Vermont Supreme Court Boots Foreclosure Action Marked By Potentially Dubious Filings; Score Victory For Homeowner, Non-Profit Law Firm (& Trial Court)

The Vermont Supreme Court recently weighed in with a ruling in a foreclosure action, affirming a trial court ruling that gave a foreclosing lender the boot, with prejudice, in a foreclosure action because of a lack of standing to bring the lawsuit.

The court's ruling contains an analysis of the applicable provisions of the Uniform Commercial Code, as well as Vermont's version thereof.

The following point, which merits highlighting, reflects the filing of potentially dubious documents by the foreclosing lender that homeowner characterized as inconsistent and "likely fraudulent filings" (among the documents filed in the foreclosure action was a copy of an instrument entitled "Assignment of Mortgage," signed by the notorious, nationally-recognized robo-signer Jeffrey Stephan) (Note: the following 'bulleted' text has been slightly adapted from the text of the court's ruling):

• Initially, the foreclosure was based solely on an assignment of the mortgage by MERS. The complaint did not allege that the foreclosing lender held the original note. It simply attached a copy of the note with an allonge endorsement in blank. Homeowner successfuly challenged this evidence as insufficient to show that the lender held an interest in her note.



• At that point, US Bank abandoned its claim of assignment of the mortgage and instead asserted that it held the original note, and submitted the note with an allonge containing two undated specific endorsements, one to the lender. The supporting affidavit claimed that the note had been endorsed to US Bank, but provided no information about when and failed to explain why a note with a blank endorsement was the basis for the complaint.

In ruling in favor of the homeowner, the Vermont high court stated (from the original text, bold text is my emphasis):

• Based on this contradictory and uncertain documentation, the trial court did not err in concluding that there was no evidence to show that US Bank was a holder of the note at the time it filed the complaint. US Bank failed to allege or demonstrate that it held the original note endorsed in blank when it commenced the foreclosure action.
  
  In fact, US Bank asserted that the note with the blank endorsement was an earlier copy that was mistakenly attached to the complaint. It also alleged that the blank endorsement was stamped with RFC's name in 2005. Therefore, it could not possibly have held the original note with a blank endorsement when the complaint was filed. Further, there is no evidence to show that US Bank held the original note endorsed to its name before the complaint was filed.
  
  While US Bank eventually produced the original note with an endorsement to it, none of the evidence submitted at summary judgment by US Bank established the timing of the endorsement. Given US Bank's failure to show it had standing, the foreclosure complaint was properly dismissed.

After the foreclosing lender made what the court implicitly indicated was a decent argument in favor of overlooking the initial defects because it now produced the original note with a chain of endorsements ending in U.S. Bank, the court excoriated the foreclosing lender with the following comments:

• US Bank argues that for reasons of policy it should be permitted to proceed because it would be wasteful to prevent it from being able to "cure" its standing problem. While we are sympathetic to the desire to avoid wasteful and duplicative litigation, the source of the unnecessary proceedings in this case was not an overly wooden application of the rules, but US Bank's failure to abide by them.
  
  It is neither irrational nor wasteful to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit.
  
  Nor is it irrationally demanding to expect the foreclosing party to provide adequate, satisfying proof in response to a motion for summary judgment challenging standing to bring suit.
  
  What should have here been a fairly straightforward, if not a summary, proceeding under the rules, was rendered inefficient by US Bank's failure to marshal its case before compelling homeowner and the court to waste time and resources, twice, by responding to what could not be proven. There was nothing inequitable in dismissing this matter.(1)

Another point worthy of note is that the Vermont high court remanded the case back to the lower court to consider the homeowner's attorney's fees request.

The homeowner filed a motion for attorney's fees asserting that US Bank had filed affidavits in bad faith. The Vermont Supreme Court agreed that the request for attorney's fees under Rule 56(g) was timely and properly raised in the trial court, and that the court erred in failing to consider the motion. It therefore kicked the case back to the trial court for consideration of homeowner's request.

For the ruling, see U.S. Bank v. Kimball, 2011 VT 81 (Vt. July 22, 2011).

See VT Sup CT: Yes US Bank, You Have to Prove Standing for commentary on this case.

Representing the homeowner in this case was Grace B. Pazdan of Vermont Legal Aid, Inc., a non-profit law firm that, according to their website, provides free civil legal services to people throughout Vermont who are poor, elderly, or have disabilities, and has six offices througout the state.

(1) Although this foreclosure action was dismissed by the trial court with prejudice, the Vermont Supreme Court cautioned the homeowner against getting too excited about winning a 'free' house in the following excerpt:

• Thus, this may be but an ephemeral victory for homeowner. Absent adjudication on the underlying indebtedness, the dismissal cannot cancel her obligation arising from an authenticated note, or insulate her from foreclosure proceedings based on proven delinquency. Cf. Indymac Bank, F.S.B. v. Yano-Horoski, 912 N.Y.S.2d 239, 240 (App. Div. 2010) (reversing trial court's order canceling mortgage and debt).
  
  Homeowner's arguments supporting a dismissal with prejudice are not convincing. Homeowner relies on Nolen v. State, but that unpublished three-justice decision simply affirmed the trial court's decision to dismiss with prejudice plaintiff's constitutional claim for lack of standing without a challenge to or any analysis of the "with prejudice" designation. No. 08-131, 2009 WL 2411832, at *2 (Vt. May 29, 2009) (unpub. mem.), available at http://www.vermontjudiciary.org/d-upeo/upeo.aspx.
  
  Further, the court's order does not support plaintiff's assertion that the court was warranted in dismissing with prejudice on equitable grounds given what homeowner characterizes as inconsistent and "likely fraudulent filings" submitted by US Bank. See New Eng. Educ. Training Serv., Inc. v. Silver St. P'ship, 156 Vt. 604, 613, 595 A.2d 1341, 1345-46 (1991) (affirming dismissal of foreclosure action where recovery on the underlying note would be unconscionable).
  
  While the trial court may have had discretion to exert its equitable powers in this manner, no findings were made to support such a conclusion, and we will not speculate on a matter of such importance.

Chase's "Unmitigated Disaster" Continues; Add 'Accidental' Issuance Of 400 Long Island Loan Satisfactions To Bankster's 'Egg-On-Face' Mortgage Mess

In Suffolk County, New York, the New York Post reports:

• Just when you think you've heard every possible way a bank's mortgage department can mess things up, the moneylenders come up with a new way to amaze.



• For example, one of the country's largest mortgage lenders, JPMorgan Chase, was in a Long Island courtroom yesterday trying to get the OK to put liens back on about 400 homes it accidentally classified as having satisfied mortgages after the homeowners refinanced their mortgages. The mistake happened four years ago, according to court papers.



• Since 2007, the 400 Suffolk County families could have stopped paying their mortgages, and it appears that Chase wouldn't have had the right to foreclose. It was an innocent bank error, Chase's lawyers said.



• While not a single homeowner nor Chase appears to have been financially harmed because of the mistake, it highlights the tricky and sticky situation banks find themselves in. Every time a bank executive says he has his arms wrapped around the mortgage morass, new evidence pops up to prove him wrong. Meanwhile, these same bank executives want investors to believe the worst has passed.



• "It's fairly incredible to me that an error of this magnitude would happen," said Mark Goldsmith, a lawyer at Jakubowski, Robertson, representing one of the Suffolk County homeowners. Said another lawyer, David Shaev, who is not involved in the Long Island case, "I've never seen anything like this as far as this many accidental [mortgage] satisfactions."

***

• The law firm handling Chase's Suffolk case is Steven J. Baum PC, which is reportedly being investigated by federal and state authorities for its alleged shoddy case work. [...] JPMorgan Chase CEO Jamie Dimon(1) recently described the mortgage mess as "an unmitigated disaster."(2)

For the story, see Farce of habit at JPM (Another mind-blowing mortgage mess for bank).

(1) A hard copy of the New York Post edition that ran this story showed a photo of the 'respected' Chase CEO Jamie Dimon with egg on his face. Regrettably, the photo apparently never made the online edition. In lieu thereof, this photo will have to suffice.

