Wednesday, February 01, 2012

Failure To Give Pennsylvania Homeowner Notice Of Right To Have Face-To-Face Meeting With Lender Within 30 Days Sinks Subsequent Foreclosure Sale

The Pennsylvania Superior Court recently affirmed a trial court order setting aside a foreclosure sale where the foreclosing lender failed to satisfy certain requirements to provide notice to the homeowner.

In the trial court, the homeowner contended that the trial court lacked subject matter jurisdiction over the matter because the lender failed to comply with the notice requirements of the Homeowner's Emergency Mortgage Act, 35 P.S. §§ 1680.401c et seq. ("Act 91").

According to the appeals court:
  • More specifically, Appellee [homeowner] maintained that the Act 91 notice she received from Appellant [foreclosing lender] failed to inform her that she had thirty days to have a face-to-face meeting with Appellant.

    After holding a hearing, the trial court agreed with Appellee that the Act 91 notice was deficient. The court issued an order setting aside the sheriff's sale and the judgment; the order also dismissed Appellant's complaint without prejudice.

For the reasons set forth in the three-judge Superior Court panel's ruling, the trial court's order was affirmed.

For the ruling, see Beneficial Consumer Discount Company v. Vukman, 2012 PA Super 18 (Pa. Super. January 30, 2012).

Suit: Woman Holds Ex-Hubby's Home Hostage, Refusing To Release Lien Held Against His House Despite Receiving Full Payment Of Debt Owed To Her

In Galveston, Texas, The Southeast Texas Record reports:
  • A divorced Galveston County couple is at odds over certain funds stemming from the sale of local property, recent court documents say.


  • Richard See has filed suit against his ex-spouse Glenda G. Gordon, claiming she refuses to release the lien on the property despite receiving $20,000 from him. The suit filed Jan. 12 in Galveston County District Court states the property was awarded to See in the final decree of divorce three years ago. According to the suit, the lien prevented the release of $30,000 in proceeds to the plaintiff.


  • According to the suit, co-respondent Alamo Title Co. held the money in question while Gordon maintained the lien. See says he paid the $20,000 owed to his former wife with the payments remitted to her attorney of record and fellow defendant, Elaine Michael, but the lien was still in place.


  • Alamo provided alternative methods to free the lien while the plaintiff made repeated yet unsuccessful attempts to reach Gordon, according to the suit. The suit says See also provided Michael a copy of the affidavit essential to the lien's release, but the attorney refused to sign it notwithstanding the plaintiff's repeated requests.

Source: Divorced couple in dispute over property.

Ex-Paralegal Gets 100 Months For I.D. Theft, Forgeries In Connection With Ripoffs Of Employer/Law Firm, Clients' Trust Accounts

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):
  • Bonnie Sweeten, 40, of Pennsylvania, was sentenced [] to 100 months in prison for fraud schemes in which she stole in excess of $600,000 from her employer and family members. Sweeten pleaded guilty June 21, 2011 to wire fraud and aggravated identity theft. In addition to the prison term, U.S. District Court Judge William H. Yohn, Jr., ordered Sweeten to pay restitution in the amount of $1,091,831 and a special assessment of $200. Sweeten remains in federal custody.


  • Sweeten stole funds from family members, from the law office where she had been employed, and from the law firm’s clients. She used the identity of another person and posed as another person while using false identification and forging signatures on various documents including a property settlement.


  • Additionally, Sweeten stole the identity of a friend and fellow employee and used the identity to facilitate her flight from the jurisdiction. She also forged a signature of a judge on a court order for the purpose of fraudulently withdrawing client funds from a bank. As part of her scheme to defraud, Sweeten concocted an elaborate hoax that she and her daughter had been kidnaped in order to deceive family members and law enforcement as toher whereabouts.

For the U.S. Attorney press release, see Bonnie Sweeten Sentenced For Fraud Schemes.

For an earlier post, see Philly Feds Probe Alleged Rogue Paralegal For Fraud, Theft; Six-Figure Sums Stolen From Law Clients; Bad Acts Lead To Boss' Disbarment: Attorney.

Tuesday, January 31, 2012

Missouri Homeowners Tire From Banksters' Sleazy Practices; Begin Mounting Challenges To State Foreclosure System

In St. Louis, Missouri, the St. Louis Post Dispatch reports:
  • John Kevin Kennedy was an engineer at Anheuser Busch for 30 years. Then came the sale to InBev, and the big downsizing at the brewery left Kennedy out on the street along with much of his department.


  • With no job, he asked his mortgage lender for a lower payment on his home in Barnhart. What happened next set in motion a lawsuit challenging the way foreclosures are done in Missouri. By raising questions about which lender actually owns the mortgages, the suit claims certain foreclosures weren't properly done and it asks the courts to give "hundreds, even thousands" of Missourians their foreclosed homes back.


  • Kennedy's is part of a broader legal movement nationwide challenging the foreclosure process, which debtors say is slanted against them.

***

  • In Missouri, lenders can foreclose without a judge's order. Unless the homeowner files suit to stop it, the house can be sold at a foreclosure sale on the mortgage holder's word alone. People who can't pay their mortgages usually can't afford lawyers, so foreclosures almost always go unchallenged. In Illinois, court approval is required before a foreclosure.


  • But Kennedy, 62, had something that most troubled homeowners don't - money in a 401(k) retirement plan. He used it to hire lawyer Greg White, who specializes in fighting foreclosures.


  • White teamed up with three other law firms to file a lawsuit challenging the state's foreclosure system. They hope to convert the case into a class-action suit.

