Wednesday, April 04, 2012

NJ Homeowner Files Suit Seeking Class Action Tagging Investor, Others With Allegations Of Bid Rigging At Tax Lien Auctions

In Camden, New Jersey, Bloomberg reports:
  • M.D. Sass Investors Services Inc., a closely held manager of more than $5 billion, and a unit of U.S. Bancorp (USB) were sued in a racketeering lawsuit claiming they helped to rig New Jersey municipal tax lien auctions for a decade.


  • The complaint by homeowner Raymond V. Contarino Jr. was filed March 30 against New York-based M.D. Sass, U.S. Bank, and four of six individuals who pleaded guilty in a U.S. antitrust investigation of rigged lien sales in New Jersey. It claims they engaged in a “cynical conspiracy” to eliminate competition at auctions.


  • Contarino seeks to proceed in a group, or class-action, lawsuit for those “subjected to artificially inflated rates of interest on their tax liens, and, in some instances, a loss of their real property through tax lien foreclosure,” according to the complaint filed in federal court in Camden, New Jersey.


  • Six people admitted in guilty pleas that they colluded at auctions where bidding for liens began at 18 percent and failed to move downward. Bidders won the right to charge 18 percent interest to property owners, and additional penalties. Three who pleaded guilty had bid at a March 2007 auction in Newfield, New Jersey, where an M.D. Sass representative also won liens.

For more, see M.D. Sass, U.S. Bancorp Sued Over Lien Sales Probed by U.S.

Head Of Maryland-Based Mortgage Elimination Racket That Ripped Off Homeowners Gets 150 Years; Scam Operated Like Ponzi Scheme

From the Office of the U.S. Attorney (Greenbelt, Maryland):
  • U.S. District Judge Roger W. Titus sentenced Andrew Hamilton Williams, Jr., age 61, of Hollywood, Florida, [] to 150 years in prison followed by three years of supervised release(1) for 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. On November 10, 2011, a federal jury convicted Williams on charges of conspiracy to commit wire fraud, wire fraud and conspiracy to commit money laundering.

***

  • These individuals were responsible for shattering the dreams of countless hard working families during one of our country’s worst economic downturns,” said FBI Special Agent in Charge Richard A. McFeely. “The teamwork exhibited by all participating agencies throughout the joint investigation was exemplary.”


  • Mortgage fraud is every bit as corrosive to American society as any street crime,” stated Eric Hylton, Special Agent in Charge, IRS-Criminal Investigation, Washington D.C. Field Office. “This type of fraud has far-reaching economic consequences and severely thwarts recovery from the foreclosure crisis, leaving homeowners in dire financial situations and financial institutions with uncollectible loans.”


  • 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.


  • Dream Homes Program representatives explained to investors that the homeowners’ initial investments would be used to fund investments in automated teller machines (ATMs), flat screen televisions that would show paid business advertisements, and electronic kiosks that sold goods and services.


  • To give investors the impression that the Dream Homes Program was very successful, Metro Dream Homes spent hundreds of thousands of dollars making presentations at luxury hotels such as the Washington Plaza Hotel in Washington, D.C., the Marriott Marquis Hotel in New York, New York, and the Regent Beverly Wilshire Hotel in Beverly Hills, California. Metro Dream Homes had offices in Maryland, the District of Columbia, Virginia, North Carolina, New York, Delaware, Florida, Georgia and California.


  • According to trial testimony, Williams and his co-conspirators failed to advise investors that the ATMs, flat-screen televisions and kiosks never generated any meaningful revenue. The defendants used the funds from later investors to pay the mortgages of earlier investors [ie. a 'Ponzi scheme'].


  • Evidence showed that MDH had not filed any federal income tax returns throughout its existence. The defendants also failed to advise investors that their investments were being used for the personal enrichment of select MDH employees, including Williams, [...].

For the U.S. Attorney press release, see Owner and Founder of “Metro Dream Homes” Sentenced to 150 Years in Prison in $78 Million Mortgage Fraud Scheme.

(1) By the time the 61-year old Williams wraps up his prison stay and becomes eligible for his three years of supervised release, he'll be over 200 years old.

Memphis Feds Indict Self-Proclaimed Sovereign Citizen For Recording Dirty Deeds Purporting To Snatch, Hijack Titles To Foreclosed HUD Homes

In Memphis, Tennessee, WMC-TV Channel 5 reports:
  • A federal grand jury indicted a self-described "sovereign citizen" on charges he fudged property deeds to steal homes. 44-year-old Devitoe Farmer of Memphis faces three counts of theft of government property. U.S. Attorney Edward L. Stanton, III, said Farmer knowingly used fraudulent "quit-claim" deeds to essentially steal foreclosed properties assumed by the U.S. Department of Housing & Urban Development (HUD).

***

  • Farmer's indictment comes almost a year to the date since The Action News 5 Investigators caught him quit-claiming (or quick-claiming) the property deeds of seven Raleigh-Bartlett homes he does not own, according to Shelby County property records. [...] "I claim the unalienable (sic) rights that were guaranteed to us by the sovereign forefathers," said Farmer when confronted at one of the properties, 5181 Wax Wing Ln.

***

  • Tom Leatherwood, Shelby County's register of deeds, said Farmer quit-claimed the deeds by coming into the office and signing paperwork that shifted the properties from himself to himself, clouding the properties' titles. "If someone files fraudulent documents, that does create a cloud over someone's title and creates a real headache for the legitimate property owner," Leatherwood said.


  • Leatherwood also produced an affidavit of truth sworn by Farmer, declaring himself to be "...a natural, freeborn Sovereign, without subjects. I am neither subject to any entity anywhere, nor is any entity subject to me."

***

  • Records held at the Shelby County Criminal Court clerk's office showed Farmer bonded out on the charge. Prosecutors held the case to state in anticipation of a grand jury indictment.


  • Since that time, Farmer quit-claimed six more properties he does not own: [...].

For more, see Feds indict "sovereign citizen" on foreclosure theft.

Tuesday, April 03, 2012

Atlanta Feds Pinch Attorney For Allegedly Having Sticky Fingers When Handling Clients' Cash At R/E Closings; Head Fed: Racket Ran Like Ponzi Scheme

For the Office of the U.S. Attorney (Atlanta, Georgia):
  • NEAL LANDERS, 45, of Duluth, Georgia was arrested [...] on federal charges that LANDERS stole money from his clients after acting as the closing attorney for their real estate transactions.

***

  • United States Attorney Sally Quillian Yates said, “In real estate closings, lenders trust the attorneys who represent them to fairly and honestly conduct the closings and appropriately handle the funds with which they are entrusted. This defendant is charged with running a Ponzi scheme out of his law firm, often using the proceeds from real estate transactions for his own personal benefit rather than the business purpose for which they were intended.”


  • According to United States Attorney Yates, the charges, and other information presented in court: Beginning in 2007, LANDERS allegedly exploited his position as a closing attorney by misappropriating the funds from real estate transactions.


  • Specifically, LANDERS is charged with receiving money transfers into his escrow account from several real estate closings. Once the real estate transactions were complete, LANDERS was required to disburse these funds. However, according to the indictment, LANDERS delayed paying out the funds for weeks and sometimes for months. Rather than promptly disbursing the funds for the recently-closed properties, LANDERS used those funds to pay out the parties from previously completed real estate transactions (who should have been paid earlier).


  • LANDERS is also charged with transferring funds, in amounts that far exceeded any closing fees and/or costs, from his escrow account to a checking account. He then used that money to pay various personal expenses.


  • Finally, LANDERS is charged with making false statements on a loan application. The fraud alleged in the indictment totals more than $1.5 million.

***

  • LANDERS was disbarred by the Georgia Supreme Court in 2009.

For the U.S. Attorney press release, see Disbarred Lawyer Indicted and Arrested for Running a Corrupt Real Estate Practice.

