Thursday, June 21, 2012

Sale Leaseback Peddler Gets 33 Months In Racket That Ripped Off Victims' Home Equity & Led To Their Getting The Boot

From the Office of the U.S. Attorney (Norfolk, Virginia):
  • Philip Villasis, 41, of Chesapeake, Va., was sentenced [] to 33 months in prison, followed by 24 months of supervised release for conspiracy to commit wire fraud in connection with a fraudulent foreclosure rescue scheme. Villasis also will be required to pay over $216,000 in restitution to his victims.
***
  • According to court documents, from November 2006 until February 2011, Villasis engaged in a foreclosure rescue scheme that defrauded homeowners and mortgage lenders. Villasis promised homeowners that he could save them from foreclosure by arranging a sale of their homes to co-conspirator, Ray D. Gata, and other straw borrowers.

  • The homeowners were promised that they could remain in their homes after the sale, pay rent, and Villasis would resell the homes back to them once they were more financially secure. Villasis and Gata profited from this scheme by taking all of the proceeds from the home sales.

  • They completed the scheme by executing false closing documents that showed the proceeds of the sale going back to the homeowners when, in fact, the proceeds were going to Villasis, Gata and the other straw borrowers.

  • The homeowners received nothing from the sale of their homes while Villasis, Gata and others received in excess of $170,000. In almost every case, Villasis required the homeowners to pay more in rent to cover a larger mortgage, and ultimately evicted these homeowners from their homes.
For the U.S. Attorney press release, see Chesapeake Man Sentenced For Mortgage Fraud Scheme.

Ex-Tax Preparer Who Provided Falsified Work, Income Records In Connection With Sale Leaseback Foreclosure Rescue Ripoff Gets Two Years

In Los Angeles, California, City News Service reports:
  • A former tax preparer from Downey was handed a two-year federal prison sentence [] for his role in a mortgage fraud scheme that preyed on Latino homeowners by secretly taking title to their properties and draining the equity from their homes. Pablo Araque, 41, was also ordered by U.S. District Judge S. James Otero to pay restitution of $1 million.

  • Araque pleaded guilty in January to federal identity theft and mail fraud charges stemming from the scam in which homeowners' properties were sold, usually without their knowledge, to third-party straw buyers.
***
  • Co-defendant Juan Rangel, 48, was sentenced last year to 22 years behind bars for running both the foreclosure fraud and a separate Ponzi scheme that took in at least $30 million from over 500 victims.

Target Of Florida AG Probe Into Debt Settlement Scheme Now Peddling Purported Mortgage Cancellation Program To Homeowners Using Quiet Title Actions

In West Palm Beach, Florida, The Palm Beach Post reports:
  • By the time the stranger called that Thursday in March, suburban Boynton Beach homeowner Marcie Lowe was out of options to fix her failed real estate wager. The savvy 78-year-old played her hand well for years in the home-buying game, picking up properties in California and Key West to rent to kids in college and bartenders serving drinks on Duval Street.

  • But she got caught with a 10 percent interest-only loan on her gated Valencia Isles home, which is now worth hundreds of thousands of dollars less than the $571,000 she paid in 2003. “What would you think of this?” Lowe remembers the caller saying.

  • He proposed a fresh strategy to end-run the banks — a complex legal plan that begins when you deed your home to the Fort Lauderdale-based Fidelity Land Trust Co. for an average fee of $2,500. Conceived, at least in part, by a man barred by the state from engaging in consumer debt-related services, the trust then sues the bank to cancel your mortgage while offering a new contract with lower payments. “He said more than 250 people were already set up for this,” Lowe recalls.

  • Fidelity Land Trust has quietly amassed about 80 Palm Beach County deeds since it registered as a limited liability corporation with the state in December. The firm is the owner of record for another 76 properties in Broward and Miami-Dade counties, according to clerk of court records.

  • If the trust is successful in canceling the mortgage through a quiet title action, the homeowner is still responsible for the loan debt, or note, but the trust then tries to buy that debt from the bank for pennies on the dollar. Because the debt no longer has collateral in the form of the home, the idea is the bank will be more willing to negotiate.
***
  • Within the layers of corporations tied to Fidelity Land Trust is Edward C. Tudor — a registered fictitious name for Edward Cherry, according to the Florida Department of State Division of Corporations. State records show the managing member of Fidelity Land Trust Co. is Fidelity Land Trust Partners, whose “member or authorized representative” is Edward C. Tudor.

  • Cherry was barred in a 2009 consent judgment by Florida’s attorney general from dealing in consumer debt-settlement services after a state investigation concluded companies he was involved with “diverted millions of dollars to themselves and a coterie of families and associates.”

  • In 2010, the attorney general accused Cherry of violating the order after he allegedly conducted debt-related seminars that charged attendance fees of upwards of $95, according to a pending Broward County court case.
For more, see Underwater owners try to beat the bank (Post Exclusive: Homeowners seeking lifeline).

Wednesday, June 20, 2012

Accused F'closure Sale Bid-Riggers Dodge Bullet As Rocky Mountain Supremes Uphold 'Joint Bidding' Defense In Civil Suit Brought By Foreclosed Owner

In Aspen, Colorado, the Aspen Daily News reports:
  • The Colorado Supreme Court on Monday ruled in favor of bidders at a 2007 foreclosure auction for an Aspen condo who were accused by the former owner of collusion and bid rigging.

  • The case of Amos v. Aspen Alps 123, LLC, stems from the foreclosure sale conducted in February 2007 for a condo in the slopeside Aspen Alps complex that was owned by Betty Amos and the estate of her late husband Thomas Righetti. Amos had used the condo as collateral for a $1.6 million loan that had fallen into default, and Equitable Bank of Florida, which made the loan, initiated foreclosure proceedings.

