who were taken advantage of were elders," said Senior Investigator Tina Greco of the San Bernardino County District Attorney’s Office. "I just hope that we are able to find him and take him into custody and then locate some of the stolen funds."

Source: Investigators Seek Public’s Help Locating Fugitive in Land Fraud Scheme.

(1) According to the press release:

• Medina was located and arrested in Utah, and was subsequently extradited to the West Valley Detention and is being held there with a bail of $940,924.00 for the San Bernardino County charges, and INS hold and other outstanding warrants from Orange County;



• Anzo Jr. was arrested in San Diego County and transferred to San Bernardino County where he is being held at the Adelanto Detention Center with a bail of $197,266.00;



• Jennifer Costa, Yvette Costa and Figueroa pleaded guilty in plea agreements with the court.

Investigators are seeking the public’s assistance in finding Salvador Anzo Sr. If anyone has information of his whereabouts they are asked to contact Sr. Investigator Tina Greco at 909-891-3348.

Robosigning Allegations Begin Hounding Prominent Michigan Foreclosure Mill Sweatshop

The Michigan Messenger reports:

• A Massachusetts county clerk says a forensic examination of documents filed by Troy-based Orlans Associates, one of the largest foreclosure firms in Michigan, shows that the company has engaged in illegal robo-signing.



• Robo-signing is when a bank, mortgage company or foreclosure company has multiple people sign documents with the name of the person who is supposed to sign those documents and then has them notarized as having been signed by that person. In the case of Orlans, the signer was supposed to be attorney Marshall Isaacs, but he has now been implicated in two states for having had others sign his name and notarize that he did so.

***

• Michigan Messenger has been carefully following the allegations against Isaacs since early May, following revelations [Ingham County Register of Deeds Curtis Hertel Jr.] had found robo-signed documents involving DocX, a Georgia company profiled on 60 Minutes. Hertel’s discovery led to investigations by both the Michigan Attorney General’s office and the FBI.

For more, see Michigan foreclosure firm implicated in robo-signing (Thousands of foreclosures may be invalidated).

For a follow-up story, see Orlans robo-signing allegations drawn concerns from lawmakers, activists (Most say independent investigation is required):

• Allegations that an attorney working for Troy-based Orlans Associates foreclosure giant is allegedly involved in robo-signing drew immediate concerns from lawmakers and activists.

Phony Land Document Epidemic Infects Charlotte-Area Courthouses; Recording Official: "My Records Are Literally Full Of This Stuff!"

In Weddington, North Carolina, The Associated Press reports:

• Officials at Charlotte-area courthouses say they are seeing epidemic of frivolous paperwork filed by people claiming the right to seize foreclosed property.



• The bogus deeds are being filed by people who claim to belong to the Moorish Science Temple of America, an obscure religious sect founded in the 1920s with beliefs loosely connected to Islam.



• In one incident, a real estate agent and a couple viewing a foreclosed $700,000 home in the Union County town of Weddington were confronted on June 1 by two men who produced a deed claiming the home in the name of the Moorish Science Temple, The Mecklenburg Times reported.(1)

***

• J. David Granberry, Mecklenburg County's register of deeds, said at least 200 deeds and other documents filed in his office in the name of the Moorish Science Temple are "outright fraud."



• Granberry said he's seen forgeries and notary fraud in the deeds claiming ownership of vacant, foreclosed properties. Many times, the documents appear official and legitimate, he said. "My records are literally full of this stuff," he said. "It's like an epidemic, as far as I can tell."



• In Union County, about 25 deeds have been filed this year in the name of the Moorish Science Temple, Register of Deeds Crystal Crump said.



• Granberry and other officials said as more homes have fallen into foreclosure and been vacated, the more opportunity there's been for others to move in. Real estate agents in Virginia and police in California warn of similar incidents there.



• "Today, all you have to do is go on to the Internet to find sites that purport to tell you how to beat your mortgage," said Tom Miller, legal counsel for the North Carolina Real Estate Commission.



• Registers of deeds say they are powerless in the face of fake deeds. As long as the deeds meet certain requirements, their offices must accept them, Crump said. "We don't check to make sure the title is good," Crump said. "That's why people have an attorney. Anybody can do this, and there is nothing we can do to stop it."

For more, see NC officials say fake property claims flooding in on real estate caught in foreclosure crisis.

(1) According to the story, the grand sheik of the Moorish Science Temple in Charlotte said his group is not affiliated with any effort to seize vacant properties. Christopher Bennett-Bey said he has heard of similar real estate scams around the country, which misrepresent a faith he has followed for more than two decades. He said he does not believe people using the group's name are members.

Judge 'Splits' Decision In HAMP Suit; Homeowners To Continue Pursuing Claims, BofA To Continue Foreclosures; Combines 26 Actions Filed In 19 States

The Huffington Post reports:

• Bank of America Corp lost its bid to dismiss a lawsuit accusing it of reneging on promises to help borrowers modify their mortgage loans under a much-criticized federal program. The bank, however, claimed a partial victory, citing District Judge Rya Zobel's decision to dismiss claims by borrowers who sought to participate in the two-year-old Home Affordable Modification Program, or HAMP.



• Zobel nonetheless ruled that homeowners who contend they did not get modifications for which they qualified under HAMP, to avoid foreclosures, could pursue claims against Bank of America.



• The complaint "meticulously" detailed each of these plaintiffs' compliance with loan modification conditions, but said the bank "willfully failed" to modify the loans, either in bad faith or for its own economic benefit, Zobel wrote. Such allegations are "sufficient" to let the lawsuit go forward, she added.



• Zobel rejected claims by borrowers who claimed they were "intended beneficiaries" of HAMP but never entered the program, saying they had no contractual right to relief. She also rejected a request to block Bank of America while the lawsuit is pending from foreclosing on 37 borrowers said to be in "imminent danger" of losing their homes.

***

• The lawsuit combines 26 cases that had been brought in 19 states, and sought class-action status for various plaintiffs.



• "The Court's conclusions will likely help hundreds of thousands of families to convert temporary mortgage modification plans into permanently lower monthly payments. Tens of thousands of foreclosures are likely to be prevented," said Gary Klein, a lawyer for the plaintiffs, adding that he expects the case to get class certification quickly.

For more, see Bank Of America Loses Bid To Dimiss Mortgage Modification Lawsuit.

Pair Of Alleged Long Island Loan Modification Rackets Get The 'Freeze' As Judges Limit Firms' Activities, Order Hold On Assets

In Nassau County, New York, Long Island Business News reports:

• The assets of two Long Island mortgage modification companies will remain frozen after separate rulings by Nassau County Supreme Court justices.



• On Tuesday, Justice Thomas Adams extended a temporary restraining order that limits the activities and freezes the assets of a group of companies in West Hempstead operating under the names Express Home Solutions and Home Preserve Law Group.



• Last week, Justice John Galasso extended a similar order, which enjoins a group of individuals operating a business called Homesafe America in Levittown, also known as United Legal Solutions.

***

• The cases were brought by the Lawyers’ Committee for Civil Rights Under Law(1) and its pro bono counsel Manhattan-based Davis Polk & Wardwell on behalf of more than 30 homeowners who allegedly lost money to the two companies. Plaintiffs are seeking a combined $3 million in punitive damages, as well as court orders permanently preventing their owners and employees from engaging in mortgage-related activities.