Title Agent Gets 18 Months For Screwing Over Lenders, Insurance Underwriter Out Of $3.1M By Pocketing R/E Escrow Proceeds Meant For Mortgage Payoffs

From the Office of the U.S. Attorney (Baltimore, Maryland):
  • U.S. District Judge William N. Nickerson sentenced James Kevin Hughes, age 53, of Crownsville, Maryland [] to 18 months in prison followed by three years of supervised release for wire fraud arising from a scheme to defraud lenders and a title insurance company of approximately $3.1 million. Judge Nickerson also ordered Hughes to perform 300 hours of community service, pay restitution of $3,107,246, and forfeit his interest in a South Carolina condominium.

***

  • According to his plea agreement, Hughes and Stephen Troese owned Troese/Hughes, a title company in Greenbelt, Maryland. [...] In approximately 2006, the real estate industry started to slow. As business slowed down, it became the policy of Troese/Hughes to check with [escrow accountant and co-defendant Brenda] Lukenich as to when mortgage pay-off checks could be sent out, so that she could confirm that there were sufficient funds in the escrow account to cover the check. At this time, the mortgage payoff checks were stored in Federal Express envelopes under the credenza in Hughes’s office.


  • Hughes made efforts to fill the escrow shortage at Troese/Hughes by re-financing his own home twice and not paying off the prior mortgage, causing a loss of over $1 million to [title insurance underwriter] Chicago Title.


  • In addition, after an employee of Troese/Hughes re-financed his home, Hughes caused the prior mortgage on that home to not be paid off so that the money could be used to fill the escrow shortage, causing a loss to Chicago Title of approximately $217,000.

***

  • Eventually, there were not enough settlements to cover all of the shortages. Chicago Title received information that a mortgage had not been paid off and conducted a surprise audit of Troese/Prestige. The escrow account did not contain enough money to cover all of the outstanding mortgage pay-offs from Troese/Prestige. Chicago Title, as the title insurer, was forced to make the mortgage pay-offs, to pay off funds due to sellers from settlement, and to pay the recording fees. In total, the loss to Chicago Title stemming from the Troese/Prestige pay-offs was approximately $1.7 million.(1)

For the U.S. Attorney press release, see Title Company Owner and President Sentenced to 18 Months in Prison In $3.1 Million Mortgage Fraud Scheme.

(1) Stephen J. Troese, Sr., age 72, of Davidsonville, Maryland, pleaded guilty and was sentenced to a year and a day in prison for his participation in the scheme. Brenda Lukenich, age 60, of Hughesville, Maryland pleaded guilty to mail fraud and is scheduled to be sentenced on April 10, 2012, at 9:30 a.m.

Non-Profit Continues Attack On Foreclosure Rescue Rackets; Targets Attorney Unlicensed In NY, Others For Alleged Upfront Fee Loan Modification Ripoff

From an announcement from the Lawyers’ Committee for Civil Rights Under Law:(1)
  • The Lawyers’ Committee for Civil Rights Under Law (Lawyers’ Committee) and pro bono counsel Davis Polk & Wardwell (Davis Polk) have filed their fifth lawsuit in a year targeting for-profit loan modification companies in Nassau County, New York, and the second such suit this month.


  • The most recently filed case, Squassoni v. Blackwell, was filed in New York Supreme Court in Nassau County on March 20 on behalf of 26 homeowners from New York and eight other states against two pairs of for-profit loan modification companies—the “United Solutions” group comprised of United Legal Solutions, Inc. (also known as United Solutions Corporation) and United Solutions Law Firm LLC and the “Consumer First” group comprised of Consumer First Corporation and Consumer First Law Group LLC, which was also sometimes called “Blackwell’s Attorneys.”


  • On March 20, 2012, the court granted plaintiffs’ emergency application to freeze certain of the defendants’ assets pending a determination of plaintiffs’ motion to attach those assets to secure a future judgment. The entities whose assets were restrained are Consumer First Law Group LLC, United Solutions Law Firm LLC, and Blackwell’s Attorneys LLC.


  • Plaintiffs allege that two so-called “law firms” run by Anthony J. Blackwell, an attorney not admitted to practice in the State of New York, falsely advertised “legal services” to vulnerable homeowners seeking help with much-needed mortgage modifications, extracting thousands of dollars in up-front payments from each homeowner.


  • Once paid, the firms then consistently failed to deliver results and abruptly stopped answering the homeowners’ phone calls and e-mails. The case seeks to recover money damages, including the illegal up-front fees paid by plaintiffs, and injunctive relief to put an end to the deceptive practices of the entities named as defendants and Mr. Blackwell. The Lawyers’ Committee and Davis Polk are representing the plaintiffs free of charge.


  • This scam is particularly pernicious because it preys on the public’s trust in legal service providers,” said Jon Greenbaum, Lawyers’ Committee chief counsel and senior deputy director. “This case really presents two scams in one—an unlicensed attorney advertising for-profit mortgage modification services as legal services, and a for-profit mortgage modification scam that can be devastating to homeowners—causing them not only to lose the fees they paid, but in the worst cases, causing defaults that lead to foreclosure as a direct result of the scam.”

For more, see Lawyers' Committee's Fight Against Unscrupulous Loan Modification Scammers Continues.

(1) The Lawyers' Committee for Civil Rights Under Law, a nonpartisan, nonprofit organization, was formed in 1963 at the request of President John F. Kennedy to involve the private bar in providing legal services to address racial discrimination.

Monday, April 02, 2012

List Of Florida Appeals Court Reversals Keeps Growing As Trial Judges Continue Showing Lack Of Regard For Basic Procedural Rules In Foreclosure Cases

In West Palm Beach, Florida, The Palm Beach Post reports:
  • A Palm Beach County family that lost its home in a 2010 foreclosure judgment is getting another shot at its case after the 4th District Court of Appeal said a lower court was premature in ruling for the bank.


  • In the case, Dilcia Osorto v. Deutsche Bank National Trust Co., the homeowner was seeking evidence from the bank when the final foreclosure judgment was entered by a Palm Beach County circuit judge.


  • Appeals court Judge Mark Polen said in the Wednesday decision that the judgment should not have occurred until the defendant's discovery was complete. The ruling sends the case back to the circuit court.


  • Homeowner attorney Brian Korte, of Korte & Wortman in West Palm Beach, said he had requested information about a trust that is said to hold Osorto's mortgage when the summary judgment was granted.


  • "The question is, does the trust even exist, and what we find is when we finally get a deposition taken is that no one has ever talked to the trust, they don't know what the address is, they don't know if the trust has employees," Korte said. "That's why trust cases have become difficult for the banks."

***

  • Korte said the law is clear that a summary judgment shouldn't be awarded when there is outstanding discovery,(1) but that straightforward rules don't always seem to apply in foreclosure cases.

For more, see Foreclosure ruling gives Palm Beach County family another chance at keeping their home.

For the court ruling, see Osorto v. Deutsche Bank National Trust Co., No. 4D10-3631 (Fla. 4th DCA, March 28, 2012).

(1) In reversing the ruling of Palm Beach County trial court Judge Roger B. Colton, the appeals court observed:

  • The trial court "should not . . . entertain[] a motion for summary judgment until . . . discovery [is] concluded." Collazo v. Hupert, 693 So.2d 631, 631 (Fla. 3d DCA 1997).

    An order granting summary judgment while there is an outstanding request for production of documents is premature and the appellate court should reverse and remand for discovery to be completed. Henderson v. Reyes, 702 So.2d 616, 616 (Fla. 3d DCA 1997).

    However, if the incomplete discovery will not raise future disputed issues of material fact, summary judgment may be properly granted. Estate of Herrera v. Berlo Indus., Inc., 840 So.2d 272, 272 (Fla. 3d DCA 2003) (holding that summary judgment is proper where "future discovery would not yield any new information that the trial court either did not already know, or needed to make its ruling").

    Here, a motion to compel, which was granted by the trial court, required Deutsche Bank to provide answers for requests seven, nine, ten, and thirteen of Osorto's requests for production, and to provide pinpoint cites for the pooling and servicing agreement. If the additional discovery would not yield new information, summary judgment would be proper.