  • The bank submitted a credit bid of $1.6 million, and three other bidders participated in the auction on the Pitkin County Courthouse steps. They were Debra Mayer of Aspen, Mike Seguin of Aspen and Thomas Griffin, who was there on behalf of James Flaum, of the Vail area. The initial bidding was competitive, and Seguin submitted what was ultimately the final bid of $1.86 million.

  • However, according to legal documents on file in the case, after Seguin entered the $1.86 million bid, Griffin suggested thatinstead of bidding the property up further and further,” the three parties stop bidding and form an LLC which would allow them to split the purchase three ways. All agreed, and they formed Aspen Alps 123, LLC, which was granted title to the condo by the Pitkin County Public Trustee in August 2007.

  • At issue in the case was whether the agreement, made by three people who had never met before the auction, was merelyjoint bidding,” which is permissible, or rose to the level ofbid rigging,” which violates state and federal antitrust laws.

  • The difference, according to relevant case law, is that joint bidding occurs when two or more people pool their resources to buy a property that they could not have afforded individually. Bid rigging is when parties collude to stifle competition.

  • In a 6-1 vote, the justices found that “we cannot say based on the limited evidence in the record that the purpose of the individuals joining to purchase the property was to eliminate, reduce, or interfere with competition.” Chief Justice Michael Bender, however, wrote a dissenting opinion and found that bid rigging did occur.

  • Amos also contended that the sale should be voided because the bank failed to properly notice the foreclosure sale to the estate, which included Righetti’s daughter, Brandy Righetti. Judges at the district and appellate court level never supported this argument, because Amos herself — who is a representative of the estate — was properly noticed. One of the seven Supreme Court justices wrote a dissenting opinion in favor of Amos’ arguments on the notice issue, but no other justices concurred.
***
  • In backing the bidders, the court relied on testimony they offered during the initial trial, when Mayer and Flaum said that the bidding had exceeded the funds they had at their disposal. Mayer stopped bidding at $1.75 million, and Griffin was authorized by Flaum to spend no more than $1.8 million, according to the testimony. It was Mayer’s testimony that after Seguin had entered the $1.86 million bid, Griffin suggested the parties “stop bidding the property up further and further” and the three agree to a joint-purchase arrangement.

  • The Supreme Court, in its 20-page majority opinion, noted that the joint purchase arrangement did not shut any other bidders out of the process, because no one else was participating in the auction.
***
  • Chief Justice Bender, in his dissenting opinion, cited the bidders’ own admitted intentions to stop the bidding process and keep the price from rising further. Justices in the majority are basing their exoneration of the bidders on the “self-serving testimony” that neither Mayer nor Flaum could afford to match Seguin’s final bid, he wrote.

  • The existence of a conspiracy to rig an auction is neither dependent on the success of the conspiracy nor on any showing that the agreement injured the seller by negatively impacting the final sale price,” Bender wrote. “In the present matter, the parties explicitly agreed to stop bidding to prevent the auction price from rising. This is the definition of anti-competitive behavior.”(1)
For the court ruling, see Amos v. Aspen Alps 123, LLC, 2012 CO 46, No. 10SC187 (June 18, 2012).
For earlier, related posts, see:

(1) Beware of dissenting opinions! Notwithstanding Colorado Supreme Court's overwhelming 6-1 vote upholding the 'joint bidding' defense in this case, the persuasiveness of Chief Justice Bender's logic in his dissenting opinion could be relied on by the Colorado state legislature to pass a statute specifically declaring the existence of a bid-rigging racket if the facts in future cases are similar to those in this case. See, for example, Foreclosing Lender's Failure To Serve Junior Lienholder Now OK In Indiana; New Law Reverses State High Court Ruling, Now Permits Lawsuit 'Do-Overs', reporting that Indiana Supreme Court Justice Frank Sullivan, Jr.'s lone dissent in the case (a 4-1 ruling), Citizens State Bank of New Castle v. Countrywide Home Loans, Inc. 949 N.E.2d 1195 (2011), formed the basis of a subsequently-passed statute that reversed the effect of the court ruling for future cases.

Further, there is nothing stopping judges in other states/jurisdictions from 'leaning' on Chief Justice Bender's logic in reaching a contrary conclusion to that of the majority in this case. See, for example, Highlights From Recent Oregon Court Ruling Booting MERS, in which a U.S. District Judge in Oregon gave significant consideration to the observations of a Minnesota Supreme Court Justice's dissenting opinion in Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d 487 (Minn. 2009) when reaching his decision. According to Chief Justice Bender:

  • ¶42 The majority reasons that the bidders’ agreement did not constitute unlawful bid rigging, but was instead lawful “pooling” of the bidders’ resources to create a joint bid similar to the arrangement that the Wyoming Federal District Court found to be lawful in Love v. Basque Cartel, 873 F.Supp. 563 (D. Wyo. 1995). Maj. op. at ¶ 33. Specifically, the Love court warned that “[b]id rigging should not be confused with joint bidding, which allows bidders to pool their resources to place bids on property which they would otherwise be unable to afford.” 873 F.Supp. at 578. I disagree with the majority’s reliance on Love because that case is easily distinguished from the present matter.

    ¶43 In Love, the court based its ruling that the joint bidding agreement constituted lawful bid pooling on three reasons.

    First, the Love court was persuaded by the fact that the parties to the joint bidding agreement were never in competition because each was only interested in owning a distinct parcel of the larger ranch that their joint bid succeeded in winning. Id. at 577-78.

    Second, the Love court reasoned that it was significant that the was no evidence that others that were present at the auction were prevented from matching or exceeding the joint bidders’ final bid. Id. at 578.

    Finally,
    the Love court held that the agreement constituted lawful joint bidding because the evidence showed that in the absence of the joint bidding agreement, the reserve would not have been met for several of the parcels and therefore the auction would have failed. Id. at 579.