For more, see Judges freeze assets of LI mortgage mod firms.

(1) The Lawyers’ Committee for Civil Rights Under Law is a nonpartisan, nonprofit organization formed to involve the private bar in providing legal services to address racial discrimination. It implements its mission and objectives by marshaling the pro bono resources of the bar for litigation, public policy advocacy, and other forms of service by lawyers to the cause of civil rights. For more on this case, see:

• Full press release,
• Lawsuit: Osmanzai v. Save My Home,
• Lawsuit: Mook v. Homesafe,
• A detailed “anatomy” of the Homesafe scam, and
• key documents related to the case.

Defective Assignment, Failure To Produce Note Endorsement Sanctionable Under Nevada Mediation Rules; Halts F'closures; Another Lower Court Reversal

From a recent ruling by the Nevada Supreme Court:

• In this appeal, we consider issues arising out of Nevada's Foreclosure Mediation Program.
  
  First, we must determine whether a homeowner who is not the original mortgagor is a proper party to participate in the program. We conclude that the Foreclosure Mediation statute, NRS 107.086, and the Foreclosure Mediation Rules (FMRs) dictate that a homeowner, even if he or she is not the named mortgagor, is a proper party entitled to request mediation following a notice of default.
  
  Second, we must determine if a party is considered to have complied with the applicable statute and FMRs governing document production in a mediation proceeding by producing what the district court referred to as "essential documents." In this, we address whether substantial compliance satisfies the mandates of the statute and FMRs.
  
  Because we conclude that strict compliance is compelled by NRS 107.086(4) and (5), that the assignment offered was defective, and that no endorsement of the mortgage note was provided according to Article 3 of the Uniform Commercial Code, we conclude that Wells Fargo failed to produce the documents required under NRS 107.086(4).(1)
  
  Additionally, we recently concluded in Pasillas v. HSBC Bank USA, 127 Nev. ___, ___. P.3d ___ (Adv. Op. No. 39, July 7, 2011), that a party's failure to produce the enumerated documents required by NRS 107.086 and the FMRs prohibits the district court from directing the program administrator to certify the mediation so that the foreclosure process can proceed. Here, we again conclude that, due to the statute's and the FMRs' mandatory language regarding document production, a party is considered to have fully complied with the statute and rules only upon production of all documents required.
  
  Failure to do so is a sanctionable offense, and the district court is prohibited from allowing the foreclosure process to proceed.
  
  Therefore, we must reverse and remand this case to the district court for it to determine appropriate sanctions against respondents.

For the rest of the ruling, see Leyva v. National Default Servicing Corp., 127 Nev. Adv. Op. No. 40 (Nev. July 7, 2011).

For a discussion of this and a companion case issued by the Nevada Supreme Court on the same day, see Credit Slips: Nevada Supreme Court: You Gotta Prove Chain of Title.

(1) It may be that the foreclosing lender here may attempt to cure its problem by 'producing' an endorsement on a separate sheet of paper that magically appears at the 11th hour in this litigation in order to move forward and proceed to foreclosure. Such a separate sheet of paper, also known as an allonge, may be fatal to the foreclosing lender's status as a holder in due course when not attached to the actual note itself. Consequently, additional defenses to the foreclosure action may become available to the homeowner when the foreclosing lender lacks this special status.

For what may be, for some, helpful discussions on the importance of this separate sheet of paper being affixed to the note itself, see:

• Adams v. Madison Realty & Development, Inc., 853 F.2d 163 (3d Cir. 1988) (involves a purchaser of a group of promissory notes where the allonges were not appropriately attached to the instruments),
• New York Law Journal: Getting Attached: When do allonges meet the requirements of the New York UCC?
• Max Gardner: STAPLES OR GLUE? The Validity of Allonges and Its Impact on Standing to Foreclose,
• All American Finance Co. v. Pugh Shows, Inc., 30 Ohio St.3d 130, 507 N.E.2d 1134, 1136-37 n. 3 (1987) (collecting cases showing disagreement among courts on how firmly indorsements must be affixed - see footnote 3 of the ruling).

Nevada Supreme Court: Violation Of State Mediation Rules A Sanctionable Offense, Slams Brakes On Foreclosure; Lower Court Reversals Continue

In a recent ruling, the Nevada Supreme Court "consider[ed] issues arising out of Nevada's Foreclosure Mediation Program and address whether a lender commits sanctionable offenses when it does not produce documents and does not have someone present at the mediation with the authority to modify the loan, as set forth in the applicable statute, NRS 107.086, and the Foreclosure Mediation Rules (FMRs)."

The court sets forth its general legal analysis in the following nutshell:

• Because NRS 107.086 and the FMRs expressly require that certain documents be produced during foreclosure mediation and that someone with authority to modify the loan must be present or accessible during the mediation, we conclude that a party's failure to comply with these requirements is an offense subject to sanctions by the district court.
  
  In such an event, the district court shall not direct the program administrator to certify the mediation to allow the foreclosure process to proceed until the parties have fully complied with the statute and rules governing foreclosure mediation.
  
  Here, because respondents HSBC Bank USA, Power Default Services, and American Home Mortgage Servicing, Inc. (AHMSI), did not bring the required documents to the mediation and did not have access to someone authorized to modify the loan during the mediation, we conclude that the district court erred in denying appellants Emiliano and Yvette Pasillas's petition for judicial review. Therefore, we reverse the district court's order and remand this matter to the district court so that the court may determine sanctions.

For the entire ruling, see Pasillas v. HSBC Bank USA, 127 Nev. Adv. Op. No. 39 (Nev. July 7, 2011).

For a discussion of this and a companion case issued by the Nevada Supreme Court on the same day, see Credit Slips: Nevada Supreme Court: You Gotta Prove Chain of Title.

Wells To Cough Up $125M To Settle Charges It Knowingly Peddled Crappy Mortgage-Backed Securities To Public Pension Plans

Bloomberg reports:

• Wells Fargo & Co. agreed to pay $125 million to settle accusations by investors that the bank misled them about the risks of mortgage-backed securities it sold. The plaintiffs in the consolidated group case, or class action, include the General Retirement System of Detroit, New Orleans Employees’ Retirement System and other public pensions, according to the proposed settlement filed yesterday in federal court in San Jose, California.



• Wells Fargo, the largest U.S. home lender, and several investment banks that underwrote the securities were sued in 2009 over alleged violations of securities laws in connection with sales of $36 billion in mortgage pass-through certificates in 2005 and 2006. The securities were backed by pools of mortgage loans that Wells Fargo or its affiliates originated or purchased.



• In 28 offerings, the bank misrepresented the quality of the loans, failing to disclose that it hadn’t followed appropriate underwriting standards and loans were made based on inflated appraisals, investors said in a complaint. The bank and the underwriters deny wrongdoing, according to the proposed accord, which is subject to a judge’s approval.

***

• The bank still faces claims in state courts in California, Illinois and Indiana filed by individual investors and federal home loan banks seeking to rescind billions of dollars of mortgage-backed securities purchases.

For the story, see Wells Fargo to Pay $125 Million to Settle Mortgage-Backed Securities Case.