    The motion to compel required Deutsche Bank to actually answer seven, nine, ten, and thirteen, and to provide Osorto with: any agreement containing any obligation to repurchase the loan; originals or best copies of exhibits attached to the pooling and servicing agreement which affect this loan; originals or best copies of all documents concerning the repurchase or reassignment of the loan from the buyer or assignee back to the original seller or assignor or to any predecessor of the buyer or assignee; and originals or best copies of records concerning the transfer or assignment of the loan.

    While Deutsche Bank already provided the pooling and servicing agreement, the information that may be included in the answers to requests for production seven, nine, ten, and thirteen could potentially be material. Where the information contained in outstanding discovery could create genuine issues of material fact, summary judgment would not be proper.

    Therefore, the trial court erred in its entry of its order because summary judgment is considered premature until all discovery which may yield genuine issues of material fact is complete. As such, we reverse and remand this matter for further proceedings consistent with this opinion.

Arizona Appeals Court: Refinance Not Fatal To Homeowner Protection From Personal Liability On Debt; Nature Of Purchase Money Loan Remains Unaltered

The Arizona Business Gazette reports:
  • Homeowners do not lose their legal protections against being sued for debt after foreclosure just because they have refinanced a mortgage, the state Court of Appeals has ruled.


  • In a unanimous decision, the judges overturned a lower- court ruling that said Michael and Kelly Pasquan are liable for more than $1.9 million. That is the difference between what they owed on their mortgage and the value of the home when sold.


  • Appellate Judge Margaret Downie, writing for the court, said that's not the way the law works, and not what legislators had in mind when they agreed to give certain protections to homeowners.


  • Court records show the couple bought a 4,000-square-foot home in Paradise Valley in 2003 for $935,000. They paid $335,000 in cash and got a $600,000 loan. The following year, they obtained a $1.6 million loan from a different lender. Those funds paid off their earlier loan, funded demolition of most of the existing home and construction of an 11,500-square-foot home in its place.


  • The couple subsequently borrowed an additional $500,000 from the same lender, with Michael Pasquin saying all those funds were for construction expenses. Then, in 2006, the couple got a $3.4 million loan serviced by Helvetica Servicing Inc. It was secured by a new deed of trust against the company, allowing it to repossess the property in the event of default.


  • Pasquan said most of that went to repay the earlier mortgage, with other funds used to repay a construction loan from Pasquan's father, with other funds for closing costs, interest and reserves, with some cash for the couple.


  • When the couple defaulted, Helvetica said it was owed more than $3.6 million. Helvetica purchased the property with a $400,000 credit bid at a sheriff's sale. A trial judge, after hearing arguments, eventually concluded the couple owed $1.9 million. Pasquan, now divorced, appealed.


  • Downie pointed out the Legislature enacted an "anti-deficiency" statute in 1971 to protect certain borrowers from remaining on the financial hook if the foreclosure value of their home was not enough to cover what was owed. "Anti-deficiency protection reflects a legislative policy decision to place the risk of inadequate security on lenders rather than borrowers," she wrote.


  • Downie said the idea is to discourage lenders from over-valuing real property "by requiring them to look solely to the collateral for recovery in the event of foreclosure."


  • Not everyone is eligible. Anti-deficiency protection is available only when the funds are used to buy either a single one-family or two-family dwelling. And the property cannot be larger than 2 1/2 acres.


  • The protection is available only when the mortgage proceeds are used to buy or build a home, making it what the law calls a "purchase money" loan.


  • Attorneys for Helvetica argued that once the couple refinanced the original purchase money loan, the new loan did not fit that definition. And that meant it was no longer subject to the anti-deficiency protections, they said.


  • Downie said that's not the case. "A change in the lender's identity does not, standing alone, alter the nature of the underlying purchase money debt," she wrote. Downie added that lawmakers clearly wanted to abolish the personal liability of those who provide a deed of trust allowing repossession.


  • The judge said the reason for disallowing deficiency judgments goes beyond keeping lenders from overvaluing the property in deciding how much to lend. She said the law is also designed to prevent financial ruin of homeowners who already have lost their homes. And that is all the more important in distressed economic climates when people frequently refinance their homes, Downie added.

Source: Court of Appeals backs sued homeowners (Decision: Foreclosure didn't sever protections despite refinancing).

For the court ruling, see Helvetica Servicing, Inc. vs. Pasquan, 1 CA-CV 0418 (Ariz. App. Div. One, Dept. C, March 20, 2012).

See also, Lexology: Arizona Court of Appeals holds that refinancing a purchase money loan does not eliminate anti-deficiency protection (may require subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link).

Homeowner Advocate Hit w/ Stiff Sanctions For Allegedly Filing Frivolous 'Show Me The Note' Suits, Judge-Shopping, Pocketing Fees As Cases Dragged On

In Minneapolis, Minnesota, Minnesota Public Radio reports:
  • MPR News received a tip about a complicated story involving an attorney, a judge and the state's foreclosure laws. U.S. District Judge Patrick J. Schiltz has taken the unusual step of sanctioning Minneapolis attorney William Butler for filing what the judge calls frivolous show-me-the-note actions. That's where a homeowner facing foreclosure argues that because the mortgage and note are held by different entities, the home's mortgage or foreclosure on that mortgage is invalid.


  • Separating the note from the mortgage contributed to the practice of mortgage securitization, one culprit in the housing bubble and crash. Some courts in other states have ruled in favor of homeowners in cases like these. But here, Judge Schiltz says it's been established under Minnesota law (he references Jackson v. Mortgage Electronic Registration Systems, Inc.) that the entity that holds the mortgage can foreclose on the mortgage even if that entity does not also hold the note. Showing the note is not necessary under foreclosure by advertisement, which is how most of Minnesota's foreclosures are processed.


  • Butler, of Butler Liberty Law, LLC, brought nearly 30 of such cases on behalf of several hundred people and apparently never won. Among other things, Judge Schiltz alleges Butler solicited homeowners facing foreclosure for frivolous cases and then "judge shopped" for sympathetic judges while his cases dragged on for months, allowing him to collect fees from clients and allowing those clients to continue living in their homes rent-free.


  • As punishment, the court ordered Butler to pay a $50,000 penalty and cover attorneys fees for some of the largest firms representing clients like GMAC Mortgage, Deutsche Bank, The Bank of New York and others. People familiar with the case expect these penalties to rise well into the six figures. Butler also risks losing his license to practice law.

For more, see Legal decision has attorneys talking.

Recent Court Ruling "Not Something The State Of Utah Can Let Pass" As Federal Judge Allows For In-State Foreclosures To Be Governed By Texas Law

In Salt Lake City, Utah, The Salt Lake Tribune reports:
  • The Attorney General’s Office is seeking to intervene in a lawsuit in which a federal judge has ruled that Texas law governs foreclosures carried out by a unit of Bank of America in Utah.


  • The Feb. 8 ruling by U.S. District Judge Ted Stewart "is not something the State of Utah can let pass," Assistant Attorney General Jerrold Jensen wrote in seeking to intervene in the lawsuit.


  • Federal judges in Utah have split over the question of whether BofA’s foreclosure arm, ReconTrust, may have violated state law in thousands of actions taken in recent years against Utah homeowners.


  • Stewart ruled that because ReconTrust is headquartered in Texas, where it carries out many of its foreclosure functions, the National Bank Act says the bank’s actions are governed by that state’s laws.


  • "Texas does not pass banking laws for Utah," Jensen wrote. "And Utah does not pass banking laws for Texas." Bank of America representatives did not respond to an email seeking comment on the state’s actions.


  • Stewart’s ruling dismissed a proposed class-action lawsuit, which claimed that in carrying out foreclosures in Utah under its own name, ReconTrust violated a state law that says only Utah attorneys or title companies can legally foreclose on behalf of a mortgage note holder.


  • Abraham Bates, one of the attorneys representing homeowners, said that perhaps 10,000 Utah homeowners were foreclosed on by ReconTrust in recent years. Bates has filed a motion asking Stewart to reconsider his decision and also wants the judge to allow an amended lawsuit to go forward. If Stewart does not reconsider his opinion, Bates said the case could be paired with another that is being appealed to the 10th Circuit Court of Appeals in Denver.


