Rogue Ch. 7 Bkptcy Trustee's Attempt To Block Debtor Conversion To Ch. 13, Then Pocket Cash By Rent Skimming Upside Down Homestead Gets Judicial Boot

From the Florida Bankruptcy Law Blog:

• I’ve written recently about some Chapter 7 trustees trying to take or administer “upside down” homestead properties when the bankruptcy debtor chooses not to claim a homestead exemption because their home has no equity.



• The debtors purposefully avoid claiming the homestead exemption in order to then qualify for the $4,000 wildcard exemption [available under applicable non-bankruptcy, state law - Section 222.25(4), Florida Statutes] that they can employ to protect cars and other personal property. Some trustees argue that since they can administer for the benefit of creditors all non-exempt debtor property they have the right to get money from the debtor’s homestead by, for example, making the debtors pay rent or by forcing a short sale of the upside down home.



• A bankruptcy judge in south Florida rebuked a Chapter 7 trustee who wanted to take the upside down homestead and make the debtors pay rent to live there.



• The trustee would collect rent but let the mortgage go into default (ie. 'rent skimming'). The trustee would then distribute rent collected to the unsecured creditors until the inevitable foreclosure.



• The debtors in this case tried to save their upside down home from a Chapter 7 trustee by converting to Chapter 13. The Chapter 7 trustee tried to block the conversion; he argued that if the debtors wanted to save their homestead they should claim the homestead exemption and forfeit the wildcard exemption that had been protecting their cars. He said the debtors’ conversion was in bad faith.



• The judge pointed out that a Chapter 7 trustee owes a fiduciary duty to all parties including unsecured creditors, secured creditors (mortgage company), and the debtors themselves. The trustees position, said the judge, ignores his fiduciary obligation to the debtors and the mortgagee. He said, “The Trustee’s proposed administration of this case would have allowed the Debtors’ home to be sold to a vulture-investor imply so that the Trustee could collect rent prior to a default on the mortgage and tax obligation.”



• The court went on to say that, “The Trustee’s position...is misguided and wholly inappropriate.”(1)



• This decision should be used to protect debtors who try to extort money settlements from honest debtors by threatening to confiscate their upside down homesteads.

Source: Court Rebukes Chapter 7 Trustee's Attack On Debtors' Upside Down Homestead.

For the ruling, see In re Luban, Case No. 11-13633-AJC (Bankr. S.D. Fla., September 15, 2011).

For more on out-of-control Chapter 7 Trustees attempting to use over-the-top tactics to screw Florida homeowners in bankruptcy cases, see:

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



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

(1) In elaborating on the arguably egregious proposal by the Chapter 7 trustee, U.S. Bankruptcy Judge A. Jay Cristol made this point:

• The Court seriously questions how it advances the purpose of the Bankruptcy Code for a Chapter 7 Trustee to administer this estate. The assets to be marshaled would be split among the Trustee and his professionals, leaving perhaps a small percentage of value for unsecured creditors.
• However, the costs inflicted by such administration may include:
  
  (a) honest Debtors in need of a fresh start and their disabled son being driven from their home despite (or perhaps because of) the fact they are current on their mortgages;
  
  (b) a $133,857.00 first mortgage that is being paid going into default and the lien holder necessarily incurring the costs of a foreclosure action;
  
  (c) a $100,165.00 under-secured second mortgage that is being paid also going into default and the creditor likely suffering a significant loss;
  
  (d) a Miami-Dade County real property tax obligation that is being paid going into delinquency; and
  
  (e) another Miami-Dade County single family home going into foreclosure, and needlessly adding another case to an already-overburdened court system.
  
• The Trustee's position in this case is misguided and wholly inappropriate. The Trustee appears to want to administer a fully secured asset primarily for his benefit and the benefit of his professionals, at great cost to the Debtors' interests and at great cost to the interests of the first and second mortgage holders, not to mention whatever damage would result to Miami-Dade County for delinquent tax revenues.

Jury Convicts 'Dream Homes' Founder, Ponzi Scheme Operator; Racket Promised Home Loan Eliminations In Exchange For Upfront Payments

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

• A federal jury convicted Andrew Hamilton Williams, Jr., age 60, of Hollywood, Florida today of fraud conspiracy, wire fraud and conspiracy to commit money laundering in connection with his 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.

***

• According to evidence presented at the two week trial, beginning in 2005, Williams and his conspirators targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange for a minimum of $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’ mortgage within five to seven years.

For the entire press release, see Owner and Founder of “Metro Dream Homes” Convicted In $78 Million Mortgage Fraud Scheme (Conspirators Spent Millions of Dollars of Investor Funds to Employ Chauffeurs and Maintain a Fleet of Luxury Cars, Travel in Luxury to the NFL Super Bowl and NBA All-Star Game, Pay Off Prior Investors as Part of a Ponzi Scheme, and Fund Failed Investment Ventures and Undisclosed Third Party Businesses).

Beginning Of A Well-Deserved End For NYS Foreclosure Mill Sweatshop? Freddie Gives Baum The Boot; Whether Others Follow Suit Remains To Be Seen

In Buffalo, New York, The Buffalo News reports:

• National mortgage servicing giant Freddie Mac has barred its loan servicers from referring any new foreclosure or bankruptcy cases in New York State to Steven J. Baum PC, delivering a severe blow to a firm that depends on such work.



• According to a new bulletin posted on the Freddie Mac website on Thursday, effective "on or after" Nov. 10, the Amherst-based law firm is no longer an approved option for the many mortgage lenders that work with Freddie Mac.

***

• Baum has been under heavy fire around the state, and even nationwide, for the firm's role in mortgage foreclosures and the "robo-signing" controversy. He and his firm have been castigated not only by consumers and consumer advocates, but also by other attorneys and even some judges, who have criticized the firm's paperwork as sloppy and riddled with errors.

***

• Most recently, it's been denounced for making fun of foreclosure victims, after photos emerged from the firm's Halloween party last year,(1) showing staff dressed up in costumes as debtors and, in one case, mocking a New York City attorney. The attorney, Susan Chana Lask, sued the firm in 2010 on behalf of a client, and then fought off a defamation suit from Baum.



• "This looks like the beginning of a well-deserved end for Baum," Lask said.

For more, see Freddie Mac bans Baum from N.Y. loan service.

(1) See The New York Times: What the Costumes Reveal.

Another County Takes Shot At Banksters Over Unpaid Fees For Unrecorded Mortgage Assignments; Lawsuit Seeks Class Status For All Pennsylvania Counties

In Washington County, Pennsylvania, the Pittsburgh Tribune Review reports:

• Pennsylvania's 67 counties may have lost $100 million in fees because of a system that assigns mortgages without recording documents in county courthouses, according to a lawsuit filed by Washington County.



• The county sued U.S. Bank Corp. of Minneapolis in Washington County Court, claiming the bank failed to pay a $52 recording fee when it acquired residential properties bundled in investment securities and sold them through the Mortgage Electronic Registration System Inc. of Reston, Va., known as MERS.

***

• In the lawsuit, Washington County estimated it lost $1.6 million in recording fees over seven years from U.S. Bank's failure to record mortgages it acquired. Based on the estimated losses, about 30,470 mortgages were not recorded in the county.



• Washington County Recorder of Deeds Deborah Bardella said that estimate may be low because the county does not know how many times the mortgages were assigned to different investors.



• The lawsuit, filed Sept. 28, not only wants restitution from U.S. Bank but asks the court to require the bank to record prior mortgage assignments on all properties on which it foreclosed. The county also is seeking class-action status that would cover the lost recording fees in the state's 67 counties.

For more, see Counties lose $100 million in fees, suit claims.

8th Circuit Bankruptcy Appeals Panel OKs Chapter 13 Lien Stripping Move

In St. Paul, Minnesota, the Pioneer Press reports on a story of a homeowner/couple and their successful effort at getting a United States Bankruptcy Appellate Panel (made up of 3 bankruptcy judges) for the 8th Circuit Court of Appeals to allow for a lien stripping of a 2nd and 3rd lien on thier home where the amount owed on the first mortgage exceeded the value of the residence.

In obtaining the favorable ruling, the the couple convinced the appellate panel to overturn an earlier ruling of the bankruptcy judge who initially heard the case and ruled against the homeowners' move.