(2) Among the other recent messes that are integral parts of Chase's 'unmitigated disaster,' as reported by the Post:

• Chase, together with Bank of America, Citigroup, Ally Financial, Wells Fargo, is facing as much as $25 billion in penalties and fines related to the robo-signing and lost-document fiasco that has slammed the nation's housing market;
• Chase recently admitted that it foreclosed on active-duty servicemen in violation of foreclosure rules. The bank agreed to pay tens of millions in cash to thousands of active-duty military personnel who were mistakenly overcharged on their mortgages or were wrongfully kicked out of their homes.

Massachusetts AG To Nix Any 50-State Deal Letting Banksters Off Hook On Securitization, MERS Issues If Foreclosure Fraud Probe Remains Incomplete

In Boston, Massachusetts, Bloomberg reports:

• Massachusetts Attorney General Martha Coakley said the state won’t sign on to any settlement of a nationwide foreclosure probe that includes certain liability releases for banks, joining officials in at least two other states(1) who have raised concerns over terms of a possible deal.



• The banks in settlement talks with state and federal officials are seeking broad releases to protect them from legal claims. Massachusetts Attorney General Martha Coakley said yesterday she won’t support an agreement that includes releases for securitization of mortgages and conduct related to a database of mortgages known as MERS.



• “Massachusetts will not sign on to any global agreement with the banks if it includes a comprehensive liability release regarding securitization and the MERS conduct,” Coakley wrote to the Norfolk County register of deeds in Dedham, Massachusetts. “These investigations must continue.” The registry keeps real estate records.

The Boston Globe adds:

• Massachusetts Attorney General Martha Coakley is beefing up her investigation into foreclosure fraud, targeting a powerful lender-created company in Virginia that claims to be the official owner of tens of millions of mortgages nationwide.



• Yesterday, Coakley said she will ask county registers to provide information to see if Mortgage Electronic Registration Systems Inc., known as MERS, is violating Massachusetts laws related to property seizures. She is concerned that MERS failed to pay government fees as well as “impaired the integrity’’ of the state recording system by failing to document loan transfers.

For the stories, see:

• Bloomberg: Massachusetts to Spurn Any Foreclosure Deal With Some Liability Releases,
• The Boston Globe: Coakley steps up probe into foreclosure fraud (Virginia-based firm is focus of new action).

(1) According to the story, Delaware Attorney General Beau Biden said in an interview that he had “strong reservations” about releasing claims other than for servicing of mortgages because he is investigating related issues, including securitization. Likewise, New York Attorney General Eric Schneiderman’s office said in a statement last week that he “remains concerned by any settlement agreement that would preclude state attorneys general from conducting comprehensive investigations of the mortgage crisis.” Schneiderman is conducting his own investigation.

Underwater Fla Homeowners Using State 'Wildcard' Exemption In Bkrptcy Urged To Resist Being Squeezed By Rogue Trustees Using Unsavory Ch. 7 Shakedowns

Jacksonville, Florida bankruptcy attorney Chip Parker writes in the Bankruptcy Law Network:

• As I previously reported, we have a problem in the state of Florida with a few rogue bankruptcy trustees using unsavory tactics to shakedown Chapter 7 debtors.



• Specifically, in the State of Florida, a debtor can choose between his homestead exemption and his wildcard exemption. The homestead exemption grants the debtor protection of all his home equity while the wildcard exemption grants $4,000 per debtor that can be applied to any property.



• Since, according to CoreLogic, half of all Florida homes have zero or negative equity, the home equity exemption is worthless. Therefore, debtors are opting to select the wildcard exemption to protect more of their personal property from the bankruptcy estate.



• The trustee’s job is to maximize the bankruptcy estate for the benefit of creditors, and he’s none too happy about the size of the estate being shrunk by up to $8,000 in a joint case where debtors elect the wildcard exemption. While the mainstream trustees have accepted this new reality, the rogue trustees have deployed guerrilla-like tactics against Florida debtors.



• Specifically, the rogue bankruptcy trustee demands that the debtor “turn over the keys” to their home if they fail to claim the homestead exemption. Now, we all know the trustee doesn’t want the house or the keys. He is merely attempting to extort money from a frightened debtor with visions of being booted to the curb.



• In a recent Jacksonville case, Jacksonville bankruptcy lawyer Ed Jackson demanded (in a motion) that the trustee “administer or abandon” the house, and Judge Paul Glenn agreed. He ordered the trustee to present a “bona fide contract to sell or otherwise administer” the debtor’s house within 60 days.



• So, can the trustee get a real estate agent to agree to short sell an underwater house? Sure, but no credible realtor would ever testify that the bankruptcy estate would get any money from the short sale. Therefore, the house would be “inconsequential” to the estate and therefore NOT subject to administration. Checkmate! Debtor wins.



• If a bankruptcy trustee demands that you turn over the keys to your home because the house isn’t claimed as exempt, what should you do?



• The issue is whether the house will generate money for the estate. A house will only generate money if it can be sold at a net profit for the estate or if it is rented for an amount greater than the mortgage payment and maintenance costs (that means homeowners association dues, taxes, insurance, etc.).



• Therefore, the first thing you do is file a Motion to Compel Trustee to Abandon or Administer Property. Second, set the trustee’s deposition, and ask him to explain his plan for generating money for the bankruptcy estate.



• Some trustees are ruthless, but they are all smart. None of them want to look stupid at a deposition, and the rogue trustee knows a decent lawyer will box him in a corner. Rather than lose some teeth in a street fight, the trustee will back down.



• If your bankruptcy lawyer won’t go to bat for you, it’s time to start looking for new representation.

Source: Can my Chapter 7 trustee kick me out of my Florida home? (Not if you hire an experienced bankruptcy lawyer).

See Osborne v. Dumoulin, 55 So. 3d 577 (2011), in which the Florida Supreme Court addressed the the circumstances under which a debtor is entitled to the statutory $4000 personal property 'wildcard' exemption from legal process for debtors who do not claim or receive the benefit of a homestead exemption.

In a related post, see Bankruptcy Trustee's Attempt To Boot Homeowner In Underwater Home Fails; State 'Wildcard' Exemption Allows Debtor To Stay Put.

Bankster Turns To Title Insurer For $24M 'Cough-Up' For Losses Over Soured HELOCs

In Minneapolis, Minnesota, Courthouse News Service reports:

• The foreclosure meltdown has led the U.S. Bank National Association to demand $24 million from First American Title Insurance Co., claiming the title company charged more than $20 million for a new product supposed to protect the bank from defaults on home loans, then walked away when the disaster came.



• U.S. Bank claims the title company charged it more than $20 million in premiums and fees for its "FACT product," and new "service" that First American introduced in 2001.



• First American claimed its product would "benefit institutions such as U.S. Bank when making home equity loans to consumers, by simultaneously allowing the lender to make faster lending decisions and insuring the lender against the risk that such faster decisions might fail to uncover, among other things, undisclosed intervening liens, title defects, errors in legal description, or vesting problems that would impair the lender's collateral in the even the customer later defaults on the loan," according to the federal complaint.

For more, see Bank Claims Title Company Scammed It.

State Appeals Court Bags Snoozing Fla. Trial Judge Allowing Bank Without Note & Mortgage To Bring Foreclosure Action, Introduce Inadmissible Evidence

Another Florida trial judge's ruling suffered a reversal in a foreclosure action.

In this case, the state's 1st District Court of Appeal found that, "Because the documentary evidence necessary to establish the amount owed under the note and mortgage was admitted without proper foundation(1) and it is undisputed that M & I Bank was not the holder of the mortgage and note," it had no choice but to reverse an earlier ruling by the ostensibly snoozing Levy County Circuit Court Judge Stanley H. Griffis, III.

(Once again, we have another example where, had a faulty foreclosure ruling not been pursued on appeal, homeowners defending against a foreclosure action would have been unfairly screwed over. Fortunately for these homeowners, limited finances was apparently not an obstacle to pursing this appeal, and they were represented by counsel who knew that the lower court ruling was incorrect and who knew how to handle appeals, something which, regrettably, can't be said for all attorneys who claim to do foreclosure defense work.)