Proposed Class Actions Against SCRA-Violating Banksters Continue; Citigroup Latest To Be Tagged By Servicemember Demanding Damages, Return Of Home

In New York City, Bloomberg reports:

• A Citigroup Inc. unit was sued by an Iraq War veteran who claims the lender illegally foreclosed on his home while he was on active military duty. Jorge Rodriguez, a U.S. Army sergeant, claimed in a complaint filed [last week] in federal court in Manhattan that he was in training in preparation for deployment to Iraq in 2006 when CitiMortgage filed a foreclosure suit against his home in Del Valle, Texas.



• CitiMortgage lawyers falsely said in an affidavit that Rodriguez wasn’t on active service at the time, depriving him of protection under the Servicemembers Civil Relief Act, or SCRA, according to the complaint. Rodriguez is seeking to have the suit certified as a class action against CitiMortgage on behalf of other service members whose homes were foreclosed.



• “This was not an isolated incident,” Rodriguez said in the complaint. Beginning in December 2003, “CitiMortgage initiated thousands of foreclosure proceedings across the United States without adequate safeguards to ensure that service members on active duty were not targeted by CitiMortgage’s foreclosures.”



• The suit seeks unspecified damages and an order restoring to service members possession of properties foreclosed in violation of the SCRA. Sean Kevelighan, a Citigroup spokesman, said the bank is looking into the matter.



• SCRA protections for active-duty members of the military include a 6 percent cap on pre-service loans, limits on court proceedings and a ban on foreclosures without court approval.



• Bank of America Corp. and Morgan Stanley agreed in May to pay $22.4 million to resolve U.S. allegations that they improperly foreclosed on active-duty soldiers. JPMorgan Chase & Co. earlier agreed to a $56 million settlement of claims that it illegally overcharged military personnel on home loans.

Source: CitiMortgage Sued by Iraq War Veteran Over Home Foreclosure.

The case is Rodriguez v. CitiMortgage Inc., 11-cv-04718, U.S. District Court, Southern District of New York (Manhattan).

Bay State Bankruptcy Court: State Law Allows Mortgage Holder To Foreclose Despite Lack Of Ownership Interest In Underlying Note

Housing Wire reports:

• Mortgage Electronic Registration Systems, the real estate registry at the center of foreclosure litigation, says a U.S. Bankruptcy Court in Massachusetts validated a MERS title assignment this week despite the promissory note moving through a succession of owners.



• The case was decided by Bankruptcy Judge Melvin Hoffman who said "Massachusetts law allows a mortgagee with no interest in the underlying obligation to foreclose, the trustee's argument that MERS did not have a sufficient interest in the debtor's property to foreclose the mortgage fails."



• The judge added, "the fact the debtors' promissory note passed like a hot potato down a line of owners, including some in bankruptcy and liquidation, with no accompanying assignment of the note holders beneficial interest in the mortgage, changes nothing."

For more, see Massachusetts bankruptcy judge, other courts validate MERS assignments.

For the court ruling, see In re Marron, Case No. 10-45395-MSH (Bankr. D. Mass. Central Div. June 29, 2011).

Another Faulty Affidavit Sinks One More Foreclosure Sale; Add One More Lower Court Ruling To List Of Those Negated On Appeal

In another case highlighting the use faulty affidavits by banksters in foreclosure actions, the Maine Supreme Court recently vacated a foreclosure judgment, finding the affidavit was inadequate to establish the admissibility of the purported business records being introduced into evidence in connection with a motion for summary judgment.(1)

For the ruling, see Beneficial Maine Inc. v. Carter, 2011 ME 77 (Me. July 7, 2011).

(1) From the ruling ("Richmond" is the individual who signed the faulty affidavit) (bold text is my emphasis):

• [¶ 15] In the matter before us, Richmond was not an employee of Beneficial itself but of Beneficial's "servicer," HSBC. Although Richmond's affidavit states that the records were kept by Beneficial in the ordinary course of business from information supplied at or near the time of the recorded events by a person with knowledge of those events, it does not provide any basis for Richmond's personal knowledge of Beneficial's practices.
  
  Richmond does not purport to be the custodian of the records, nor does she explain the source of her understanding of Beneficial's "daily operation" or show the "firsthand nature of [her] knowledge." Murphy, 2011 ME 59, ¶ 10, 19 A.3d at ___ (quotation marks omitted). Her affidavit indicates only that she has personal knowledge of "this account and of the records of this account" and that she has "access to the records." The affidavit provides no elaboration on the nature of HSBC's role as Beneficial's "servicer," or of HSBC's responsibilities and activities with regard to Beneficial's accounts.
  
  [¶ 16] Although it is possible that an employee of HSBC—perhaps even Richmond herself—may have personal knowledge of both entities' practices for creating, maintaining, and transmitting the records, the affidavit does not report the basis for Richmond's knowledge of (1) Beneficial's practices for creating, maintaining, and transmitting the records at issue; (2) HSBC's practices in obtaining and maintaining the bank's records for HSBC's own use; or (3) HSBC's integration of the bank's records into HSBC's own records. See Murphy, 2011 ME 59, ¶ 10, 19 A.3d at ___; Barr, 2010 ME 124, ¶¶ 18-19, 9 A.3d at 820-21; Soley, 481 A.2d at 1127; M.R. Civ. P. 56(e). Richmond did not, therefore, establish that she was a "custodian or other qualified witness" who could provide trustworthy and reliable information about the regularity of the creation, transmission, and retention of the records offered. M.R. Evid. 803(6). Because Richmond's affidavit could not establish the foundation for the records' admissibility, the court could not properly consider those records on summary judgment. See M.R. Civ. P. 56(e).
  
  [¶ 17] Beneficial presented no other evidence regarding the mortgage, the default, or the other elements set forth in Chase Home Finance LLC v. Higgins, 2009 ME 136, ¶ 11, 985 A.2d 508, 510-11, to support its motion for summary judgment. Because of the deficiencies in the affidavit, Beneficial has failed to demonstrate on summary judgment that the Carters were obligated by, and defaulted on, the mortgage note, and that Beneficial is entitled to judgment as a matter of law. See M.R. Civ. P. 56(c), (e); Murphy, 2011 ME 59, ¶ 17, 19 A.3d at ___. Accordingly, we vacate the summary judgment entered in favor of Beneficial.

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

Editor's Note: The court's mention of 'Murphy' in the above excerpt is a reference to HSBC Mortgage Services, Inc. v. Murphy, 2011 ME 59 (Me. 2011), a recent case where the Supreme Judicial Court of Maine, in vacating a foreclosure judgment, slammed HSBC in determining that the affidavits they submitted were inherently untrustworthy and, therefore, did not establish the foundation for admission of the attached documents as business records necessary to properly support a grant of summary judgment.

Insurance Underwriting Giants Slam Brakes On Issuing Title Policies On Foreclosed D.C. Homes; Say New Local Law Makes Risk Too Crappy To Take

In Washington, D.C., The Washington Post reports:

• A District effort to help distressed homeowners threatens to bring a halt to the sale of foreclosed properties in the city, depress home prices and cast new uncertainty on the local housing market.



• The District implemented regulations in May requiring lenders to enter into mediation with a homeowner before foreclosing on a home. But now, two large title insurers, which have about 80 percent of the D.C. market share, have stopped insuring the sale of foreclosed properties, saying the law makes it too risky.