    ¶44
    Each of these rationales is inapplicable to the auction in this case.

    First, there was
    only one parcel, the condo, and all three bidders were bidding competitively against one another to obtain the property in its entirety.

    Second, unlike in Love, where there
    were other bidders that may have competed against the joint bidders, here, all of the bidders present at the auction colluded to stop bidding. Their collusive behavior, which occurred while the auction was underway, destroyed any incentive among the bidders to match or to exceed the final bid.

    Finally, the reserve (or minimum bid amount) was
    met well before the parties conspired to stop bidding up the price of the auction. Thus, the success of the auction, in surpassing the reserve, was not contingent upon the parties’ ability to submit a combined bid. Although I am mindful of Love’s warning that ““[b]id rigging should not be confused with joint bidding,” id. at 577, Love should not control this case. I acknowledge that, under certain circumstances, a combined bid may actually serve to foster competition by allowing joint bids to reach ever higher. In this case, however, the combined bid served to cut off all competition and, in the words of one of the bidders, “stop the bidding process.”

    ¶45
    Indeed, in direct contradiction to the facts in Love, the uncontroverted evidence here shows that the bidders did not come together to make the final, winning bid.

    Rather, after several rounds of bidding, Seguin, in his individual capacity, bid $1.86
    million, and then, once that bid was submitted, Griffin (representing Flaum) approached Meyer and Seguin andproposed to the others that, instead of ‘bidding the property up further and further,’ they cease bidding against each other and buy the property jointly.” Maj. op. at ¶ 6.

    Unlike in Love, where, prior to the final round of
    bidding, the bidders pooled their bids to reach a price that they otherwise could not afford, here, Seguin could have afforded the final bid price independent of the financial contributions of the other bidders.

    ¶46
    Seguin won the auction with his individual bid, and it was not until after the close of the auction that the parties came together to form Aspen Alps. At the time that their anti-competitive agreement occurred, Seguin held the high bid independent of the others. Thus, the incentive for him to join in the agreement was to prevent the auction price from getting bid up “further and further.”

    Seguin was able to buy-off his
    competitors by agreeing toform an LLC and stop the bidding process.” In my view, their agreement represented a classic bid rigging scheme. It constituted an “’agreement between competitors pursuant to which contract offers are to be submitted to or withheld from a third party.’” Love, 873 F.Supp. at 576 (quoting United States v. Mobile Materials, Inc., 881 F.2d 866, 869 (10th Cir. 1989), cert. denied 493 U.S. 1043 (1990)).

    ¶47
    The majority reasons that this scheme did not constitute bid rigging because the non-winning bidders, Flaum (who was represented by Griffin at the auction) and Meyer, each provided self-serving testimony that they could not afford to match Seguin’s final, winning bid. Maj. op. at ¶¶ 34-35.

    In my view, this misapprehends
    federal bid rigging jurisprudence, which has long recognized that the existence of a conspiracy to rig an auction is neither dependent on the success of the conspiracy nor on any showing that the agreement injured the seller by negatively impacting the final sale price. See ABA Section of Antitrust Law, Model Jury Instructions in Criminal Antitrust Cases 61 (2009) (“Bid Rigging”).

    Rather, the relevant inquiry is whether the
    “aim and result” of the conspiracy was “the elimination of one form of competition.” Id. Thus, the sole issue in determining whether a joint bidding scheme constitutes unlawful bid rigging is whether it produces an anti-competitive result. In the present matter, the parties explicitly agreed to stop bidding to prevent the auction price from rising. This is the definition of anti-competitive behavior. Id. (“A conspiracy to rig bids may be an agreement among competitors about . . . who should be the successful bidder . . . or who should refrain from bidding . . . that affects, limits, or avoids competition among them.”).

    ¶48
    Finally, I do not agree with the majority’s implication that the fact that the bidders’ agreement was made during—rather than before—the auction supports the conclusion that this scheme did not constitute bid rigging. Although the majority acknowledges that “a prior agreement is not necessary to prove bid rigging,” maj. op. at ¶ 34, it nevertheless uses this fact to distinguish the present matter from Guthrie, in which the federal district court for the Eastern District of Washington denied a defendant’s motion for judgment of acquittal on bid rigging charges because the defendant had contacted other potential bidders and offered them money to refrain from participating in upcoming auctions. 814 F.Supp. at 943-44, 950.

    In my view, from
    a competitiveness standpoint, this case presents a more troublesome situation than existed in Guthrie. In Guthrie, because the alleged bid rigging occurred prior to the auctions, there was no guarantee that the defendant had bought off every potential bidder that might attend the auction. See id. at 943-44.

    In contrast, because the bidders’
    agreement in this case was not made until after the auction was already underway, the three bidders were assured that their agreement eliminated all competition.

    ¶49
    I would hold that the bidders’ agreement constituted unlawful bid rigging in violation of section 6-4-106 and proceed to address the remedy issue consistent with section 6-4-121, C.R.S. (2011), which, in my opinion, would void this unlawful transfer. Accordingly, I respectfully dissent from Part II.B of the majority’s opinion.

Property Buyer Pursuant To Contract For Deed Sues Seller For Failure To Transfer Legal Title After Being Tendered Payment

In Galveston, Texas, The Southeast Texas Record reports:
  • Local resident Ivonne Elena Davila has filed suit against Flor Reyna of Spring for failing to provide documentation to real property in Texas City. A lawsuit filed June 7 in Galveston County District Court says Reyna, also known as Flor Orihuela, has failed to provide annual accounting statements to Davila for property on 11th Street as mandated by Texas law.

  • The original petition states that Davila demanded the defendant execute a warranty deed conveying the legal title to the property, tendered a promissory note and drafted a deed of trust.