  • That case involves a decision by U.S. District Judge Bruce Jenkins who ruled that ReconTrust was governed by Utah laws when foreclosing in this state. Because of the split over the issues among federal judges in Utah, Bates and attorneys for ReconTrust recently agreed to halt proceedings and take Jenkins’ ruling directly to the appeals court. "It’s time to take this to the 10th Circuit and have it resolved," Bates said.

Source: Utah AG: We will fight foreclosure ruling (Lawsuit » Judge said BofA’s actions in Utah are governed by Texas laws).

Sunday, April 01, 2012

Feds Continue Applying The Squeeze On Sale Leaseback-Peddling Ripoffs As Head Of Granite State Equity Stripping Racket Feels The Pinch

In Concord, New Hampshire, the Nashua Telegraph reports:
  • A federal grand jury has indicted a former Nashua man whom investigators say was the ringleader of a mortgage scheme that duped financially strapped homeowners out of their properties, which were eventually lost to foreclosure.


  • Michael Prieto will make his first appearance in U.S. District Court in Concord on Tuesday afternoon to answer charges of mail fraud and money laundering, according to federal court documents.


  • The indictments allege Prieto coordinated the mortgage scheme from offices in Manchester, controlling a number of employees and agents involved in the scam, and that he identified struggling homeowners to target. Prosecutors say dozens of New Hampshire homeowners, including at least one in Nashua, were targeted by the conspiracy.


  • The scheme was part of a long-running criminal conspiracy whose members defrauded lenders and homeowners across New Hampshire, Assistant U.S. Attorney Michael Gunnison told Judge Steven McAuliffe when another defendant, Richard Winefield, was sentenced. Two other people – Walter Bressler and Sadie Stanhope Ng – have also pleaded guilty and are scheduled to be sentenced in April, according to court documents.


  • Prieto has said in previous interviews that there was no scheme, but rather a refinancing program intended to help struggling homeowners, which would have worked if they paid their agreed-upon rent.


  • The agreement and the program … was not a scam,” Prieto previously told The Telegraph. “It was designed for its purpose, which was helping people pay off their debts, giving them breathing room, giving them an opportunity to stay in their homes for two years.” Prieto said it was a genuine effort to help people with debts. He noted, as have prosecutors, that they also paid off other creditors.


  • Yet prosecutors claim that Prieto and others sought out homeowners who were having trouble making ends meet and offered to buy the property, take over the loan and rent the home back to homeowners. They also contracted to let the homeowner buy the home back later, at a higher price, although no homeowner was ever able to do so, Gunnison said.


  • Meanwhile, and without the homeowners knowing it, Gunnison said, the other conspirators were flipping the homes, selling them at inflated prices to bogus straw buyers who had taken out much larger loans. Those larger loans paid off the original mortgages and were then defaulted on while the difference, often tens of thousands of dollars, was pocketed, according to court documents. The indictments accuse Prieto of overseeing the entire enterprise.(1)

For more, see Former Nashua man indicted on money laundering and mail fraud charges as ringleader of mortgage scheme.

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

Oregon Federal Judge Orders F'closure Controversy Referral To State High Court For Final Resolution, Despite Objections From Obviously-Frightened MERS

In Portland, Oregon, The Oregonian reports:
  • With Oregon's state and federal courts singing a variety of different tunes on the mortgage industry's controversial nationwide document-registration system, someone will finally ask the state Supreme Court to step in. If the high court gives the system a thumbs down, it could throw a wrench into thousands of pending foreclosures in Oregon and potentially upend thousands more already completed.


  • An order filed this week in the U.S. District Court in Portland said that court's chief judge will certify questions for the Supreme Court. The Supreme Court has to formally accept the questions, and it has the latitude to reject or even reword them. If the seven justices do take on the issue, their decision could bring an end to a series of differing rulings on whether the industry's Mortgage Electronic Registration Systems, or MERS, meets the requirements of state law when it comes to property documentation.


  • That conflicting legal history makes it likely to get the Supreme Court go-ahead, said Willamette University law professor Jeff Dobbins. "It's such a significant issue," he said. "Unless they see something in the case that makes them think it's not right, I think the betting is probably reasonable that they'll go ahead and consider the question."

***

  • Some courts in Oregon have upheld MERS, while others have blocked the foreclosure proceedings. The conflicting rulings have resulted in a race to the Supreme Court for a definite ruling, or a fix from the legislature.


  • In the five cases the District Court has flagged for high court consideration -- like many others involving MERS -- borrowers argued that a lender can't foreclose out of court unless every change in control of the loan was recorded. The court will have to determine whether MERS qualifies as a loan beneficiary under state law and whether it has met state recording standards.


  • "It has undermined the whole basis of law that our country was founded on, in establishing a chain of title," said John Bowles, a partner at the Bowles Fernandez law firm in Lake Oswego. "MERS is a privately owned mechanism, owned by the principal industry players, that have chosen to subvert the whole system of recording."


  • MERS said Thursday it was still waiting to hear details of the court's order. "We do not have the specifics yet from the court, but we look forward to the opportunity to present the seven honorable justices of the Oregon Supreme Court with the ample evidence of the benefits and legality of the MERS model," spokeswoman Janis Smith said in a statement.


  • Often, when a federal court decides to send questions to the state's high court, it has the agreement of both sides. In these five cases, the court moved forward with certification over the objections of MERS' representatives.


  • Kelly L. Harpster, a Lake Oswego attorney who represents homeowners in other MERS cases, said it's important for the justices to let everyone know where things stand so they can move forward. "Until there is a decision from the Supreme Court, we're going to get these conflicting results," she said. If the court rules against MERS, lenders could still pursue foreclosure through the courts. But that procedure is more costly and takes longer.


  • It's not clear how a ruling against MERS could affect the thousands of foreclosures that have already been completed. According to the data firm CoreLogic, some 10,000 foreclosures have been completed in Oregon in a 12-month period though last month.

Source: MERS foreclosure issue headed to Oregon Supreme Court.

Federal Judge Vacates 'MERS-Critical' Portion Of Oft-Cited Agard Case That Constituted An 'Advisory Opinion'

Bloomberg reports:
  • Merscorp Inc., operator of the electronic-registration system for about half of all U.S. home mortgages, got a court to set aside a bankruptcy judge’s opinion criticizing its right to transfer the mortgages among members.


  • U.S. District Judge Joanna Seybert in Central Islip, New York, yesterday vacated part of U.S. Bankruptcy Judge Robert E. Grossman’s February 2011 decision in the bankruptcy of Ferrel L. Agard. Merscorp, based in Reston, Virginia, runs Mortgage Electronic Registrations Systems, or MERS.


  • The issue of whether MERS had authority to assign the mortgage was no longer before the bankruptcy court,” Seybert wrote. “There was no longer a live case or controversy.”

***

  • I thought it was a poor decision because it was decided only on procedural grounds,” George E. Bassias, a lawyer for Agard in Queens, New York, said of Seybert’s ruling in a phone interview today. “In my opinion she’s wrong on the procedure too.”

***

  • [Bankruptcy Judge] Grossman then [said] that Select Portfolio and U.S. Bancorp, which had been assigned the mortgage by MERS, wouldn’t have been given the relief had a state court not already granted a foreclosure judgment. That was because MERS’s “nominee” status didn’t give it the authority to assign mortgages, Grossman said.


  • Seybert said that that part of the order constitutes an unconstitutional advisory opinion and must be vacated.”


  • What the judge wrote is dicta,” Bassias said, referring to Grossman. “Dicta means it’s not a binding decision. He’s specifying everything MERS does that’s wrong. This judge did not address whether what MERS does is right or wrong.” Bassias said he didn’t oppose MERS’s appeal.