Reportedly, the appellate panel's decision is being appealed to the full 8th Circuit Court of Appeals, but attorneys say they expect the panel's decision to stand, as it mirrors decisions in other circuits,(1) the story states.(2)

For the story, see Bankruptcy made easier: Appeals court decision allows stripping of second mortgages.

For the court ruling, see Fisette v. Keller (In re Fisette), 455 B.R. 177 (B.A.P. 8th Cir. 2011).

Go here for other posts on lien stripping in bankruptcy cases.

(1) The court made the following observation in connection with this point:

• We agree with courts holding that §1322(b)(2) does not bar a Chapter 13 debtor from stripping off a wholly unsecured lien on his principal residence, a position that has been adopted by all Circuit Courts of Appeal to address this issue. See, e.g., Zimmer v. PSB Lending Corp. (In re Zimmer), 313 F.3d 1220 (9th Cir. 2002); Lane v. W. Interstate Bancorp (In re Lane), 280 F.3d 663 (6th Cir. 2002); Pond, 252 F.3d at 127; Tanner v. FirstPlus Fin., Inc. (In re Tanner), 217 F.3d 1357 (11th Cir. 2000);[2] In re Bartee, 212 F.3d 277 (5th Cir. 2000); McDonald v. Master Fin. Inc. (In re McDonald), 205 F.3d 606 (3d Cir. 2000).[3] Bankruptcy appellate panels of the Tenth and First Circuits have agreed with this conclusion. Griffey, 335 B.R. 166; In re Mann, 249 B.R. 831 (B.A.P. 1st Cir. 2000).[4]

(2) Worth noting is that within one year of the couple filing their Chapter 13 bankruptcy petition in this case, the couple had filed an earlier Chapter 7 bankruptcy case, in which the Debtor received a discharge of his unsecured debts. This maneuver is sometimes informally referred to by some bankruptcy practioners as a 'Chapter 20' bankruptcy (Ch.7 + Ch 13 = Ch.20). Go here for other posts on the so-called 'Chapter 20' bankruptcy.

Massive Foreclosures A Godsend For Vegas-Area Indoor Pot Farm Operators

The Los Angeles Times reports:

• [L]as Vegas has a pot home problem. And like many of the region's maladies, it's tied to the housing slump.Last year, authorities took down 153 indoor grow sites in Nevada and seized more than 13,000 plants, compared with 18 sites and 1,000 plants in 2005, the U.S. Drug Enforcement Administration said. (By comparison, California busted 791 indoor sites last year.)



• "You can't have crime without opportunity," said William Sousa, a criminologist at the University of Nevada, Las Vegas. "And all those empty homes present an opportunity for criminal activity."



• Major cultivators spend tens of thousands of dollars turning cheap homes into greenhouses. Small-scale growers transform bedrooms into grow rooms, [...]. In neighborhoods where residents may be as transient as crowds in a subway station, growers are rarely questioned about dark windows and empty driveways. Those are also hallmarks of abandoned homes, of which America's foreclosure capital has plenty.



• "I don't know anybody here, and I don't want to stick my nose in their business," an elderly man who lived near [the site of one recent indoor pot farm bust] said one afternoon. Then he shut his door.

For more, see In foreclosure-plagued Vegas, empty homes go to pot.

Texas Homestead Claim Fails To Fully Protect Sale Proceeds For Homeowner Who Unloaded Moldy Home Onto Unwitting Homebuying Couple

The following facts have been taken from a recent court ruling from a U.S. Bankruptcy Court in Dallas, Texas:

• Home seller, Chastain, sells home to a homebuying couple, netting Chastain $482,718.14 in cash which she deposited in her bank accounts.



• Later that month, Chastain used $72,028.39 of this amount for a down payment and closing costs on another home, financed the balance with a $161,000 mortgage, and subsequently used about $80,000 of the remaining cash to remodel and improve the new home.



• Later that year, Chastain used some of the remaining proceeds to pay off her $161,000 mortgage.



• Concurrently with the foregoing, the unwitting couple discovered that the home Chastain unloaded on them was a mold trap, that Chastain knew about it, and that she did nothing to disclose that fact to them.



• The unwitting couple then obtained a judgment against Chastain for approximately $200,000, plus pre-judgment and post-judgment interest, plus costs of the damages lawsuit they brought against Chastain over the sale of the moldy home.



• Chastain then filed for bankruptcy.



• She sought to dodge the liability of the debt represented by the unwitting couple's judgment, and attempted to invoke the provisions of the Texas homestead exemption law to protect the loot she scored from the dirty deed she perpetrated on the unwitting couple from the claims of her creditors.

After taking testimony, the court sorted out this mess by ruling as follows:

1. Upon Chastain's acquisition of the replacement home as her homestead within weeks of the sale of her moldy home, using $72,028.39 for the downpayment, the remaining proceeds of the sale of the home unloaded onto the unwitting couple—$410,689.75—immediately lost its homestead protection, even though the six-month transfer period allowed under Texas law had not expired. In re England, 975 F.2d 1168, 1174 (5th Cir. 1992); In re Presto, 376 B.R. 554 (Bankr. S. D. Tex. 2007).



2. The $200, 000 judgment owed by Chastain to her two victims is a debt nondischargeable in bankruptcy, pursuant to the provisions of 11 U.S.C. § 523(a)(2)(A), in Chastain's bankruptcy case, because it is a debt that is the result of Chastain obtaining money from the unwitting couple based upon false pretenses, false representations, fraudulent omissions, and actual fraud concerning the condition of the moldy home.



3. With regard to Chastain's expenditures of $80,000 in home improvements and $161,000 to pay off the mortgage used to financed her replacement home, the court believed that these expenditures constituted a conversion of nonexempt property into exempt property—spent to hinder and delay the unwitting couple in the collection of their judgment and, consequently, ruled that the value of Chastain's homestead exemption from creditors' claims for her replacement homestead must be reduced by $241,000 ($161K + $80K).

For the ruling, see In re Chastain, Case No. 10-37341-SGJ, Adversary No.: 11-03164-SGL (Bankr. N.D. Tex., Dallas Div. October 28, 2011).

Dubious Contract Clauses Not Uncommon In Attorney/Client Retainer Agreements

Buried in a recent story in the Orlando Sentinel is a reference to a clause in a retainer agreement used by a foreclosure defense attorney when taking on the representation of a client needing foreclosure assistance. The clause relates to fees charged by the lawyer:

• In denying [the homeowner/client] a full refund, it also cited her contract with [the foreclosure defense attorney], which states that the original fee was a "flat, nonrefundable rate earned upon acceptance."

Notwithstanding the actual quality of the services that may be offered by the attorney, attempting to assert that the legal fee is a "flat, nonrefundable rate earned upon acceptance" appears to be, at a minimum, a bit of an overreach, and worse, a possible unfair or deceptive trade practice on the part of the attorney, and even worse yet, could make the entire retainer agreement void as against public policy if it is found to fail to comply with the Florida Bar lawyer disciplinary rules.(1)

Florida case law appears to make clear that attorneys practicing in the Sunshine State "are not free to negotiate just any fee" with their clients.(2)

Further, one can reasonably construe the clause to mean that, once the fee is paid, a client's change of heart and desire to withdraw from the agreement shortly thereafter and without the attorney doing any work will leave the client out the entire fee. Such a end result could be found to be the charging of a fee that is "clearly excessive."(3)

In conclusion, even if attorneys fully and in good faith intend to refund any part of the fee that may be unearned, such good intentions won't necessarily stop some "greedy, good-for-nothing, contingency fee class action consumer protection lawyer" (I hear there are a few out there) from trying to make an example out of them for slipping an arguably unenforceable clause into all of their retainer agreements, such clause having the capacity for potentially creating a false or misleading impression in the mind of the consumer (ie. the client) that the 'non-refundable fee, earned upon acceptance' is truly non-refundable, earned at acceptance. Such a practice could be found to be an unfair or deceptive trade practice and, consequently, make the foreclosure defense attorney a nice, juicy target for litigation.(4)

For the story, go here.