  • According to court papers, Reyna contacted Davila's attorney and notified him "that she was willing to sign the deed and accept the proposed promissory note and the proposed deed of trust." The defendant also reportedly divulged that she had an attorney, but the suit states "no communication from the defendant to the plaintiff's counsel is appropriate or needs to be recognized."

  • Davila alleges her counsel repeatedly urged Reyna's to approve and sign the proposed documents to no avail. Failure to do so violates state law, according to the suit.

  • The plaintiff seeks a temporary injunction which prevents the defendant or anyone affiliated with her from "accelerating, maturing or canceling the contract for deed or threatening to do so" and at least $20,000 in attorney's fees.

Attorney Suspected Of Moving Nearly $200K Of Client's Cash Into Firm's Bank Account Now Facing Felony Charges

In Raleigh, North Carolina, The News & Observer reports:
  • A Raleigh lawyer faces embezzlement and forgery charges after prosecutors say he took more than $30,000 that belonged to his clients. Nicholas Andrew Stratas Jr. was released from the Wake County jail Friday on $20,000 bond.

  • The felony charges aren’t the only problem facing Stratas, 54. The North Carolina State Bar has also filed a complaint against Stratas, saying he took clients’ money held in trust. A hearing later this year could result in Stratas losing his law license.
***
  • Last week, a Wake County grand jury accused Stratas of taking more than $30,000 from two clients between March 2010 and June 2011. One of the cases involves Laura Candes, who hired Stratas to pursue an injury settlement after her car was rear-ended on Interstate 440 near Crabtree Valley Mall.

  • The collision left Candes, 69, with persistent back pain, according to her husband, Chris. The bar’s complaint against Stratas says the attorney settled the case without the family’s permission. A $24,000 insurance check was deposited into the firm’s bank account, and the family has not received any money, the complaint says.

  • Stratas cashed the check and kept the money after the couple refused to accept the settlement offer, said Chris Candes, former owner of the well-known Two Guys Italian restaurant on Hillsborough Street. “I’ve known him for 25 years,” Chris Candes said in an interview Wednesday. “I felt betrayed. I considered him a friend.”

  • A disciplinary hearing on the Candes case and others has been set by the state bar for Sept. 6 and 7. Stratas has been prohibited from being involved in any financial matters related to his practice since the bar began its investigation in December. The bar alleges that Stratas moved nearly $200,000 of clients’ money into the firm’s account.(1)

(1) The North Carolina State Bar Client Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a North Carolina-licensed attorney. Request for possible reimbursement can be made with this reimbursement application form.

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.

Tuesday, June 19, 2012

More Suits Filed Targeting HOAs That Allegedly Squeezed F'closure Sale Investors w/ Inflated Lien Shakedowns For Unpaid Assessments When Taking Title

In Clark County, Nevada, Vegas Inc. reports:
  • Four more Southern Nevada homeowners associations have been sued over allegations they’ve been requiring purchasers of foreclosed homes to pay off inflated liens.

  • In one case filed this week in Clark County District Court, Metroplex Realty LLC sued the Black Hawk Homeowners Association in North Las Vegas, Shadow Wood Homeowners Association Inc. in Las Vegas and Highgate Condominium Property Owners Association in Las Vegas. In another suit filed in the same court May 29, Elsinore LLC sued the Springs at Centennial Ranch Homeowners Association.

  • The plaintiffs in both suits are represented by Las Vegas attorneys James Adams and Puoy Premsrirut. Those attorneys regularly sue HOAs over what they call unauthorized collection costs and other charges included in liens that HOAs file against properties whose owners are delinquent on assessments and that ultimately are foreclosed on.

  • State law says HOAs can file ''Super Priority Liens'' that are ahead of mortgage liens, meaning the HOA lien amounts have to be paid for the buyer of a foreclosed property to obtain clear title.

  • Adams and Premsrirut insist these Super Priority Liens are limited under state law to six or nine months of assessments, depending on the circumstances. In some cases, Adams and Premsrirut say the liens are also limited by individual HOA CC&Rs (covenants, conditions and restrictions).

  • The HOA and collection industries say the law allows interest and collection costs on top of the caps claimed by Adams and Premsrirut. They say HOA budgets, already depleted by the recession and the flood of foreclosures, would be harmed even more if Adams and Premsrirut and their investor clients have their way.

  • State agencies and Clark County District Court judges have issued conflicting rulings on this issue, and many attorneys expect the Nevada Supreme Court to ultimately decide the dispute.

Illinois AG Tags Defunct Home Improvement Company's Owners w/ Suit Alleging They Pocketed Customer Cash On Orders That They Knew Would Go Unfulfilled

From the Office of the Illinois Attorney General:
  • Attorney General Lisa Madigan [] filed suit against a defunct south suburban home improvement supply company for failing to refund Cook County homeowners more than $90,000 in down payments for orders that were never fulfilled after the company went out of business.

  • The lawsuit was filed in Cook County Circuit Court against Family Security Doors & Windows Inc., [...] in Alsip. The suit names company principals Robert E. Starr, of Worth, his brother Michael Starr, of Chicago, Thomas J. Abbott, of Chicago, and Gordon Jackson, of Oak Forest.
***
  • Madigan alleges Family Security solicited and accepted down payments from consumers for new business throughout the summer of 2011, even though previous orders already faced lengthy delivery and installation delays as the company prepared to shut down. The lawsuit alleges that beginning in at least April 2011 the company was preparing to liquidate as it struggled to meet debt and operating costs, yet it continued to accept new business.

  • When the business finally closed in September 2011, Family Security had accepted down payments from more than 150 consumers totaling more than $90,000 that it would never fulfill. Customers who were able to reach company representatives after the closure were told services would not be provided nor would they be refunded for their down payments, which totaled as much as $1,000 per person.