  • We have long believed that those who sought to use the In re Agard decision against MERS were wrong to do so,” Janis Smith, a Merscorp spokeswoman, said in a statement. “Any future challenges to MERS’ business model will have to be done without citing to Judge Grossman’s now vacated opinion.”(1)

For the story, see MERS Judge Sets Aside Bankruptcy Court’s Critical Ruling.

(1) As Judge Seybert correctly points out, that portion of the Agard case that criticized MERS was, in fact, nothing more than an advisory opinion. As such, and since that portion of Judge Grossman's opinion was not binding on any other court anyway, there is nothing that stops any other litigant or judge in any other case from any jurisdiction from citing to Judge Grossman's original opinion in Agard for the persuasive value of Judge Grossman's logic applied in his analysis, contrary to the statements of the presumably well-paid MERS' flack. What this flack also fails to mention is that the portion of Judge Grossman's opinion that was vacated was not done so on substantive grounds (ie. Judge Seybert didn't actually disagree with anything Judge Grossman said, but merely disagreed with the fact that he said it in light of the fact that nothing he said was necessary to reach his ruling in that particular case - remember, Judge Grossman actually rejected the homeowners's challenge to MERS).

Citing to a lower (non-appellate) court ruling that may have been subsequently vacated or reversed, or to a non-binding portion of a ruling, is not unheard of and is often done. See, for example, Hooker v. Northwest Trustee Services, Inc., et al., Case 1:10-cv-03111-PA (D. Or. May 25, 2011), in which Oregon Federal District Court Judge Owen M. Panner, in ruling against MERS in a foreclosure case, quotes from the dissenting opinion of Minnesota Supreme Court Justice (and pro football Hall of Famer) Alan C. Page in Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d 487, 503-04 (Minn. 2009) (Page, J., dissenting), an earlier Minnesota Supreme Court decision ruling in favor of MERS in a foreclosure case. Specifically, Judge Panner said this about the non-binding views expressed in the Minnesota case by Justice Page in his dissent:

  • Although Justice Page wrote in dissent in a case involving a Minnesota statute, his concerns apply to numerous cases pending before me. [...] Justice Page wrote in dissent, but his views are persuasive.

By the way, in quoting from a dissenting opinion from an out-of-state court ruling that has no binding legal effect in Oregon, Judge Panner's action illustrates at least one example of why appellate-level judges (ie. Justice Page) spend their time writing dissenting opinions. The fact that none of Justice Page's colleagues on the Minnesota Supreme Court shared his view in the 6-1 ruling in Jackson v. Mortgage Electronic Registration Systems, Inc. didn't mean there wouldn't be other judges from around the country (ie. Judge Panner, among possibly many others) who would find his observations and concerns useful when considering subsequent cases.

Minnesota Appeals Court: 'Nice Try, But No Dice!' To Hubby's Slick Maneuver To Subsequently Void 'Wife-Unsigned' Refinanced Home Mortgage

Minnesota Public Radio reports:
  • File this one under "nice try." The Minnesota Court of Appeals [] rejected a Grasston man's attempt to stop foreclosure proceedings against him because he listed himself as "single" on the mortgage application even though he was married.


  • Thomas Graikowski of Grasston refinanced his mortgage in 2006, two days after he married a woman who didn't know about the mortgage, didn't attend the closing, and didn't sign the loan application.


  • He defaulted on the $170,000 loan a year later, the marriage ended a year after that, and two years after the divorce, the mortgage company foreclosed on both of them. He attempted to have the mortgage declared void because his then-wife didn't sign it.


  • Under Minnesota law, the Appeals Court said, the Graikowski's mortgage is void because it lacked his wife's signature, but it said the law can't be used by someone who signed a mortgage to avoid repaying it.


  • Not that it hasn't been tried before. The court cited a Minnesota Supreme Court case in which a Buhl man, Stanley Bozich, declared himself "single" on a mortgage application even though he was married. His wife died and he remarried, then he attempted to cancel the mortgage on the basis that his new wife didn't sign it. The state Supreme Court had a word for that: "fraud."


  • In [the current] ruling, the Court of Appeals said Mr. Graikowski misrepresented his marital status either intentionally or unintentionally, and can't walk away from the obligation because of it.(1)

Source: The case of the unknowing spouse and the mortgage.

For the ruling, see HSBC Mortgage Services, Inc. v. Graikowski, A11-1456 (Minn. App. March 26, 2012).

(1) The Minnesota Appeals Court explained why it refused to void the mortgage in this case, despite the fact that the wife neither signed the mortgage, nor even knew of its existence:

  • Despite the plain language of section 507.02, "even though great importance is attached to the homestead right, under certain circumstances a [nonsigning spouse] may be estopped from denying a sale of the homestead even if the statutory requirements are not met." Dvorak, 285 N.W.2d at 677-78 (requiring the presence of three factors for successful application of equitable estoppel: "[1] the nonsigning spouse's consent and full knowledge of the transaction, [2] retention of benefits, and [3] delivery of possession to the grantee, who typically took possession and made valuable improvements"); see St. Denis v. Mullen, 157 Minn. 266, 270-71, 196 N.W. 258, 259-60 (1923) (estopping nonsigning wife from challenging conveyance when wife and husband were separated for 32 years, wife knew husband lived with another woman and knew husband died, wife failed to timely contest husband's conveyance to another woman, and an innocent purchaser was involved).

    In Dvorak, the supreme court stated that "detrimental reliance by the party seeking relief is critical to a finding of estoppel" and declined to estop the nonsigning spouse from challenging the validity of the conveyance under section 507.02 because the party seeking relief could not show detrimental reliance.
    Dvorak, 285 N.W.2d at 678; cf. Karnitz v. Wells Fargo Bank, N.A., 572 F.3d 572, 574-75 (8th Cir. 2009) (noting Dvorak factors and estopping both signing and nonsigning spouses from challenging the validity of their mortgage because nonsigning spouse knew about and intended to mortgage her homestead, retained the benefit of the mortgage, and lender significantly changed its position by lending couple over $130,000).

    In this case, the parties do not dispute that the property was Graikowski's homestead and that he was married to Coleman when he alone signed the mortgage conveying a property interest to HSBC. Under the plain language of section 507.02, Graikowski's mortgage is void because it lacked Coleman's signature. But this does not end our analysis, because no Minnesota state court case supports the application of section 507.02 to void a conveyance solely to protect a signing spouse. To the contrary, the Minnesota Supreme Court has estopped a signing spouse from challenging the validity of a conveyance under section 507.02 in
    Bozich v. First State Bank of Buhl, 150 Minn. 241, 184 N.W. 1021 (1921).

    Bozich, who was married to Helda, "represented to the bank in his application for the loan, and in response to a direct question, that he was a single man, and it was so recited in the mortgage and in the acknowledgment."
    Bozich, 150 Minn. at 242, 184 N.W. at 1021. The bank "believed and relied upon such representation and by it was induced to make the loan and take the mortgage [on Bozich's homestead]." Id. The supreme court stated that Bozich knew that his wife should sign. Whether he knew the full legal effect of a failure to sign when the mortgage was upon the homestead is not apparent. He knew that the bank supposed it was getting a good lien and his representation was necessarily fraudulent. Id. After Helda died, Bozich and his new wife brought an action to cancel the mortgage on the basis that Helda did not join it. The district court said:

    Stanley Bozich unquestionably perpetrated a fraud on the defendant. The purpose of estoppel is to prevent fraud resulting in injustice. If any state of facts justifies the application of the doctrine of estoppel it ought to be applied here. Stanley obtained $3,000 from the defendant by falsely representing that he was a single man. He now asks the court to release the mortgaged property from the lien of the mortgage without requiring him to pay the loan. His wife is dead. No one will be benefited by such decree but the party who perpetrated the fraud. The courts cannot be used for such a purpose. Id. at 242-43, 184 N.W. at 1021 (quotation omitted).