(1) See:

• Rule 4-1.5, Florida Rules of Professional Conduct:
  
  (a) Illegal, Prohibited, or Clearly Excessive Fees and Costs: An attorney shall not enter into an agreement for, charge, or collect an illegal, prohibited, or clearly excessive fee or cost, or a fee generated by employment that was obtained through advertising or solicitation not in compliance with the Rules Regulating The Florida Bar.A fee or cost is clearly excessive when [...]. [Go here for more of Rule 4-1.5, Florida Rules of Professional Conduct].



• Chandris, S.A. v. Yanakakis, 668 So.2d 180 (Fla.1995), where the Florida Supreme Court held that fee contracts that do not comply with the lawyer disciplinary rules are subject to being held void as against public policy. See also American Casualty Co. v. Coastal Caisson Drill Co., 542 So.2d 957, 958 (Fla.1989); City of Miami v. Benson, 63 So.2d 916 (Fla. 1953); City of Leesburg v. Ware, 113 Fla. 760, 767, 153 So. 87, 90 (1934).

(2) Franklin & Marbin, PA v. Mascola, 711 So. 2d 46 (Fla. App. 4th DCA 1998): Commenting on attorneys fee contracts with clients and their enforceabilty, generally, a state intermediate appeals court observed:

• Of course, the supreme court has also long held that attorney's fee contracts are infused with the public interest and that attorneys are not free to negotiate just any fee. In Baruch v. Giblin, 122 Fla. 59, 164 So. 831 (1935), the court said:
  
  "Lawyers are officers of the court. The court is an instrument of society for the administration of justice. Justice should be administered economically, efficiently, and expeditiously. The attorney's fee is, therefore, a very important factor in the administration of justice, and if it is not determined with proper relation to that fact it results in a species of social malpractice that undermines the confidence of the public in the bench and bar. It does more than that; it brings the court into disrepute and destroys its power to perform adequately the function of its creation."
  
  164 So. at 833. To meet this public interest, the supreme court has adopted specific rules regulating attorney's fees.[7],[8] The issue of enforceability of lawyer fee contracts is set out in a specific rule that states:"Contracts or agreements for attorney's fees between an attorney and client will ordinarily be enforceable according to the terms of such contracts or agreements, unless found to be illegal, obtained through advertising or solicitation not in compliance with the Rules Regulating The Florida Bar, prohibited by this rule, or clearly excessive as defined by this rule."[9]

(3) See generally:

• The Florida Bar v. Moriber, 314 So. 2d 145 (Fla. 1975):
  
  Few, if any, areas of attorney discipline are as subject to differing interpretations as the matter of what constitutes an excessive attorney's fee. See The Florida Bar v. Winn, 208 So.2d 809 (Fla. 1968), cert. den., 393 U.S. 914, 89 S.Ct. 236, 21 L.Ed.2d 199. The answer turns upon multiple factors including the difficulty of the case; the contingencies, if any, upon which the fee is based; the novelty of the legal issues presented; the experience of the attorney; the quality of his work product; and the amount of time spent in preparation and litigation.

Go here for approximately 100 or so links to Florida cases addressing the issue of attorneys' fees that are 'clearly excessive.'

(4) For more, generally, on the Florida Deceptive and Unfair Trade Practices Act ("FDUPTA" - F.S. Ch. 501, Part II), see The Florida Bar Journal:

• Obtaining Relief for Deceptive Practices Under FDUTPA,
• Per Se Violations of the Florida Deceptive and Unfair Trade Practices Act,
• Entitlement to Attorney's Fees Under FDUTPA.

Florida Bar Issues Quarterly 'Gossip Sheet'

From a recent issue of The Florida Bar's quarterly 'gossip sheet':

• The Florida Bar, the state's guardian for the integrity of the legal profession, announces that the Florida Supreme Court in recent court orders disciplined 24 attorneys, disbarring 12 and suspending 10. Some attorneys received more than one form of discipline. Two attorneys were placed on probation; two attorneys were publicly reprimanded and two were ordered to pay restitution.

Among those making the 'honor roll' specifically for playing fast and loose with their clients' cash, and, in a couple of cases, for improper conduct in holding themselves as providing foreclosure defense and loan modification services are listed below. Also indicated is the appropriate hammering, commensurate with their handiwork, that each was belted with:

1. Paul Francis Angueira, 1808 NW 126th Ave, Pembroke Pines, disbarred effective immediately, following an Aug. 25 court order. (Admitted to practice: 1997) Further, Angueira shall pay restitution of more than $11,000 to two clients. In several instances, Angueira misappropriated and misused client funds. (Case No. SC11-92).



2. Thomas W. Dvorak, 633 S. Andrews Ave., Suite 402, Fort Lauderdale, suspended for one year, following an Aug. 25 court order. The suspension shall run consecutive to the one-year suspension ordered in June 2010 and is effective retroactive to July 24, 2011. Further, as a condition of his eligibility to apply for reinstatement, Dvorak shall pay restitution totaling approximately $125,000 to clients in both cases and enter into an agreement with Florida Lawyers Assistance Inc. (Admitted to practice: 2002) Dvorak is the subject of seven Bar investigations. After collecting legal fees from several clients in mortgage loan modifications and real estate foreclosure defense cases, Dvorak failed to keep the clients informed of their cases, failed to competently and diligently represent them and failed to communicate with them. He took little or no action in their cases. (Case No. SC11-1499).



3. David Eric Hammer, 1005 N. Marion St., Tampa, disbarred, effective retroactive to Sept. 22, 2010, following an Aug. 30 court order. (Admitted to practice: 2006) Hammer misappropriated client trust funds for his personal use. (Case No. SC10-2029).



4. Larry Elliot Klayman, 2929 Pennsylvania Ave. N.W., No. 35, Washington, D.C., publicly reprimanded following an Aug. 29 court order. (Admitted to practice: 1977) Klayman agreed to submit to mediation through The Florida Bar's Grievance Mediation Program after a former client filed a complaint alleging that he had failed to provide services in a criminal case for which he was paid a $25,000 retainer. After entering into a mediation agreement, Klayman failed to repay the money in full within the specified time. (Case No. SC11-247).



5. Denise Letizia, P.O. Box 7256, Wesley Chapel, disbarred effective 30 days from an Aug. 10 court order. (Admitted to practice: 1993) Letizia engaged in dishonest conduct by using an invalid power of attorney to withdraw more than $100,000 from bank accounts bearing her developmentally disabled brother's name. She also demonstrated a pattern of misconduct regarding the representation of her brother and in the subsequent disciplinary proceedings. (Case No. SC09-1308).



6. James Robert Mann, 1220 16th Street, Miami, disbarred effective immediately, following an Aug. 12 court order. (Admitted to practice: 1997) In several instances, a Bar auditor found trust account irregularities because of misuse of client funds. In one case, a client gave Mann $5,000 to fund a settlement agreement. Instead of holding the funds in his trust account as required, Mann used the money to satisfy his own unrelated personal and business obligations. (Case No. SC10-2318).



7. William Timothy O’Toole, 1489 W. Palmetto Park Road, Suite 494, Boca Raton, suspended until further order, following a July 25 court order. (Admitted to practice: 1992) O’Toole is the subject of 20 Bar disciplinary matters. According to a petition for emergency suspension, O’Toole appeared to be causing great public harm by failing to properly communicate with clients and failing to diligently handle their cases. O’Toole allowed nonlawyers to improperly solicit clients on his behalf for loan modifications and foreclosure defense on a nationwide basis, despite the fact he can only practice law in Florida. He also split fees with nonlawyers, a violation of Bar rules. (Case No. SC11-1384).



8. Jeffrey Alan Schwarz, 801 N.E. 167th Street, North Miami Beach, suspended until further order, following a Sept. 27 court order. (Admitted to practice: 1976) After being retained for $8,500 to represent two clients on charges of drug trafficking charges, Schwarz failed to adequately represent them. Schwarz neither met nor communicated with clients while they were in custody. Schwarz also allowed a non-lawyer assistant to communicate with the clients’ families and accept money for representation. The clients testified that the paralegal told them he was their lawyer and they believed that he was representing them. (Case No. SC09-766).

For the entire gossip sheet, see Supreme Court Disciplines 24 Attorneys (October 31, 2011).(1)

(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.

Arkansas Federal Judge To 'Non-Judicial' Foreclosing Banksters Unauthorized To Do Business In State: 'Take A Hike!'