• Without title insurance, obtaining a home loan is extremely difficult. The policy protects mortgage lenders from challenges to the title of a property. The problems could move beyond the foreclosure market to all home sales if lenders decide that any District home that could potentially fall into delinquency would face a similar problem down the road, according to industry officials and local lawyers. If these foreclosed properties linger on the market, unable to be sold, they could bring down neighborhood prices, they said.

***

• At issue is one sentence in the council’s legislation: “Each foreclosure sale in violation of this act shall be void.” [...] First American Title Insurance and Fidelity National Title Group argue that the new regulations make it more likely that someone could challenge the validity of a foreclosure sale, forcing them to pay or defend claims in court. First American and Fidelity have 50  percent and 28 percent of the D.C. market respectively, according to data from American Land Title Association.

***

• First American declined to comment but said in a letter to its agents that the regulations make it “virtually impossible” to write insurance. A borrower would have to sign a long affidavit certifying that the foreclosure had been carried out properly, according to the letter obtained by The Washington Post.

For the story, see District effort to help distressed homeowners could halt foreclosure sales.

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

Escrow Agency Operator Gets 24 Months For Ripping Off $5.3M+ In Title Insurance Premiums, Closing Costs From Thousands Of Real Estate Closings

From the Office of the U.S. Attorney (Minneapolis, Minnesota):

• [A] 42-year-old Golden Valley man was sentenced for stealing money in a mortgage fraud scheme. United States District Court Judge Ann D. Montgomery sentenced Trent Christopher Jonas to 24 months in prison on one count of wire fraud and one count of money laundering. In addition, Jonas was ordered to pay more than $5.3 million in restitution. Jonas was charged on November 22, 2010, and pleaded guilty on December 30, 2010.



• In his plea agreement, Jonas admitted that from June of 2005 through August of 2007, he misappropriated more than $5.3 million that was intended to pay for title insurance premiums, title search costs and recording fees in connection with thousands of residential real estate mortgage financing transactions.

***

• Jonas owned and operated Title Source, Ltd. and Zen Title, two title insurance agencies. Both agencies acted as an insurance agent for Ticor Title Insurance Co., a title insurance underwriting company located in Florida, which is a subsidiary of Fidelity National Financial and United General Title Insurance Co.

***

• Ticor Title has now issued title insurance policies for all homeowners whose premiums went unpaid because of defendant's fraud. Ticor Title has also paid all of the recording fees that went unpaid because of defendant's fraud, which total more approximately $2.3 million. In addition, Ticor has paid more than $1.8 million in expenses and losses on claims related to Title Source’s and Zen Title’s failure to issue policies and record documents.

For the U.S. Attorney press release, see Golden Valley man sentenced for stealing mortgage title insurance proceeds.

(1) Those who have been screwed out of money due to the fraudulent, deceptive or dishonest practices, or conversion of trust funds by a Minnesota closing agent, or licensed real estate broker or salesperson can apply to the Minnesota Department of Commerce's Real Estate Education, Research and Recovery Fund to try and recover some or all of their losses.

According to their website:

• The improper action that was committed must be an activity that required a license,


• Applicants may be awarded any amount from $0 to $150,000, depending on a number of factors. According to the Fund's website, there is no guarantee that a claim will be paid. Whether an applicant will receive payment from the fund depends on the specific facts of the case.

See also, State Recovery Fund To Cough Up $116K+ To Compensate Elderly Victim Of Bogus Sale Leaseback Equity Stripping Scam Involving Licensed Real Estate Agent for a story on how this fund ponied up what was reported as the largest compensation payout from the Minnesota real estate recovery fund in 13 years to an 87-year old woman who was victimized by a licensed real estate agent in a real estate equity ripoff that stripped an elderly womans's title to her home of fifty years.

Florida Appeals Court Upholds Temporary Injunction Ordering Removal Of Videotaped Robosigner Depositions

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• A foreclosure defense attorney who uncovered what he called "astounding" revelations of bank misbehavior does not have a right to post videos of bank employees on the Internet, an appeals court has ruled.



• The videos are anything but a YouTube sensation, but they touched off a legal battle over First Amendment rights in December when a Sarasota County judge ordered them taken off the Internet video sharing site.



• The ACLU of Florida appealed on behalf of Sarasota lawyer Christopher Forrest and his law firm, saying Circuit Judge Rick De Furia's temporary injunction violated Forrest's free-speech rights.

***

• But the 2nd DCA ruling last week stated that De Furia made the right call because depositions and other pre-trial information are not court records that are generally open to the public and because they frequently contain matters that are irrelevant, defamatory or prejudicial.

For more, see Bank employee videos to be kept off YouTube.

For the court ruling, see Forrest v. Citi Residential Lending, Inc., 2D10-5667 (Fla. App. 2d DCA June 29, 2011).

Miami Feds Pinch Four In Alleged Refinance Ripoff; Reverse Mtg Proceeds Illegally Diverted, Existing Liens Remain Unpaid; Some Seniors Face F'closure

In Miami, Florida, The Miami Herald reports:

• Three South Florida mortgage professionals conspired with a Pittsburgh title agent to defraud senior citizens through a reverse mortgage scam, according to allegations unveiled Wednesday by U.S. Attorney Wifredo Ferrer.



• Through 1st Continental Mortgage Company, which has offices in Fort Lauderdale and Boca Raton, the group processed 14 reverse mortgages across the country and did not use the mortgage money to pay off the existing loans, the U.S. attorney charges.



• Louis Gendason, John Incadela, Marcos Echevarria of 1st Continental, and Kimberly Mackey, a title agent in Pittsburgh, obtained $2.5 million in reverse mortgage loans from Genworth Financial between 2009 and 2010.



• They are charged with pocketing nearly $1 million in illegal loan proceeds, and each faces one count of conspiracy to commit wire fraud. The reverse mortgage loans are insured by the Federal Housing Administration.



• “There are multiple levels of fraud in this one case,” said Ferrer. “Because of this fraud, some of these [victims] are having to fight off foreclosure.”

***

• “These are seniors who are on Medicare, limited incomes, desperate for help,” said Tony West, U.S. assistant attorney general for the Civil Division. “Money that should’ve gone to help seniors with modest incomes instead went to line the pockets of fraudsters.”

For more, see Reverse mortgage scam targeted seniors (A South Florida company engaged in a $2.5 million reverse mortgage fraud scheme, according to charges revealed Wednesday by the U.S. Attorney’s Office).

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

The South Florida Sun Sentinel adds:

• In a separate action, the Federal Trade Commission filed a lawsuit in March that named Incandela and Lower My Debts.com, a loan modification operation based at 1st Continental's Boca address, in a crackdown on foreclosure rescue and mortgage modification businesses. The FTC said the company falsely promised consumers they would get their mortgage payments reduced or their money would be refunded.(1)

For more, see South Florida seniors targeted in mortgage fraud, officials say.

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

From the Office of the U.S. Attorney (Miami, Florida):

• Press Release:Three Loan Officers And A Title Agent Charged In A $2.5 Million Reverse Mortgage And Loan Modification Scheme,


• Criminal Information: U.S. v. Gendason, et al.

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

(1) See FTC Charges Mortgage Relief Operation with Deceiving Distressed Homeowners.