  • While the company’s operators were actively preparing to shut down, they continued to take customers’ down payments even though it was evident that the company couldn’t fulfill the orders already on its books,” Madigan said. “Now hundreds of consumers who’d been waiting months for their orders are out thousands of dollars for nothing in return.”
For the Illinois AG press release, see Madigan Sues South Suburban Home Improvement Supply Company (Attorney General Alleges Manufacturer Bilked Consumers of $90,000 as Shutdown Loomed).

Foreclosing Lender's Lack Of Due Diligence May Leave It Holding The Bag On Environmentally Contaminated Collateral

From a recent story posted on JD Supra:
  • When the collateral has environmental contamination, the lender is faced with a take-it-or-leave-it dilemma, either of which poses significant financial risk.

  • Taking a property in foreclosure may result in the lender bearing substantial costs of cleanup and regulatory compliance just to sell in a market where property values may still be depressed. If the lender does not foreclose, then it loses its investment in the loan.

  • Often, however, it’s not clear that property is contaminated, which makes it imperative not to wait until the end of the foreclosure decision process to find out whether and how much cleanup might be necessary.

Monday, June 18, 2012

Federal Appeals Court Ruling Adds Uncertainty To Timing For Filing Rescission Lawsuits Under Truth In Lending Act

From the law firm Ballard Spahr LLP:
  • A borrower cannot bring a lawsuit seeking rescission more than three years after loan consummation, the U.S. Court of Appeals for the 10th Circuit has ruled. In its June 11, 2012, decision in Rosenfield v. HSBC Bank, USA, the 10th Circuit rejected the borrower’s argument that her lawsuit was timely because, before the three-year period ended, she had sent a notice of rescission to the holder of her mortgage loan.

  • The borrower’s position—that she needed only to send notice of rescission within the three-year period to validly exercise her rescission right—was not compelled by the plain language of the Truth in Lending Act or Regulation Z and conflicted with TILA Section 1635(f), which provides that the right to rescind expires after three years, the 10th Circuit concluded.
***
  • The 10th Circuit has now joined the Third and Ninth circuits in holding that notice alone within the three-year period is insufficient to validly exercise a right to rescind.

  • By contrast, the Fourth Circuit, in its decision in Gilbert v. Residential Funding LLC, is the only federal appeals court to hold to the contrary. Commenting on Gilbert, the 10th Circuit stated that it “simply [could not] square the Fourth Circuit’s view with the Supreme Court’s strong pronouncement in Beach [v. Ocwen Federal Bank] that the TILA rescission right is extinguished if it is not exercised within the three-year statutory period.” (For more information on Gilbert, see our prior legal alert and blog post.)

Fighting Off Zombie Debt Buyer Lawsuits

From Public Citizen's Consumer Law & Policy Blog:
  • Peter A. Holland of Maryland has written Defending Junk-Debt-Buyer Lawsuits, 46 Clearinghouse Review No. 1-2 (May/June 2012). Here is the abstract:

    Junk debt buyer lawsuits have overwhelmed the courts all across the United States. These lawsuits wreak havoc on consumers and their families. Often overlooked is the fact that judgments against consumers which are based on junk debt are part of a zero sum game, where every bogus judgment deprives a legitimate creditor of the chance to get paid from scarce resources.

    Thus, the legitimate creditor to whom money is owed is materially harmed by the junk debt buyer who extracts money based on an illegitimate claim, or who causes someone to declare bankruptcy. Providing representation to this otherwise unrepresented population will not only help individual consumers. It could improve the entire U.S. economy, by preserving precious resources to pay what is legitimately owed, and avoiding paying for what is not.

    This article surveys the landscape of the junk debt buyer industry and provides advice for consumer advocates engaged in the battle against unscrupulous junk debt buyers.

LA Feds Bag 3 For Allegedly Running Short Sale Rackets Targeting Distressed Homeowners; Unwitting Buyers Left Holding Bag On Homes With Crappy Titles

In Los Angeles, California, KCBS-TV Channel 2 reports:
  • Federal authorities say three Southern California men have been indicted for allegedly running a scam involving short sales that caused more than $10 million in losses. [...] Atiqullah Nabizada, 29, of Coto de Caza, and Kenneth Moore, 49, of Tustin, were arrested Thursday at their homes after a grand jury returned two indictments charging them and a third defendant – 32-year-old Ahmed Tariq Asghari, of Sherman Oaks – with fraud violations and identity theft in connection with a variety of schemes using real or fake short sale real estate transactions and home loans.
***
  • The defendants preyed on distressed homeowners, claiming to have insiders working at the bank, who, in exchange for cash, would authorize short sales for far less than fair market value, according to court documents. At least twice, the defendants used short sale approval letters that had been entirely fabricated.

  • The defendants also allegedly assumed the identities of property owners and sold and refinanced their properties without authority. [...] As a result of the schemes, federal officials said home buyers and investors bought homes they believed had clear titles but were actually devalued and subject to hundreds of thousands of dollars worth of liens.

Sunday, June 17, 2012

S. California Man Gets 55 Months For Scoring $5M+ In Mortgage Loans By Pledging Real Estate He Didn't Own As Collateral

From the Office of the U.S. Attorney (Riverside, California):
  • A Sylmar man has pleaded guilty to federal conspiracy and tax evasion charges, admitting that he plotted with others to fraudulently obtain four loans for more than $5 million by pledging houses that they didn’t own as collateral, falsely claiming that the houses had enough equity to secure the loans, forging documents and falsifying notary stamps.

  • Hamlet Sardariani, 42, pleaded guilty [...] in United States District Court. Hamlet Sardariani was scheduled to go on trial next week before United States District Judge Virginia A. Phillips.

  • Three other members of the conspiracy have previously pleaded guilty. Hamlet Sardariani’s brother – Henrik Sardariani, 44, of Glendale – pleaded guilty in January and is scheduled to be sentenced by Judge Phillips on August 6 (see: Glendale Man Pleads Guilty In $5 Million Loan Fraud Case).