Self-described rogue journalist and recovering attorney Ethan C. Nobles writes in First Arkansas News:

• The U.S. Bankruptcy Court for the Eastern District of Arkansas, Jonesboro Division, ruled on a case at the end of September that may well have a substantial impact on non-judicial foreclosure proceedings in the state.



• Before getting into that, it’s worth mentioning that Arkansas is one of about half of the state in the Union that allow non-judicial foreclosures. All states, of course, allow a creditor to foreclose on a home through the courts system, but not all of them have non-judicial procedures in place.



• Non-judicial foreclosures are, indeed, less costly for lenders and expedited. For those reasons, the non-judicial foreclosure process has become the most popular route for lenders to take when they deem it necessary to take homes from defaulting borrowers.



• According to companies dealing with foreclosures, the case of In Re Johnson (case nos. 3:10-bk-19119, 3:11-bk-10602 and 3:10-bk-16541 in the Eastern District of Arkansas, Jonesoboro Division) has caused the number of foreclosure proceedings to drop significantly since the court issued its ruling on Sept. 28.



• In a nutshell, the court found that lenders not authorized to do business in Arkansas can’t properly utilize the state’s Statutory Foreclosure Act as codified in Ark. Code Ann. §§ 18-50-101 through 18-50-117.(1)



• The aforementioned non-judicial foreclosure act requires all companies wanting to take back homes under that act must be authorized to do business in the state — a real problem for mortgage companies located out-of-state that are servicing loans paid on by Arkansans.

For more, see Bankruptcy court throws wrench in non-judicial foreclosure proceedings.

See also, Bankruptcy court ruling slows down foreclosure sales in state, indicating that national title insurers may be beginning to slam the brakes on Arkansas realty sales involving homes recently foreclosed in non-judicial proceedings.

For the court ruling, see In Re Johnson, Case Nos. 3:10-bk-19119, 3:11-bk-10602, 3:10-bk-16541 (Bankr. E.D. Ark., Jonesboro Div. September 28, 2011).

Editor's Note: Buried in footnote 4 of the court ruling is this point of interest:

• The Court notes that counsel for the Debtors argued that a determination that the statute had been violated would make any sale under the Statutory Foreclosure Act void ab initio. No property sales actually resulted from the foreclosure proceedings in these cases. The sole dispute in these cases is whether the foreclosure fees and costs incurred through use of Arkansas' non-judicial foreclosure process are owed.

(1) According to the court:

• Absent compliance with Ark. Code Ann. § 18-50-117, J.P. Morgan's avenue for foreclosing on these properties was that of judicial foreclosure through the courts, not through Arkansas' non-judicial foreclosure process.

The court also made this observation on the Arkansas statutory provisions authorizing the use of non-judicial foreclosure procedings in the state:

• These statutory provisions must be strictly construed. See Robbins v. M.E.R.S., 2006 WL 3507464, at *1 (Ark. Ct. App. 2006) ("It is also true that the Arkansas Statutory Foreclosure Act, being in derogation of common law, must be strictly construed.")

BofA To Cough Up $116K + Lost Equity To Each Servicemember/Borrower Who Lost Home To Unlawful Foreclosure Over Alleged SCRA Violations

From the U.S. Department of Justice:

• The Justice Department announced [] that, as part of its settlement with BAC Home Loans Servicing LP, a subsidiary of Bank of America Corporation, servicemembers whose homes were unlawfully foreclosed upon will each receive a minimum $116,785 plus compensation for any equity lost to compensate them for the bank’s alleged violation of the Servicemember Civil Relief Act (SCRA).



• Bank of America agreed to pay $20 million to approximately 160 servicemembers who were illegally foreclosed on between 2006 and the middle of 2009. Under the agreement, Bank of America agreed to provide information about its foreclosures from mid 2009-2010 and will pay damages in the same minimum amount to those servicemembers whose homes were illegally foreclosed upon to compensate for the loss of their homes. The review is on-going.

For the entire press release, see Department of Justice Announces Compensation for Servicemembers as Part of Settlement with Bank of America.

Arizona AG: Loan Modification Racket Targeted Spanish-Speaking Victims With Verbal Promises That Were Then Disclaimed In English-Text Contracts

In Pima County, Arizona, The Arizona Republic reports:

• Arizona Attorney General Tom Horne's office has filed a consumer-fraud lawsuit against a mortgage loan-modification assistance company that targets Spanish-speaking homeowners in Phoenix, Tucson and Las Vegas.



• A civil complaint filed Monday in Pima County Superior Court accuses Las Vegas-based Mortgage Capital USA Inc., Phoenix-based American Mortgage USA Inc. and affiliated businesses, all owned by Las Vegas resident Gustave "Gustavo" Anaya, of violating the Arizona Consumer Fraud Act.



• According to the complaint, Anaya and his companies charge struggling homeowners from $500 to $3,500 to help them avoid foreclosure but provide little or no assistance in return.

***

• The companies, which advertise through Spanish-language media, instruct clients to stop paying the mortgage and cut off all communication with loan servicers, which actually hastens foreclosure of their homes, the complaint states.

***

• According to the complaint, Mortgage Capital and American Mortgage follow a strategy of making verbal promises of success in Spanish while requiring clients to sign service contracts in English that contain no such promises.



• "Defendants verbally and routinely guaranteed consumers specific results from the negotiation process in Spanish while defendants' working agreement, written in English, disclaimed any guarantee or promise of a specific result," the complaint says.

For more, see Mortgage loan-aid company accused of fraud (Suit: Spanish-speaking homeowners targeted).

For the Arizona Attorney General press release, see AG Horne Files Complaint in Pima County Alleging Consumer Fraud Violations Against Mortgage Capital USA, Inc.

For the lawsuit, see State of Arizona v. Mortgage Capital USA, Inc., et al.

Cops: Prosecutors Likely To Get Case Against Local Man Suspected Of Renting Out Vacant Foreclosures To Unwitting Tenants

In Albuquerque, New Mexico, KOB-TV Channel 4 reports:

• The Albuquerque Police Department is investigating a possible rental scam using foreclosed and abandoned properties. APD’s White Collar Crimes Unit has been investigating Shaun Anaya who owns Olive Tree Property Management out of Albuquerque.



• According to police reports, Anaya is suspected of putting people in foreclosed and abandoned homes to be a caretakers of the house during the foreclosure process. According to the renters statements to police, Anaya charges the renter just a couple hundred dollars a month while they live in the house.



• When police contacted the banks they said no one should be in the homes and they'd never had contact with Anaya or Olive Tree Property Management.



• Neighbors in a recent incident tipped off police when someone moved into a nearby home that wasn't supposed to be occupied. "Olive Tree is coming in and saying they own property that the don't. I think they're forging something. Something not right," said Tina Conary, a neighbor in southwest Albuquerque. Anaya wouldn't give KOB Eyewitness News 4 an interview but over the phone he denied all the accusations.



• Police warn if you have an abandoned or foreclosed house in your neighborhood and someone moves in that you don't think should be there, call police. Officers say they're seeing this growing problem in Las Vegas, Nevada and Phoenix.



• Albuquerque Police officer say they'll likely submit a case against Anaya to the Bernalillo District Attorney's Office by the end of November. Officers say Anaya has an extensive criminal record.

Source: Rental scams hits Albuquerque foreclosed homes.

Suit: Loan Servicer Used Deceptive Correspondence, Illegal Demands In Effort To Intimidate Tenants Out Of Foreclosed Homes In Violation Of Federal Law

In Brownsville, Texas, Foreclosure Buzz reports:

• Loan servicers and their henchmen (attorneys and real estate brokers) continue to ignore the requirements of the Protecting Tenants at Foreclosure Act. Many take the position that tenants’ leases do not have to be honored, and instead only provide a 90 day notice to vacate. Some decide to advise tenants of their “rights” expressly.



• On October 28, 2011, American Home Mortgage Servicing, Inc. (AHMSI) was sued for issuing a letter to a tenant that said as much, and refusing to change its letter in the future despite numerous requests. Without any basis in the law, AHMSI’s representatives also demand extensive documentation within a short time frame in order to get the 90 days.



• AHMSI even said for the tenant to not be concerned with an eviction. It appears that loan servicers hope to take advantage of tenants as much as possible and hope the law is not extended past December 2014.

