Wednesday, May 30, 2012

Feds Tag Banksters With Suits Over Crappy Mortgage Securities They Allegedly Unloaded Onto Pair Of Now-Defunct Financial Institutions

Reuters reports:
  • The U.S. government has filed three lawsuits against a group of large banks over losses on soured mortgage debt purchased by two small Illinois banks that failed in 2009. Acting as receiver for Citizens National Bank and Strategic Capital Bank, the Federal Deposit Insurance Corp sued a number of banks including Bank of America Corp , Citigroup Inc , Deutsche Bank AG and JPMorgan Chase & Co.

  • Seeking a combined $92 million, the lawsuits accuse the banks of misrepresenting the risks of residential mortgages they packaged into securities, causing losses for investors once the poor quality and defective underwriting became evident. [...] Two FDIC lawsuits were filed in Manhattan federal court and seek a combined $77 million, while a third filed in Los Angeles federal court seeks $15 million.

Deutsche, Affiliate Admit To Peddling Crappy FHA Mtgs; Head NYC Fed On Banksters' Practices: "Seemed To Treat Red Flags As If They Were Green Lights!"

From the Office of the U.S. Attorney (Manhattan):
  • Preet Bharara, the United States Attorney for the Southern District of New York, [and others] announced [] that the United States has settled a civil fraud lawsuit against DEUTSCHE BANK AG, DB STRUCTURED PRODUCTS, INC., DEUTSCHE BANK SECURITIES, INC. (collectively “DEUTSCHE BANK” or the “DEUTSCHE BANK defendants”) and MORTGAGEIT, INC. (“MORTGAGEIT”).

  • The Government’s lawsuit, filed May 3, 2011, sought damages and civil penalties under the False Claims Act for repeated false certifications to HUD in connection with the residential mortgage origination practices of MORTGAGEIT, a wholly-owned subsidiary of DEUTSCHE BANK AG since 2007.

  • The suit alleges approximately a decade of misconduct in connection with MORTGAGEIT’s participation in the Federal Housing Administration’s (“FHA’s”) Direct Endorsement Lender Program (“DEL program”), which delegates authority to participating private lenders to endorse mortgages for FHA insurance.

  • Among other things, the suit accused the defendants of having submitted false certifications to HUD, including false certifications that MORTGAGEIT was originating mortgages in compliance with HUD rules when in fact it was not.

  • In the settlement [...], MORTGAGEIT and DEUTSCHE BANK admitted, acknowledged, and accepted responsibility for certain conduct alleged in the Complaint, including that, contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations.
For the lawsuit, see U.S. v. Deutsche Bank, et ano.
In a statement in connection with this litigation, the U.S. Attorney made these observations on the bankster's lending practices that precipitated this lawsuit:
  • The complaint describes, in detail, lenders taking abusive advantage of a vital Government mortgage insurance program, issuing billions in loans to countless aspiring homeowners. But while the homes the defendants issued loans for may have been built on solid ground, the defendants’ lending practices were built on quicksand.

  • Borrower after borrower defaulted – often within just months of closing – because those loans were doomed to fail. Why? Because, as alleged, the defendants simply ignored every type of red flag and breached every duty of due diligence before endorsing mortgages for federal insurance.

  • In fact, they seemed to treat red flags as if they were green lights. Ultimately, prudence was trumped by profit, and good faith took a back seat to good fees.

Lack Of Notice, Dispute Over Homestead Eligibility Left Couple Facing Possible F'closure By Tax Certificate-Holding Neighbor & Subject Of Local Gossip

In Washington, D.C., The Washington Post reports:
  • Theresa Bollech found out by chance that a neighbor had purchased a tax-sale certificate on her family’s home in the Chevy Chase neighborhood in the District and was quietly planning to foreclose in a matter of weeks.

  • The Bollechs weren’t deadbeats. But they were at odds with the D.C. Office of Tax and Revenue over their homestead exemption.

  • They say they never received notification last year that the city had placed a lien on their property and sold it to the neighbor in July at a tax-sale auction. In that, their experience was typical of a system in which the District sells tax-sale certificates — liens — on properties owing as little as $500 in back taxes or utility bills to speculators and financial institutions that are not required to notify property owners until they begin foreclosure proceedings, according to attorneys working with a consortium called the Alliance to Help Homeowners Maintain Equity.
***
  • But all parties agree on one critical aspect of the system — the notice property owners receive immediately after the tax-sale auction: none. The city passes that responsibility to purchasers, who are required to notify property owners only when they file to foreclose, a motion that can’t be legally pursued until six months after a sale.
***
  • Theresa Bollech said she and her husband didn’t know that the city had sold a tax certificate on their home in the 5700 block of 27th Street NW last July to a neighbor because they never received notice before or after the sale.

  • What’s more, she said, no one from the District said a word to them about the sale during a hearing in September with the director of the OTR’s homestead unit over the root cause of their delinquency — the disputed homestead exemption, which significantly reduces assessments for residents who claim a D.C. property as their primary home. (The unit ultimately ruled in the Bollechs’ favor.)

  • They wouldn’t learn that a neighbor had purchased a tax certificate on their home for months. But it became the subject of gossip in their neighborhood, and a neighbor tipped them off just weeks before the neighbor who purchased the certificate could have initiated foreclosure proceedings.