  • Wanda Tenney, 66, of South Los Angeles, who was an escrow officer, pleaded guilty on December 5, 2011 and is scheduled to be sentenced on October 15. The fourth co-conspirator, Christopher J. Woods, 53, of Beverly Hills, pleaded guilty on November 8, 2011, and is scheduled to be sentenced on July 16.(1)
For the U.S Attorney press release, see Sylmar Man Pleads Guilty In $5.4 Million Loan Fraud Case.

(1) To get a flavor of the kind of civil litigation that was spawned as a result of Sardariani's handiwork, see:

High-Living Steeltown Closing Agent Gets 55 Months For Looting $1.5M In Real Estate Escrow Cash, Closing Loans Without First Paying Off Existing Liens

From the Office of the U.S. Attorney (Pittsburgh, Pennsylvania):
  • A resident of Pittsburgh, Pa., has been sentenced in federal court to 55 months of incarceration on his conviction of wire fraud, United States Attorney David J. Hickton announced []. Senior United States District Judge Maurice Cohill imposed the sentence on Jason Sheppard, 31. Sheppard has been incarcerated since his arrest after he violated the conditions of his bond and fled the jurisdiction. As part of his sentencing, he was ordered to pay approximately $1.5 million in restitution.

  • According to information presented to the court, Sheppard was the president of TruClose Financial Services, which is a company that closed loans collateralized by real estate with an office in Mt. Lebanon. For much of 2009 Sheppard withdrew money from TruClose's accounts, and spent the majority of the money paying off gambling obligations and substantiating his life style.

  • In just a few months (October through December 2009) Sheppard sent nearly $600,000 to casinos from the accounts of TruClose Financial. Sheppard also wire transferred money into his wife's account and used the business's account to pay her substantial credit card bills. The shortfall that Sheppard caused is approximately $1.5 million.

  • As part of the closing of real estate transactions, representatives of TruClose signed settlement statements that represented to the lenders that the liabilities associated with the collateral would be paid off. The payment of those liabilities would ensure that the lenders would be in the first lien position and that the borrowers had only one mortgage on the property.

  • Sheppard withdrew so much money from the accounts of TruClose, however, that TruClose could not pay the liabilities that were required to be paid as part of the closings, and some of the checks used to pay the liabilities bounced. Sheppard knew that TruClose could not pay its liabilities, but he instructed the employees to close the transactions anyway.

Judge OKs Asset Attachment Against Alleged F'closed Home Hijacker For Renting Out House To Unwitting Family, Charging Pet Deposit For Service Animal

In Auburn, Maine, the Sun Journal reports:
  • A Turner family is suing a Leeds man claiming he rented them a house that he didn’t own. John Stetson and Melissa Rollins say they were seeking a rental in December for themselves and their children: two sons, ages 2 and 17, and a 19-year-old daughter. They answered an ad for a house for rent that was posted on the Craigslist website. They recently filed a complaint in Androscoggin County Superior Court against John Gray.

  • When the family called the phone number listed in the online ad, Gray answered. He showed the family a four-bedroom house at 64 Bean St. in Turner with a two-car garage during the two weeks following Christmas.

  • The family signed a one-year lease with Gray on Jan. 6, the complaint said. They paid Gray a security deposit of $500 and a $50 propane fee plus a pet deposit of $250, because their daughter, Brittany, needs a black Labrador service dog for her post-traumatic stress disorder.
***
  • At the time the family leased the house from Gray, it belonged to the MSHA. Before a scheduled June 6 eviction hearing, the family agreed to MSHA’s eviction judgment.
***
  • In a separate court proceeding shortly after the lawsuit was filed, the family was successful in securing an attachment of Gray’s property and other assets in the amount of $4,300 in the “reasonable likelihood” they would recover judgment against Gray and the Rebis Agency.

  • The family, represented by attorneys Maureen Boston and Matthew Dyer at Pine Tree Legal Assistance,(1) claim Gray falsely represented himself when he signed a lease with the family.

  • The family claims it suffered monetary and emotional damages due to what they said was Gray’s fraudulent misrepresentations. The family is seeking an award of punitive damages as well as attorney’s fees.

  • In addition, the family claims that state law bars landlords from charging tenants damage deposits for service animals.(2)

(1) Pine Tree Legal Assistance provides free legal help to Maine people with low incomes, and has offices in every part of the state, from Presque Isle to Portland.

(2) The inability to make the distinction between a service animal and a pet can become a very costly problem for landlords, homeowner associations, etc. See, for example:

Saturday, June 16, 2012

Big Apple Homeowners: We're Gettin' Soaked By New Automated Water Meter Readers! Say They're Being Forced To Flush Away Cash To Dodge Lien Foreclosure

In New York City, the Daily News reports:
  • Maybe water is liquid gold. The city is on pace to collect a record $3 billion in water bills this year — even as the amount of unpaid invoices has soared to $582 million, the Daily News has learned. The sharp uptick is a 30% spike from the $2.1 billion collected from homeowners and businesses in 2008, according to data obtained via a Freedom of Information Law request.

  • But as the city touts the increased revenues, homeowners are complaining they’re getting soaked — and the new automated water meter readers are at the center of the controversy. The new devices, which cost $252 million to develop and install, are meant to more accurately measure the amount of water each household uses.

  • However, those who feel like they are flushing away their cash believe the meters are full of massive inaccuracies. Sonia Bender said her bill suddenly went from $500 to $700 up to $7,000 after an automated reader was installed in her three-floor Harlem building in 2009.

  • The home health aide hired a plumber to check for leaks at the beauty parlor and 99 cents store she rents to on the ground level. Nothing was found.

  • As her appeal was pending, the city put a lien on the place and threatened to foreclose on the property due to $19,000 in outstanding bills, forcing her to enter into a payment plan. Yet her bill continues to fluctuate wildly, with her latest three-month charge totaling $517.