Texas Housing Justice League, a Texas non-profit corporation and membership organization that is operated under the Texas Non-Profit Corporation Act to serve the housing interests of low-income Texans, is a co-plaintiff in this case.(1)

For more, see AHMSI Sued for Misleading Tenants per PTAF.

For the lawsuit, see Davis v. AHMSI et al., Civil Action No. 1:11-cv-219, US District Court, S.D. Tex., Brownsville Division.

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

(1) According to their website, Texas Housing Justice League was formed to address housing problems associated with:

• abusive homeowner association rules,
• improper eminent domain efforts,
• oppressive property tax schemes,
• severe housing conditions,
• predatory lending practices,
• improper evictions,
• illegal foreclosures,
• lease-to-own scams,
• defective titles from contracts for deed, and
• a host of other housing problems.

Rent Skimming Suspected As New Haven Landlords Allegedly Pocket Section 8 Rent Subsidies While Stiffing Banks On Mortgage Payments

In New Haven, Connecticut, the New Haven Independent reports:

• Poverty landlords Janet Dawson and Michael Steinbach found a way to make money in the recession—stop paying the bank, let properties deteriorate, but continue collecting tens of thousands of dollars a month in checks from New Haven’s housing authority.



• The Housing Authority of New Haven (HANH) is sending Section 8 federal rent subsidy checks to Dawson’s and Steinbach’s various corporate entities for at least 73 rental apartments, according to HANH. That amounted to nearly $80,000 paid out by HANH to the two for the month of October alone.



• Meanwhile, lenders are foreclosing on their homes across town. And even though Dawson and Steinbach stopped paying their mortgages on the properties, that hasn’t stopped New Haven’s housing authority from continuing to send them rent checks.

For more, see Slumlords Stiff Banks—& Rake In Sec. 8 Bucks.

Recently Widowed Woman Fleeced For $500K, Loses Home After Falling For Lonely Hearts Ripoff; Scammer Said He Was Military Man

In Castle Rock, Colorado, the Daily Mail reports:

• A grieving widow has lost $500,000 of her life savings and her home after being taken in by an Internet dating scam. Esther Ortiz-Rodeghero, 55, decided to look for love online after she lost her husband and thought she had hit the jackpot with a suave military man on the website, seniorpeoplemeet.com.



• Instead it was a fraudster who convinced her to continually fork out money which Mrs Ortiz-Rodeghero wired all over the world from her home in Castle Rock, Colorado.



• She had started to look for love online last October after her husband David Rodeghero died of pancreatic cancer at the age of 52. She told ABCNews.com: 'After seeing a therapist I was advised maybe I should go on a dating website and meet new people ... because I was depressed.'

For more, see 'I was blinded by his romantic emails': Widow loses $500,000 after falling for fake 'military lover' in internet dating scam.

Bronx Landlord Vows Appeal Of Ruling To Cough Up $33K In Refunds, Punitive Damages For Squeezing Single Mom With Illegal Rent Overcharges

In The Bronx, New York, the New York Daily News reports:

• A Bronx single mother could soon be collecting more than $33,000 from her landlord, after the state Department of Housing and Community Renewal found that she was charged excessive rent for her Norwood apartment. Iris Vega-Ortiz, 41, was charged $400 more every month for her one-bedroom apartment, according to a ruling.

***

• Meanwhile, local housing advocates said it’s the largest award they've ever seen by the state for an individual tenant in the neighborhood. “In the years that I’ve been doing this work, I’ve never seen a settlement, a ruling this high,” said Sally Dunford of the nonprofit West Bronx Housing and Neighborhood Resource Center. “It was just really good to see the system work the way it’s supposed to work.”

***

• The state HCR department told Vega-Ortiz that the rent for her apartment was supposed to be $554.75 a month, not $975. According to the state, Vega-Ortiz is owed more than $33,000, including more than $10,000 in overpaid rent and nearly $22,000 in punitive charges for intentionally jacking up the rent. According to city records, there are 31 open violations for [the buliding], including six severe hazards.

For the story, see Bronx mom awarded $33,000 from landlord after state agency rules she was overcharged for rent (Landlord vows appeal of HCR ruling).

Unwitting Homeowner Finds Tenant In Former Home After Signing Away Deed Three Days Before Auction To Outfit Promising Relief From Foreclosure Issues

In Ione, California, news10.net reports:

• A homeowner who tried a creative approach to avoid a foreclosure on his credit report was surprised to see a tenant in his house complaining about the pending auction. "It seems kind of weird," said Phil Scantling, who sold his house in September for $10 to a "walk away" company with the understanding the company would attempt to negotiate a settlement with the lender, GMAC.



• The new owner, Home Advocate Trustees, placed a tenant in the Lake Camanche home in October, three days before an auction notice was posted on the door. Tenant Stephanie Swisher paid more than $1,200 to Home Advocate Trustees for a deposit and pro-rated October rent, and contacted News10 because she was worried the foreclosure auction would lead to her eviction.



• Scantling saw the story and called to say he had been unable to get any information from Home Advocate Trustees on the status of the negotiations, and was concerned the company was more interested in collecting rent than resolving his mortgage problem.



• "They pitched it as this would pretty much fix your foreclosure issues," Scantling said. According to the company's website, Home Advocate Trustees uses "aggressive legal tactics" to achieve high quality results for sellers.



• Home Advocate Trustees obtains houses from distressed homeowners through its sister website, walkawaytoday.org.

For more, see Foreclosed homeowner surprised to see house on TV.

S. Fla. Town Mayor Faces Probe Into Homestead Exemption Claim On Condo She Didn't Reside In; Prosecutors Mull Grand Theft, Scheme To Defraud Charges

In Miami, Florida, SunPost Weekly.com reports:

• North Bay Village Mayor Corina Esquijarosa is once again in trouble, this time via a criminal investigation started by Miami-Dade prosecutors. According to records, Esquijarosa claimed a homeowner’s tax break on a condominium where she did not reside.



• Prosecutors have filed a search warrant and are looking into charges of grand theft and scheme to defraud, but as of today, no charges have been filed.



• Esquijarosa’s problems stem from a 2009 and 2010 claim of a 50,000 homestead exemption for a condominium. She was however not living in the property in Miami, but was living in North Bay Village.



• Last week, her records were seized from the Miami-Dade property appraiser’s office and she was also hit with a $500 fine by Miami-Dade’s Commission on Ethics and Public Trust for not publicly disclosing her income on her campaign disclosure forms.(1)

For more, see Prosecutors Open Investigation on North Bay Village Mayor Corina Esquijarosa.

(1) I guess possibly from rental income from the condo she claimed as her homestead that she may have been renting out to a tenant.

Future Bright For Bronx Hip-Hop Birthplace As Housing Group Takes Over F'closed 102-Unit Complex Victimized By Wall Street/Predatory Equity 'Geniuses'

In The Bronx, New York, The New York Times reports:

• After a long struggle, ownership of a Bronx building known as the birthplace of hip-hop, which had fallen into neglect and foreclosure, was taken over on Monday by a group that specializes in preserving working-class housing.



• The building at 1520 Sedgwick Avenue in the Morris Heights neighborhood was, in the early 1970s, the home of D.J. Kool Herc, whose community room parties were pivotal to the early development of hip-hop.



• But in recent years, the 102-unit complex had become a symbol for aggressive investment practices and property neglect, so much so that Senator Charles E. Schumer recently called it “the birthplace of predatory equity.” It was sold in 2008 before the real estate bubble burst to a real estate group that defaulted on the building’s mortgage within two years. The building fell into disrepair and foreclosure.



• On Monday, Workforce Housing Advisors, a group focused on salvaging working-class housing in buildings that have been overleveraged, became the building’s owner. In 2010, it bought the building’s mortgage for $6.2 million, with help from the city, and because no bidders came forward on Monday, it will keep the building. A bid of at least $7.9 million at the auction would have been required for another party to take control.



• Several residents, accompanied by an advocacy group that supported them through a long struggle, were at State Supreme Court in the Bronx on Monday and broke into cheers and “hallelujahs” when the auctioneer announced that no bidders had registered.



• Geraldine Davis, 72, a resident of the building for 37 years, hugged her neighbors and dried a few tears. “I always thought positive,” she said. “We prayed so hard and worked so much to save this building.”