For the ruling, see Mazine v. M&I Bank, Case No. 1D10-2127 (Fla. App. 1st DCA July 22, 2011).

(1) The court's analysis with respect to the inadmissible evidence allowed in by Judge Griffis follows (bold text is my emphasis):

• The only witness to testify at the bench trial regarding the allegations of the amended complaint was David Taxdal, the regional security officer for "M & I Marshall and Ilsley Bank" in the State of Florida.
  
  According to Taxdal's testimony, his "duties and responsibilities are fraud investigation, internal investigation and physical security for the branches" in Florida, and he does not originate loans, service loans or collect loans in default.
  
  Through Taxdal, the bank attempted to introduce several documents, including an affidavit as to amounts due and owing. The affidavit was executed by Michael Koontz, who did not appear at trial, and the bank sought to introduce it as a business record.
  
  Taxdal testified that he had no knowledge as to who prepared the documents submitted at trial by the bank as he is not involved in the preparation of documents such as the ones proffered by the bank, that he does not keep records as a records custodian, that he has no personal knowledge as to how the information in the affidavit as to the amounts due and owing was determined or whether it was prepared in the normal course of business, and that he did not know whether such information was accurate.
  
  Counsel for the defendants vigorously opposed admission of the affidavit of indebtedness, the only evidence of the amount allegedly in delinquency, as a business record. Counsel observed that the affiant (Koontz) was not subject to cross-examination, and that given the matters to which Taxdal testified it was evident that Taxdal "has no knowledge of the basis upon which this affidavit was prepared."
  
  The trial court denied defendants' objection and admitted the affidavit without explanation.
  
  This was error. Before a document may be admitted as a business record, a foundation for such admission must be laid. Section 90.803(6), Florida Statutes (2010), allows the admission of records of a regularly kept business activity when the business record was made at or near the time of the matters reported and when the business record is made by a person having personal knowledge of the matters reported or when the information supplied in the record is supplied by a person with knowledge.
  
  Further, it must be shown that the business record was kept in the ordinary course of a regularly conducted business activity and that it is the regular practice of the business keeping the record to make such a business record. Yisrael v. State, 993 So.2d 952 (Fla. 2008).
  
  While it is not necessary to call the individual who prepared the document, the witness through whom a document is being offered must be able to show each of the requirements for establishing a proper foundation. Forester v. Norman Roger Jewell & Brooks, 610 So.2d 1369, 1373 (Fla. 1st DCA 1992).
  
  Here, none of the requirements for admission of a business record were met. As noted, Taxdal candidly admitted that he had no knowledge as to the preparation or maintenance of the documents offered by the bank, including the affidavit as to amounts due and owing. Taxdal did not testify and, indeed, could not testify, that the affidavit as to the amounts owed was actually kept in the regular course of business.
  
  Further, he did not know if the source of the information contained in the affidavit was correct. He did not know if the amounts reported in the affidavit were accurate. There was no attempt to admit the affidavit by certification or declaration pursuant to section 90.803(6)(c), Florida Statutes.
  
  Accordingly, because no foundation was laid, the admission of the affidavit was erroneous. Because the affidavit was the only evidence as to the amount of defendants' default, the error was harmful necessitating that the amended final judgment of foreclosure be reversed.

Nevada Foreclosure Defense Attorney Seeks $1M In Bankster Sanctions For 'Contemptuous' Bad Faith Approach To State's Mandatory Mediation Program

In Reno, Nevada, the Las Vegas Review Journal reports:

• The Nevada Supreme Court altered the foreclosure mediation landscape in dramatic fashion earlier this month when, in two separate cases,(1) justices made it clear lenders must follow two simple rules -- bring all relevant documents to the table and make sure someone with loan modification authorization is readily available.



• A homeowner's lawyer in one of those cases, Terry Thomas of Reno, plans to test the waters Monday by asking Washoe County District Judge Patrick Flanagan to impose a $1 million fine against a banker who a mediator found acted in bad faith.



• "Lenders were saying the rules were not really mandatory," said Thomas, who represents about a dozen homeowners facing foreclosure in the Reno area. Now, lenders have been forewarned that the rules are not optional, and the two Nevada judges who review failed mediations have been put on notice that they must sanction lenders who fail to strictly comply with those rules.

***

• Thomas said the high court's rulings send an unmistakable message to lenders, but homeowners who can't afford to file an appeal "are screwed," he said, making it all the more important for district judges to hold lenders accountable when they fail to abide by the program. Mosley and Flanagan will have to start enforcing the law, "or lenders will continue to scoff at the system," Thomas said.



• He said the $1 million sanction he seeks is not aimed at a lender whose noncompliance is minor, but rather one who exhibited contempt for the program, and by extension the state Supreme Court, which created the foreclosure program following the 2009 legislative session. The lender, whom he did not identify, skipped two mediation sessions.



• "My clients just get stonewalled," Thomas said. "They are already in financial peril, and they pay thousands of dollars just to get to a mediation, and the lender doesn't care about the rules. This does real harm to real people."

For more, see Lenders feel pressure in foreclosure process.

(1) See:

• Leyva v. National Default Servicing Corp., 127 Nev. Adv. Op. No. 40 (Nev. July 7, 2011);


• Pasillas v. HSBC Bank USA, 127 Nev. Adv. Op. No. 39 (Nev. July 7, 2011).

For a short commentary on these cases, see Credit Slips: Nevada Supreme Court: You Gotta Prove Chain of Title.

Florida Judge Refuses To Recuse Herself From Foreclosure Cases As Hubby Serves As Local Bank's Chairman, CEO; Jurist To Critics: 'Take A Hike!'

In Central Florida, The Tampa Tribune reports:

• A Hillsborough County judge seeking to tame a backlog of thousands of foreclosure lawsuits is raising questions from critics who wonder whether she should be hearing foreclosure cases at all.



• Judge Martha J. Cook has an ownership interest in Community Bank, where her husband, William H. Sedgeman Jr., serves as chairman and chief executive, public documents show.



• The bank, known formally as Community Bank of Manatee, has 17 locations throughout the Tampa Bay area. The bank has been hard-hit by the foreclosure crisis and has struggled to shed troubled assets. Like most banks, Community Bank often finds itself as a plaintiff against homeowners in foreclosure cases.



• "It's reasonable that a homeowner would fear they aren't going to get a fair hearing before her," said Mark Stopa, a foreclosure defense attorney. "There's no way I could go into court before her without thinking about this."



• But Cook said she is not prejudiced. "I don't have bias," Cook said. "I listed my connection, as required by the law. Beyond that, my personal life is my personal life."

***

• Henry P. Trawick Jr., a Sarasota lawyer and author of Florida's Practice and Procedure, a textbook used by lawyers, said it's good that Cook disqualifies herself from hearing cases that involved her husband's bank. But he said she should go a step further. "I think she shouldn't hear foreclosure cases," Trawick said. "That's what I would do if I had that close of a connection, but perhaps my ethical standards are higher."



• The problem, Trawick said, is whether or not Cook shows favor to the banks; those representing homeowners may feel like she might. Hillsborough's other nine judges have not owned bank stock over at least the past four years, according to state disclosure documents.



• Stopa, the foreclosure defense attorney, said Cook once told him in court that she thought the "only way to improve the economy is to push through foreclosures as soon as possible." Cook said she was misquoted, but she declined to correct the statement.



• Mike Wasylik, a foreclosure defense attorney, said he's had few cases before Cook but is uncomfortable with her connection to a local bank. "A judge has the duty to avoid even the appearance of bias," Wasylik said. "She may have personal opinions about the need to push foreclosures through quickly."



• Phyllis Kotey, a professor at FIU School of Law, said the connections show an "appearance of personal and financial interest." "At the very least, parties before her should be put on notice and have the opportunity to object to her hearing their cases."

For more, see Critics: Judge with interest in bank shouldn't hear foreclosures.