For more, see Suits challenge Missouri foreclosure law.

Colorado Lawmaker Moves To Tighten Up State Foreclosure Procedures, Minimize Sleazy Conduct From Banksters, Lawyer-Sweatshops

In Denver, Colorado, The Denver Post reports:
  • A years-old practice allowing foreclosure attorneys simply to attest with a signature that a bank has the right to take someone's home rather than produce the actual mortgage documents is the target of new legislation.


  • The bill, introduced last week by Rep. Beth McCann, D-Boulder, aims to ensure thousands of Colorado homeowners facing foreclosure each year know that whomever is trying to take their house is legally entitled to do so.


  • The foreclosure process has come into question nationwide because banks and lenders for years have bought, sold and traded mortgages as securities, but rarely recorded those transfers in property records. As a result, homeowners are often left wondering how a bank they'd never done business with could possibly be foreclosing without paperwork proving they had that right.


  • "To me it's the integrity of the process we're trying to protect," McCann said. "This bill prevents a lawyer from saying a bank can foreclose simply on their say-so. That's a huge presumption."

***

  • Currently, judges near-automatically approve the auctions during a process called a Rule 120 hearing. Their job is only to determine a homeowner is in default and that they're not currently serving in the military.


  • Consumers once had the right to challenge a bank's standing to foreclose, thanks to a 1989 Colorado Supreme Court decision. But that disappeared following 2006 legislation that let lawyers proceed with a foreclosure based only on their signature rather than actual mortgage documents.


  • Homeowners could still file a lawsuit to challenge a foreclosure, but most were already in too much of a financial bind to afford an attorney. If filed, the lawsuits might not yield a result until long after a house is auctioned.


  • "They say people are in default anyway, so what's the big deal," McCann said of foreclosing lawyers. "But a homeowner is entitled to know it's all being done properly and legally."

***

  • With the 2006 change to state law — written largely by the attorneys who handle the highest volume of foreclosures in the state and quietly slipped into a broader piece of legislation — Colorado became a state in which it took little more than a lawyer's signature to take someone's home.

For more, see Colorado bill targets foreclosures based only on a lawyer's OK.

Federal Judge OKs Banksters' Sleazy, Illegal Conduct During F'closure Litigation Where Homeowners Fail To Immediately Raise Issues During Proceedings

In Greenbelt, Maryland, The Baltimore Sun reports:
  • A class-action lawsuit over alleged foreclosure "robo-signing" was thrown out of federal court in Greenbelt last week when a judge ruled that the plaintiffs could have raised those complaints during their foreclosure cases.

***

  • The class-action suit was filed after a former paralegal at the defendant Shapiro & Burson, a law firm based in Virginia that has handled many Maryland foreclosure cases in recent years, complained to regulators and prosecutors, alleging that robo-signing there was routine.


  • An attorney for Shapiro & Burson suggested that the ruling could be a blow for other suits seeking damages for alleged foreclosure misconduct. The decision by U.S. District Court Judge J. Frederick Motz said homeowners could have raised the issue during their foreclosure cases and thus are barred from bringing it up in a later suit.

***

  • The law firm of JR Howell & Associates, which represented the plaintiffs, alleged in the April suit that robo-signing at Shapiro & Burson meant the firm's legal fees and other charges were "fraudulently obtained" and improperly passed on to the homeowners.


  • The homeowners argued that allegations of robo-signing at Shapiro & Burson weren't made until after their foreclosures were complete, so they couldn't have raised the issue earlier.


  • But Motz dismissed that argument in his written decision Thursday, pointing to the so-called "doctrine of claims preclusion" in Maryland law. "The fact that plaintiffs may not have been aware of the existence of their claims during the litigation of the previous action does not render the doctrine of claims preclusion from being applicable 'where the means of obtaining such knowledge existed and the knowledge could have been obtained with ordinary diligence,'" Motz wrote, citing a 1978 case.(1)

For more, see Md. 'robo-signing' case thrown out of federal court (Complaints should have been raised in the earlier foreclosure cases, judge says).

(1) Singer v. Steven Kokes, Inc., 39 Md. App. 180, 384 A. 2d 463 (1978).

Monday, January 30, 2012

Elderly Woman Faces The Boot From Home Of 40+ Years After Unwittingly Signing Over Premises To Convicted R/E Scam Artist Assisted By Then-L.A. Cop

In Los Angeles, California, NBC Los Angeles reports:
  • A tangled web of fraud allegedly involving an ex-LAPD officer and a self-proclaimed Bishop has ensnared an 89-year-old woman who is losing to foreclosure the Lynwood home she paid off more than two decades ago, police say.


  • Vistula Graham bought the three-bedroom ranch house more than 40 years ago, and owned it free and clear after paying off the mortgage in the late nighties, said her daughter, Keta Davis, who grew up there. Now the house is scheduled to be auctioned off. “I want the foreclosure to stop because we’re not at fault,” Davis said.


  • The story begins with Leroy Dowd, a 74-year-old, self-proclaimed, charismatic leader of a now-defunct South LA church called Triumph Church of God. “Bishop Dowd is a con artist," Davis said. "Bishop Dowd preyed on my mom.”


  • Dowd conned Graham into giving him money and unknowingly sign over the house, Davis said. “He called himself a bishop he called himself a prophet,” she said. Profit off her mother is more like it, she said.


  • Her mother "didn’t know what she was signing,” Davis said. Davis claims the Bishop opened a $150,000 credit line with Bank of America using her mother’s information and the house as collateral. Checks signed with her mother’s name were forged, Davis said.