    The supreme court agreed with the district court's result and said:

    Many cases, speaking directly to the facts presented and with emphasis upon the importance of preserving unimpaired the homestead right, have used language from which on casual view an inference might be drawn that an estoppel cannot be invoked at all when a spouse fails to sign. Usually in these cases the estoppel was predicated upon covenants in the conveyance. . . . There are cases holding or implying that an estoppel may be invoked from facts apart from the covenants. . . . The defendant does not predicate the estoppel which it invokes upon the covenants in the mortgage. Upon inquiry made Bozich fraudulently represented that he was unmarried and by his misrepresentation induced the defendant to part with $3,000 upon the faith of the proffered security. The fraudulent misrepresentation is the basis of the estoppel claimed. Id. at 243, 184 N.W. at 1021-22 (citations omitted).

    The supreme court held that:

    [W]here as here the mortgagor, a married man, procures a loan on his homestead by fraudulently representing that he is unmarried, and afterwards his wife dies, ownership remaining in the meantime unchanged, the situation then being that a mortgage executed by himself alone is valid, he will not be heard to say in a court of equity that the mortgage which he made when his wife was living was void and will be held estopped to assert its invalidity. Id. at 243-44, 184 N.W. at 1022.

    Graikowski argues that nothing in the record suggests that he knew that his wife needed to sign the mortgage, that he knew that the documents he signed at closing indicated that he was single, or that he intended to perpetrate a fraud. He argues that at all times he acted in good faith. His arguments are unavailing. "In the absence of fraud or misrepresentation, a person who signs a contract may not avoid it on the ground that he did not read it or thought its terms to be different."
    Gartner v. Eikill, 319 N.W.2d 397, 398 (Minn. 1982); see Bus. Bank v. Hanson, 769 N.W.2d 285, 288 (Minn. 2009) (indicating that a mortgage is a contract).

    Like the supreme court in Bozich, we are unpersuaded by Graikowski's claim that the mortgage, which he executed two days after his marriage to Coleman, is void because she did not sign it. Although on January 25, 2006, Graikowski's response to the loan officer's direct inquiry about his marital status was true, Graikowski signed the loan application on June 26, after his marriage to Coleman. In the loan application, Graikowski represented that the information provided was true and correct "as of the date set forth opposite [his] signature[, January 26, 2006,] and that any intentional or negligent misrepresentation of [the] information contained in [the] application may result in civil liability."

    Moreover, Graikowski represented in the application that "the Lender . . . may continuously rely on the information contained in the application, and I am obligated to amend and/or supplement the information provided in this application if any of the material facts that I have represented herein should change prior to closing of the Loan." (Emphasis added.)

    When Graikowski signed the loan application on June 26, 2006, the information contained in it—that he was a "[s]ingle man"—was false. Graikowski was obligated to correct that information and did not do so. Based on Graikowski's false representation about his marital status, HSBC loaned him $170,100, believing that its loan would be secured by a first mortgage against his homestead. Graikowski's assertion that he did not read the application at the closing on June 26 has no legal significance, and the district court properly concluded that it does not create a genuine issue of material fact.

    The equitable estoppel factors articulated in Dvorak are not applicable here because, unlike Dvorak, HSBC seeks to estop only a signing spouse from challenging the validity of a conveyance. In Dvorak, a purchaser sought to estop a nonsigning wife from challenging the validity of a contract for the sale of her homestead.
    Dvorak, 285 N.W.2d at 677. In this case, albeit through marriage dissolution, Coleman, the nonsigning spouse, claims no interest in the homestead.

    We conclude that Graikowski, as the signing spouse, is estopped from challenging the validity of his mortgage because (1) he procured the conveyance through an intentional or negligent misrepresentation of fact, (2) the lender relied on the misrepresentation to its detriment, and (3) he retained the benefits.

Saturday, March 31, 2012

Bankster's Failure To Obtain Writ Of Possession May Be Crucial In Recent Suit Targeting Wells Fargo Alleging Post-Foreclosure Sale Home 'Trash-Out'

In Parma, Ohio, WKYC-TV Channel 3 reports:
  • Foreclosure is a nightmare in itself and now a Parma woman says Wells Fargo closed up her house and cleaned her out illegally. "It was my first home, it was my children's first home that we owned," says Elizabeth Kennedy. It was her American dream: A home on a quiet street in Parma.


  • But the nightmare of the recession hit her family hard. "About a year ago, year and a half ago, my husband lost his job. It was supposed to be a month long thing, it ended up being almost a year," she explained.


  • Despite attempts to get the house back, Kennedy's home went into foreclosure and sold back to the bank at auction. Then going through divorce, this legally blind mother of two relied on friends to slowly move her possessions out of her home.


  • One day -- she says without warning -- the locks had been changed with some of her stuff still inside. She still had boxes of baby pictures, sentimental family memories, TVs, furniture and four brand new dirt bikes.


  • After two weeks of trying to go through Wells Fargo, she finally broke in to find all of her stuff gone. "I don't even think there was a dust bunny in the corner. There was nothing, just completely empty," Kennedy said.


  • She hired attorney Ed Heben after she learned from the Cuyahoga County Sheriff's Department that the mortgage lender never requested a "writ of possession" and that the house was still legally her property.


  • Heben filed a lawsuit Wednesday against Wells Fargo/U.S. Bank. "They've been sued for trespassing, changing the locks on a property, conversion -- which is theft and stealing of the personal property," says Heben.


  • Kennedy says the company that claims to have hauled everything away says they dumped it in Sparta, Ohio. Wells Fargo says it does not have the lawsuit in-hand and said it would look into her case.(1)

Source: Parma woman sues Wells Fargo for "trashing out" foreclosed home.

(1) For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

For examples of filed lawsuits involving illegal bank break-in, "trash-out" & lockout cases, see:

Nevavda Regulator Orders Two Loan Mod Rackets To Cease & Desist For Unlicensed Operation; One Outfit Improperly Pocketed Homeowner's Monthly Payments

In Carson City, Nevada, the Las Vegas Sun reports:
  • Two Las Vegas companies advertising foreclosure services have been ordered to cease operating and fined $50,000. The state Division of Mortgage Lending claims Majestic Group LLC and Nevada Sky Premier LLC were not licensed to operate as covered service providers and bilked at least two unidentified clients. Jose Benjamin Rodriguez, listed as the head of the companies, has 20 days to contest the order by Commissioner James Westrin. The companies could not be reached for comment. One of their listed telephone numbers has been disconnected and no one answers the other.


  • Majestic, 2300 W. Sahara Ave., advertised that it would help homeowners pay overdue mortgages, boasting "We are your last resort." One homeowner signed a contract with Majestic in March 2011 and made an upfront payment of $3,623. The homeowner then made $800 monthly payments for six months. Rodriquez told the homeowner the monthly payments would be forwarded to the mortgage service.


  • A second homeowner signed a contract with Majestic in November 2010 and paid an upfront $3,498. The homeowner made $800 payments to Majestic for 10 months. The owner was then directed to send the payments to Nevada Sky and he did for six months.


  • The complaint says the companies did not have a state license and that payments made by the second homeowner were never sent to the mortgage servicer. The home was foreclosed on.


  • The state order directs Rodriquez and the companies to return $8,423 to the first homeowner and $16,298 to the second. The restitution must be made within 30 days. Westrin also imposed a $50,000 fine on Rodriquez and the companies.

Source: State fines foreclosure companies $50,000, orders them shut down.

Banksters Accused Of Loophole Abuse In NY Law Calling For Foreclosure Settlement Conferences; Results In Judicial Logjams, Homeowners Left In Limbo

The New York Law Journal reports:
  • Advocates of homeowners facing foreclosure are pushing for a change in court rules to remove an obstacle that has put many homeowners in a judicial limbo, unable to participate in settlement conferences to make their debt more manageable.


  • In particular, the advocates have proposed moving up the point at which attorneys for lenders must submit an affirmation attesting to the accuracy of court documents.


  • "If the whole point of the [affirmation] rule is to prevent plaintiff lawyers from knowingly filing false or inaccurate filings in foreclosure cases, make it a rule that the affirmation be filed when they file the complaint, and not wait until they file the request for judicial intervention," said Jacob Inwald, director of foreclosure prevention litigation for Legal Services NYC.