For more, see For Birthplace of Hip-Hop, New Life.

See also:

• Crain's New York Business: Sold! Birthplace of hip-hop beats the rap (A Bronx building famed for its role in the origins of the musical phenomenon escapes the clutches of a “predatory equity” scourge that tenants feared would lead to its demise).



• New York Daily News: Birthplace of hip-hop in Bronx gets new landlord after battle to keep building affordable (DJ Kool Herc celebrates at 1520 Sedgwick Ave.).

BofA Bagged For Charging $39 Interest On $0 Balance; Insists It Was Right, But Refunds Cash Anyway "As A Courtesy" After Media Begins Asking Questions

In Jacksonville, Illinois, the Chicago Tribune reports:

• Roger Greenwood thought he had heard of every conceivable bank fee. Then he received his September credit card bill.



• Bank of America charged the Jacksonville, Ill., man $39.23 in interest — on a $0 balance. Greenwood was convinced it was a mistake. In August, he charged a vacation rental to his credit card, resulting in a $5,734.13 balance. Weeks later, he received $1,450 in credits from two merchants, lowering his balance to $4,284.13.



• He paid the remainder of what he owed with an electronic transfer Sept. 6, three days before it was due, bringing his balance to zero. His statement clearly showed that between the credits and his payment, Greenwood paid off the entire $5,734.13. So why, he wondered, had he been charged interest?



• Greenwood emailed Bank of America, and quickly received a response. An online representative agreed that between the credits and his Sept. 6 payment, Greenwood had paid his balance in full.



• "However, we need to inform you that credits are not considered as payments on credit accounts," the representative wrote. "Therefore, the credits (of $1,450) were not considered as payments on this account, and the interest charges were applied correctly."



• The representative told Greenwood Bank of America would not erase the $39.23 in interest. "We regret we are unable to remove the interest charges at this time," the representative said. "Therefore, this transaction will remain part of your account balance."



• Greenwood emailed Bank of America again and received the same reply from a different representative — the $1,450 in credits weren't considered payments, and thus he was charged interest on that amount.



• Flummoxed, Greenwood emailed What's Your Problem?

For more, see Problem Solver: Numbers don't add up on credit card charge (Jacksonville, Ill., man charged interest even though he showed zero balance).

Foreclosure Surplus Snatching Rackets Extending To Local Gov'ts? "City Of Brotherly Love" Stiffs Hapless Homeowners, Makes Major Move At Greedy Grab

In Philadelphia, Pennsylvania, The Philly Post reports:

• The news that nearly $56 million had been recovered from the bowels of the sheriff’s office’s sloppy bookkeeping was welcomed by government officials. However, the former owners of properties sold at sheriff sale—who are due much of that money—continue to be victimized by government ineptitude.



• City officials announced that the funds–including unclaimed proceeds of sheriff sales over the last dozen years when property sales generated more than the amounts owed for past-due mortgages, taxes, and utilities–would be transferred to the City’s General Fund and State Treasury.



• But, that money was not just misplaced, it was misappropriated; taken from those who were lawfully due the funds. Unless they act deliberately and quickly to return the money to the rightful recipients, the sheriff, controller and the mayor are working to benefit government balance sheets instead of helpless property owners.(1)

For more, see "Misplaced" Funds From Sheriff's Office Legally Belong to Victimized Property Owners in Philadelphia (The mayor, sheriff and city controller have no right to give this money to the government).

(1) The City of Philadelphia is not the first government entity suspected of getting funny ideas when it comes to handling the surplus loot, which represents some of the foreclosed owner's home equity, that was commonly generated by foreclosure/sheriff's sales during the boom real estate market. See, for example, Colorado Law Incentivizes Foot Dragging By County Officials When Returning Surplus Sale Proceeds To Foreclosed Homeowners After Public Auctions.

Maryland Ground Rent System Continues Drawing Attention As Investors, State AG Wrangle Over Process That Allows Locals To Lose Homes Over Minimal Sums

In Baltimore, Maryland, The Baltimore Sun reports:

• Another challenge by ground rent holders to Maryland's 2007 reform laws has been revived, with lease holders claiming that a state law unconstitutionally diminished the value of their property by making collection of payments costly and difficult to enforce.



• Attorneys for ground rent holders in a pending class action lawsuit say that a recent ruling by the Maryland Court of Appeals(1) dooms the law being challenged, according to a recent motion. They are asking a judge in Anne Arundel County Circuit Court to invalidate the law.



• But in a newly filed motion, the attorney general's office says otherwise. It contends that the recent ruling strengthens its position that laws for enforcing collections are valid. State lawyers maintain that because the laws provide ground rent holders with ways to collect past-due payments, the new law should be upheld.

***

• [L]ast month, the state's highest court delivered a significant blow to the legislative reforms, which called for ground rents to be registered. Even as the court upheld the registry that was created in 2007 — and that has about 85,000 properties — it said unregistered ground rents could not be canceled, or extinguished. That revived an estimated 30,000 to 40,000 unregistered ground rents.



• In the pending challenge, ground rent owners argue in court papers that the new process is "a costly and complicated lien and foreclosure process, forcing ground lease holders to spend thousands of dollars in an effort to collect at most a couple hundred dollars of delinquent ground rent."



• That, they contend, is unconstitutional for the same reasons the Court of Appeals decided to erase the cancellations of the thousands of unregistered ground rents. In asking the judge to uphold the law, the Attorney General's Office maintains that lease holders have "at least two remedies" for seeking past-due ground rents. In addition to the lien and foreclosure, they can sue the renter.



• In about two weeks, lawyers for lease holders and the attorney general's office are expected to meet with Anne Arundel County Circuit Judge Paul F. Harris Jr., who halted the case while waiting for the appeals court to rule on unregistered ground rents.



• However, the case may not be resolved in a courthouse. State legislators plan to meet in about two weeks with an eye toward new ground rent laws, addressing concerns raised in the Court of Appeals decision and in the Anne Arundel case.

For the story, see Ground lease holders challenge state law (Issue in class action suit focuses on payment collection).

(1) Muskin v. State Department of Assessments and Taxation, No. 140, September Term, 2010, ___ Md. ___, 141, ___ A.2d ___ (Md. October 25, 2011).

Rogue 'Sovereign Citizen' Homeowner Strikes Back After Adverse Foreclosure Ruling; Tags Judge w/ Bogus $350K Lien, Then Gets 179 Days For Contempt

In Daytona Beach, Florida, The Daytona Beach News Journal reports:

• Senior Judge Pope Hamrick handled a foreclosure case back in June, one of dozens. The veteran jurist, a member of The Florida Bar for more than 40 years, ruled in favor of a bank in a foreclosure. Hamrick never expected that the person foreclosed upon, Patricio E. Sanchez, would file a lien and judgment against him in court. But that's just what happened. Patricio E. Sanchez.



• Hamrick was shocked to learn the lien -- claiming a debt of $350,000 -- was even recorded against him. The man who filed it, Sanchez, 58, of Deltona is a registered sexual offender. Sanchez was immediately summoned back to court to explain why he "willfully filed and recorded the false and fraudulent liens and judgment." The judgments were filed against Hamrick and two attorneys who had represented Chase Home Finance in the foreclosure. Sanchez was jailed for 179 days for contempt of court.



• Although Sanchez became known by local court officials as the "sovereign citizen case," he never uttered the phrase. His case -- the second time the sovereign citizen movement has come up locally in court this year -- highlights the growth of ideology that has been around for more than 20 years.



• The sovereign citizen movement is a loosely organized collection of groups and individuals who have adopted an ideology considered "right-wing" by the Anti-Defamation League. Its adherents believe that virtually all government in the United States is illegitimate. Sometimes, the sovereign citizen movement has been blamed on acts of extremism and violence.



• Earlier this year, police said a 5-year-old boy was kidnapped by his grandmother in Port Orange. When police caught up with Laurine Arnold and recovered the child, she told them she was a sovereign citizen.



• Starting in the 1980s, anti-government extremists began pushing theories that claimed people could avoid debt and claim riches under an interpretation of common law. In 1996, members of a sovereign citizen group known as the American National Freemen were indicted in Tampa on charges including conspiracy and jury tampering. Three of the members were sentenced to prison for filing $22.8 million in bogus liens against federal officials and citizens.