  • There’s no way to describe what it feels like to think you’re going to lose your home,” said Bollech, sitting at the dining room table that now doubles as a repository for hundreds of tax documents. “How could they do this to us? How could they not say something?”

Tuesday, May 29, 2012

Bid & Cure Statements Filed During Foreclosure Process With Four County Public Trustees The Focus Of Colorado AG Mortgage Fraud Probers' 'Paper Chase'

In Denver, Colorado, The Denver Post reports:
  • Mortgage fraud investigators with the Colorado Attorney General's office have gathered documents filed with at least four county public trustees' offices by some of the state's largest foreclosure law firms, according to several people familiar with the request.

  • Trustees in four counties confirmed they each provided hundreds of pages of documents — mostly bid and cure statements associated with foreclosures spanning a five-year period — in response to a request by the attorney general's consumer protection division.

  • Deputy Attorney General Jan Zavislan, who heads that office's consumer protection division, declined to comment about the scope or nature of the request, or even to say it was an inquiry or formal investigation. "That's a very big no comment," Zavislan said Friday.
***
  • Trustees in Boulder, Jefferson, Arapahoe and El Paso counties confirm they provided sets of 100 documents for each of seven law firms — Vaden, Dale & Decker, Castle Stawiarski, Hopp, Aronowitz & Mecklenburg , Medved and Janeway — covering the period of 2008 to the present, according to a copy of an email sent to the Boulder County public trustee and obtained by The Denver Post under the state's open records law.
***
  • The request was focused on bid and cure statements attorneys file in a foreclosure case. Each statement includes charges the law firm says must be paid — by the homeowner in the case of a cure or, in the case of a bid, by the winner of a public auction when a property is sold.

  • The bid sheet is a bank's offer for the auction of a foreclosed property, a requirement by law. If there are no other bidders, the bank retains the property and reduces by their bid amount what a homeowner owes them. Sometimes lenders will bid the exact amount owed.

  • Cures are filed with trustees when homeowners indicate they would like to stop the foreclosure process by paying what they owe. The cure bill will include charges such as outstanding amounts on a mortgage, accrued interest and a variety of other fees such as attorneys costs and property inspections.

NJ AG Squeezes Five Guilty Pleas From Scam Group For Roles In Use Of Dead Man's ID To Buy, Finance Home Purchase

From the Office of the New Jersey Attorney General:
  • Attorney General Jeffrey S. Chiesa announced that five people have pleaded guilty for their roles in a scheme, led by a Hudson County woman, to defraud a mortgage lender of $431,200 by filing a false loan application and purchasing a home in Newark in the name of a man who was deceased. The final defendant, a Morris County lawyer, pleaded guilty [].

  • The leader of the scheme, Genilza R. Nunes, 38, of Kearny (aka Leticia Wilchez, Geny Silva, Gena Nunez and Genilza Borges), pleaded guilty on May 8 to second-degree money laundering before Superior Court Judge Salem Vincent Ahto in Morris County. Under the plea agreement, the state will recommend that she be sentenced to 10 years in state prison, including two years of parole ineligibility, and be ordered to pay a $150,000 fine.

  • [P]aul DiGiacomo, 46, of Madison, a lawyer who laundered stolen funds through his trust account, pleaded guilty to second-degree money laundering before Superior Court Judge Thomas V. Manahan in Morris County. Under his plea agreement, the state will recommend that he be sentenced to eight years in state prison and be ordered to pay a $150,000 fine.
For the rest of the NJ AG press release, see Five Plead Guilty in Scheme to Defraud Lender of $431,200; False Mortgage Loan Application Results in Loan Issued to Dead Man (Leader of scheme faces up to 10 years in state prison).

Theft By Deception Among Charges For Newark Man Accused Of Using Stolen ID To Sell His Own Home To Unwitting Victim, Then Purchase & Move Into Another

From the Office of the New Jersey Attorney General:
  • Attorney General Jeffrey S. Chiesa announced that a Newark man was indicted [] for allegedly stealing approximately $1.2 million from two mortgage lenders by using a stolen identity and false information to obtain two home loans, which he used to sell his home in Newark and acquire a luxury home in Georgia.

  • Davionne Anderson, 41, of Newark, and his unregistered real estate investment company, AAA Investment Group, were each charged in a five-count state grand jury indictment with two counts of second-degree theft by deception, two counts of second-degree identity theft and one count of third-degree money laundering. The charges stem from an investigation by the Division of Criminal Justice Financial & Computer Crimes Bureau.

  • In April and May of 2007, Anderson and AAA allegedly used a woman’s stolen identity and false information to obtain a total of $1,205,250 in loans, which Anderson used to buy two homes in the woman’s name: a home that he himself owned in Newark, and a home in Georgia that was owned by an innocent seller who was unaware of the fraud. [...] After completing the phony sale of his own home and acquiring the Georgia home in the name of the unsuspecting buyer, Anderson moved into the Georgia home with his wife

  • Using a single stolen identity and two fraudulent loan applications, this defendant from Newark allegedly stole over a million dollars from lenders and attempted to settle into a luxury home in Georgia that we allege he never intended to pay for,” said Attorney General Chiesa.