  • Under current procedure, lenders can file a summons and complaint for a foreclosure action without triggering a mandatory settlement conference. A conference is scheduled only after proof that the summons has been served, a specialized request for judicial intervention and the attorney's affirmation are submitted.


  • Since the implementation of the affirmation requirement in October 2010, advocates charge that lenders have delayed filing the request for judicial intervention so that they do not have to file the affirmation right away. That has created a "shadow docket" of cases that do not show up in official court statistics or trigger a settlement conference.

***

  • [Co-director of the Neighborhood Economic Development Advocacy Project Josh] Zinner said he and fellow advocates are "very supportive" of the affirmation, noting that the purported shadow docket was "not the fault of the [attorney affirmation] rule itself." Instead, he argued, "lenders are not following the spirit of the rule by taking advantage of a loophole, filing cases and holding off on filing the affirmation."

For more, see Advocates Seek to Eliminate Foreclosure 'Shadow Docket'.

Real Estate Agent Dodges Permanent License Revocation Over Sleazy Conduct That Screwed Over Client; Appeal Yields 6-Month Negotiated Handslap

In Denver, Colorado, KUSA-TV Channel 9 reports:
  • A Realtor who was exposed in a 9Wants to Know investigation has had his license suspended for six months and must pay a $5,550 fine. 9Wants to Know showed in 2011, that Mark Dyson didn't bring an offer to a seller he represented, and then turned around and bought the building at a foreclosure auction himself.


  • The Colorado Real Estate Commission and Dyson reached the agreement which also requires him to be supervised by a broker for two additional years after his suspension, if he chooses to practice real estate in Colorado. The commission will have to approve the supervising broker, according to the final agency order issued Mar. 19.


  • In February 2011, 9Wants to Know discovered Dyson didn't tell Carol Price about an offer to buy her property, and then when the property went to foreclosure, Dyson bought it and sold it to a buyer who had made two previous offers. State law requires a seller's agent to present all offers.


  • "I should have presented the offer, that was my mistake," Dyson told 9Wants to Know previously. "My mistake." State law does not restrict real estate agents from buying a property they list at the foreclosure auction.


  • Dyson did not comment on the suspension when reached by phone Monday morning. His attorney, Jon Goodman, released the following statement to 9Wants to Know: "Once Mark had a chance to kick around his side of the story, in detail, with neutral and sophisticated decision makers, we worked out a six month suspension rather than a permanent revocation. Mark respects the ultimate decision reached by the State."


  • The Colorado Real Estate commission voted to revoke Dyson's license during a meeting in April 2011. Dyson appealed that decision and reached an agreement with the Colorado Real Estate Commission this month.

Source: Realtor Mark Dyson, exposed in 9Wants to Know investigation, agrees to license suspension, fine & supervision.

Relentless Banksters Continue Harassing Homeowner, Despite Victim's Recent $18M Score In Nationwide Foreclosure Fraud Settlement

In Palm Beach Gardens, Florida, The Palm Beach Post reports:
  • The pool guy, plumber and lawn man for a Palm Beach Gardens homeowner who recently won an $18 million settlement in a foreclosure-related lawsuit are being sought for questioning by the bank still seeking to repossess her home.


  • Lynn Szymoniak, a 63-year-old attorney who specializes in white collar crime, shot to national fame last year when she was featured on the CBS news show 60 minutes for her role in uncovering widespread mortgage and foreclosure fraud after finding it in her own 2008 case.


  • This month, it was announced she would receive $18 million from a whistle-blower lawsuit filed under the federal False Claims Act, which allows the government to bring civil actions against entities that knowingly use or cause the use of false documents to obtain money from the government.


  • Deutsche Bank, which filed to foreclose on $759,428 in unpaid principal against Szymoniak in 2008, sent notice to her attorney Monday that it plans to depose eight companies that have done work on her home including her plumber, air conditioning repair firm, landscaper and two pool service companies.


  • Szymoniak said because her loan was taken out to renovate her home, including installing hardwood floors and upgrading bathrooms, the bank may be trying to determine whether she actually used the money for the designated purpose.


  • But she said the move is unusual in a foreclosure case, and because the requests are so lengthy, including a demand for all communications between the company and herself, she said it’s more likely a form of harassment or an effort to increase court costs.


  • It’s just them saying ‘How can we dirty her up as best we can,’” Szymoniak said. “It would almost be funny to see my yard guy come in. The one guy didn’t even start servicing my pool until four months ago.”


  • A representative from American Home Mortgage Servicing, Inc., which services Szymoniak’s loan, said she was looking into the reason beind the subpoena and would respond to the Palm Beach Post’s request for comment by the end of the day.


  • Last year, shortly after appearing on 60 Minutes, Deutsche Bank’s case was thrown out of court after it was ruled it couldn’t prove ownership of the mortgage. It re-filed the foreclosure in May, but also included Szymoniak’s son, Mark Cullen, in the case. Cullen, who was not on the mortgage, was a graduate student living in New York at the time.


  • Now, every time my son fills out a loan application he has to say he was sued for foreclosure,” Szymoniak said, noting that Deutsche eventually dropped Cullen from the suit.


  • Szymoniak won’t receive the $18 million settlement for at least two months and plans to pay off the mortgage as well as donate to several charities. “Until I can pay this mortgage off, Deutsche Bank will just continue to run up fees and try to harass the living hell out of me,” she said.

Source, see Pool guy, landscaper of $18 million foreclosure winner subpoenaed.

Cook County Continues Search For Ex-Homeowners Who Left Behind $16M In Surplus Sale Proceeds From Foreclosure Auctions

In Chicago, Illinois, NBC Chicago Channel 5 reports:
  • A pot of money held in limbo at the Cook County Clerk of the Circuit Court could help ease the pain of some homeowners affected by the housing bust. The money in question -- about $16 million -- are surplus funds, created after a homeowner was foreclosed upon and their home re-sold. If the foreclosed homeowner owed less on the mortgage than the final sale price of the subsequent sale, those funds go back to the first owner.


  • "We have an individual that’s due 13 cents. We have someone that’s due $400,000 dollars," said Dorothy Brown, the clerk of the court.

  • Illinois law requires these surpluses to be deposited to the clerk of the court, where it then continues to sit, collecting interest until the original homeowner claims it.


  • The problem? Finding those people. Many don’t realize the funds are due them, and many who’ve been through foreclosure don’t often leave a forwarding address.


  • "It’s hard to find them because many times when people lose their properties to mortgage foreclosure they have also have a lot of credit card debt and a lot other kinds of debts, and they’re probably actually running from those creditors," said Brown. "As a result when they leave their property, they don’t leave a forwarding address."


  • In an attempt to shorten a lengthy list of names and a piggy bank of surplus money, Brown's office has created a searchable section on its website to help locate the funds' owners. Those who think they may have money in the fund can visit www.CookCountyClerkofCourt.org and enter their last name, first initial, and phone number. "I just felt it was something we should do for the people," said Brown.


  • For those experiencing the foreclosure process right now, the clerk advised homeowners to stay in contact with her office. The clerk's office can help monitor the sale of the homes and alert the homeowner if they're owed a surplus.

Source: County Wants to Return $16M to Homeowners (Roughly 1,900 homeowners that have gone through foreclosure are due money).

Feds, State AGs Take Various Approaches In Efforts To Neutralize Deceptive Practices By Sleazy Bill Collectors, Zombie Debt Buyers

From a column in The Southeast Texas Record:
  • Medical researchers came up with a breakthrough in the 1980s in their quest to cure patients of HIV. They developed the Highly Active Antiretroviral Therapy, which non-scientists called a "drug cocktail."


  • Even though any single medicine was not powerful enough to cure people with HIV, it was discovered that the right cocktail of drugs could be highly effective.


  • Many U.S. attorneys general are working with each other and with the federal government to employ the same strategy to control and eventually eradicate the scourge that is unethical debt collectors, because just one strategy alone seems not to be enough.