  • Dowd also added his name to a Wells Fargo account. Wells Fargo and BofA both determined it was fraud and canceled those loans. But the last loan Dowd allegedly obtained, through IndyMac Bank, for $410,000 is the one in foreclosure.


  • Two years ago, Dowd pleaded guilty to one count of grand theft for forging a grant deed and stealing another church member’s house. That victim was 87.


  • Mr. Dowd is a smooth con artist,” said Claremont Detective David DeMetz who has a thick file on Leroy Dowd, from that case. The victim “had no idea what she was signing or that she gave her house away to Mr. Dowd.”


  • Sound familiar? Dowd was sentenced to 3 years in prison on that case, but in the case of Vistula Graham, the Los Angeles District Attorney didn’t press charges because the primary witness, Graham, can no longer talk. Davis has offered to testify on behalf of her mother.


  • But the story doesn’t end there. Sheriff’s investigators say Leroy Dowd could not have been working alone. Detectives suspect he was working with Darcy Greenfield, who was an LAPD officer at the time and had a real estate business on the side.


  • Deed records on the Lynwood house show that in 2007 the house was put in Greenfield’s company name: Greenfield and McCall. Documents show Greenfield and McCall were named beneficiaries of the IndyMac Bank loan, and a received a payout of more than $261,000.


  • Keta Davis says the loan is clearly “fraudulent.”(1)I’d never heard of them,” she said. Davis was stunned to learn that not only did a stranger own her family house, but that the stranger was an LAPD officer. Greenfield was never charged in Graham’s case, but the former LAPD officer was charged last May in a San Bernardino fraud case.


  • Greenfield has been charged with ten felony counts all pertaining to real estate fraud, said San Bernardino deputy district attorney Vance Welch who specializes in real estate fraud. Greenfield has pleaded not guilty, and her attorney Grover Porter has not returned numerous calls to his office.


  • Greenfield’s connection to Dowd is the subject of a broader investigation by the LAPD and FBI.

For the story, see Elderly Woman Falls Victim to Con, Loses House to Foreclosure (Elderly woman loses home in tangled web involving an ex-LAPD officer and self-proclaimed Bishop).

(1) Unwinding or undoing a scam like this requires the filing of a civil suit in which, among other things, a determination is sought as to whether the deed signed by the unwitting victim is void, or is merely voidable. See Schiavon v. Arnaudo Bros., 84 Cal. App. 4th 374; Cal.Rptr.2d 801 (Cal. App 6th Dist. 2000), for California case law that references the propositions that:

  • A deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing. (Erickson v. Bohne, supra, "130 Cal.App.2d at pp. 555-556.)

    A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations. (Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106 [215 Cal.Rptr. 748].) The same rules apply to the reconveyance of the property interest under a deed of trust as to the conveyance of property by grant deed. (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 43 [198 Cal.Rptr. 418] (Wutzke).)

If the deed is found to be void, a subsequent bona fide purchaser for value is not protected by the state recording statutes, in which case his/her interest is a nullity. If the deed is found to be voidable, a subsequent conveyance to a bona fide purchaser will be recognized as valid. Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103 [215 Cal.Rptr. 748]:

  • A deed obtained as a result of fraud committed against the grantor or by use of undue influence by the grantee may be rescinded by the grantor. (Rogers v. Warden (1942) 20 Cal.2d 286 [125 P.2d 7].) If a grantor is aware that the instrument he is executing is a deed and that it will convey his title, but is induced to sign and deliver by fraudulent misrepresentations or undue influence, the deed is voidable and can be relied upon and enforced by a bona fide purchaser. (Peterson v. Peterson (1946) 74 Cal.App.2d 312 [168 P.2d 474]; Conklin v. Benson (1911) 159 Cal. 785 [116 P. 34].)

  • In Conn. Life Ins. Co. v. McCormick (1873) 45 Cal. 580, the Supreme Court held a deed voidable, not void, if obtained as a result of undue influence or compulsion. Such a deed "stands on the same footing as a deed procured by fraud." The court concluded that a deed or mortgage procured by duress cannot be set aside as against a party purchasing in ignorance of the facts constituting the duress, that is to say as against a purchaser for a valuable consideration and without notice of the duress. Until a voidable deed is declared void it is fully operative. (Frink v. Roe (1886) 70 Cal. 296 [11 P. 820].) Civil Code section 1107 provides: "Every grant of an estate in real property is conclusive against the grantor, also against everyone subsequently claiming under him, except a purchaser or incumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded."

For more, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.

Go here for more on void and voidable deeds.

Sale Leaseback Peddler Squeezed By Norfolk Feds 'Scores' 54 Month Stay In Federal Prison After Copping Plea For Running Home Equity Stripping Racket

From the Office of the U.S. Attorney (Norfolk, Virginia):
  • Kathleen Harps, 51, of Chesapeake, VA, was sentenced [] in Norfolk federal court to 54 months in prison for operating a foreclosure rescue mortgage fraud scheme. [...] Harps previously pled guilty on August 23, 2011.


  • According to court documents, during 2006 Harps owned and operated the now defunct Hampton Roads businesses, New Beginnings Group, LLC, and IMAK Group, LLC, which specialized in “foreclosure rescue.”


  • Through these businesses, Harps and others solicited homeowners in financial distress and facing foreclosure, to agree to sell their homes to Harps or straw buyers working with her.