Monday, May 28, 2012

NH Homeowner Suit To Enjoin F'closing Lenders From Forcing Sale Gets Green-Light Where Mortgage Assignor Ceased Holding Loans Years Before Assignment

From a recent ruling from the U.S. District Court in New Hampshire:
  • At first blush, this case appears to present a question that has demanded the attention of state and federal courts throughout the country over the past several years: whether mortgagors have standing to challenge the validity of putative assignments of their mortgages to claimed assignees attempting to enforce those mortgages.

  • Two of the defendants argue that mortgagors have no such standing, and have moved to dismiss the complaint for that reason. Upon closer scrutiny, however, the complaint does not squarely challenge the validity of an assignment, and thus does not implicate that question.

  • Plaintiffs Michael and Kathleen Drouin filed this action in state court seeking to enjoin American Home Mortgage Servicing, Inc., Wells Fargo Bank, N.A., and Option One Mortgage Corporation from foreclosing on the property securing their mortgage loan.

  • The Drouins allege that American Home Mortgage and Wells Fargo (collectively, "Wells Fargo"), claiming to possess an assignment of their mortgage from Sand Canyon Corporation, the successor-in-interest to Option One (the original mortgagee), have demanded payment on the mortgage and threatened to foreclose if such payment is not made.

  • But Sand Canyon cannot have assigned the mortgage to Wells Fargo, the Drouins allege, because it ceased holding any mortgages—including theirs—years before the alleged assignment.

  • Wells Fargo removed the case to this court, which has diversity jurisdiction over this matter under 28 U.S.C. § 1332. It then moved to dismiss, see Fed. R. Civ. P. 12(b)(6), asserting that the Drouins have no standing to challenge the assignment's validity and that they may not maintain a cause of action seeking to enjoin the foreclosure sale. Both parties declined the court's offer to hold oral argument on Wells Fargo's motion.

  • The motion is denied. Whatever the merits of Wells Fargo's argument as to the standing of a mortgagor to challenge the validity of an assignment, the gravamen of the Drouins' complaint is not that the assignment from Sand Canyon to Wells was invalid (though there are overtones of that as well).

  • Rather, the Drouins' principal grievance is that, even if the assignment was technically "valid," it cannot have served to assign their mortgage to Wells Fargo because Sand Canyon did not hold the mortgage, and could not assign what it did not have.

  • Because the Drouins satisfy the requirements of standing as to that claim, and because New Hampshire law clearly establishes the right of mortgagors to file an action seeking to enjoin a foreclosure sale, the case may proceed.
For the factual background, and the court's analysis of the law it applied to these facts, see Drouin v. American Home Mortgage Servicing, Inc., Civil No. 11-cv-596-JL (D.N.H. May 18, 2012).
Thanks to Mike Dillon of Stellionata Consulting, LLC for the heads-up on this litigation.

Lower Court Ruling Leading To Low-Income Homeowners Being 'Priced Out' Of Court Faces Appellate Challenge From Consumer Advocates

From a post in Public Citizen's Consumer Law & Policy Blog:
  • After Pittsburgh-area homeowner Mary Glover was subjected to a series of overcharges on her mortgage and misallocation of her payments by Goldman Sachs and Wells Fargo, she filed a putative class action under state contract law, the FDCPA, and state consumer protection laws.

  • When the financial institutions stonewalled during discovery, the magistrate judge -- instead of simply adjudicating Ms. Glover's motions to compel -- told the parties they ought to work out their disputes and if they couldn't, he'd appoint a special master.

  • They couldn't, and he made good on his threat, ordering that the master's fees be split equally between the large institutional defendants and Ms. Glover, whose only income is less than $10,000 in Social Security disability benefits.

  • [P]ublic Citizen filed a mandamus petition in the Third Circuit to overturn the appointment of the special master. The issues we raise are whether a special master's costs can be allocated in such a way as to price a low-income litigant out of court, and whether a special master could be appointed in the first place for the purpose of coercing parties into settling their discovery disputes. (Obviously we believe the answer to both questions is "no.")

  • Our petition, filed in cooperation with Michael P. Malakoff who brought the case originally, is here.

Federal Appeals Court: OK Under State Law To Double-Cross Minnesota Homeowners With False Promises Of Foreclosure Forbearance

From a recent post in Public Citizen's Consumer Law & Policy Blog:
  • What Happens When A Lender Promises Not to Foreclose But Forecloses Anyway?

  • According to Brisbin v. Aurora Loan Services, No. 11-1218 (8th Cir. May 21, 2012), decided Monday by the Eighth Circuit, under Minnesota law, the homeowner is out of luck because a homeowner can only sue on promises made in written agreements.

  • This is true even under a promissory estoppel theory -- that is, even if, as alleged in Brisbin, the homeowner relied to her deteriment on the promise to forbear

  • As the homeowner's lawyer put it in an article on the case, the Eighth Circuit's decision "solidifies the ability of the mortgage company in this case to explicitly lie to the customers it's serving and not be held accountable when an individual is relying on representations being made."