• Since then, information on the Internet has spread the word. Motivational speakers offer seminars to teach people how to file documents in court, claiming they will be free of debts and government interference.



• Sanchez was less than cooperative when he appeared before Circuit Judge Robert Rouse. He refused to acknowledge his identity. He claimed he was a "representative" of Sanchez. In court documents, Sanchez wrote his name in all capital letters, and referred to the term "UCC-1."



• The use of that phrase, according to the Southern Poverty Law Center, is sometimes used as an effort to distinguish the "flesh and blood" person from his "corporate shell." The technique is used to avoid paying debt. According to the Anti-Defamation league, sovereign citizens use "paper terrorism," by filing documents against public officials.



• When Rouse asked Sanchez to explain the liens and judgments he filed against Hamrick and the others, Sanchez insisted "they don't have the authority to deal with the private business of Patricio Sanchez." Judge Rouse found Sanchez committed contempt of court by filing the liens. Rouse gave him 179 days in jail -- significantly less than the one-year maximum allowed.



• Sovereign citizen activity has been reported in 26 states and their numbers are estimated in the hundreds of thousands. Because of the potential for harm to credit reports and court records, many people who are familiar with the sovereign citizens are weary of speaking publicly about the movement.



• Among them was Judge Hamrick, who expressed some concerns about further attacks on paper. "You won't print my address, will you?" he said.

Source: Judge in Daytona targeted by man in foreclosure case.

Go here for other posts on sovereign citizens and "paper terrorists."

Steven J. Baum - "Worst Person In The World"

On a recent edition of the program Countdown with Keith Olbermann, upstate New York foreclosure mill sweatshop operator Steven J. Baum was recognized for his less-than-meritorious service in his efforts to allegedly boot homeowners illegally (mocking Baum's now well-known Halloween party that belittled financially distressed homeowners) and was named by Olbermann as the winner of his nightly award "Worst Person In the World."

For the YouTube Video, see Olbermann Wears Guy Fawkes Mask & Discloses Steven J. Baum Addresses (1:47).

Lawsuits: Missouri Homeowners Facing Foreclosure Squeezed By Lenders For Illegal Attorney Fees; Complaints Seek Class Action Status

In Clayton, Missouri, Courthouse News Service reports:

• Four companies, including GMAC Mortgage and BAC Home Loans charge illegal attorneys fees during foreclosures, according to two class actions in St. Louis County Court. Lead plaintiff Mimi Fowler filed both class actions, one against BAC Home Loans Servicing, Kozeny & McCubbin LC and Kozeny Lenders, the other against GMAC Mortgage, South & Associates PC and South Lenders.



• Fowler says Missouri law limits compensation for a trustee's services to a commission on the amount of sale: 2 percent of the first $1,000, 1 percent of the next $4,000 and 0.5 percent of any amount over $5,000.



• She says the defendants charged attorney's fees for legal work connected with the foreclosures. She says she paid $650 in attorney's fees in November 2009 and another $520 in attorney's fees in December 2010 to reinstate her mortgage.



• The class consists of all Missourians who reinstated their mortgage loan and paid attorney's fees in foreclosure proceedings for Missouri real estate from Nov. 7, 2006 to the present. Fowler seeks actual damages and $3,000 in punitive damages for each class member. She estimates that both classes number in the thousands.

For the story, see Classes Claim Illegal Fees in Foreclosures.

For lawsuits, see:

• Fowler v. BAC Home Loans Servicing, L.P., et al.,
• Fowler v. GMAC Mortgage, LLC, et al.

Another Criminal Prosecution In Equity Stripping Racket Ends w/ Conviction As Pennsylvania Sale Leaseback Peddler Defrauded 34 Homeowners, 14 Lenders

In Harrisburg, Pennsylvania, WHTM-TV Channel 27 reports:

• A former East Berlin woman has been convicted of defrauding 14 mortgage lenders and 34 homeowners in Cumberland, Dauphin, York and Adams counties out of more than $6.2 million.



• Joanne Seeley, 41, was found guilty in federal court Monday on four counts each of wire fraud and money laundering, according to U.S. Attorney Peter Smith. Each count is punishable by up to 20 years in prison and a $500,000 fine. Seeley was released pending a sentencing hearing which was not immediately scheduled.



• Smith said Seeley, who now lives in Texas, was a Pennsylvania licensed real estate agent until December 2006, when she permanently surrendered her license in lieu of disciplinary action. She then became the primary owner and operator of a business in East Berlin known as S&D Property Solutions.



• Smith said Seeley devised a foreclosure rescue scheme in which she would identify homes scheduled for sheriff's sale and advise homeowners they could avoid foreclosure by selling the home to her or one of her investors.



• Seeley assured homeowners the homes would be leased back to them after the sale, and the sales would allow them to pay off personal debts, rebuild their credit ratings, and allow them to qualify for a new mortgage when they bought back the homes a year later, Smith said. She also promised homeowners that any equity they had in the house would be held in escrow after the sale as a down payment, Smith said.



• Smith said Seeley either charged homeowners an extremely high commission or had them sign over their entire sales proceeds to S&D Property Solutions. No homeowner was ever able to buy back their home and no funds were escrowed because Seeley instead spent the money on her personal expenses, Smith said.



• Seeley also submitted false documents to induce lenders into making more than $6.2 million in loans, but converted about $2.3 million from the loans to her own use., Smith said.(1)

Source: Former real estate agent convicted of money laundering, wire fraud.

(1) For more on sale leaseback equity stripping ripoffs, see:

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).

Miami Sale Leaseback Equity Stripping Victim Reaches End Of The Road In Fight To Keep Home As Scammer Awaits Trial On RICO, Grand Theft, Etc. Charges

In Miami, Florida, The Miami Herald reports:

• On Friday, Imogene Hall fought against tears as she boxed up her belongings and shut the door at her Miami Gardens home for the last time, closing the chapter on a five-year homeownership nightmare.



• Hall’s account of her housing experience involves a harrowing combination of mortgage fraud, foreclosure rescue scams, title fraud, predatory lending and unscrupulous foreclosure attorneys.

***

• Hall’s ordeal began in 2006, when she lost her job as a home health nursing aide and looked to tap into the equity in her home to help pay the bills while she looked for work. Her plan was to take out a home equity loan for about $50,000 on the three-bedroom home, which had nearly doubled in value since she purchased it for $80,000 in 1997.



• As her bills began to pile up, a well-dressed man showed up on her doorstep unannounced, pitching just what she thought she needed: a no-stress cash-out refinance. What Hall didn’t know was that the man, Johnson Cuffy, was a convicted felon who investigators say was running an elaborate mortgage fraud scheme. Through his Tamarac-based company BlueKap Financial, Cuffy allegedly duped Hall into signing over the property to a straw buyer who later took out an outsized mortgage on the property, according to court documents and Hall’s account.



• Unlicensed title agents helped Cuffy and his associates siphon off more than $180,000 from the mortgage loan, leaving Hall with $50,000 and what she thought was a simple second mortgage. In reality, she had sold the home to a straw buyer, wiping out her equity.



• Subprime lender Argent Mortgage approved a $230,000 mortgage loan to the straw buyer, even though he listed employment at a non-existent video store in New York, and a county property appraiser valued the home at only about $140,000.



• “The more we learn about this the more incredibly amazing it is that mortgage servicers and banks allowed this to happen,” state mortgage fraud investigator R. Scott Palmer told The Miami Herald when briefed about Hall’s case last year.



• Hall began making monthly mortgage payments of $1,500 to Cuffy’s BlueKap Financial firm. The money — about $12,000 — never made it to the lender, and the home went into default.



• Hall’s house fell into foreclosure in 2006, sparking a five-year court battle that involved allegations of mortgage fraud and predatory lending. The case began to shift against Hall last year when it was transferred to Miami-Dade’s Section 50 court, a so-called “rocket docket” created to quickly dispose of old foreclosure cases. In a matter of weeks, the bank foreclosure was approved.



• While Hall, 50, has been living rent-free during the legal ordeal, she said much of her limited income went to attorneys who charged her more than $20,000 while assuring her they would save the home.