Fla Appeals Court: Expired Statute Of Limits No Bar To Raising Alleged ECOA Violations As Valid F'closure Defense; Trial Court 'Reversals' List Grows

In a case emanating from Walton County, Florida, a state appeals court has ruled that, notwithstanding the expiration of the statute of limitations for bringing a lawsuit, alleged violations of the Federal Equal Credit Opportunity Act ["ECOA"] by a homeowner/wife (who served solely as a guarantor on a loan taken by her co-owner/husband) can be raised as a valid defense to a foreclosure action in Florida, and in finding that there were disputed issues of material fact on this affirmative defense, held that the granting of summary judgment in the case at bar to the foreclosing lender, Whitney National Bank, was premature and reversed a ruling of the trial court to the contrary.(1)

For the ruling, see Chen v. Whitney National Bank, Case No. 1D10-5718 (Fla. App. 1st DCA, July 22, 2011).

(1) Part of the court's analysis follows (bold text is my emphasis):

• With respect to the ECOA affirmative defense, Whitney argued below and on appeal that the defense was inadequate as a matter of law because the language of ECOA does not allow voiding a guaranty as an affirmative defense; rather, the Lins could seek only an affirmative remedy for the alleged ECOA violation.
  
  Whitney further argued that, if the defense was intended to be an affirmative claim, it was barred by the two-year statute of limitations in 15 U.S.C. § 1691e(f). Appellants argue on appeal, as they did below, that the alleged ECOA violation may be raised as an affirmative defense in an action to enforce the guaranty, even after the expiration of the statute of limitations. We agree with Appellants for the reasons that follow.

***

• ECOA provides that an applicant aggrieved by a violation of the act may bring a federal civil action against the creditor to recover actual damages, punitive damages, and attorney's fees. See 15 U.S.C. § 1691e(a), (b), (d). ECOA does not expressly authorize an aggrieved applicant to raise an alleged ECOA violation as an affirmative defense to a claim by a creditor on the debt, and there is a split of authority in the federal and state courts as to whether this remedy is available.
  
  The only court in Florida to have directly considered the issue is Matsco v. Clermont Center for Comprehensive Dentistry, P.A., 2010 WL 746709 (M.D. Fla. Mar. 2, 2010). In that case, the federal district court struck the defendant spouses' affirmative defenses that Matsco, through its predecessors, violated the ECOA by having them execute personal guaranties solely in their capacity as spouses. Id. at *1. The court concluded that ECOA did not provide for the invalidation of a guaranty or the underlying obligation as an available remedy or as an affirmative defense. Id. at *3 (citing other federal district court cases).
  
  We do not find Matsco persuasive because it did not even acknowledge the conflicting case law, apparently because the defendant spouses in that case did not submit any decisional authority or argument to the court. Id.
  
  Indeed, there are a number of federal and state cases holding contrary to Matsco that ECOA can be used defensively after the statute of limitations has run on an affirmative claim. See, e.g., LOL Finance Co. v. F.J. Faison, Jr. Revocable Trust, 2010 WL 3118630, at *8 (citing cases from the First Circuit, Third Circuit, federal district courts, and state supreme courts), adopted by 2010 WL 3118583 (D. Minn. Aug. 4, 2010).
  
  The split of authority on this issue was recently canvassed by the Iowa Supreme Court in Bank of the West v. Kline, 782 N.W.2d 453 (Iowa 2010). The court explained in Kline that courts have "staked out three general positions" on the use of an alleged violation of the ECOA after the statute of limitations has run: (1) a debtor can only assert an ECOA violation as a counterclaim; (2) a debtor can assert an ECOA violation as an affirmative defense in the nature of recoupment; and (3) a debtor can assert an ECOA violation as an affirmative defense based on the defense of illegality. Id. at 458-61. After analyzing each position in detail, the court adopted the position allowing a debtor to assert an ECOA violation as an affirmative defense to void an obligation made in contravention to ECOA. Id. at 463.
  
  The court reasoned that it would frustrate the purpose of ECOA and be contrary to public policy to enforce an obligation that violated ECOA, such as a guaranty required of the spouse of an independently creditworthy debtor. Id. The court further reasoned that a creditor should not benefit from its discriminatory practices and that releasing the spouse from liability under a guaranty made in violation of ECOA would deter discriminatory practices. Id.
  
  Finally, the court reasoned that allowing a guarantor to assert an ECOA violation as a defense to the creditor's claim, even after the statute of limitations had run on an affirmative claim under ECOA, best protected victims of credit discrimination because most debtors would not know about ECOA's provisions against discrimination until they consulted an attorney or until the creditor sought to enforce the guaranty. Id.
  
  We find this analysis persuasive. It is also consistent with Florida law, which recognizes that the illegality of a contract may be raised as an affirmative defense. See Harris v. Gonzalez, 789 So.2d 405 (Fla. 4th DCA 2001).
  
  Similar to Iowa law discussed in Kline, the Florida Supreme Court has expressed that "where a statute pronounces a penalty for an act, a contract founded upon such act is void, although the statute does not pronounce it void or expressly prohibit it." Town of Boca Raton v. Raulerson, 146 So. 576, 577 (Fla. 1933).

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

The following two points appear to be clearly worthy of note:

(I) On the basis of the underlying legal rationale in this case, there appears to be no reason why said rationale would not be equally applicable where a homeowner alleges violations of the Federal Truth in Lending Act and other applicable Federal and state lending statutes as a defense to a foreclosure action.

(II) Until the Florida Supreme Court addresses this issue, and to the extent there are no conflicting rulings from sister Florida appeals courts, the ruling by Florida's 1st District Court of Appeal in Chen v. Whitney National Bank is binding, not only on all trial courts within the 1st District, but on all trial courts throughout the state. See:

Gross v. State, 765 So. 2d 39 (Fla. 2000):

• A trial court is obligated to follow decisions of the district court of appeal, and where there is no decision on point from the district court for the circuit in question, the trial court is bound to follow precedents of other district courts of appeal. See Pardo v. State, 596 So.2d 665, 666-67 (Fla.1992) ("[I]n the absence of interdistrict conflict, district court decisions bind all Florida trial courts.").

Pardo v. State, 596 So. 2d 665 (Fla. 1992):

• This Court has stated that "the decisions of the district courts of appeal represent the law of Florida unless and until they are overruled by this Court." Stanfill v. State, 384 So.2d 141, 143 (Fla. 1980).
  
  Thus, in the absence of interdistrict conflict, district court decisions bind all Florida trial courts. Weiman v. McHaffie, 470 So.2d 682, 684 (Fla. 1985).
  
  The purpose of this rule was explained by the Fourth District in State v. Hayes:
  
  "The District Courts of Appeal are required to follow Supreme Court decisions. As an adjunct to this rule it is logical and necessary in order to preserve stability and predictability in the law that, likewise, trial courts be required to follow the holdings of higher courts--District Courts of Appeal.
  
  The proper hierarchy of decisional holdings would demand that in the event the only case on point on a district level is from a district other than the one in which the trial court is located, the trial court be required to follow that decision.
  
  Alternatively, if the district court of the district in which the trial court is located has decided the issue, the trial court is bound to follow it.
  
  Contrarily, as between District Courts of Appeal, a sister district's opinion is merely persuasive."
  
  333 So.2d 51, 53 (Fla. 4th DCA 1976) (footnote and citations omitted).[5]
  
  [See generally Taylor Mattis, Stare Decisis Among and Within Florida's District Courts of Appeal, 18 Fla.St.U.L.Rev. 143, 155-160 (1990).]

Fed $85M 'Pick-A-Pay' Settlement With 'Stagecoach To Hell' - Just Another Wrist-Slap?

Valparaiso University Associate Professor of Law Alan White posts on Credit Slips:

• [T]he Fed announced a settlement with Wells Fargo of claims that its subprime unit had 1) deliberately steered prime borrowers into higher-cost subprime mortgage refinancings and 2) falsified income documents to put subprime borrowers into unaffordable loans.(1)



• The settlement provides for an $85 million fine, plus an elaborate claims-based compensation procedure for victims, who may number 10,000 or more. Notably, families who lost their home in foreclosure as a consequence of Wells Fargo's illegal steering are to receive $7,000 for the loss of their home. That should cover some moving costs and a month's rent or so.