  • I wonder whether this would be the law in any, many, or most other states.
See also, The National Law Journal: Oral promise to delay foreclosure means nothing, Eight Circuit rules (Minnesota's credit agreement law bars courts from enforcing a lender's oral promise to delay a foreclosure sale, the U.S. Court of Appeals for the Eighth Circuit has ruled) (free registration required).
Thanks to Deontos for the heads-up on the story.

Sunday, May 27, 2012

C. Florida Cops Pinch Suspect Allegedly Posing As Real Estate Agent Holding Open Houses At Vacant, F'closed Homes, Duping Would-Be Buyers Out Of Cash

In Central Florida, the Tampa Bay Times reports:
  • A Polk County man has been accused of collecting down payments of homes that were not for sale — and state authorities believe some of his victims are in the Tampa Bay area. Paul Vencatasawmy, 41, has been arrested on fraud charges in connection with a couple of transactions, the Florida Department of Law Enforcement says.

  • So far, they've identified victim losses that add up to $380,000 but believe there's more.

  • Vencatasawmy posed as a real estate agent selling properties. Though he had some affiliations with legitimate companies, the FDLE said he struck out on his own to do these fraudulent transactions.
  • Florida Department of Law Enforcement agents claimed Vencatasawmy held open houses at homes that were in foreclosure or vacant.

Suspected Connecticut Foreclosure Assistance Scammer Feels The Heat, May Be Readying To Bolt Town; Victims: Target About To Take 'Extended Vacation'

In Wethersfield, Connecticut, NBC Connecticut reports:
  • A local attorney told the Troubleshooters more people have come forward to blame a Wethersfield business for their foreclosures. Attorney Manny Suarez now represents six clients with complaints about Deowraj "Deo" Buddhu.

  • Court documents describe Buddhu as running a scheme that promises customers who often don't speak English well access to a supposed stash of federal money that can help pay off their debt. Court records say Buddhu collects thousands of dollars from his customers and tells them to stop paying their mortgages.

  • The result, according to court papers, is that customers like Heddy Arcos-Torres of Hartford never see a dime and they wind up in foreclosure. [...] Suarez said the government money fund is fictitious and that Arcos-Torres is one of 200 alleged victims. A judge has since vacated the foreclosure judgment against Arcos-Torres, which means she and her husband will be able to modify their loan and stay in their house.

  • The Connecticut Office of Chief Disciplinary Council investigates the unauthorized practice of law. The office said it has received complaints about Buddhu. Buddhu spent time in jail for forgery and in 2008 both he and his daughter, Sunita, were permanently barred from preparing tax returns for others.
***
  • The Wethersfield Police Department cannot confirm or deny it is investigating Buddhu.

  • According to customers, Buddhu is now telling people he's about to take an extended vacation. Buddhu did not respond to our repeated requests for comment, only to say on the phone "if you want to believe what they are saying" before our call was disconnected.
For the story, see More Foreclosure Victims Come Forward (More people are coming forward after the Troubleshooters first reported on a Wethersfield business).

Ten Screwed Over Homeowners Sue Motown-Area R/E Operator Suspected Of Using Land Contract Deals To Rip Off Cash Peddling Homes In Foreclosure

In Detroit, Michigan, WXYZ-TV Channel 7 reports:
  • Leonard Bale, the West Bloomfield real estate investor exposed by 7 Action News for selling houses he knew were in some phase of foreclosure, has been sued in Wayne County Circuit Court. In a Dearborn law office, attorney Mike Jaafar announced his clients’ allegations that he said could support criminal fraud charges.

  • Ten people who say they suffered from Bale’s business practices - some who were left homeless - claim fraud, conspiracy and other misconduct when they made land contract purchases from Bale and his Wolverine Investment company.
***
  • His customers say Bale takes down-payment cash from families like the McGee’s, then, breaking promises along the way, they allege he lies about his true ownership in the house, up the point of bank notices asking Bale to respond to foreclosure proceedings.

  • He knew at the time he was selling these properties that he was inducing them by giving false information,” says attorney Jaafar.

Complaints Flood Florida Bar As Pervasive Cavalier Attitude Of Wayward Attorneys Unsettles Some

The South Florida Business Journal reports:
  • It’s been a tough stretch for the reputation of Florida’s 93,000 attorneys. The blemished names include convicted Ponzi schemer Scott Rothstein and alleged foreclosure king David J. Stern. In all, almost 200 attorneys currently face complaints of violations regarding loan modification services.

  • The situation has been called overwhelming. Last year alone, the Florida Bar processed some 8,000 grievance cases. Almost 100 attorneys were disbarred.

  • Malfeasance and misconduct is nothing new, at least to Andrew Hall, founding partner with Hall, Lamb and Hall, P.A. in Miami. What’s unsettling is the magnitude and a pervasive cavalier attitude, said the attorney, [...]
For more, see Florida Bar tackles attorney discipline (requires subscription).