  • Harps promised the homeowners that, during a one year period after the sale, they could remain in their homes without having to pay the mortgage, while simultaneously putting their financial affairs back in order, so that they could buy back their homes at the end of the year.


  • This, however, failed to occur. Instead, court records show that Harps and her straw buyers made assorted false statements to fraudulently obtain mortgage loans, upon which they later defaulted.


  • As a result, foreclosures soon followed and the homeowners lost both their homes and substantial sums of homeowner equity, which was siphoned out of the closing transactions and paid to Harps’ businesses.

For the U.S. Attorney press release, see Business Owner Sentenced to Prison for Foreclosure Rescue Scheme.

(1) For more on this type of foreclosure rescue ripoff, see:

Minneapolis Feds Pinch Two In Alleged Sale Leaseback Rescue Peddling Scheme, Stripping Home Equity From Dozens Of Homeowners Seeking Financial Help

In Minneapolis, Minnesota, the Star Tribune reports:
  • Two Bloomington residents were arraigned Thursday in Minneapolis on charges that they ran an $8 million equity-stripping scheme under the guise of a nonprofit that claimed to help troubled homeowners avoid foreclosure.


  • Richard Scott Spady, 38, and Michele Denise Sengstock, 48, were each charged Jan. 19 in a sealed indictment with conspiracy, fraud and money laundering involving transactions that took place from 2005 through October 2007.


  • Spady owned and operated Unified Home Solutions, which he promoted as a nonprofit but ran as a for-profit entity, the indictment says. He also owned and operated American Mortgage Lenders, a mortgage brokerage that facilitated the transactions. And Sengstock owned and operated a company called MLAA Holdings, which also played a role, the government says.


  • According to the indictment, Spady told homeowners facing foreclosure that Unified Home Solutions offered a rescue program backed by investors who would buy their homes and sell them back after they'd regained their financial footing in a year or two.


  • The homeowners could live in the homes and pay rent and upkeep in the meantime. Some homeowners only learned that their homes were being sold when they attended the closing.(1)


  • The indictment says mortgages were obtained with fraudulent financial information, a common pattern in such schemes. Investors collected a "risk fee," generally 3 percent of the purchase price, but most of the equity in the home went to Unified Home Solutions and American Mortgage Lenders in the form of "undisclosed kickbacks," according to an affidavit filed in the case by IRS criminal investigator Angela Johnson. She said Spady and his companies facilitated the sale of about 79 properties; fewer than five avoided foreclosure.


  • Spady closed the two companies in 2008 and opened new firms that he's believed to be operating, Johnson said. They include New Start Homes, Start to Finish Realty, RVenture Inc. and RInvestment I. None of those firms was mentioned in the indictment, however.

For the story, see Bloomington duo accused of mortgage fraud (Indictment says they preyed on homeowners facing foreclosure and stripped away the remaining equity).

For the U.S. Attorney press release, see Two Bloomington residents indicted in mortgage fraud scam.

For the indictment, see U.S. v. Spady, et ano.

(1) For more on this type of foreclosure rescue ripoff, see:

Sunday, January 29, 2012

Sacramento Feds Squeeze Another Guilty Plea Out Of Real Estate Investors Suspected Of Bid Rigging At Foreclosure Sale Public Auctions

From the Office of the U.S. Attorney (Sacramento, California):
  • [K]enneth A. Swanger, 41, of Woodland, pleaded guilty to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County.(1) The primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at noncompetitive prices, the department said in court papers.


  • According to the court documents, after the conspirators’ designated bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay.


  • The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the price at the public auction and that at the second auction was the group’s illicit profit. The illicit profit was divided among the conspirators in payoffs. According to his plea agreement, Swanger participated in the scheme beginning in or about June 2009 until in or about October 2009.


  • To date, nine individuals, including Swanger, have pleaded guilty in U.S. District Court for the Eastern District of California in connection with the investigation. They are: Anthony B. Ghio; John R. Vanzetti; Theodore B. Hutz; Richard W. Northcutt; Yama Marifat; Gregory L. Jackson; Walter Daniel Olmstead; and Robert Rose. In addition, four other investors, Wiley C. Chandler, Andrew B. Katakis, Donald M. Parker and Anthony B. Joachim, and one auctioneer, W. Theodore Longley, were indicted by a federal grand jury in Sacramento on Dec. 7, 2011.

For the U.S. Attorney press release, see Woodland Man Pleads Guilty To Bid Rigging And Fraud At San Joaquin County Public Auctions.

(1) Swanger pleaded guilty to bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either of those amounts is greater than the statutory maximum fine. Swanger also pleaded guilty to conspiracy to commit mail fraud, which carries a maximum sentence of 30 years in prison and a $1 million fine.

Lack Of Standing Sinks Effort To Squeeze Cash Out Of Consumer; 'Show Me State' High Court: Collector Failed To Show Proper Evidence Of Debt Assignment

Lexology reports:
  • A recent Missouri decision in a credit card collection case illustrates the kind of documentation attacks that are increasingly being lodged against the non-mortgage consumer lending industry.


  • In its January 17, 2012, opinion in Cach, LLC v. Askew, the Missouri Supreme Court ruled that a debt collector was not entitled to judgment in its favor because the collector had not properly established that it had been assigned the debt in question. Following the card issuer’s acquisition by another bank, the consumer’s credit card account was assigned to a purchaser that subsequently assigned the account to the debt collector.


  • At trial, the collector submitted a document purporting to be a bill of sale transferring the account from the acquirer bank to the purchaser.