• As far as I could tell the agreement does not provide for consumers to release claims in exchange for these paltry sums, but advocates would be well advised to review settlement notices with affected consumers carefully.



• The Fed announcement touts this wrist-slap settlement as the largest consumer protection enforcement fine in its history. Ample evidence that consumer protection against financial institutions needs to be transferred to a real enforcement agency at the earliest.

Source: Fed to Wells: $7000 for Wrongful Foreclosure.

From the Federal Reserve Board:

• Press Release,


• Settlement Agreement.

(1) According to a Federal Reserve Board press release:

• Based on preliminary estimates, the amount of compensation that each eligible borrower will receive ranges between $1,000 and $20,000, but some eligible borrowers may receive less than $1,000 and others may receive more than $20,000. The number of borrowers who may receive compensation under both plans is estimated to be between 3,700 and possibly more than 10,000.

How The MERS' Mess Is Addressed In 50-State AG Foreclosure Fraud Settlement May Be Troublesome (& Troubling For Homeowners)

A recent New York Times column on the settlement talks involving the 50-state attorney general foreclosure fraud probe highlights an issue that has not been resolved and should, at least in theory, be difficult for the banksters to do so:

• A looming issue relates to the potential liability stemming from the Mortgage Electronic Registry Systems, or MERS.

***

• Lawyers challenged MERS’s ability to bring foreclosure proceedings because the system does not technically own the security or note underlying properties, as required. While some courts have not objected to MERS’s foreclosing in place of banks, others have. New York courts, for instance, have been increasingly hostile to MERS.



• In a February 2011 opinion, Robert E. Grossman, a federal judge on in Long Island, wrote: “This court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”



• Equally troubling for MERS is the fact that its officials have filed questionable documents with courts attesting to ownership of the notes and other significant matters. These practices have consequences, as described by R. K. Arnold, MERS’s former president, in a 2006 deposition.



• “We are heavily at risk as far as, you know, having to follow the rules of the court and enforcing our rules that our members must go by,” he said. “We also have jeopardy as far as if we were to fail in the foreclosure realm.”



• David Pelligrinelli, president of AFX Title, a title search company, said MERS contributed to the problem of thousands of mortgages lacking a complete ownership chain. “You can’t go back and redocument all these things, because some of the companies aren’t around anymore,” he said. “Even if they are, the charters for these companies don’t allow for backdating of assignments.”



• How MERS and its bank owners will fare with the attorneys general is unclear. The early term sheet for the possible settlement said only this: “Issues relating to the use and performance of MERS are reserved for further discussion.” Those further discussions may be taking place now. It’s a good bet that the banks want a comprehensive release from liability relating to MERS.

For more, see The Banks Still Want a Waiver.

See also, MERS? It May Have Swallowed Your Loan.

Suit: Saxon, Ocwen Stiffed Pennsylvania Homeowners Seeking Loan Mods; Complaint Seeks Class Action Status As HAMP Federal Litigation Parade Marches On

From a press release from the Philadelphia, Pennsylvania-based law firm of Berger & Montague, P.C.:

• The law firms of Berger & Montague, P.C. and Ann Miller, LLC have filed a Class Action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of all Pennsylvania homeowners whose mortgage loans have been serviced by Saxon Mortgage Services, Inc. and/or Ocwen Loan Servicing, LLC, and who, since April 13, 2009, (1) have entered into a Trial Period Plan ("TPP") contract with Defendants and made all payments as required by their TPP contract and complied with Defendants' requests for documentation, and (2) have not received or have been denied a permanent Home Affordable Modification Agreement in accord with the U.S. Department of the Treasury's Home Affordable Modification Program ("HAMP") rules.

For more, see Pennsylvania Homeowners File Class Action Against Saxon Mortgage Services, Inc. and Ocwen Mortgage Servicing, LLC for Wrongfully Denying Mortgage Modifications.

Banksters' Legal Costs Continue To Pile Up; Continued Bleeding Attributed Significantly To Foreclosure, Mortgage Issues

Housing Wire reports:

• Legal expenses at Bank of America and JPMorgan Chase more than doubled for the second quarter from the previous period, according to each bank's financial documents.



• BofA reported $1.9 billion in litigation expenses for the second quarter, most of it related to its foreclosure and mortgage issues. It's an increase from $785 million for the previous quarter.



• Chase reported $1.3 billion in legal expenses for the second quarter, more than triple from the $400 million for the previous quarter and nearly double the $700 million added to reserves one year ago. However, legal expenses peaked in the fourth quarter of 2010 at $1.5 billion.

For more, see Litigation costs mount at BofA, Chase over foreclosure, mortgage issues.

Robosigner List Update

From Fraud Digest:

• 1. Who were the top mortgage document signers in the first half of 2011?
• 2. Which trusts that closed in 2005, 2006 and 2007 repeatedly filed mortgage assignments signed and notarized in 2011?
• 3. Who was the most prolific MERS Certifying Officer in the first half of 2011?
• 4. Which law firm used the following phrase instead of an actual date for the assignments:

"At or before the ensealing and delivery of these presents the receipt whereof is hereby acknowledged…”

For the answers to these questions, see Fraud Digest: WHO’S SIGNING NOW?

Thanks to Deontos for the heads-up.

Among the listed outfits using these robosigners are:

• American Home Mortgage Servicing in Jacksonville,
• Aurora Loan Services in Scotts Bluff, Nebraska,
• BAC Home Loan Servicing in Simi Valley, California,
• Carrington Mortgage Services, LLC in Santa Ana, California,
• CitiMortgage in St. Charles, Missouri,
• GMAC in Upper Dublin Township, Pennsylvania,
• HomEq Servicing in North Highlands, California,
• HSBC Mortgage Corp. in Depew, New York,
• IndyMac Mortgage Services in Austin, Texas,
• JP Morgan Chase in Jacksonville, Florida,
• Litton Loan Servicing in Dallas, Texas,
• Nationwide Title Clearing in Palm Harbor, Florida,
• Ocwen Loan Servicing, LLC in West Palm Beach, Florida,
• Orion Financial Group in Southlake, Texas,
• Saxon Mortgage Service in Fort Worth, Texas,
• Select Portfolio Servicing in Salt Lake City, Utah,
• Wells Fargo Home Mortgage in Minneapolis, Minnesota.

Banksters Go For The Kill In 50-State AG Settlement Talks; Demand Broad Liability Release Over Sloppy, Fraudulent Foreclosure Practices; 2 AGs Resist

Bloomberg reports:

• A push by U.S. banks to win broad liability releases has become one of the main obstacles in talks to resolve a nationwide probe of mortgage-servicing and foreclosure practices, two people briefed on the matter said.



• The mortgage servicers want protection from additional state and federal claims over their mortgage practices as part of reaching a settlement that may exceed $20 billion, according to the people, who declined to be named because the talks are private. The banks are seeking releases that go beyond servicing of mortgages to include lending and securitization of loans, one of the people said.



• That effort has encountered resistance from at least two states. Delaware Attorney General Beau Biden and New York Attorney General Eric Schneiderman, who are investigating the bundling of mortgage loans into securities, don’t want their probes blocked by a broad settlement of liability.

For more, see Foreclosure Deal Said to Be Held Up Over Liability Releases.

Florida Foreclosure Document Sweatshop's Campaign Cash To New State AG May Explain Recent Firings Of Duo Heading Up Major Fraud Probe

In Tampa, Florida, a recent story by University of South Florida's WUSF Radio contains the following tidbit addressing a possible reason for the firing of foreclosure fraud investigators Theresa Edwards and her friend and colleague, June Clarkson:

• Edwards says there’s another possible explanation. “I don’t really know, but I think there was political pressure to cause this to happen,” she said.