Woman Who Witnessed Phony Docs Cops Plea, Gets Probation In Exchange For Deal To 'Sing' Against Co-Defendants In Alleged Home Hijacking Operation

In DeKalb County, Georgia, WSB-TV Channel 2 reports:

• A woman pleaded guilty Wednesday morning to participating in a housing scheme involving 11 other people. Channel 2’s Carol Sbarge attended an arraignment for a dozen racketeering suspects at the DeKalb County Courthouse on Wednesday morning. It was the latest stage in the case against a group of people accused of using fraudulent deeds to take over metro Atlanta homes in foreclosure.



• The suspects, or self-proclaimed sovereign citizens, were the subject of a Channel 2 investigation last year. Sovereign citizens claim they are immune from Georgia law and prosecution. Prosecutors said their beliefs don’t supersede the law. “They can believe in the spaghetti monster if they want to,” prosecutor John Melvin said in court.



• The suspects face a maximum 20-year sentence for each count against them, but Wylissa Lawrence was sentenced to five years of probation and community service because of her guilty plea. The prosecution said she witnessed documents used to falsely get homes.



• As part of her deal, she must testify against the others.(1) Melvin said the indictment against the group involves 18 properties.

Source: Woman Pleads Guilty In Housing Scheme.

(1) Another defendant in a multi-defendant prosecution wins the "race to the prosecutor's office," as she is the first to "belly up" to investigators and spill her guts to cut the best deal for herself.

BofA Tagged With Utah Suit For Allegedly "Conducting Thousands Of Unauthorized Foreclosures," Class Action Status Sought

In Salt Lake City, Utah, The Salt Lake Tribune reports:

• A Salt Lake City law firm has filed a proposed class-action suit against Bank of America and its subsidiary ReconTrust "for conducting thousands of unauthorized foreclosures in Utah."



• Mumford West & Snow filed the suit in 3rd District Court last week. The action comes in the wake of the Utah Legislature creating civil penalties against what state authorities consider illegal foreclosures. It also comes more than one month after the Utah Attorney General’s Office pledged that it would file suit against the banking giant if ReconTrust continued to file foreclosure proceedings in violation of state law.

***

• Lead counsel for the law firm, Marcus R. Mumford, said Wednesday he intends to seek a statewide restraining order and a preliminary injunction "prohibiting the named defendants from conducting any additional foreclosure sales within the state."

***

• Mumford said that Bank of America and ReconTrust "have demonstrated a long-standing pattern of illegal activity in taking thousands of homes from Utah homeowners in unauthorized foreclosures." He estimates there are tens of thousands homeowners who could be eligible to sign on to the lawsuit if it receives class-action status from the court.

For more, see Utah law firm sues to halt Bank of America foreclosures.

Minnesota Prosecutors Invoke Seldom-Used Law To Charge Office Building Owner In Foreclosure With Removing/Damaging Property Subject To Mortgage

In Anoka County, Minnesota, the Star Tribune reports:

• With his building under foreclosure, Donald Mordal decided to take some items that he says belonged to him.



• Now, he's facing criminal prosecution, only the second person charged in Anoka County in the past 25 years under a 1963 state law. The law makes it a felony to remove or damage property subject to a mortgage with intent to hurt the property's value. It is so rarely used that officials in the Hennepin and Ramsey county attorney's offices couldn't recall prosecuting anybody under it.

***

• Mordal, 44, was charged in March with "defeating security on realty." Prosecutors said he wasn't charged with a more common felony theft crime, which requires intent to take someone else's property and deprive them of it. Technically, he owned the property he is alleged to have taken illegally.



• Mordal, who has nothing more than a speeding ticket on his record, was stunned when he learned of the charge. Potential jail time is now piled atop the foreclosures of his business and house, along with unemployment and a divorce.

***

• According to the charges against Mordal, the bank contacted law enforcement in May 2010 when it learned he had removed items and allegedly damaged property just before the sheriff's foreclosure sale.(1) He says he had removed the items months earlier.



• Aleesha Kveton-Webb, vice president of special assets for Village Bank in Blaine, said the bank's four branches in Anoka County work hard to improve local communities and that they have to protect customer's assets. The bank could have "just left this at foreclosure" and not pursued criminal charges, but "we want to make a point that this shouldn't happen to other banks."

For the story, see Nowthen businessman faces rare charge in foreclosure (Under a seldom-used law, he is accused of illegally removing items from his office building).

(1) See State v. Zacher, 490 NW 2d 149 (Minn. App. 1992) for an example of one property owner who successfully scored a reversal of a conviction of this charge where the property was taken after the sheriff's foreclosure sale had taken place (owner removed the fixtures one day before the end of the statutory six-month redemption period).

Judge 'Green-Lights' Trial For Ex-Cop, Wife Accused Of Trashing Their Now-Foreclosed Home

In French Valley, California, The Press Enterprise reports:

• A judge ruled Friday that there is enough evidence for a former San Diego police officer and his wife to stand trial on felony charges in connection with the trashing of their foreclosed French Valley home.



• Robert Conrad Acosta, 39, and Monique Evette Acosta, 35 -- who has worked as a real estate agent -- are each charged with one count of carrying away or disposing of items from a mortgaged or foreclosed property. They have pleaded not guilty.



• The property suffered more than $100,000 in damage, including missing doors, light fixtures and air-conditioning units, stones smashed off the facade, dye poured on carpets, spray-painted graffiti, wiring pulled out of walls and cut, a gutted kitchen and chopped-down landscaping tossed in the backyard swimming pool, court records show.



• If convicted, the Acostas face up to four years in prison. "There is a public interest in seeing that this conduct is not encouraged," Judge Mark Mandio said at the conclusion of a preliminary hearing Friday at the Southwest Justice Center in French Valley.

For more, see Ex-officer, wife to stand trial in foreclosure trashing.

Judge Appoints Receiver To Take Control Over Mobile Home Park After Stiffed Lender Levels Rent Skimming Charges Against Landlord In Foreclosure

In Bloomington, Illinois, The Pantagraph reports:

• A court has appointed a Michigan company to oversee Southgate Estates while a foreclosure case is pending against the south Bloomington mobile home park.



• The foreclosure, filed last month in McLean County court, alleges that the property’s owner, Southgate Estates LLC, has failed to make payments on a $6.9 million loan since June 2010.



• The foreclosure alleges Southgate “misappropriated rents, security deposits and other income from the property” after it defaulted. Judge Paul G. Lawrence on June 10 granted the plaintiff, Wells Fargo Bank, its request that a receiver be appointed to oversee the property, [...] which has about 364 pads for mobile homes. Newbury Management Services LLC, based in Farmington Hills, Mich., was given control while the case is pending.



• “The property is in jeopardy and plaintiff will suffer severe and irreparable injury unless immediate steps are taken to secure the property,” Wells Fargo’s attorney wrote in the foreclosure filing.



• Lawrence’s ruling says residents who own or lease mobile homes on Southgate’s property should continue to make regular monthly lot rent payments to Newbury.

For the story, see Judge names receiver for B-N mobile home park.