  • The Missouri Supreme Court held that the trial court erred by admitting the bill of sale into evidence based on testimony of the debt collector’s records custodian. More specifically, the court found that the custodian was not a “qualified witness” to lay the foundation for the document to qualify for the business records exception to the hearsay rule.


  • According to the court, the custodian failed to show that she had any personal knowledge of how or when the bill of sale was prepared. Without the bill of sale, the debt collector had no competent evidence of the first assignment and therefore failed to show it had standing to bring the collection action, the court found.

For the story, see Missouri High Court scuttles credit card collection action due to problem documentation (may require subscription; if no subscription, TRY HERE - then click appropriate link for the story).

For the ruling, see Cach, LLC v. Askew, No. SC 91780 (Mo. January 17, 2012) (en banc).

Reluctant Banksters Refuse To Correct Loan Servicing Abuses, Resulting In Continued Harrassment Of Homeowners With Foreclosure Threats

An excerpt from a recent story from The Center for Public Integrity's iWatch News:
  • Since 2007, nearly 9 million homes have been lost to foreclosure, according to data from RealtyTrac. About 4 million are currently in default on or in some stage of foreclosure. Some of these homeowners saw their payments skyrocket, some lost their jobs, and some bought a more expensive home than they could afford.


  • But many, [...], say that their foreclosures or defaults were triggered by an error made by the mortgage servicing company. Common errors include late fees generated through questionable accounting and imposed without notice, excessive charges for property inspections and maintenance, and inflated or unnecessary attorneys’ fees.


  • Many homeowners who have tried to correct what seem to be simple accounting mistakes say that the servicers — often, an arm of a major bank — are unable or unwilling to help them resolve even the most basic problems.


  • Every time I would call I’d get a different person,” said William Allen, a retiree near Baltimore who is fighting a Bank of America foreclosure. “I worked on it nearly a year and it didn’t do me any good.”


  • Most banks and independent loan servicers now say that they have cleared the decks on systemic problems that led to the errors and that they now make it much easier for homeowners to easily resolve their problems with bank representatives.

***

  • But veterans of the foreclosure wars tell a different story. More than four years after reports of these kinds of errors began bubbling to the surface, homeowners are still fighting to fix servicer mistake that threaten their homes, they say.


  • Almost all loans in default have something wrong with them,” said Tara Twomey, a lawyer at the National Consumer Law Center who recently completed a study of the servicing industry.

***

  • So why are things such a mess? Much of the blame can be directed at a foreclosure machine created during the housing boom to deal with the mad rush of mortgage applications. The automated system prizes efficiency over customer service, makes frequent errors in the administration of troubled home loans, and, according to one study, pays servicers more for foreclosures than loan modifications.


  • They don’t want to spend enough money to not make mistakes,” said Kurt Eggert, a law professor at Chapman University, who testified about servicing errors at a Senate hearing in 2010 and has written extensively about the industry.

***

  • [R]ather than hire and train enough employees to personally manage troubled loans in a way that minimizes foreclosures and encourages loan modifications, servicers entrusted management of troubled loans to old computer software that legal experts say isn’t up to the task.


  • The end result is a system with little accountability and a whole lot of angry homeowners. It is impossible to know how many loans have been subject to wrongful fees and accounting errors, but foreclosure war veterans say the number is high.


  • Jay Patterson, a forensic accountant who has examined hundreds of mortgage loans in bankruptcy or foreclosure, said that “95 percent of these loans contain some kind of mistake,” from an unnecessary $15 late fee to thousands of dollars in fees and charges stemming from a single mistake that snowballs into a wrongful foreclosure.

For more, see Raging against the foreclosure machine.

Dangers Of Buying Or Selling Real Estate With Land Contracts, Lease/Options

From SummitDaily.com:
  • It happens innocently enough: A seller wants to sell real property and a buyer wants to buy it, only the buyer does not have the ability to obtain traditional financing. So, the parties make an arrangement.


  • Perhaps the seller “leases” the property to the buyer for a period of time with the buyer having an “option” to purchase the property at some time in the future.


  • Perhaps the parties agree to an installment land contract (ILC) whereby the buyer makes payments over time and the seller agrees to deliver a deed when the purchase price is paid. What can go wrong? It turns out a lot.

For more, see Mountain Law: Dangers of leases with purchase options (And installment land contracts).

Saturday, January 28, 2012

Arizona AG: BofA Stymies State Probe Into Loan Modification Practices By Silencing Homeowner-Victims With Settlement Agreements

Bloomberg reports:
  • Bank of America Corp. is impeding an investigation of its loan modification practices by negotiating settlements with borrowers who must agree to keep them secret and not criticize the bank in exchange for cash payments and loan relief, Arizona officials say.


  • The Arizona Attorney General’s office is asking a court to block those aspects of the settlements and require the bank to turn over all the agreements. The bank denies any wrongdoing.

***

  • The settlement agreements came to light as state investigators followed up on borrower complaints filed with the attorney general’s office. The office learned of 12 settlements while examining 1,900 complaints and when it attempted to contact the borrowers, Assistant Attorney General Carolyn Matthews said in Jan. 11 court filing.


  • Only four returned phone calls and none would provide a copy of the settlement, Matthews said. Some who signed the settlements had previously been in frequent contact with the attorney general’s office, according to court records.


  • Matthews contends that under the terms of the settlements, even if subpoenaed, borrowers can’t reveal any unflattering information about the bank. They couldn’t talk about misrepresentations the bank made about loan modifications, which is what the state is investigating, she said.