• She declined to say more than that, but others point to Lender Processing Services. They’re a Jacksonville-based company Edwards and Clarkson were investigating.



• If you look at campaign contributions to Bondi, a certain address comes up a lot: 601 Riverside Avenue in Jacksonville. It’s the home of Lender Processing Services, its subsidiaries, and the company it recently spun off from, Fidelity National Financial.



• Altogether, those companies gave $6,500 to Bondi’s campaign directly. They also gave $78,000 to the Republican Party of Florida – which was itself a major funder of Bondi’s campaign.



• Finally, Lender Processing Services recently hired a new senior vice president for government affairs – Joe Jacquot, who until recently was an assistant attorney general for Bondi.



• Lender Processing Services did not respond to a request for an interview. Jacquot told the Sarasota Herald-Tribune that he has “no particular insight” into the investigation against Lender Processing Services.

For the story, see Bondi: Poor Performance, not Politics Led to Ouster of Robo-signing Investigators.

Register Of Deeds Refers Head Of Michigan Foreclosure Mill To Law Enforcement Authorities For Criminal Probe

The Michigan Messenger reports:

• Ingham County Register of Deeds Curtis Hertel Jr. has referred a top attorney from Orlans Associates, one of Michigan’s largest mortgage foreclosure law firms, to law enforcement for a criminal investigation of allegations of robo-signing.



• Hertel tells Michigan Messenger that he referred Marshall Isaacs and examples of his signatures filed at the Ingham County Register of Deeds to law enforcement because he believes Isaacs did not sign all the legal documents. Hertel declined to identify the law enforcement agencies involved, but did note that there were at least two interested in the Isaacs case.

For more, see Hertel refers Orlans attorney for criminal investigation.

Bar Staff Opinion: Florida Attorneys Representing Foreclosing Lenders Obliged To Step Up & Take Action When Questionable Affidavits Come To Light

American Banker reports:

• A Florida Bar Association opinion could have costly legal ramifications for banks embroiled in the robosigning controversy.



• According to the staff opinion, a bank with a large portfolio of mortgages approached a law firm it had hired to process foreclosures and asked it to stop doing so because of potential problems with the foreclosure documents.



• The lawyer requesting the opinion wanted to know the Florida Bar's stance on whether his office's filing of questionable affidavits in foreclosure cases was a violation of the law. According to the lawyer, replacing the affidavits in questions could raise red flags for 1,000 pending foreclosures as well as 18,000 completed foreclosures.



• And although the unidentified lawyer expressed confidence that replacing the questionable affidavits would not change the outcome of the foreclosure actions, he noted that doing so could result in costly litigation for the bank.



• Although at the time the questionable affidavits were filed, the lawyer's office had no grounds to know whether they might contain false information, the Florida Bar informed the lawyer that based upon the new revelations from the bank, he was obliged to take action.



• According to the Florida Bar, the lawyer should tell the bank to correct the affidavits, and that if the bank fails to do so, then the lawyer should withdraw from the case.



• Further, if the bank fails to step up to the plate, the lawyer is obligated to reveal to the court the fact that there has been an improperly verified and notarized affidavit filed in every one of the foreclosure cases that he processed, whether or not they are pending or already closed.(1)

Source: Florida Bar Opines.

See also, The Florida Bar News: Lawyers obligated to disclose faulty foreclosure paperwork.

(1) The next question to be addressed, in those cases that resulted in foreclosure sales, would be whether the defect in the affidavit is significant enough to render the subsequently-obtained foreclosure judgment (and, consequently, the foreclosure sale):

• absolutely void (in which case an action can generally be brought at any time to undo the foreclosure sale - and will necessarily obliterate the entire portion of the chain of title to the property created on and after the date of the foreclosure sale), or


• merely voidable (in which case an action to undo the foreclosure sale is subject to certain time limitations, and will have no effect on the rights of a foreclosure buyer, but only if said buyer qualifies for protection as a bona fide purchaser).

Sloppy Paperwork, Fraudulent Banksters, F'closure Mill Sweatshops, Robosigners Make Title Insurance More Necessary Than Ever For Real Estate Buyers

Imperial Valley News reports:

• Today’s housing market, with sometimes sloppy foreclosure procedures and corner-cutting sellers, makes owner’s title insurance more important than ever, and a growing number of home-buyers are warding off potential real estate problems with this proactive type of insurance.



• Owner’s title insurance can offer homeowners protection against many legal hazards (incorrect notary acknowledgements, previously undisclosed heirs to the property and even counterfeit land deeds) that can emerge, usually after the completion of a real estate purchase.



• Most lenders require home-buyers to purchase lender’s title insurance when they obtain a loan, but this only protects the lender’s investment when problems occur. Owner’s title insurance provides coverage to homebuyers for as long as they or their heirs own the property. For a one-time fee, it gives the insured the best possible chance for avoiding title claim and loss.



• After your sales contract has been accepted, a title professional will search the public records to look for any problems with the home’s title. This search typically involves a review of land records and title problems that are fixed before you go to closing. Owner’s title insurance comes into play after settlement when previously undisclosed problems arise.(1)

Source: Ensuring Sound Real Estate Purchases.

(1) Title losses arise from three principal sources: (1) Errors in searching the records, (2) errors in interpreting the legal effect of those records, (3) facts outside the records, known as “off-record risks," or 'hidden hazards'. See, generally:

• Straw, Ralph L. Jr., Off-Record Risks for Bona Fide Purchasers of Interests in Real Property, 72 Dick. L. Rev. 35 (1967-1968) for a general discussion of the various 'hidden hazards' that face bona fide purchasers of interests in real estate.

The following list identifies 35 off-record risks, or "hidden hazards," that a title insurance policy protects a homeowner and mortgage lender against:

• false personation of the true owner of the land,
• forged deeds, releases, etc.,
• instruments executed under fabricated or expired power of attorney,
• deeds delivered after death of grantor or grantee, or without consent of grantor,
• deeds to or from defunct corporations (in the context of sloppy or fraudulent foreclosures, this presumably also refers to affidavits and assignments of mortgage to or from defunct corporations),
• undisclosed or missing heirs,
• misinterpretation of wills,
• deeds by persons of unsound mind,
• deeds by minors,
• deeds by aliens,
• deeds by persons supposedly single but secretly married,
• birth or adoption of children after date of a will,
• surviving children omitted from a will,
• mistakes in recording legal documents,
• want of jurisdiction of persons in judicial proceedings (ie. where a court lacks subject matter jurisdiction over a case, or where it lacks personal jurisdiction over a defendant, for example, failure to properly serve a defendant with legal process), thereby leading to judgments that are either void or voidable,
• discovery of will of apparent intestate,
• errors in indexing,
• falsification of records,
• capacity of foreign fiduciaries,
• claims of creditors against property sold by heirs or devisees,
• deeds in lieu of foreclosure given under duress,
• ultra vires deed given under false corporate resolution,
• easements by prescription not discovered by a survey,
• deed of community property recited to be separate property,
• errors in tax records (ie. listing payment against wrong property),
• deed from a bigamous couple,
• defective acknowledgements (ie. notary public screw-ups when notarizing legal documents - not uncommon in the context of sloppy or fraudulent foreclosures),
• federal condemnation without filing notice,
• descriptions apparently, but not actually, adequate,
• corporation franchise taxes, a lien on all corporate assets,
• erroneous reports furnished by tax officials,
• administration of estates of persons absent but not deceased,
• undisclosed divorce of spouse who conveys as consort's heir,
• marital rights of spouse purportedly, but not legally, divorced,
• duress in execution of instruments.

New California Law To Prohibit Consenting Junior Lienholders From Scoring Deficiency Judgments On Short Sales

American Banker reports:

• The California Association of Realtors declared victory in getting a bill signed into law that prohibits junior lien holders from pursuing a deficiency judgment on short sales. For some homeowners the prospect of a deficiency judgment hanging over their heads was a deterrent to giving up their homes through a short sale or strategic default.