FDNY: Candle Triggered Deadly Bronx Blaze In Illegally-Subdivided Firetrap In Foreclosure; Power To Premises Previously Shut Off

In New York City, The Wall Street Journal reports:

• Fire marshals have determined a candle started a fast-moving fire that killed a 12-year-old boy and his parents in an apartment building city officials say was illegally subdivided.



• The troubled three-story Bronx building was in foreclosure, and the utility Consolidated Edison had shut off the electricity because it had no record of tenants at that address. But the victims and others were living there in illegally subdivided apartments where access to fire escapes was blocked, city officials said after the April 25 blaze.



• The death of Christian Garcia and his parents, Christina Garcia, 43, and Juan Manuel Lopez, 36, prompted a city crackdown on illegal subdivisions, which are common in many neighborhoods where tenants struggle to make ends meet.

***

• The building's ownership status and who should have been responsible for it were the subjects of debate. The owner listed on city records said he lost it during a foreclosure proceeding, and it changed hands through several financial institutions. City officials have said the foreclosure had not been finalized.



• A state law that took effect last year makes lenders responsible for properties in foreclosure, but the dispute over the Bronx building is likely to end up in the courts. Because of the uncertainty, the Department of Buildings issued several violations on the day of the fire to the listed owner, Domingo Cedano, and the Bank of New York/Mellon, Buildings spokesman Tony Sclafani said.(1)

For more, see FDNY: Candle caused deadly Bronx fire. subdivided
In a related story, see New York Daily News: Bronx firetrap owner fined $25K for violations after devastating blaze killed 12-year-old, parents (Four violations against the bank were thrown out by Administrative Law Judge Malcolm Spector because it was not the titleholder at the time of the fire).
(1) For earlier posts on this story, see:

• Foot-Dragging Lender Says Bronx Firetrap Tragedy Not Its Problem; Foreclosure Sale Never Took Place Despite Obtaining Court Judgment,



• Tragedy Involving Deadly Bronx Firetrap That Lingered For Years In Foreclosure Spurs Crackdown On Illegally Converted Rooming Houses Throughout City,



• Early Morning Bronx Fire In Illegally Converted Rooming House Leaves 3 Dead, 8 Injured; Firetrap Lingered In Foreclosure Since 2008.

Recently-Pinched Burglary Suspect Invokes Foreclosure 'Defense'

In Nevada City, California, The Union reports:

• A Nevada City man allegedly caught in the act of burglarizing a home [] had an explanation for Nevada County Sheriff's deputies. He believed the house was a vacant foreclosure, said Sheriff Keith Royal.

***

• The man, identified as Van Cade Marsh, 69, was ordered out of the residence at gunpoint, Royal said. He complied and was arrested without incident. [...] Marsh was booked into county jail on suspicion of burglary of an inhabited dwelling and was being held in lieu of $25,000 bail.

For the story, see NC man arrested after allegedly breaking into home.

Closing Attorney Cops Plea To $900K Escrow Funds Ripoff; Pocketed Loot Intended To Pay Off Sellers', Refinancing Homeowners' Existing Mortgage Loans

From the Office of the U.S. Attorney (Pella, Iowa):

• [F]ormer attorney, Franklin R.York, of Pella, Iowa pled guilty in federal court in Des Moines to one count of wire fraud, announced United States Attorney Nicholas A. Klinefeldt.



• According to the written plea agreement, York owned and operated Escrow and Closing Services of Marion County, LLC since 2005 and provided real estate closing and refinancing services. Funds from real estate purchases and refinancing were wired to the escrow account belonging to Escrow and Closing Services and were intended to be used to pay mortgage balances of real estate sellers or persons refinancing.



• Beginning in at least 2009, York took money from the escrow account for his own use. To hide this, York would delay paying a mortgage balance and would use funds from a later transaction to then pay for the mortgage.



• As of February 1, 2010, there were ten mortgages that York received funds to pay but did not pay. These unpaid mortgages involved nine individuals and totaled $907,600.00.(1)

For the U.S. Attorney press release, see Pella Attorney Pleads Guilty To Wire Fraud.

(1) The Iowa Judicial Branch's Client Security Commission manages a fund, generated from contributions from lawyers and judges, that reimburses clients of lawyers who have misappropriated or lost a client's money. The purpose of the fund is to prevent defalcations by members of the lowa bar and to provide for the indemnification by the profession for losses caused to the public by the dishonest conduct of members of the bar of this state.

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

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian recovery funds, courtesy of the American Bar Association);


• Check the USA Client Protection Funds Map;


• Check the Canada Client Protection Funds Map.

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

Law Firm's Real Estate Closing Paralegal Gets 3 Years For Pilfering $260K From Company Escrow Account

From the Office of the U.S. Attorney (Atlanta, Georgia):

• OLA SUZANNE STOWERS, 34, of Dawsonville, Georgia, was sentenced to prison yesterday by United States District Judge Richard W. Story on charges of bank fraud and aggravated identity theft. STOWERS was sentenced to 3 years in prison, and ordered to pay $260,171.94 in restitution. STOWERS pleaded guilty to the charges on April 4, 2011.



• According to United States Attorney Yates, the charges and other information presented in court: From July 1999 through May 2010, STOWERS was a closing paralegal and database manager at a real estate law firm located in Atlanta, Georgia.



• In June 2008, STOWERS transferred $176,946.79 from a law firm escrow account into a Bank of America account that she had been directed to close, but instead kept open and changed the statement mailing address on the account to her residence. [...] In July 2008, STOWERS began writing checks from that Bank of America account for her own personal use, forging the signature of one of the firm’s partners.



• By March 2009, the Bank of America account had a balance of $959.93. In April 2010, STOWERS deposited $82,727.42 of checks made payable to the law firm into the Bank of America account, and again wrote checks from the account for her own personal use, again forging the signature of one of the firm’s partners.

For the U.S. Attorney press release, see Law Firm Paralegal Sentenced to Federal Prison for Stealing from Escrow Account (Defendant Wrote Over $260,000 in Checks From Firm’s Account for Her Own Personal Use).

Trio Get Multi-Year Sentences In MD-Based $78M "Dream Homes" Ponzi Scam; Home Refinancing Pitch Used To Generate Funds To Invest In Worthless Racket

From the Office of the U.S. Attorney (Greenbelt, Maryland):

• U.S. District Judge Roger W. Titus sentenced Isaac Jerome Smith, age 48, of Spotsylvania, Virginia; and Alvita Karen Gunn, age 33, of Hanover, Maryland today to 70 months and 60 months in prison, each followed by three years of supervised release, respectively, for a fraud conspiracy, wire fraud and conspiracy to commit money laundering in connection with their participation in a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves. Judge Titus also ordered that the defendants pay restitution in the full amount of the loss, with the exact amount to be determined at a later hearing.



• On February 18, 2011, a federal jury convicted Smith and Gunn, along with co-defendant Michael Anthony Hickson, age 48, of Commack, New York, after a six week trial. Hickson, chief financial officer of Metro Dream Homes (MDH), was also convicted of making a false statement in a federal court proceeding [...].(1)

***

• According to evidence presented at the trial, beginning in 2005, the defendants targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange for a minimum $50,000 initial investment and an “administrative fee” of up to $5,000, the conspirators promised to make the homeowners’ future monthly mortgage payments, and pay off the homeowners’ mortgages within five to seven years.