  • These agreements have completely silenced even the most communicative consumers,” Matthews said in the filing. “The settlement agreement purposefully makes it impossible, legally and practically, for a consumer signing it to come forward, voluntarily and promptly, to provide evidence in this case.”


  • She asked a state judge to order Bank of America to notify borrowers who signed the agreements that they don’t have to adhere to the confidentiality and non-disparagement provisions.

For more, see Bank of America Settlements Impede Fraud Probe, Arizona Says.

Law Firm Faces Bar Probe For Allegedly Using Trust Funds To Advance Anticipated Proceeds From Check That Subsequently Bounced; Left Holding $285K+ Bag

In Orlando, Florida, the Orlando Sentinel reports:
  • The Florida Bar is investigating practices by the KEL law firm that may have played a role in it being bilked out of more than $285,000 in a high-tech flim-flam, the Bar confirmed this week.


  • Staff investigators are looking at whether the Orlando law firm violated the Bar's rules of financial conduct when it moved funds in and out of a trust account while becoming ensnared in the international scam, a spokeswoman said.

***

  • In the latest incident, KEL finds itself both the victim of wrongdoing and the target of the complaint that accuses it of flouting Florida Bar rules. U.S. Attorney Robert E. O'Neill for the Middle District of Florida announced last week that KEL had been defrauded and that federal authorities have taken action to recover $285,833 stolen from the firm. The U.S. has filed a civil-forfeit lawsuit against JPMorgan Chase Bank as part of that effort, O'Neill said.

***

  • According to a Secret Service investigator's affidavit, KEL was contacted by phone last summer by a prospective client named "David Benson," who claimed to be a business consultant. He wanted to sue a former boss, identified as "Fred Sanders," for wrongful termination. The sum in dispute: $90,000.


  • After receiving a $500 retainer check, KEL took the case, contacted Sanders and obtained a settlement, the affidavit states. The firm later received a check in the mail for $285,833. It deposited the check in its business account and wired the money to Benson before the check cleared, apparently feeling "obligated" to get the money to him as soon as possible, according to the investigator.


  • But KEL didn't have enough money in the business account to wire the full amount, so it transferred funds from its title-work subsidiary account, the federal affadavit states. When it wired the money to Benson at an account in Shinsei Bank in Japan, someone withdrew the entire amount.


  • Later, both the retainer check and the settlement check were found to be counterfeit; and everything else about the people involved had been fabricated, according to the affadavit. KEL's money was gone, and the law firm had never met its client face-to-face.

For more, see Bilked by scam, KEL law firm draws Florida Bar scrutiny.

Property Insurer Seeks Court Guidance On To Whom To Pay Policy Proceeds Where Multiple Claims Made On Same 'Ike-Destroyed' Home

In Galveston, Texas, The Southeast Texas Record reports:
  • American Modern Lloyds Insurance Co. is embroiled in a dispute over Hurricane Ike-related claims with three East Texas residents. The insurer filed suit against Orange resident Melvin Cook and Lumberton locals Stephen and Debora Dzenowski on Jan. 13 in Galveston County District Court, stating the respondents may expose it to "multiple liability" because of their alleged "rival claims."


  • The suit shows American Modern provides property damage coverage with a total limit of $43,000 to a Crystal Beach house which was completely destroyed by Hurricane Ike in 2008.


  • According to the original petition, American Modern "has indicated its willingness to pay the proceeds of the policy, but conflicting claims have arisen from the plaintiffs." "The defendant is unable to determine which, if any, of the defendants are entitled to the policy proceeds," the suit says.


  • "There is an issue between the named insureds regarding insurable interest and ownership of the insured property."


  • American Modern insists it claims "no interest in the proceeds of the policy, which the plaintiff has at all times been willing to pay to the person or persons entitled to payment."

Source: Insurance proceeds for destroyed beach house delayed by rival claims.

Florida AG Stands Behind Crappy Nationwide Foreclosure Fraud Settlement She Helped Negotiate

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Florida Attorney General Pam Bondi stood by the 50-state attorneys general settlement with the nation's biggest banks on Thursday as California and Delaware formally rejected the proposal she helped negotiate.


  • Bondi said Floridians can't wait for foreclosure relief and that the draft proposal sent to states on Monday addresses California's concerns.


  • "The settlement under discussion contains all the elements California purports to be looking for; transparency, substantial relief for distressed homeowners, and strict enforcement," Bondi said Thursday.


  • "Florida's homeowners need relief now, and protracted and uncertain litigation would be contrary to their best interests." Bondi is on a core team working with the nation's five biggest banks to settle an investigation into mortgage servicing and foreclosure wrongdoing.

For more, see Florida Attorney General bashes states that rejected nationwide foreclosure settlement.

Wisconsin High Court Nixes Request From Advocates For Poor To Create Right To Free Counsel In Civil Cases Involving Housing, Other Basic Needs

In Madison, Wisconsin, The Capital Times reports:
  • Courts in Wisconsin will not have to provide lawyers for poor people embroiled in cases that involve basic human needs, the state Supreme Court ruled last week. But the court gave its blessing to starting a pilot project in one or more counties that would provide attorneys in certain cases.


  • The court's decision at Thursday's administrative conference was in response to a petition by Legal Action of Wisconsin(1) asking the court to adopt "civil Gideon," which takes its name from the landmark 1963 case Gideon vs. Wainright, which established the right to counsel for criminal defendants.


  • Civil Gideon advocates sought to establish a similar right in civil court for low-income people litigating matters involving basic needs like shelter, food, clothing, heat, medical care, child custody and safety.