• Gov. Jerry Brown signed the bill, sponsored by state Senate Majority Leader Ellen Corbett, D-San Leandro, into law last week. The law limits any lien holder from going after borrowers if the sale of a home does not satisfy the entire mortgage balance.(1)

For more, see Short Sale Deterrent Eliminated By New California Law.

(1) See Lexology: California legislature fixes “short sale” law, which points out that only junior lienholders who consent to the short sale will be precluded from suing for any deficiency (requires subscription; if no subscription, TRY HERE):

• [T]he holder of a second priority deed of trust (such as a lender who has obtained a second deed of trust to secure a home equity line of credit (“HELOC”)) who consents to a short sale of the dwelling is also precluded from obtaining a personal judgment against the borrower.
  
  This change was intended to benefit borrowers but may have the opposite effect in some circumstances. Under existing law, a foreclosure under the senior deed of trust terminates the junior deed of trust and, in most circumstances, entitles the holder of the junior deed of trust to proceed against the borrower for a personal judgment.
  
  Under SB 458, the holder of the second deed of trust may conclude that it is preferable to refuse to consent to a short sale, allow the holder of the first deed of trust to foreclose, and then sue the borrower for the amount owed on the note secured by the second deed of trust.

Chase Targeted In Proposed Class Action With Allegations Of Ignoring Legal Obligations, Violating Rights Of Tenants In Foreclosed Homes

The following excerpt has been lifted from a recent lawsuit, filed in Los Angeles, California and that seeks class action status, against JPMorgan Chase accusing it of illegal conduct designed to drive tenants in foreclosed properties out of their homes in violation of local rent control laws:

• JP Morgan Chase Bank's "evict and sell" business model, in summary, goes as follows: When JP Morgan Chase Bank becomes the owner of a foreclosed property, JP Morgan Chase Bank chooses to evict whatever tenants reside at the property in order to enhance the property's sale prospects.
  
  JP Morgan Chase Bank has no intent in becoming a landlord of the property or to comply with the law as it concerns the innocent tenants residing on the property.
  
  In furtherance of JP Morgan Chase Bank's scheme, JP Morgan Chase Bank uses realtors to sell the properties and "handle" the tenants prior to eviction. The realtors only get paid if the property is sold, so the realtors do everything possible to force the tenants off the property.
  
  They have no incentive or desire to comply with LARSO [Los Angeles Rent Stabilization Ordinance] and help the respective foreclosing bank manage the rental property as a landlord.
  
  When JP Morgan Chase Bank cannot force tenants to vacate properties by deception and intimidation, JP Morgan Chase Bank resorts to high volume, "eviction mill" attorneys to handle the preparation and service of eviction notices and the filing of Unlawful Detainer complaints.
  
  The attorneys' job is not difficult and is to illegally force the tenant off the property in violation of LARSO by serving a notice to quit, wait the notice period (whether 30, 60, or 90 days), and then file a Judicial Council form unlawful detainer lawsuit. Under general State law, no reason is required for an eviction as long as the bank provides the proper notice period. As far as JP Morgan Chase Bank is concerned, the "evict and sell" business model is efficient, quick, and cheap.
  
  The "evict and sell" business model, though, is not legal in the City of Los Angeles, where an entire body of rent control laws protecting tenants - LARSO, protects tenants and promotes stable communities. Evictions must be supported by "good cause," rather than at the owner's whim.
  
  Moreover, landlords are required to pay tenants fixed relocation assistance when they intend on taking the rental unit off the market, which is the intent of all the banks, including JPMorgan Chase Bank, when foreclosing upon the subject properties, especially when the tenant resides in an "illegal unit."

***

• Many of these tenants that are being subjected to JP Morgan Chase Bank's "evict and sell" model are the poorest of the poor and live in intolerable conditions. Also, they do not know their rights or cannot defend themselves against these multi-billion dollar institutions bent on throwing them out of their homes.

***

• To further expedite the vacating ofthe units, JP Morgan Chase Bank generally refuses to undertake the necessary repairs or cuts the tenant's utilities. [...] Within the broader group ofLos Angeles tenants falling victim to the JP Morgan Chase Bank's "evict and sell" model, there is a subset of the poorest, often minority residents of Los Angeles living in basements, attics, garages, storage rooms, in corners of a house that have been haphazardly separated by drywall - all of which have been illegally converted into living quarters with varied levels of bathroom, kitchen, and entrance.
  
  These converted spaces share the same basis of illegality in that these now-dwelling units have been constructed without permits, without the watchful eye of local regulatory agencies, and not in conformity with the laws intended to protect the illegal unit's human habitants. Thus, these illegal units have not been granted a Certificate of Occupancy issued by the City ofLos Angeles Department of Building and Safety ("LADBS").
  
  Because of the inherent danger of these illegal units, the City of Los Angeles deems them "unapproved" for occupancy. In other words, their existence for the purpose of human habitation is illegal. In such situations, landlords are required to either (a) sufficiently remediate the illegal unit so as to obtain a Certificate of Occupancy and make it habitable, which the banks steadfastly refuse to do, or (b) relocate the tenant and pay the tenant a relocation fee fixed by LARSO.
  
  Notwithstanding JP Morgan Chase Bank's legal obligations as landlords under rent control, JP Morgan Chase Bank has instead chosen to steadfastly continue with its "evict and sell" model without paying the tenants relocation fees as mandated by LARSO.

For the entire lawsuit, see Gonzalez v. JPMorgan Chase Bank, National Association.

Thanks to Deontos for the heads-up on this litigation.

Florida AG Responds To Recently-Dumped Foreclosure Fraud Fighters With Mud-Slinging Rip Job

The Palm Beach Post reports:

• The Florida Attorney General's Office released a cutting statement Thursday criticizing the work of two former state foreclosure fraud investigators after a week of national attention paid to the duo's forced resignations.



• Carlos Muniz, deputy attorney general and chief of staff in Attorney General Pam Bondi's office, said the performance of former Assistant Attorneys General Theresa Edwards and June Clarkson was "unacceptable" and that they were given the option to resign or be fired because of their "failure to improve after multiple warnings."



• The Palm Beach Post first reported their departure on July 13. Edwards and Clarkson, who resigned their jobs at the South Florida bureau of the office's Economic Crimes Section on May 20, had been investigating the state's so-called "foreclosure mills," uncovering evidence of legal malpractice that also implicated banks and loan servicers.



• In his statement Thursday, Muniz refers to an April 28 review of the South Florida bureau and Chief Assistant Attorney General Robert Julian that lists staff shortcomings, including "proper identification and analysis of legal issues" and "professionalism to opposing counsel." "Hopefully improvement will be made in these areas in the future," the review concluded. It does not mention Edwards or Clarkson by name.



• Just seven days earlier, in an interim evaluation of Edwards, Julian praised her work, saying it has been "instrumental in triggering a nationwide review" of foreclosure practices. "I cannot overstate the degree to which I respect Ms. Edwards and her work with this unit," Julian wrote.



• Edwards said Julian was assigned to another position in Fort Lauderdale in June.

For more, see State rips job quality of two fired foreclosure fraud investigators.

See also:

• Florida AG’s Politically Motivated Firings Protect the Foreclosure Fraud Industry,
• State defends ousters of foreclosure investigators.

Loot From Settlement Between Washington AG & 'Stagecoach To Hell' Over Alleged 'Pick-A-Pay' Predatory Home Loan Racket To Fund Ongoing Free Legal Help

In Yakima, Washington, KIMA-TV Channel 29 reports:

• The Washington State Bar Association (WSBA) is pleased to announce that its Home Foreclosure Legal Aid Project will continue to help homeowners for another two years. The program provides free legal assistance to low- and moderate-income homeowners whose homes are in danger of foreclosure.



• Since the program’s inception in June 2009, the WSBA; its program partner, the Northwest Justice Project (NJP); and hundreds of volunteer lawyers have helped Washington families in crisis.



• Program continuation and expansion is made possible by a $1.1 million grant from the Washington Attorney General’s Office to the Washington State Bar Foundation, the WSBA’s charitable arm.