Attorney To Get License Pulled After $95K Client Ripoff; Cash Intended To Pay Off Civil Settlement

The State Bar of California recently announced:
  • The State Bar of California has accepted a stipulated disbarment from Newport Beach attorney Kendall R. Paulson, who misappropriated $95,000 that was supposed to be used to settle his client’s lawsuit.
  • According to the disbarment stipulation approved by the State Bar Court Wednesday, Paulson, 51, represented Carl Lovegren in a civil suit filed against him in Orange County Superior Court in September 2006. The following year, the parties entered into a settlement agreement whereby Lovegren agreed to pay the plaintiffs $95,000. The agreement stated that should Lovegren fail to pay an agreed-upon amount by Feb. 9, 2008, he would be responsible for twice the balance, plus interest.
  • On Dec. 10, 2008, Lovegren gave Paulson $40,000 to pay part of the settlement agreement, money that Paulson deposited into his client trust account but later spent. Paulson misappropriated an additional $55,000 in settlement money from another check Lovegren gave him in June 2009.
  • According to the stipulation, Paulson misled both Lovegren, who thought he had been paying off the settlement, and the court, by telling a judge that his client was trying to raise money to pay the judgment but needed more time.
  • Paulson (bar number 120688), who had no prior history of discipline, will be placed on involuntary inactive status May 18 until the California Supreme Court acts on the disbarment recommendation. He has agreed to pay restitution, plus interest.(1)
(1) Homeowners ripped off by the dishonest conduct of a California attorney (including a failure to refund unearned legal fees) who want to recover their money can apply for possible restitution from the Client Security Fund of the State Bar of California (see also Can the Client Security Fund Help You?).
For earlier posts referencing California's Client Security Fund in the context of loan modification ripoffs, see:
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:

Saturday, May 26, 2012

Court Slams Brakes On Suspected Loan Modification Racket's Claim Of Affiliation With Nationally-Recognized Non-Profit To Scam Homeowners In F'closure

Non-Profit Quarterly reports:
  • A federal judge has ruled that home loan company First One Lending Corporation may not continue to present itself as affiliated with the Neighborhood Assistance Corporation of America (NACA), which describes itself as “a non-profit, community advocacy and homeownership organization.”

  • NACA was granted a preliminary injunction by U.S. District Judge David Carter. According to the lawsuit filed by NACA, First One has been claiming that it is affiliated with the nonprofit in order to help itcheat desperate homeowners facing foreclosure.”
***
  • NACA alleges that First One is charging for a service that NACA provides for free while trying to benefit from the NACA name in the process. According to the injunction ruling, First One is now prohibited from “making a number of specific false or misleading statements it currently uses to perpetuate their deceptive scheme.”

  • We found this passage from Judge Carter’s ruling particularly interesting: “All too frequently, intellectual property disputes between two faceless entities can make the judiciary appear to the public like a mere handmaiden to corporate interests, blessing corporations’ efforts to commodify an ever-growing swath of the nation’s intellectual capital. This case is a refreshing reminder that the policy justification for trademark law is to protect human beings, not corporations.”

  • It’s also a reminder to nonprofits to be on the lookout for those who might seek to use their good name for less than noble purposes.
See also: Courthouse News Service:
Go here for:

Illegal Tax-Dodging Homestead Exemption Claims Skyrocket; Local Teachers Union Proposes Amnesty Program To Raise Cash, Minimize Membership Layoffs

In Miami, Florida, The Miami Herald reports:
  • The teachers union in Miami-Dade County has proposed what could be an innovative way to raise extra money for education: A tax amnesty program that would go after homestead exemption cheats.

  • At a news conference Tuesday, the United Teachers of Dade announced plans to push for a pilot program that would encourage residents to come clean that they are illegally claiming homestead exemption - a tax break of up to $50,000 for those whose Florida property is their full-time residence.

  • UTD President Karen Aronowitz said the amnesty would be accompanied by an advertising campaign linking tax evasion with the negative effect on school funding, and would be followed up with higher penalties. "Teachers hate cheaters," Aronowitz said. "If people pay their taxes we can pay our teachers."

  • Exactly how much a tax amnesty could raise is debatable. Miami-Dade Property Appraiser Pedro Garcia said homestead exemption fraud liens have grown from about $2.7 million in 2007 to $14.5 million so far this year. That is driven by two factors: A poor economy leading more people to cheat and increasing the number of detectives investigating fraud cases.

  • But James DiBernardo, a retired major with the Miami-Dade County Police who investigated economic crime, believes those numbers are much higher. Whereas Garcia estimates there are upward of 400 deceased people claiming homestead exemption on the tax rolls, DiBernardo said that number is actually about 12,000. Most of those cases involve relatives of the deceased who now live in the home but have not changed the ownership.(1)

  • DiBernardo consulted with three private companies and said each provided similar figures. In all, DiBernardo estimates $280 million is owed in back taxes, 40 percent of which would go toward education. In addition to the 12,000 deceased residents, he believes there are about 20,000 residents who are renting properties but still claiming them as their full-time residence.

  • "I'm uncovering a lot more than I ever expected," DiBernardo said of the fraud cases.

(1) My guess is that there is also a 'ton' of recently-foreclosed homes once owned by exemption-claiming homeowners that have now been acquired by banksters who have conveniently failed to file the appropriate change in the properties' homestead status, thereby enabling them to improperly continue pocketing the tax benefit.

C. Fla. County Official: New System For Taking Online Applications For Real Estate Tax Benefits On Homestead Exemption Claims Virtually 'Fraud-Proof'

In Pasco County, Florida, The Pasco Tribune reports:
  • For years, Pasco Property Appraiser Mike Wells resisted the idea of allowing homeowners to file online for a homestead exemption. "Other counties have tried it, and there were always flaws," he said.