• Dream Homes Program representatives told investors that the homeowners’ initial investments would be used to fund investments in automated teller machines (ATMs), flat screen televisions that would show paid business advertisements and electronic kiosks that sold goods and services. To give investors the impression that the Dream Homes Program was very successful, Metro Dream Homes spent hundreds of thousands of dollars making presentations at luxury hotels in Washington, D.C., New York, New York and Beverly Hills, California.(2)

***

• MDH encouraged homeowners to refinance existing mortgages on their homes in order to withdraw equity and generate the funds necessary to enroll their homes in the Dream Homes Program.

***

• Trial testimony established that at a hearing on Sept. 12, 2007, Hickson testified that the financial success of the Dream Homes Program did not rely upon new investor funds, when in fact Hickson knew that the sole source of meaningful revenue for MDH was new investor funds [ie. 'Ponzi' scheme].



• As a result of the scheme, more than 1,000 investors in the Dream Homes Program invested approximately $78 million. When the defendants stopped making the mortgage payments, the homeowners were left to attempt to make the mortgage payments MDH had promised to make in full.

For the U.S. Attorney press release, see Two Conspirators Sentenced To Prison In $78 Million "Dream Home" Mortgage Fraud Scheme (Defendants Spent Investor Funds to Employ Chauffeurs and Maintain a Fleet of Luxury Cars; on Luxury Travel; to Pay Off Prior Investors as Part of a Ponzi Scheme; and Fund a Failed Investment Venture and Undisclosed Third Party Businesses).

(1) In addition, Carole Nelson, age 52, of Washington, D.C., the chief financial officer of POS Dream Homes, previously pleaded guilty to money laundering, and Charlotte Melissa Josephine Hardmon, age 39, of Bowie, Maryland, pleaded guilty to conspiracy to commit wire fraud in connection with their participation in this scheme, and are awaiting sentencing, according to the press release.

Hickson has since received a ten-year prison sentence. See Leader In $78 Million "Dream Home" Mortgage Fraud Scheme Sentenced To 10 Years In Prison.

(2) The evidence also showed that in February 2007, the Dream Homes Program added a second program called “POS Dream Homes” offering similar promises of paying off investor mortgages in five to seven years in exchange for an up-front investment of $50,000 or more, the press release states. Collectively, these programs had offices in Maryland, the District of Columbia, Virginia, North Carolina, New York, Delaware, Florida, Georgia and California.

High-Risk, Illiquid Securities Peddler Targets Seniors, Others With Home Refinance Pitch To Fuel Sales Of Dubious Investments

In Victoria, British Columbia, the Times Colonist reports:

• Last week, I reported that David Michaels, principal of Michaels Wealth Management in Victoria, has been selling highrisk, illiquid securities to his clients, many of whom are quite elderly. He has been promoting these investments through hour-long infomercials on CFAX Radio, and through "lunch and-learn" seminars at his office.

***

• In some cases, Michaels arranged for investors - some of them seniors - to borrow against their homes to finance these investments. "My mother, a retired widow, went to see David Michaels after hearing his radio show on CFAX where he claims that he loves making seniors money," Heidi Dubas told me in an email.



• "She made it clear that she was on a fixed income and was not interested in any high-risk investments. Michaels convinced her that borrowing $100,000 against her mortgage would net her 12 per cent monthly interest on her investment, which would be low risk, as well as getting her involved with Focus Money Solutions Inc. To date, she is out over $150,000 as well as having to pay interest monthly on her loan."



• I spoke to several other investors who told me that, at Michaels' prompting, they also borrowed against their home. One was 70-year-old Robert Davey of Ladysmith, who borrowed $150,000 to invest in Focused Money Solutions, plus two other deals that Michaels was recommending.



• Another elderly woman - who wouldn't tell me her age, but I would guess to be in her 70s or 80s - told me that, on Michaels' recommendation, she borrowed $200,000 against her house and invested $75,000 in Focused Money Solutions and $100,000 in Bethel.



• That money is gone. The loan is not.



• To my surprise, most of these people didn't blame Michaels for these losses. In the case of Focused Money Solutions, they blamed promoter Victor DeLaet, or they blamed the Alberta Securities Commission for issuing the cease-trade order, or they blamed themselves for making such a risky investment.

***

• Last Saturday, Michaels was on CFAX Radio's Talk to the Experts infomercial program, promoting foreclosure properties in Arizona. CFAX general manager Jim Blundell has since advised that Michaels will no longer appear on the program, but that won't necessarily stop him.



• Meanwhile, more of Michaels' investment deals are turning sour. One client told me that in March 2010, she invested RRSP money - how much, she didn't say - in Treadwell Energy Inc., through Michaels.

For the story, see Investment deals devastate seniors (B.C. Securities Act exemption allows Victoria agent to sell high-risk, illiquid securities without a licence).

In related stories, see:

• Victoria woman, 90, is now out $550,000,
• B.C. Securities Commission says it will review rules for sale of exempt securities.

Brooklyn Judge Demands Court Appearances From Bankster Exec, Foreclosure Mill To Explain Document Filings "Replete With False Statements"

In Brooklyn, New York, the New York Daily News reports:

• A Brooklyn judge has ordered the head of one of the nation's biggest banks to appear in court and explain why it should not be penalized for submitting false documents in a foreclosure case.



• In a scathing decision issued Friday, Supreme Court Justice Arthur Schack dismissed HSBC's case against Bedford-Stuyvesant homeowner Ellen Tahrer as a "frivolous motion" and a "waste of judicial resources."



• The bank failed to prove it even owned the $475,000 mortgage on Tahrer's home, Schack ruled. Instead, its lawyers submitted documents from several notorious "robo-signers,"(1) all of which claimed the original loan had been transferred to HSBC from Delta Funding Corp., the original lender, which declared bankruptcy in 2007.



• Those documents were "replete with false statements," Schack ruled. He ordered the British bank's North American CEO, Irene Dorner, to appear July 15 to explain. Tahrer, 55, the delinquent homeowner, still lives in the two-story home and had no idea what had happened with her case.



• Laid off in 2009 as an office worker at American Express, Tahrer has been unable to make her $3,000 monthly mortgage payment. "I went to legal aid for help and tried to get a mortgage modification, but had no success," she said. "A few months ago, the bank called and offered me $20,000 to get out of the house. I told them, I had no place to go."



• Schack's decision freezes Tahrer's status for perhaps another year or two. With his tough stance on shoddy foreclosure filings, Schack has emerged as a folk hero among financially strapped homeowners. In HSBC, he is tackling the ninth-largest bank in the U.S., and he has concluded that what happened goes beyond shoddy paperwork.

For the story, see Supreme Court Justice Schack hits HSBC for 'frivolous motion' in foreclosure, asks boss to explain.

For the court ruling, see HSBC Bank USA, N.A. v Taher, 2011 NY Slip Op 51208(U) (N.Y. Sup. Ct. Kings Cty. July 1, 2011).

Thanks to William A. Roper, Jr. for the heads-up on the court ruling.

(1) Among the notorious, prolific, nationally-recognized, multiple corporate hat-wearing robosigners involved in this case:

• Robosigner Scott W. Anderson: In describing the history of his handiwork, Schack notes (among other things):
  
  While I have never personally met Mr. Anderson, his signatures have appeared in many foreclosure documents in this Court. His claims of wearing different corporate hats and the variations in the scrawls of initials used for his signature on mortgage documents has earned Mr. Anderson notoriety as a robosigner. [...]
  