• Funds came from a settlement the Attorney General’s Consumer Protection Division reached with Wells Fargo regarding its ―Pick a Pay loan scheme. These funds are enabling the WSBA to extend the project through June 2013, and expand staff attorney capacity.



• The additional attorneys and support staff will provide greater presence in the three counties with the highest rates of foreclosure (King, Pierce, and Snohomish), and they will be able to provide enhanced training and support for the lawyer volunteers.

For the story, see Home Foreclosure Legal Aid Project Continues.

Vacant Foreclosed Homes Without Electrical Service Left Lingering By Negilgent Banksters Leading To Economic Boom For Mold Abatement Outfits?

NPR reports:

• As huge numbers of foreclosed homes continue to work their way through the real estate pipeline, another problem is blossoming — mold. In most homes, as residents go in and out and the seasons change, natural ventilation sucks moisture up to the attic and out through the roof. It's called the "stack effect." And in many parts of the country, it's driven by air conditioning in the summer and heat in the winter.



• But no one is going in or out of most foreclosed homes — regardless of climate — and the effects can be devastating.



• In some states, it's estimated that more than half of foreclosed homes have mold and mildew issues. Realtors across the country say they're seeing the problem in everything from bungalows to mansions.



• Bob Bennett runs Farsight Management in northeastern Ohio, specializing in cleaning up water-damaged buildings. A full quarter of his work now comes from moldy, foreclosed homes where the electricity has been shut off. No electricity means no sump pump or dehumidifier for months, even years, and that often means mold — slimy black or green patches creeping up drywall and blanketing bathroom fixtures.

***

• Even minor mold abatement can start at $5,000 and cost much, much more. In this particular case, Bennett estimates a price tag of more than $6,000, plus the cost of new floors, walls and carpet.(1) He wears a head-to-toe protective suit on most jobs.

For more, see As Number Of Foreclosed Homes Grows, So Does Mold.

(1) With price tags running into the thousand$, I wouldn't be surprised if the mortgage servicing fraudsters begin gravitating into the mold abatement business in search of a new 'revenue stream' with which to continue the screwing over being given to investors holding the 'moldy' mortgage-backed paper the banksters unloaded on them.

Housing Code Violations Surge As Residential Buildings Fall Into Foreclosure, Leaving Hapless Tenants In Deteriorating Apartments To Pay The Price

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

• More city apartment buildings are going into foreclosure - and low-income neighborhoods in Brooklyn are among the hardest hit. The foreclosure crisis that engulfed individual homeowners has also hit larger buildings, with more getting slapped with foreclosures in the last two years than any time since the early 1990s, according to a new report by New York University's Furman Center for Real Estate and Urban Policy.



• It's often tenants who pay the price when landlords can't pay the bills, with living conditions deteriorating when a building is foreclosed, the study said. There were 730 apartment building foreclosures in Brooklyn in 2009 and 2010 - up from 454 in the previous two years and the most in any borough.

***

• The researchers found that housing code violations surge 21% around the time a building is foreclosed - and the problem has even extended to some of the borough's more affluent neighborhoods.



• At 294 Fifth Ave. in Park Slope, which went into foreclosure two years ago, tenants are dealing with 131 open violations, from leaky roofs to broken locks. "I'm here alone with these problems. Nobody helps me," said tenant Eulogia Hevandez, 73, who said her kitchen sink has been broken for a month. "I need somebody to fix it .... I use a bucket instead of my kitchen sink."



• She pointed to numerous dark stains and chipped paint left on her apartment ceiling by leaks and showed a visitor a bill for $140 that she had to pay herself to replace the broken lock on her apartment door. "I have to spend my own money to fix this apartment," she said. "I live alone. I'm afraid. I need to lock my door."

For the story, see Foreclosures on apartment buildings surge reducing living conditions for tenants.

Major Harlem Landlords Pocketed Million$ While Leaving Thousands Of Overleveraged Housing Units & Their Residents Sucking Wind

In New York City, The New York Times reports:

• At Riverton Houses, a middle- and working-class apartment complex in Harlem, residents noticed a few changes after new owners came in. Lobbies were renovated. New elevators were installed. A decorative fence went up around the entire property.



• Nearby, the new owners of another complex, Delano Village, were doing similar work with the same goal, to replace rent-stabilized tenants with ones paying market rates.



• But while they were making improvements — some of which they would eventually charge to tenants — the new owners were piling on debt that their rental income could not support.



• Yet in each case, they have not exactly suffered: despite plunging the buildings into financial despair, each has been able to take tens of millions of dollars in cash out of the properties.



• What the owners did was legal, and in the microcosm of a few square blocks of Manhattan, it tells a story of the nation’s real estate bubble and collapse. As millions of homeowners did, but on a much larger scale, the owners refinanced their properties, finding lenders willing to give them far more money than the buildings turned out to be worth.



• When they refinanced, the owners of Riverton took out as much as $60 million in cash, and the owners of Delano Village, which they renamed Savoy Park, initially took out as much as $105 million, according to loan documents, credit analysts and lenders.

For more, see In Harlem Buildings, Reminders of Easy Money and the Financial Crisis.

Renters In 60 Properties May Have To Pack Their Bags As Another Landlord Stiffs Bank, Utilities Out Of Payments; Water, Electric Shutoffs Threatened

In Mason City, Iowa, the Globe Gazette reports:

• City Administrator Brent Trout and others are working to resolve a housing crisis caused by an apparent negligent landlord, affecting tenants in 60 properties in Mason City. US Bank has filed foreclose papers on one property. In other cases, tenants whose utility payments are included in their rent have been told their utilities will be shut off for lack of payment. Garbage has piled up around some of the properties, creating a public health hazard.



• All of the properties are owned by Mike Hammond of Hammond Estates, Swea City. Repeated calls to Hammond’s office have gone unanswered. Hammond purchased many of the properties on contract from Matthew and Christine Birkey of Clermont, Fla., formerly of Mason City, according to court records.



• Trout has taken several steps to make sure tenants affected are not left homeless and have utility and garbage service. The city’s Neighborhood Services personnel was directed to check all Hammond properties and pick up the garbage.



• “It is a health and safety issue,” said Trout. “The costs associated with the cleanup will be assessed to Mr. Hammond’s property.”



• The city has agreed to not shut off the water until tenants can find other living arrangements. Trout also has contacted Alliant Energy to try to postpone shutting off tenants’ electricity until other living arrangements can be made.

For more, see Apparent landlord negligence causes crisis for tenants.

Neglect, Deterioration, Water Shutoffs, Landowner Facing Foreclosure All Leave Mobile Home Park Residents Fearing The Worst

In Glenview, Illinois, the Chicago Tribune reports:

• After his wife died, retired plumber Leonard Selinsky tried to simplify his life by moving into Sunset Village, a mobile home park in Glenview with tidy homes and friendly neighbors. His new home is no trailer — it's a two-story Cape Cod with three bedrooms and an attic. "I love my house," he said. "This is ideal for me."



• But in recent years, Selinsky and other residents say, the park's streets have been crumbling, water service has cut out for days at a time and they can't drink the water because it's contaminated. Now, the situation has worsened: Sunset Village is in foreclosure, and residents fear it could be sold and demolished, leaving them with homes they can't afford to move.

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• Once derided as trailers, mobile homes are now commonly called "manufactured homes." Most stay on one site for good. Moving such a structure can cost $10,000 or more, so most residents can't afford to leave, according to Terry Nelson, president of the Mobile Home Owners Association of Illinois.



• Unlike real estate, which is expected to appreciate in value, manufactured homes often lose value, Nelson said. Homeowners at Sunset Village have bought new homes for up to $118,000 but can't sell them for half that. They don't pay property taxes but say they do pay about $950 a month in rent for the ground beneath their homes.



• Anita Noel, secretary of the residents association, said years of neglect at the park have made it impossible for those who live there to sell their homes. The lack of maintenance has brought lawsuits from the village and the state in recent years.

For more, see Residents of foreclosed mobile home park fight to control their future (If their efforts fail, the families might be priced out of Glenview).