  • But Wells, who is running for his fifth term, said his office has developed an online application that is virtually "fraud-proof." The new application system started Thursday.

  • The Property Appraiser's Office reviews 10,000 to 14,000 new homestead exemptions a year. Wells said he hopes the new online application will reduce the amount of office work involved in the reviews. Applicants must fill out personal information, such as the driver's license number, voter identification and Social Security number, and the program will compare the information with state and national databases.

  • "It's completely automated," he said. "The system reviews the input of information online in real time. So if you give the wrong driver's license number, it's going to stop."

Nev. High Court OKs HOA Squeeze On F'closure Purchasers; Says State Regulator Erred In Capping 'The Clip' On Association Assessments, Collection Costs

In Las Vegas, Nevada, Vegas Inc. reports:
  • Nevada homeowner associations and their collection agencies have prevailed in the latest court ruling in disputes over collection costs for unpaid HOA assessments.

  • The Nevada Supreme Court on Wednesday ruled the state Financial Institutions Division (FID) was wrong to cap the assessments and collection costs that purchasers of foreclosed homes must pay. These assessments and costs typically accumulate for months while the homes sit vacant during the foreclosure process.

'The Swine Stays!' Says Judge To HOA; Well-Behaved Wilbur The Pot-Bellied Porker Dodges Boot As Effort To Evict Beloved Family Pet Deemed 'Not Kosher'

In Spring, Texas, KPRC-TV Channel 2 reports:
  • Monday, a judge ruled a Spring family can keep their pet pot-bellied pig, Wilbur, in their home. "Relief," said Missy Sardo, Wilbur's owner. "It's unbelievable."

  • Wilbur's owners, the Sardo family, have been fighting this battle for more than a year now. They said their pet pig is part of the family. "It's like one of my kids, only more well-behaved," said Alex Sardo. "I would do anything for him."

  • The family said their homeowner's association was objecting to Wilbur. They said The Thicket at Cypresswood Community Improvement Association told them they were in violation of deed restrictions. The family was ordered to get rid of Wilbur or face a possible foreclosure and hefty fines.

  • Monday, the judge ruled in favor of the Sardo family, granting their little piggie the right to stay in his home. "Don't let your HOA push you around," said Missy Sardo. The family celebrated the win with Wilbur in their home. They gave him an extra special treat of carrots and his favorite food, strawberries.

  • Wilbur is a popular pig with thousands of Facebook fans: https://www.facebook.com/#!/WilburSardo. He also has a website www.wilbursardo.com with a live web cam.
Source: Family wins legal battle to keep pet pig (HOA told family to get rid of pig or face foreclosure).
For the court's ruling, see Sardo v. The Thicket At Cypresswood Community Improvement Association, No. 2011-51454 (Dist. Ct. Harris County, May 7, 2012).
Go here for the deposition of Spring, Texas veterinarian Robert L. Rogers, whose testimony contrasting the difference between a "household pet" and "livestock" (ie. an 'ordinary farm pig') was apparently found to be persuasive by the court.
Go here for Wilbur's lawsuit against the HOA, and here for the court papers in which Wilbur outlines his case, and includes appellate case law citations and affidavits from Wilbur's expert witnesses in support of his position, as well as his responses to the Association's objections.
Representing Wilbur in his successful battle against his homeowners' association were attorneys Mitchell Katine and Benjamin Ha of Katine & Nechman LLC, Houston, Texas.
Editor's Note: No word yet from Wilbur as to whether he will be awarded prevailing party attorneys' fees and costs under the Texas Uniform Declaratory Judgment Act (which the court explicitly makes reference to in its ruling), the tab for which the homeowners' association would be left holding the bag (it sure sounds like Wilbur dragged the HOA through a 'pig sty' when he brought his grievances to court and, given the way this case appears to have been litigated by his advocates, the homeowners' association may be in for another major $lam).

Friday, May 25, 2012

Among Victims Scammed By Mortgage Fraud Conspiracy Were Home Sellers Who Had Their Equity Financed Out From Under Them In Owner Financing Ripoff

In Panama City, Florida, the News Herald reports:
  • The grand jury indicted Maurice Bates for wire fraud in the nick of time, enabling a trial jury Wednesday to find him guilty of defrauding lenders out of more than $1 million.

  • The indictment was filed Dec. 6, 2011, only seven days before the statute of limitations would’ve expired. Judge Richard Smoak ruled Wednesday that a check that was cashed on Dec. 13, 2006 constituted the final act of a conspiracy to commit wire fraud after Bates’ attorney, Tonya Higgins, rested her case without calling a single witness and asked Smoak to dismiss the charge.
***
  • [The conspirators] defaulted on every loan they received. Most of the homes they bought have been foreclosed on, and the rest are only waiting for a final judgment. In a couple cases, the sellers agreed to loan money to the buyers and were named as defendants in foreclosure proceedings.

  • Marie Beamer is one of them. The 81-year-old Beamer took the witness stand Wednesday to tell the jury how her Realtor convinced her that it was a good idea to loan $100,000 to the group who bought her home in Bay Point in 2006.

  • She expected to receive $733 every month, but after about six months the checks stopped showing up.