  • There has to be something wrong,” she said. “They say I used 1,000 gallons of water over a seven hour stretch last month but the beauty parlor was closed that day.”

  • Many feel Bender’s frustration: 10,266 customers officially disputed their bill last year, up from 7,788 in 2008. Public Advocate Bill de Blasio says the city is picking on the little guy. “We have homeowners facing foreclosure because of these botched bills,” de Blasio charged.

  • We need to stop these liens and runaway charges now — and that starts with the city fessing up to the problem,” added de Blasio, a 2013 mayoral candidate.
For the story, see Daily News finds city collects millions more in water bills (Nearly $3 billion in water fees are expected to be collected this year, but many customers complain of higher charges stemming from new meters).

Camden Tax Collector Puts Squeeze On Day Care Centers, Social Service Agency Non-Profits; Outfits Considered Exempt In Years Past Now On City Hit List

In Camden, New Jersey, the Courier Post reports:
  • The city has published a staggering list of almost 10,000 properties that it says owe money for unpaid property taxes or water and sewer service charges.

  • But some property owners long considered tax-exempt — especially day care centers and nonprofit social service agencies — contend the city has wrongly targeted them and they do not belong on the lien list.

  • The city’s finance director, Glynn Jones, said the decision to assess day care centers and nonprofits was made by the recently resigned municipal assessor, with input from the county’s tax office. Jones said he knows the tax office has been in communication with nonprofits, many of which are appealing.
***
  • [W]hile the number of properties and the amount owed might seem out of whack in a cash-strapped city of just over 77,000 citizens, the totals are about the same as last year, according to Jones. That’s because what’s normal elsewhere isn’t normal in Camden.

  • For instance, Trenton, with about 7,000 more residents than Camden, usually has only a few thousand properties on its lien list, owing just a few million dollars, according to its tax collector, Ed Kirkendoll. Jones’ explanation for the discrepancy?

  • This is Camden,” he said.
***
  • [One] issue is at play in properties owned by nonprofits and day care centers. They are disproportionately represented on the current lien list of 9,837 properties, according to a Courier-Post review.

  • The city and Camden County’s Board of Taxation have targeted day care centers and nonprofit social service agencies since the completion of a citywide revaluation last August, seeking taxes on holdings considered exempt for years.

Foreclosure Sale Purchaser Unwittingly Buys 'Demo-Listed' Property; Seeks Judicial Help In Slamming Brakes On City Wrecking Ball

In Beaumont County, Texas, The Southeast Texas Record reports:
  • Local resident Ronnie Mickles is seeking an injunction to stop the city of Beaumont from demolishing a property he obtained at the Jefferson County Sheriff's sale in April. The petition was filed June 7 in Jefferson County District Court.

  • According to the petition, on April 3 Mickles purchased property at 1140 Roberts Street in Beaumont at the sheriff's sale with the intention of renovating and remodeling the house. However, when he sought a building permit, Mickles learned the city had condemned the house and planned to demolish the structure.

  • Mickles claims he will suffer irreparable harm unless the city is enjoined.

Another Indiana County Agrees To Contingency Fee Deal With Outfit To Ferret Out Tax Cheats Filing Fraudulent Homestead Claims

In Lafayette, Indiana, the Journal and Courier reports:
  • Homeowners are entitled to homestead credits on one property — their primary residence. But some property owners don’t always follow the law, so Tippecanoe County plans to find those who have two or more homestead credits here or in other counties in Indiana.

  • [T]he Tippecanoe County commissioners approved an agreement with SRI Inc. to ferret out those who have received more than one homestead credit. “We’ve done this for the last two years,” said Dawn Rivera, Tippecanoe County chief deputy auditor. “It allows the auditor’s office to bill for fraudulent claims for deductions. It allows them to bill for back taxes and a civil penalty of 10 percent.

  • The cost of doing this is SRI will charge 20 percent of the civil penalties that we collect,” Rivera told commissioners. “The civil penalty is 10 percent of the taxes.”

  • SRI currently is working with several Indiana counties to find inconsistencies and property owners who have more than one homestead credit, either in Tippecanoe County or in Tippecanoe County and another Indiana county.

  • We are working with 32 counties in this program right now,” said Glen Luedtke of SRI Inc. “Some of them have generated over $1 million.”

Funeral Home Foreclosure Threatens Final Resting Place For Dozens Of Babies, Worries Parents

In Jonesboro, Georgia, WAGA-TV Channel 5 reports:
  • Parents are concerned about the fate of a rose garden at funeral home in Jonesboro now in foreclosure. The garden contains the ashes of dozens of babies. When mother Amanda Bartlett heard that the Pope Dickson Funeral Home had gone out of business, she immediately thought of her son's ashes, which are scattered in the property's rose garden. Amanda was seven months pregnant when her son, Preston, was stillborn.

  • The hospital where she delivered, Southern Regional Medical Center, told her about the garden. "We were promised that this would always be here for us to come and it's all we have left of our babies," said Bartlett. However, the funeral home that planted the garden is now out of business. Its property has been placed in foreclosure and is up for sale. A real estate agent said that he doesn't know who will be eligible to buy the property, or if it will remain a funeral home.

  • There are more than 30 markers in the rose garden; one of them dates back to 1962. Amanda says she hopes whoever decides to buy the funeral home will also decide to keep up the rose garden.

  • "They come here and we feel so much comfort. It's like going through it all over again. My concern is that so many people are going to lose that comfort if this is taken away from us," said Bartlett.

  • Southern Regional Medical Center says it has given the rose garden as an option to their patients who've lost loved ones. Hospital spokesperson Justin D. Cooper said, "There was no financial agreement made between Pope Dixon and Southern Regional and the maintenance of the grounds was the sole responsibility of the funeral home. We extend our deepest condolences and empathize with families affected by the actions of Pope Dixon Funeral Home." The property was just listed for sale on Monday.