  • Legal Action filed the petition, with 1,320 supporting signatures, in September 2010. John Ebbot, executive director for Legal Action, says he was "deeply disappointed" by the court's decision. "I'm concerned that this pilot project is going to be an excuse to wait for that to be concluded before courts start to appoint counsel," he says.


  • No state has enacted a comprehensive civil Gideon policy, but a few states have done pilot projects. Last year California embarked on an $11 million project.

For more, see Crime and Courts: Supreme Court rejects court-appointed lawyers for poor in civil cases.

(1) Legal Action of Wisconsin is a non-profit law firm that provides free legal services for low-income people in Wisconsin, having offices in six cities serving 39 southern counties.

Friday, January 27, 2012

Sloppy Loan Servicers Continue Victimizing Homeowners With Crappy Recordkeeping

Reuters reports:
  • In July 2009, Roy and Sheila Bowers refinanced the mortgage on their suburban ranch home in Topeka, Kansas. The couple wanted to take advantage of the low interest rates that were all the rage at the time.


  • Roy, a truck driver, and Sheila, a former hotel housekeeping supervisor, knew their new loan from Wells Fargo would enable them to save $198.86 a month - a nice chunk to help with gas and groceries.


  • But what the Bowers never imagined was that their old loan, the one Wells Fargo told them was paid off, would resurrect itself, trashing their credit report, scotching their son's student loans and throwing the whole family into foreclosure. All, they say, even though they didn't miss a single mortgage payment. The Bowers aren't alone.


  • More and more, homeowners say that mortgages they thought were dead and buried are springing back to life, sometimes haunting them all the way into foreclosure. "It's the most egregious manifestation of an industry that's seriously broken," said Ira Rheingold, a lawyer who is the executive director of the National Association of Consumer Advocate.


  • Diane Thompson, an attorney with the National Consumer Law Center, says she has defended hundreds of foreclosure cases, and in nearly all of them, the homeowner was not in default. "The record-keeping on the part of the mortgage servicers is not to be trusted."


  • The problems grew from a lot of sloppy recordkeeping that began during the housing boom, when Wall Street built a quick-and-dirty back-office operation to process mortgages quickly so lenders could sell as many loans as possible. As the loans were later sold to investors, and then resold around the world, the back office system sidestepped crucial legal procedures. Now it's becoming clear just how dysfunctional and, according to several state attorneys general, how fraudulent the whole system was.


  • Depositions from "affidavit slaves" depict a surreal, assembly-line world in which the banks and their partner firms hired hair stylists, fast-food kids and Wal-Mart floor workers, paying them $10 a day, to pose as bank vice presidents, assistant secretaries and corporate attorneys.


  • These "robosigners" became a national sensation in the fall of 2010 when it was revealed that they faked titles, forged documents and backdated affidavits so they could make up for the bypassed procedures and foreclose on properties.


  • They passed around notary stamps as if they were salt. They did all of this, they testified, without verifying a single word in any of the documents - as is required by law. And it was all done, they say, to foreclose on as many homeowners as fast as possible.

For more, see Old mortgages rise from the dead, haunt homeowners.

Oregon Foreclosure Trustee Accused Of Secret Markups For Published Legal Ads, Passing Jacked-Up Costs To Homeowners, Others

In Portland, Oregon, The Oregonian reports:
  • A lawyer representing The Bulletin of Bend and the Redmond Spokesman newspapers has filed an ethics complaint with the Oregon State Bar against an executive of the Northwest's largest foreclosure trustee, accusing the company of secretly marking up the cost of foreclosure legal ads to its lender clients.


  • Michael Dillard, of the Karnopp Petersen law firm in Bend, filed the complaint last week against David Fennell, a lawyer and a principal owner of Northwest Trustee Services, which by its own account has handled more than 250,000 foreclosures.


  • Dillard alleges that Northwest Trustee and its advertising operation, FEI, charged its clients an undisclosed 18 percent premium over the actual price. These "deceptive and dishonest" tactics, Dillard said, allowed FEI to collect from its clients about $360,000 more than it actually paid for the foreclosure notices published in the Redmond newspaper just since 2009. Those costs were then presumably passed on by banks to homeowners and others, Dillard said.


  • Stephen Routh, CEO of Northwest Trustee Services, denied that FEI was charging a secret premium. "The markup was fully disclosed to it customers," Routh said. "It's how they make a profit."


  • The complaint is intriguing on several levels.

For more, see Portland foreclosure attorney hit with ethics complaint due to premiums.

Calif. AG Gives Thumbs Down To Latest Version Of Nationwide F'closure Fraud Settlement; Says New Deal Still Falls Short For Golden State Homeowners

In Sacramento, California, The Sacramento Bee reports:
  • Calling it "inadequate for California," the state is rejecting the latest settlement proposal between states and major U.S. banks over lending abuses that fueled the foreclosure crisis.


  • California Attorney General Kamala Harris pulled out of nationwide talks with the banks in October, saying the proposed $25 billion deal gave too much immunity to lenders and didn't provide enough relief for homeowners in a state hard hit by the mortgage meltdown.


  • On Wednesday, Harris' office said a new version of the settlement plan still falls short of those goals. "At this point, this deal does not suffice for California," said spokesman Shum Preston.

For more, see California attorney general rejects foreclosure settlement.