• Robosigner Margery ("The Milliner's Delight") Rotundo: In describing the robosigning history of the "peripatetic" Ms. Rotundo, Schack includes a quote from an earlier ruling in another case:
  
  The late gossip columnist Hedda Hopper and the late United States Representative Bella Abzug were famous for wearing many colorful hats. With all the corporate hats Ms. Rotundo has recently worn, she might become the contemporary millinery rival to both Ms. Hopper and Ms. Abzug. [...]
  


• Robosigner Christina Carter: Regarding a foreclosure mill attorney's statement filed in court describing Carter as an employee of the plaintiff, HSBC, Schack responds:
  
  This is disingenuous. Ms. Carter is not employed by plaintiff, but by OCWEN. She executed documents as an officer of MERS and as an employee of OCWEN. Ms. Carter's signature on documents is suspect because of the variations of her signature used. This Court examined eight recent documents that exhibit three different variations of Christina Carter's signature. [...]

Foot-Dragging BofA Reluctant To F'close On Abandoned House Loses Lien Priority To HOA; Judge To Allow Home Sale, Apply Proceeds First To Junior Claim

In Nashville, Tennessee, The Tennessean reports:

• An outgoing Nashville bankruptcy judge has sided with a local flood victim over the nation’s largest mortgage lender in a decision that could serve as a blueprint for disaster victims who can’t escape mounting homeowners association fees even if they abandon their homes, enter foreclosure and declare bankruptcy.



• At a time when mortgage lenders are taking more than a year to complete foreclosures, Judge George C. Paine II has ruled that Bank of America has consented to the sale of a flood-damaged Bellevue condominium through its inaction and must wait in line behind a homeowners association to get paid.



• The Bellevue condo belongs to Sheryl Lynn Pigg, a filmmaker professionally known as Sherry Paige, who lost nearly everything in the Nashville flood of 2010. She ultimately found a new home, declared bankruptcy, discharged her debts and embarked on a fresh start.



• Or, so she thought. Pigg was surprised when she learned that Belle Management Corp. was still saddling her with homeowners association fees for a unit that she stripped to its studs and abandoned.

***

• Pigg sued her mortgage holder, Bank of America, to get the lender to finalize the foreclosure, accept a deed in lieu of foreclosure or allow a sale of the condo.



• Citing the wide latitude courts have to fashion whatever remedy is necessary to achieve justice, Paine said Pigg and others like her have unjustly been left in limbo. In a memorandum opinion, he has asked that Pigg’s bankruptcy be reopened so that a trustee can sell the condo.



• Proceeds from the sale will go first toward settling the homeowners association bill and then Bank of America. When Pigg declared bankruptcy in September, she owed $97,500 on a home that was worth only $55,000.



• “With the real estate collapse, lenders, who otherwise have the right to do so, are choosing not to foreclose on their collateral leaving homeowners in limbo,” Paine wrote. “Congress’ broadening of (the bankruptcy code) to protect HOAs deprives the debtor of a fresh start, and thwarts the goals of the entire Bankruptcy Code.”

For the story, see In rare move, court backs flood victim in foreclosure (Bankruptcy judge says bank unjustly left woman in limbo).

For the ruling, see Pigg v. BAC Home Loans Servicing LLC (In re Pigg), Case No. 10-10168 (Bankr. M.D. Tenn. June 24, 2011).

Go here for the Pigg-Amended Complaint, and here for Pigg - Trial Brief.

Bankruptcy Trustee's Attempt To Boot Homeowner In Underwater Home Fails; State 'Wildcard' Exemption Allows Debtor To Stay Put

The Florida Bankruptcy Law Blog reports:

• Some bankruptcy trustees have been trying to force debtors’ to turn over possession of real property even when the property appears to be under water. It seems that these bankruptcy trustees want to see if they can find a buyer and/or negotiate concessions or payment from the mortgage lender.



• A recently decided district court case in the Middle District of Florida considered a Chapter 7 bankruptcy case wherein a trustee wanted debtors to surrender and move out of their upside down homestead so that the trustee can market the property.



• The debtor’s objected on the grounds that the trustee cannot compel turnover of assets with no equity and no benefit to creditors. The trustee then argued that the debtors’ objection, itself, impeded the trustee’s administration of the estate and thereby disqualified the same debtors from the $4,000 wildcard exemption.



• The district court ruled that the trustee had no right to compel turnover of an asset with no value, and that the trustee should abandon such assets.



• The court indicated that a trustee could try to sell the debtor’s property but that the debtor should retain possession unless the trustee finds a buyer who will pay more than the mortgage debt. The debtor’s opposition to turnover did not forfeit his wildcard exemption.(1) 8:11-cv-193

Source: Chapter 7 Trustee Wants Debtors To Move Out And Turn Over Upside Down House.

For the ruling, see Iuliano v. Brook (In re Iuliano), Case No. 8:11-cv-193-T-JSM (M.D. Florida, Tampa Div. April 29, 2011).

In a related post, see Chapter 7 Trustees Attacking Debtors' Right To Stay Put In Their Upside Down Homestead Property.

(1) Among the cases cited by the District Court in reaching its conclusion:

• Osborne v. Dumoulin, 55 So. 3d 577 (2011),
• In Re: Feinstein Family Partnership, 247 B.R. 502 (Bankr. M.D. Fla. 2000),
• In Re: Bennett, 395 B.R. 781 (Bankr. M.D. Fla. 2008).

Title Lawyer Gets 29 Months, Loses 'Ticket' After $16.3M Escrow Swindle; Bar's 'Attorney Ripoff Reimbursement Fund' May Be Left Holding Heavy 'Bag'

The South Florida Sun Sentinel reports:

• A Boca Raton real estate title attorney has been disbarred for five years, the Florida Bar announced Thursday, two days after he was sentenced to 29 months in federal prison on bank fraud charges.



• Bar records show that Andrew Mark David, an agent with the Attorney's Title Insurance Fund, did not document $16.3 million in escrow disbursements for closings. The bar said Angel Puentes, a non-lawyer with several real estate investment companies who became affiliated with David's practice, took most of the money for himself.



• David pleaded guilty to both the bar complaint and federal charges, although he said he was unaware of Puentes actions and denied wrongdoing. He received a reduced sentence for cooperating with federal investigators, and agreed to be part of a $4.4 million restitution, court documents show. The case against Puentes is pending.



• "Mr. David is very remorseful for his conduct. He did not knowingly defraud anyone," said Allen Stewart Katz, David's attorney.

Source: Boca title attorney disbarred after sentencing on bank fraud charges.
See also: The Florida Bar v. David - Referee's Report for the results of The Florida Bar probe:
Among the referee's recommendations:

• Respondent will make reasonable efforts to reimburse The Florida Bar’s Clients' Security Fund if it issues any payments to compensate the victims of his misconduct.(1) Respondent must repay to the Clients’ Security Fund all monies paid out as a result of his misconduct, as a condition precedent to his eligibility to apply for readmission to The Florida Bar.

(1) The Florida Bar's Clients' Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

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

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian recovery funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

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