  • West Virginia Attorney General Darrell McGraw saw how the settlement against a major debt collector in a class-action lawsuit would pay out a lousy ten bucks per victim. Exercising his rights to protect the citizens of West Virginia, McGraw then brought his own suit against the company for using false affidavits when obtaining default judgments against West Virginians and for not including necessary details when suing consumers.


  • Attorney General McGraw said:"Many consumers are frightened or unaware of their rights when they are sued and fail to respond to these groundless lawsuits, leaving them subject to judgments on debts that cannot be proved. Companies such as Midland rely upon this fear and typically drop their lawsuits if consumers know their rights."


  • Minnesota Attorney General Lori Swanson is prosecuting agencies who work with attorneys to scam consumers. Debt-settlement companies align themselves with lawyers so they can use official-looking letterhead to collect fees up-front for promising to help consumers with their overwhelming debts. Then they fail to deliver, leaving the consumers in even-deeper debt.


  • Attorney General Swanson said: "It's particularly galling. Here you're seeing people who have a special privilege -- the privilege to practice law -- abusing consumers who are down on their luck."


  • Illinois Attorney General Lisa Madigan is going after lawyers who specialize in requesting arrest warrants for consumers behind on their bills. One example is a 53-year-old woman who was stopped for a broken taillight. When the police ran her name, she was handcuffed in front of her kids and hauled away for a $2,200 debt that had turned into a default judgment.


  • The Wall Street Journal surveyed just nine counties in the U.S. and found more than 5,000 such arrest warrants issued since 2010 for debt-related cases. Attorney General Madigan said: "We can no longer allow debt collectors to pervert the courts."


  • Texas Attorney General Greg Abbott has gone after multiple debt-collection companies, including one whose employees took the arrest-warrant threat to a whole new level. Their employees claimed to be associated with law-enforcement agencies and the IRS. They would insist that consumers pay their debts or risk facing arrest, prosecution, and imprisonment.


  • Massachusetts Attorney General Martha Coakley is onto the game some debt collectors play of threatening consumers with legal action while hiding the fact that the debt is "time-barred"; in other words, the debt has passed the statute of limitations for any legal action. Her amended regulations would require that consumers be informed of that fact.


  • Ohio Attorney General Mike DeWine has banded together with 18 other states to go after NCO Financial, a large debt-collector, for a whole range of violations, including extracting money from consumers for debts they did not owe, and charging excessive interest.


  • Ohio has a tradition of pursuing debt collectors. As Attorney General in 2010, Richard Cordray investigated two other debt-collection firms, and now he heads the Consumer Financial Protection Bureau. He therefore has first-hand knowledge of the games debt collectors play.


  • No doubt that is why Director Cordray has already proposed regulations that would involve on-site federal inspection of the top debt collectors representing 63 percent of collections in the U.S.


  • More bad news is in store for crooked debt collectors. Recently, state and federal officials gathered to announce the $25 billion mortgage-servicing settlement.


  • Attorney General Lisa Madigan used that event to reinforce the regulatory cocktail that's being assembled against the worst debt collectors: "Know that this is neither the beginning nor the end of our work to hold banks and other institutions accountable.... Today's settlement should serve as a warning for financial institutions: there are consequences for engaging in practices that jeopardize the stability of our communities and our economy."

Source: It's Time for a "Regulatory Cocktail" Against Unethical Debt Collectors.

Friday, March 30, 2012

Maryland Attorney Gets 18 Months For Ripping Off Client's Dead Mother's Estate Out Of $300K+

In Anne Arundel County, Maryland, The Baltimore Sun reports:
  • A disbarred Annapolis lawyer was ordered Thursday to serve 18 months in the Anne Arundel County jail plus five years on probation for siphoning nearly $308,000 from a client.(1)


  • Jerold K. Nussbaum, 60, whom Karen Gunther hired to handle her mother's estate, stole most of it in 2005 and 2006, according to prosecutors and court records. He had pleaded guilty in January. "Mr. Nussbaum not only stole my money, but I've lost my home," Gunther, the heir, told Judge Paul A. Hackner, according to a recording of the court hearing. She said she had to move in with a cousin and still pay $6,000 a year in taxes on a house "I can't even live in" because she couldn't afford needed repairs.


  • Nussbaum, who practiced mostly tax and bankruptcy law and now works for a start-up company, was in financial trouble because of clients' bankruptcies, was going through a divorce and was using Gunther's funds to stay afloat, according to his attorney, Drew Cochran. He plans to repay the funds, Cochran said.


  • Nussbaum was disbarred in 2007 after using other clients' money between 2003 and 2005 for his expenses and seeking to cover it up when questioned by the Attorney Grievance Commission.

Source: Disbarred Annapolis lawyer jailed for stealing client's money (He siphoned $308,000 from estate he was handling for heir).

(1) The Client Protection Fund of the Bar of Maryland (formerly "The Clients' Security Trust Fund") was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Maryland-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:

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

Sticky-Fingered Attorney Cops Guilty Plea For Pocketing $2M+ In Closing Proceeds Meant To Pay Off Existing Mortgages On Sold, Refinanced Real Estate

From the Office of the U.S. Attorney (Montgomery, Alabama):
  • On March 22, 2012, James Boyd Douglas, Jr., who previously practiced law in Lee County, Alabama, pled guilty to engaging in a multimillion-dollar mortgage fraud scheme, announced the United States Attorney’s Office in the Middle District of Alabama.


  • Between January 2005 and September 23, 2011, Douglas handled numerous real estate closings and real estate refinancing transactions on behalf of his clients. As part of the real estate closings, Douglas received the proceeds of new mortgage loans.


  • Douglas was supposed to use the proceeds from new mortgage loans to repay the old mortgage loans on the properties that were being sold or refinanced. But instead of using that money to repay the old loans, Douglas embezzled more than $2,000,000 from his clients’ real estate closings over approximately six years.(1)

For the U.S. Attorney press release, see Lee County Attorney Pleads Guilty to Mortgage Fraud Scheme.

(1) The Client Security Fund of the Alabama State Bar was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by an Alabama-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:

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

Florida Lawyer Gets Six Years For Looting $2.4M+ Of Entrusted Funds Belonging To Clients

In Fort Myers, Florida, Gulf Coast Business Review reports:
  • U.S. District Judge John Steele sentenced Fort Myers attorney Joseph Troiano, 63, [...] to six years in federal prison for mail and wire fraud. Steele also ordered Troiano to pay restitution to his victims totaling nearly $2.5 million. A jury convicted Troiano in November of six counts of wire fraud and one count of mail fraud for misusing client funds.


  • He used $2.4 million of client money to pay off loans and invest in real estate from 2005 to 2010 without his clients’ permission, according to a statement from U.S. Attorney Robert O’Neill.(1)

Source: Fort Myers attorney sentenced.

(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:

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

Las Vegas Attorney Under State Bar Probe For Allegedly Illegally Pocketing Ten$ Of Thousand$ In Client Ca$h

In Las Vegas, Nevada, the Las Vegas Review Journal reports:
  • In an emergency petition, the Nevada State Bar is seeking to suspend the license of a politically active Las Vegas attorney, alleging he misappropriated tens of thousands of dollars in client funds and tried to cover up his actions.


  • The bar called attorney Barry Levinson a "substantial threat" to the public and said it wants the Nevada Supreme Court to issue a "swift and immediate suspension" of his license while the bar conducts formal disciplinary proceedings against him.


  • "In short, Levinson has repeatedly misappropriated funds and has compounded his misconduct by repeatedly lying to clients and the State Bar regarding his delay in disbursing funds to the appropriate parties," according to the bar in a 24-page complaint [...].


  • "Levinson's lies, combined with his failure to cooperate, constitute an obstruction to the State Bar's investigation, as does Levinson's failure to provide information requested." Disciplinary proceedings against Levinson could result in an additional suspension or disbarment.

For more, see State Bar targets Las Vegas attorney.

(1) The State Bar of Nevada's Clients' Security Fund was established to reimburse clients who have suffered a loss due to theft by a Nevada-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:

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