Judge Pinched For Allegedly Bleeding 90+ Year Old Widow's Assets Of $1.6M; Victim Had No Family At Time Of Death

In Oakland, California, KTVN-TV Channel 2 reports:
  • An Alameda County judge has been charged with elder theft for allegedly stealing at least $1.6 million from his 97-year-old neighbor. Paul Seeman was arrested and charged Thursday with one count of elder theft and 11 counts of perjury. He was being held on $525,000 bail.

  • Authorities said Seeman began stealing from Anne Nutting, his neighbor, in 1999 after her husband died. Seeman is accused of slowly bleeding her assets until April 2010 when she died at the age of 97. Nutting didn't have any family when she died. Police said the 57-year-old Seeman became Nutting's durable power of attorney and claimed he found $1 million worth of stock certificates and dividend checks in her house.

  • Seeman was appointed to the bench in 2009 by former Gov. Arnold Schwarzenegger.

Friday, June 15, 2012

Ex-'Stagecoach To Hell' Loan Officer Describes Experiences Peddling Subprime Mortgages For Alleged 'Ghetto Loans' Peddler

The Washington Post reports:
  • For nearly a decade, Beth Jacobson lived inside the vast machinery of subprime mortgages that shook the nation’s economy.

  • In sworn court testimony, she described watching loan officers comb through heavily African American areas such as Baltimore and Prince George’s County, forging relationships with churches and community groups to sell their members shoddy mortgages.

  • She says she processed loans for homeowners with sterling credit ratings with higher interest rates than they needed to pay. And she says she pumped out millions of dollars in mortgages to people with no paperwork and low incomes, becoming Wells Fargo’s top-producing loan officer.

  • The machine made her rich — the questions came later. Now, she has recast herself as a crusader for consumers in a battle that has pitted her against the system she once pushed.

  • The 51-year-old Maryland resident has emerged as a defining character in the ongoing saga of the country’s housing crisis, from the headiest days of the bubble to the current flood of foreclosures. Her scathing affidavit detailing “the stagecoach to hell” at Wells Fargo is a key part of the groundbreaking lawsuit filed by the city of Baltimore against her former employer. The case spawned copycats across the nation, and federal regulators launched investigations mirroring its allegations.
***
  • But some things poked at her conscience, she said. She said she grew uncomfortable after being excluded from meetings about marketing to black churches. She said that she later learned how sales pitches purposefully shunned the word “subprime” and that she was taken off the roster to speak at a “wealth-building” seminar in predominantly black Prince George’s County because she wastoo white.”

  • The point was clear to me: Wells Fargo wanted black potential borrowers talking to black loan officers,” she wrote in the affidavit.

Blogger's Bank Account Freeze Believed To Be Bankster's Response To Negative Publicity On Its Foreclosure Practices

An excerpt from a recent post in The Big Picture:
  • ML-Implode.com discovered yesterday (2012-06-12) in the course of its normal banking activities that Wells Fargo had frozen its bank account with no warning. Upon inquiring at the local branch (which had no direct knowledge of the incident), it was discovered the account had been flagged “credit risk”, and slated to be immediately closed.

  • These actions are more than slightly unusual because ML-Implode’s account was a plain checking account and was not an underwritten account. In fact, ML-Implode paid a monthly fee for the account, so Wells Fargo was certainly doing it no favors.
***
  • In fact, as part of the freeze, Wells Fargo made a $3500 deposit from ML-Implode’s merchant account processor “disappear”, leaving a short-term advance of $1500 from an affiliate un-covered, and a similar $1500 obligation to another affiliate unpaid. The whereabouts of the monies are unknown.
***
  • It is believed that the actions were taken in retaliation for a recent series of articles by ML-Implode blogger Martin Andelman which pulled no punches in criticizing Wells Fargo over its foreclosure practices — in particular the tragic and horrific case of Norm Rousseau who was driven to suicide after Wells Fargo lost a mortgage payment and mistakenly foreclosed on the family’s home, despite a lengthy back-and-forth process which gave the bank ample opportunity to correct the mistake.

  • (Other recent articles by Andelman taking Wells to task that may have angered the bank include this one and this one.)

Court Order Slams Brakes On Outfit Targeted By Feds For Alleged Bogus Promises Made In Connection w/ Peddling Forensic Loan Audits To Halt F'closures

From the Federal Trade Commission:
  • At the request of the Federal Trade Commission, a U.S. district court has halted an operation that allegedly preyed on financially vulnerable homeowners, convincing them to pay $1,995 or more by holding out bogus promises that they could help them avoid foreclosure and renegotiate their mortgages.

  • The order issued by the court stops the allegedly illegal conduct, freezes the operation’s assets, and appoints a receiver to run the business while the FTC moves forward with the case.

  • According to the FTC complaint, the defendants behind the operation claimed on their website thatup to 95% of mortgages may be legally unenforceable due to defects like lost documents, improper notices, appraisal and/or predatory lending.” Using this claim, several defendants, including Consumer Advocates Group Experts, LLC, virtually guaranteed that they could get mortgage modifications with reduced interest rates and lower monthly mortgage payments for consumers.

  • The defendants offered to review consumers’ mortgage loan documents to determine whether their lenders complied with state and federal mortgage lending laws, and made allegedly false claims that the consumers could use the resulting “forensic audits” to avoid foreclosure and negotiate more favorable terms on their mortgages.
For the FTC press release and links to the related court order, lawsuit, etc., see FTC Action Halts Alleged "Forensic Audit" Scam that Targeted Consumers in Danger of Losing Their Homes (Forensic Mortgage Loan Audit Scams: A New Twist on Foreclosure Rescue Fraud).