  • Littleton asked Beamer what she would’ve done with that $100,000. “I would have saved it for retirement and then I wouldn’t have work today,” Beamer replied. After she said it, a juror looked down at the floor and shook her head.

  • Of the $100,000 Beamer lost, $83,000 ended up in a bank account that Bates controlled. Add that to the money skimmed off the bank loan, and Bates cleared nearly $200,000 from the deal to buy Beamer’s house. “Cases like this are about people like Marie Beamer,” [Assistant U.S. Attorney Gayle] Littleton told the jury.
For the story, see Man guilty of fraud (He faces up to 20 years in prison for mortgage scam).

Attorney Agrees To Disbarment After Admitting To $1.1M Client Ripoff; Victims Promised Loan Mods, Discounted M'gage Payoffs For Pennies On The Dollar

The State Bar of California recently announced:
  • A Los Angeles attorney accused of misappropriating $1.1 million from 10 clients has agreed to be disbarred, the State Bar announced [].
  • In one of the largest misappropriation cases ever handled by the Office of Chief Trial Counsel, Vafa Allan Khoshbin [bar# 165486], 52, had promised clients he could get their first mortgages modified and their second mortgages settled for pennies on the dollar.
  • The clients gave him money, which was deposited either to his client trust account or to his business account. But the cash disappeared before Khoshbin did any loan modification work or made any payments to banks on his clients’ behalf, according to a stipulation approved Wednesday by the State Bar Court.
  • One couple, Sharooz and Fariba Arianpour, turned over $357,000 thinking it would be used to settle a second mortgage and a loan they held on a car wash.
  • Koshbin will be placed on involuntarily inactive status May 5 until the California Supreme Court acts on the disbarment recommendation. Khoshbin also agreed to pay restitution plus interest of 10 percent per year.(1)
  • In mitigation, Khoshbin was experiencing family and financial problems. Khoshbin also said he inappropriately surrendered his authority to a non-attorney who was handling finances for the firm, Debt Relief Law Center.
  • Khoshbin, who was admitted to practice in 1993, also received a public reproval Feb. 13 for failing to follow through with a client’s lawsuit against a mortgage lender and failing to refund $5,000 in attorney fees. The case was prosecuted by Senior Trial Counsel Suzan J. Anderson.
(1) Homeowners ripped off by the dishonest conduct of a California attorney (including a failure to refund unearned legal fees) who want to recover their money can apply for possible restitution from the Client Security Fund of the State Bar of California (see also Can the Client Security Fund Help You?).
For earlier posts referencing California's Client Security Fund in the context of loan modification ripoffs, see:
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:

Lone Star Firm Tags F'closed Calif. Borrowers For Unpaid 2nd Mtgs; Homeowners' Lawyer: Outfit Nothing More Than "People In Texas Acting As Vultures!"

In Southern California, Rick Jurgens of California Watch reports:
  • Adding new uncertainty in the state’s ongoing mortgage crisis, a Texas company is aggressively pursuing hundreds of Californians to collect second-mortgage debt – on homes they’ve already lost through foreclosure.

  • Many of these former homeowners believed their mortgage debt had been erased after their houses were taken by banks and lending companies. But the Texas company, Heritage Pacific Financial, has pursued collections and filed lawsuits claiming those debts still linger.
***
  • Critics of Heritage Pacific say the company’s central tactic is forcing settlements from people who can’t afford a drawn-out legal fight and who don’t know the details of California law. The company has sued people with second-mortgage debts of less than $150,000, despite a state law prohibiting lawsuits alleging fraud on mortgages below that amount.

  • Heritage Pacific’s collection methods now face legal challenges, including a class-action lawsuit in Santa Clara County Superior Court that contends that the company is carrying out an “insidious and illegal debt collection scheme.”
***
  • By demanding payments from more than 1,000 individuals in California, the lawsuit contends, Heritage Pacific has violated “the rights of those who have already suffered the emotional and financial distress that results from the loss of their foreclosed home.”

  • Heritage Pacific is nothing more thanpeople in Texas acting as vultures,” said Will Kennedy, a lawyer in the class-action suit.
***
  • Heritage Pacific’s first big foray into California came in U.S. District Court in Los Angeles, where in a three-month period beginning in December 2009, Heritage Pacific filed three lawsuits seeking $46 million in actual and punitive damages from 158 defendants who took out 143 loans.

  • Meanwhile, Heritage Pacific opened another front in California state courts. California Watch reviewed online records in 10 of the state’s 17 largest counties and found 365 lawsuits in which Heritage Pacific was a party. Heritage Pacific also has filed 226 cases in federal bankruptcy courts in California.

  • This story was produced by California Watch, the state’s largest investigative reporting team. It is a part of the independent, nonprofit Center for Investigative Reporting. For more, visit www.californiawatch.org. Jurgens can be reached at rjurgens_2000@yahoo.com.

Arizona High Court: OK For Banksters To Stiff Homeowners On 'Show Me The Note' Requests When Proceeding With Foreclosure

From the law firm Ballard Spahr LLP:
  • Arizona’s non-judicial foreclosure statutes do not require the beneficiary to prove its authority or “show the note” before a trustee may commence a non-judicial foreclosure, the Arizona Supreme Court has ruled.