• Court records show that many of the attorneys did not follow through on their promises, failing to show up at court hearings, avoiding her phone calls and collecting thousands of dollars in fees. One lawyer billed her $2,800 for work he did trying to withdraw himself from the case. Another is being investigated by the attorney general for foreclosure rescue fraud.



• “None of the attorneys did anything for me but take my money,” said Hall, who had heart surgery during the foreclosure process and now lives on a disability check.



• Deutsche Bank, a trustee for Argent Mortgage, took title to the home on the Tuesday before Christmas last year. After several attempts by pro-bono lawyers to stave off eviction and work out a mortgage modification, a judge in October ordered Hall to vacate her house within 30 days.



• John Spittler, an attorney that took over Hall’s case on a pro-bono basis earlier this year, said he tried to halt the bank foreclosure, but the case had gone too far by the time he came along. “Everything was exhausted that we could possibly do to keep her in the home,” he said. “We kept her in there another seven months.”



• Cuffy is currently serving an 11-year sentence for grand theft in an unrelated case and is charged with defrauding unsuspecting homeowners like Hall. His trial is set to begin in January, said John Swope, a Department of Financial Services agent who has been investigating Cuffy for the last four years. Cuffy faces charges for violating the Racketeer Influenced and Corrupt Organizations Act, grand theft and scheme to defraud.



• “He’s refused to take a plea agreement,” Swope said. “He’s being charged under the Habitual Offender Act and he [faces] 65 years.”(1)

***

• The mortgage scheme stripped her of the equity she had built in her home, tarnished her credit and forced her out of the humble Miami Gardens neighborhood where she raised her four children and three grandkids.



• In what she describes as a final effort to save a bit of dignity, Hall decided to move out a week before the court-ordered eviction date. “I don’t want them to throw me out,” she said. “I want to take my time and move out.”(2)

For the story, see Mortgage fraud victim ends up losing her house.

(1) At one time, many in state and local law enforcement (particularly those with untrained eyes and who were otherwise clueless in handling 'semi-sophisticated' white collar crimes - for some, anything more complex than investigating a 'rubber check' case is 'semi-sophisticated') once passed on prosecuting these sale leaseback equity stripping ripoffs that under the flimsy pretense that these cases were merely 'civil matters.' Over the last couple of years, it's been primarily the Feds (U.S. Attorneys, FBI, Secret Service, etc.) that have been bringing prosecutions in these equity stripping ripoffs. However, more and more local (state court) prosecutors now appear to be stepping up to the plate and showing some guts by bringing criminal charges against these scammers. See, for example:

• Sale Leaseback Equity Stripping Peddler 'Scores' Guilty Verdict In Equity Stripping Ripoff; Grand Larceny, Scheme To Defraud, Conspiracy, Says Jury (Prosecuted by the Westchester County, NY District Attorney, a scammer who swindled four local families out of their homes was convicted after a jury trial of four felony counts of second-degree grand larceny and one each of first-degree scheme to defraud and fourth-degree conspiracy),



• Convicted Foreclosure Rescue Scammer Could Face Life Sentence On New Charges In Alleged Sale Leaseback, Equity Stripping Ripoff That Fleeced 5 Victims (Los Angeles District Attorney charged alleged scammer with 23 felonies — including theft from the elderly, identity theft and real estate fraud — for allegedly tricking five people into unknowingly granting him title to their homes, and charged him under California's 'three-strikes' law),



• Foreclosure Rescue Scam Mastermind Found Guilty Of Dozens Of Felonies; Ran Upfront Fee Land Grant Scheme, Sale Leaseback Rent Skimming Racket (After an eight-week trial, and through the efforts of the San Diego District Attorney, a scammer was found guilty of 160 counts of conspiracy to commit grand theft, grand theft, rent skimming and deceitful practices by a foreclosure consultant),



• Delaware AG Levels 21-Count Indictment Against Alleged Foreclosure Rescue Racket Using "Divine" Cover In Sale Leaseback, Equity Stripping Ripoff (The Delaware Attorney General obtained an indictment alleging that the scammer ran a criminal enterprise involving theft, money laundering, and forgery in which he preyed on vulnerable homeowners who faced imminent foreclosure),



• Central Florida Sale Leaseback Peddler Linked To 50 Ripoff Deals Gets 10 Years On Racketeering Charge; Targeted Cash-Strapped, High-Equity Homeowners (A joint prosecution by the Orange County, Florida and the state attorney general (under former AG Bill McCollum) led to the scammer copping a plea to a single count of felony racketeering after initially being charged with 12 first-degree felony counts, including racketeering, conspiracy to commit racketeering and numerous counts of grand theft),



• NY AG Squeezes Guilty Pleas From 4 For Roles In Alleged Sale Leaseback, Equity Stripping Foreclosure Rescue Racket; 1 Awaits Trial On 23 Felony Counts (After a New York Attorney General prosecution, four employees of a sale leaseback racket pleaded guilty in Albany County to felony charges that included grand larceny, scheme to defraud and falsifying business records, after the Attorney General's Office filed criminal complaints),



• Queens DA Bags Seventeen Suspects In Alleged Sale Leaseback, Equity Stripping Foreclosure Rescue Racket (Queens County, NY DA (joined in the probe by the office of the New York State Banking Department and the New York State Police) variously charged the defendants with first- and second-degree grand larceny, first degree criminal possession of stolen property, first-degree money laundering, first-degree identity theft, second-degree forgery, second-degree criminal possession of a forged instrument, first-degree falsifying business records, first-degree offering a false instrument for filing, first-degree scheme to defraud and fourth-degree criminal facilitation.).

See generally:

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).

(2) One may wonder why the homeowner/victim of this ripoff was forced out of her home before the criminal prosecution of the scammer was completed. After all, if the ripoff of the title to the homeowner's residence was perpetrated as a result of an act that is determined to be a crime, it is at least arguable that any contract founded upon such act is absolutely void. The case law, at least in the State of Florida, appears to support this view, as the Florida Supreme Court appears to make pretty clear in one case. See:

• Town of Boca Raton v. Raulerson, 146 So. 576, 577 (Fla. 1933):
  
  "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."

See also:

Chen v. Whitney National Bank, 65 So. 3d 1170 (Fla. App. 1st DCA, July 22, 2011) ([alteration added] - not in the original text):

• [T]he 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).

Hooten v. Lake County, 177 So. 2d 696 (Fla. App. 2nd DCA, 1965):

• As we have indicated, the supreme court in the Town of Boca Raton case approved the principle that where a statute pronounces a penalty for an act, a contract founded on such act is void, although the statute does not pronounce it void nor expressly prohibit it.

Jaylene, Inc. v. Steuer, 22 So. 3d 711 (Fla. App. 2nd DCA, 2009) (Northcutt, J. concurring):

• One well-established defense to the enforcement of a contract is that the contract violates public policy. See E. Allan Farnsworth, Unenforceability on Grounds of Public Policy, in Contracts ch. 5 (2d ed. 1990).
  
  This defense is firmly rooted in common law, and because it protects the interests of society at large as well as—and sometimes contrary to—those of the contracting parties, it is an important aspect of the courts' authority. As far back as 1775, Lord Mansfield was expressing the view that an agreement may be void on grounds of public policy, stating: "No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act." Id. § 5.1 at 347 (quoting Holman v. Johnson, 1 Cowp. 341, 343, 98 Eng. Rep. 1120, 1121 (1775)).
  
  An early Florida case recognized this defense to contract enforcement, citing the principle "ex turpi causa non oritur actio" to explain the law's reluctance to enforce contracts in violation of public policy. Town of Boca Raton v. Raulerson, 146 So. 576, 577 (Fla. 1933). Translated, the maxim means "`from an immoral consideration an action does not arise,'" which "expresses the principle that a party does not have a right to enforce performance of an agreement founded on a consideration that is contrary to the public interest." Black's Law Dictionary 607 (7th ed. 1999).

Who knows, but it may very well be that if the lowlife who perpetrated the ripoff is convicted of a crime, said conviction could give rise to a cause of action for the victimized homeowner (ie. possibly a quiet title action) in an effort to reclaim the title to her home on the basis that the contract entered into as part of perpetrating the ripoff, and every contract, conveyance, etc. subsequently made in connection therewith (or devolving therefrom) is absolutely void/void ab initio.