Thursday, January 26, 2012

Elderly Couple Says Misapplied House Payments, Force Placed Insurance Racket Victimized Them Into F'closure; Compelled To Hire Attorney To Stall Sale

In Baird, Texas, the Abilene Reporter News reports:
  • It's been enough to make Virginia Tollett sick with worry. "If we hadn't went and got an attorney, they would have auctioned our house on the courthouse lawn," said Tollett, 72, her voice rising. "They would have sold our house."


  • Tollett and her husband, Jim, 74, have turned to the courts in an effort to prevent lender JP Morgan Chase from foreclosing on the Baird home they bought for $300,000 in 2006 with the help of a $200,000 loan. The banking giant did not respond to a request for comment.


  • Tom Watson, the Abilene attorney representing the Tolletts, said a judge stepped in to prevent a sale of the home, scheduled for January. The status of the house remains uncertain, however, as a lawsuit remains pending in federal court that claims JP Morgan Chase wrongfully foreclosed on the home.


  • "What we are alleging is they took money that we submitted for payment to the principal and interest and instead applied it toward insurance," Watson said.


  • But the couple claim that they already had insurance, so the lender was wrong to take out the home insurance policy.


  • "My husband and I truly believe that we were paying our payments," said Tollett, 72, explaining that the couple paid roughly $1,500 monthly. Chase wants about $10,000 to bring the account up to date, Watson said. "I don't know how they arrived at that amount," Watson said.


  • He added: "We don't know how the payments were applied. Their records don't disclose that to us, at least in what I would call an intelligible, understandable form." The claim also seeks recovery of the couple's $100,000 down payment.


  • Tollett said she has cried and even been sick to her stomach since first receiving a foreclosure notice last fall. [...] The experience has caused her to "hate this beautiful home." She said she's been embarrassed by the courthouse foreclosure postings and doesn't know how she wants things to end, recalling her initial enthusiasm for the house.

For the story, see Baird couple facing foreclosure claims house payments wrongly uncredited to mortage loan.

Recent Nevada High Court Rulings Add Teeth To Earlier Precedent On Banksters' Obligations To Cough Up Loan Documents During Mediation

In Las Vegas, Nevada, KTVN-TV Channel 2 reports:
  • Officials say a pair of Nevada Supreme Court rulings requiring mortgage lenders to produce all required foreclosure documents before repossessing a house don't establish a new legal standard, but rely on state high court opinions issued last July.


  • In unanimous rulings Friday,(1) the court ruled there was insufficient documentation for separate foreclosure cases in Las Vegas and in Reno.


  • The court sent the cases in Clark County and Washoe County back to district court judges who had determined lenders produced enough documentation to foreclose.


  • The rulings rely on two cases setting a strict standard for lenders to produce the original note and deed of trust plus subsequent ownership records. The foreclosure mediation program was created in 2009 to give lenders, homeowners and an arbiter a chance to rework defaulted loans.

Source: Supreme Court Ruling Strengthens Foreclosure Mediation.

See also, Las Vegas Review Journal: Papers in foreclosure cases ruled insufficient.

(1) Piazza v. Citimortgage, Inc., No. 57026 (Nev. January 20, 2012); Karl v. HSBC Bank, USA, N.A., No. 57561 (Nev. January 20, 2012).

White House To Create Mortgage Crisis Unit To Probe Bankster Wrongdoing; Names Foe Of Current State AG Investigation To Co-Chair Operation

Bloomberg reports:
  • President Barack Obama said he will create a mortgage crisis unit that includes federal and state officials to investigate wrongdoing by banks related to real estate lending.


  • The president announced the unit in his State of the Union speech yesterday after protests by the Campaign for a Fair Settlement, a coalition of labor unions, consumer advocates and political activists including MoveOn.org. The group is calling for a full investigation into bank home lending and the creation and sale of mortgage-backed securities.


  • This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans,” Obama said in the speech.


  • New York Attorney General Eric Schneiderman will co-chair the unit along with officials from the Department of Justice, Securities and Exchange Commission and Internal Revenue Service.

***

  • Representatives of Democratic attorney general offices met at a Chicago hotel Jan. 23 to discuss the negotiated terms and ask questions, said Iowa Attorney General Tom Miller. Miller, who is helping to lead talks, said an agreement with the banks is getting closer.


  • Schneiderman and California Attorney General Kamala Harris have said any settlement shouldn’t protect banks from claims that haven’t been fully investigated, such as claims stemming from the packaging of mortgages into securities sold to investors.

***

  • Schneiderman has been participating in the nationwide probe of foreclosure practices. His office also has been conducting a broader investigation into the mortgage operations of major banks.


  • In coordination with our federal partners, our office will continue its steadfast commitment to holding those responsible for the economic crisis accountable, providing meaningful relief for homeowners commensurate with the scale of the misconduct, and getting our economy moving again,” Schneiderman said in his statement.

For the story, see Obama Creates Unit With States to Investigate Mortgage Misconduct by Banks.

See also, Firedoglake: The Schneiderman Gambit: Financial Fraud Unit Appears Designed to Fail, and Grease Skids for Foreclosure Fraud Settlement:

  • I’ll pepper in my thoughts on the State of the Union Address throughout the day, but I would be remiss if I didn’t start with the announcement of a Unit on Mortgage Origination and Securitization Abuses (UMOSA) to investigate bank practices during the financial crisis.

    The unit will be co-chaired by Eric Schneiderman, the New York Attorney General who bravely waged an often lonely battle to stop a misguided settlement on foreclosure fraud.

    But “co-chair” is the operative word here, and it suggests that the entire maneuver was created to grease the wheels for the pre-arranged settlement, while turning this investigatory arm into nothing so much as regulatory theater.