  • The May 18, 2012, decision in Hogan v. Washington Mutual Bank, N.A. et. al should have a significant impact on pending and future mortgage foreclosure-related litigation in Arizona, as it flatly rejects a legal theory frequently advanced by borrowers in an attempt to avoid foreclosure.

  • Sitting en banc, the court was asked to decide whether Arizona law permits a trustee to foreclose on a deed of trust without the beneficiary first having to show ownership of the note that the deed of trust secures.

Thursday, May 24, 2012

Unwitting Borrower Has Home Foreclosed Out From Under Her Despite Three Approved Loan Modifications; 'Sleeping' Servicer: 'We Know Nothing About It!'

In Park City, Utah, KSL-TV Channel 5 reports:
  • Georgene Clotfelter recently hired a realtor to sell her Park City home, but was surprised to find out country records showed she no longer owned it. When she contacted her mortgage lender, Chase Bank, she says a representative told her the bank had no record of a sale.

  • "I don't even want to hear the word bizarre anymore, because everybody I talk to uses the word bizarre," Clotfelter said. "It's stupid. It really is stupid." Having spent decades working in the mortgage finance business, Clotfelter said she's yet to see anything like the mess she finds herself in today.

  • The problems began back in 2009 when she was having trouble making her mortgage payments and began the process of applying for a loan modification. To be eligible for a modification, she said the bank told her to skip mortgage payments, declare hardship, and go into default.

  • Since 2009, Clotfelter says Chase has approved her for three different loan modifications.

Federal Appeals Court: OK To Use 'FDCPA-Hammer' On Attorneys Hired For Mere Enforcement Of Security Interest Through Non-Judicial Foreclosure

From the law firm Burr & Forman, LLP:
  • The Eleventh Circuit Court of Appeals released an opinion earlier this month that could give foreclosure lawyers cause for concern.

  • In Reese v. Ellis, Painter, Ratterree & Adams, LLP, No. 10-14366, 2012 WL 1500108 (11th Cir. May 1, 2012), the Eleventh Circuit ruled that a foreclosure firm conducting a non-judicial foreclosure could be liable under the Fair Debt Collection Practices Act (“FDCPA”) for sending homeowners correspondence that includes false or misleading information.

  • This decision may call into question the protection that foreclosure firms have enjoyed under existing case law holding that mere enforcement of a security interest through non-judicial foreclosure is not debt collection activity under the FDCPA.
For the ruling, see Reese v. Ellis, Painter, Ratterree & Adams, LLP, No. 10-14366, 2012 WL 1500108 (11th Cir. May 1, 2012).
Editor's Note: This case was brought as a putative class action.

Fed. Appeals Court: OK To Hammer Bill Collectors Making Automated Calls To Wrong Cell Phone Subscribers; Numbers Were Reassigned To Unintended Targets

In Chicago, Illinois, Legal Newsline reports:
  • A federal appeals court ruled last week that bill collectors can be sued for costly, automated calls made to the wrong cell phone subscribers. [...] At the center of the case is the federal Telephone Consumer Protection Act, the law governing the conduct of telephone solicitations and telemarketing.

  • In particular, the TCPA restricts the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text messages received by cell phones, and the use of fax machines to send unsolicited advertisements.

  • The act also curtails the use of automated dialers and prerecorded messages to cell phones whose subscribers often are billed by the minute as soon as the call is answered. Routing a call to voicemail counts as answering such a call.

  • As the Seventh Circuit noted, an automated call to a landline phone is simply an annoyance, but the same call to a cell phone adds expense to the annoyance.

  • In this case, dozens of automated calls were made to two cell phone numbers, which went to voicemail, consuming minutes from the current subscribers' plans. All of the calls were made in an effort to reach previous subscribers to the numbers, whom agreed to receive the calls.

  • The "bystanders" or current subscribers, Teresa Soppet and Loidy Tang, sued Enhanced Recovery Company LLC, a bill collector for AT&T, contending they never consented to receive the automated or recorded calls.

  • In all, Enhanced Recovery called Soppet's number 18 times and Tang's 29 times trying to reach the previous subscribers, whom provided AT&T with the cell phone numbers as a way to contact them at least three years prior.

  • Enhanced Recovery argues that the previous subscribers' consents to be called at the cell phone numbers remained in force even after the numbers were reassigned to Soppet and Tang.

  • The district court disagreed, saying that only the consent of the subscriber assigned to the cell phone number at the time of the call, or perhaps the person who answers the phone, justifies an automated or recorded call. The court then certified the issue for interlocutory review by the Seventh Circuit.

  • In its 12-page opinion, the Seventh Circuit affirmed the lower court's ruling, concluding that the so-called "called party" is the cell phone number's current subscriber, not the person the debt collector is trying to reach.
For the appeals court ruling, see Soppett v. Enhanced Recovery Company, LLC, No. 11-3819 (7th Cir. May 11, 2012).
For the earlier ruling of the lower court, see D.G. ex rel Tang v. William W. Siegel & Associates, Attorneys At Law, LCC, 791 F.Supp.2d 622 (N.D. Ill. Eastern Div. 2011).
Editor's Note: This case was brought as a putative class action lawsuit (go here for the lawsuit).