Sale Leaseback Peddler Gets 12 Years In Equity Stripping, Foreclosure Rescue Ripoff That Victimized Homeowners Of $1M+

In Los Angeles, California, The Orange County Register reports:

• An Anaheim Hills man was sentenced to 12 years in federal prison Monday for his role in a mortgage fraud conspiracy and for evading taxes. Gregory Flores was also ordered to pay more than $1 million in restitution to homeowner victims and more than $98,000 to the IRS, the U.S. Attorney's Office in Los Angeles said. Flores pleaded guilty in February to one count each of wire fraud conspiracy and tax evasion.
  
  According to the plea agreement, Flores, along with co-conspirators Sheri Gale, a realtor in La Mesa, and Amy Hall, also of Anaheim Hills, a loan processor, executed an illegal scheme to defraud distressed homeowners facing foreclosure and lenders who made mortgage and home equity loans, the U.S. Attorney said.
  
  From May 2003 through June 2006, Flores managed the satellite offices in Anaheim Hills and Murrieta of All Fund Mortgage, based in Tacoma, Wash. He and the others falsely claimed they could save the homeowners from foreclosure. Homeowners with typically poor credit were solicited through mailings, prosecutors said. At least 21 homeowners were victimized for a total of $1.04 million.
  
  As part of the conspiracy, Flores and others convinced homeowners to allow an investor, who was really a "straw buyer" with good credit to be added to the title of their homes, and told them they could then refinance under more favorable terms.
  
  In most cases, title was never transferred back to the homeowner, essentially stealing the equity out of the property, prosecutors said. Few if any payments were ever made and the properties were eventually sold during foreclosure proceedings.
  
  Most of the time homeowners and their families were evicted without the knowledge they had no title to the property, Assistant U.S. Attorney Ami Sheth said.(1) Gale and Hall were charged with wire fraud; Gale has pleaded guilty, Hall's case is still pending, Sheth said.

Source: O.C. man sentenced in foreclosure scam.

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

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

Feds Pinch Home Inspector In Alleged F'closure Service Report Fraud; Freddie, Fannie Among Unwitting Dupes Snookered Into Footing BofA-Authorized Tab

In Tampa, Florida, The Tampa Tribune reports:

• As the real estate market plunged in Florida, a Brooksville company that inspected foreclosed homes had trouble keeping up with the work. American Mortgage Field Services was contracted by Bank of America to perform upward of 100,000 inspections a month for $6.50 each.
  
  So the company started fabricating reports for follow-up inspections, using re-dated photographs taken at the first visit, according to documents filed in U.S. District Court in Tampa.
  
  Altogether, the company defrauded the bank of nearly $12.8 million out of the $23.5 million paid for inspection services on properties in various states of foreclosure or resale between 2007 and 2012, according to court documents.
  
  Although Bank of America paid for the inspections, it billed the entities that owned or insured the mortgages, including taxpayer-funded Fannie Mae, Freddie Mac and FHA.
  
  Company owner Dean Counce, 42, of Spring Hill, has agreed to plead guilty to a federal charge of wire fraud, which carries up to 20 years in prison, although he is likely to receive less. He is required under his plea agreement to cooperate with authorities and pay restitution.
  
  Counce's lawyer, John Fitzgibbons, suggested there will be more prosecutions. "Mr. Counce has admitted that he participated in wrongdoing in his business, and he is very remorseful for some of the things that happened," Fitzgibbons said. "I anticipate that there will be others who will reach the same conclusion as Mr. Counce, that it is in their best interest to admit their wrongdoing and move forward."(1)

***

• [Stacie] Gearhart said she was paid $9 an hour and never received her final paycheck for 68 hours of pay. Gearhart said she knows of about 15 other employees who also lost their last paycheck, although Counce did write personal checks to some. One co-worker who didn't get paid, she said, lost her home. Fitzgibbons said Counce is trying to pay the employees he owes.
  
  "Since the time that the federal authorities raided the business, which basically shut it down," Fitzgibbons said, "Mr. Counce has made many, many employees whole. Mr. Counce has paid almost all of his employees. There are a few that are still left and he is hopeful that eventually everyone will be paid." Gearhart said Counce generally treated employees well, buying them food when they had to work overtime.
  
  According to Counce's plea agreement, employees who created large amounts of fraudulent inspection reports were often given cash bonuses.

For the story, see Home inspector to plead guilty in fraud case.

(1) In essence, by making this indirect 'announcement' that his client is 'singing' to the Feds with the view of taking down as many other people as possible and 'throwing them under the bus' to save his ass and keep any time he spends behind bars to a minimum, I suspect that this is Counce's defense counsel's less-than-subtle way of persuading others to just come forward and admit their guilt. After all, the more scores the Feds ring up that can be credited to Counce's cooperation, the lighter the 'judicial hammer' he'll be belted with when his sentencing day arrives:

• "When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed." United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring).

Low Contingency Fee, High Success Rate Makes Software Tool Big Hit In Crackdown On Tax-Cheating Property Owners Making Fraudulent Homestead Claims

In Miami, Florida, Government Technology reports:

• A new software tool is turning up the heat on property tax fraudsters in Southern Florida.
  
  Called Government Revenue Management (GRM) Insight, the program is helping investigators in Miami-Dade County to mine and analyze national databases to find individuals who may be improperly claiming tax exemptions. Initial efforts have been fruitful, unearthing approximately $5 million in back taxes owed by county residents.
  
  The violations primarily deal with fraudulent claiming of homestead exemptions, which allow a tax break for individuals who own multiple homes. In Florida, the exemption caps the increase of a property’s assessed value by 3 percent year to year and allows a homeowner to deduct $50,000 from the assessed value of the home for county tax purposes.
  
  Under Florida law, a person is allowed to claim only one homestead exemption on his or her property taxes. But determining eligibility was difficult. Lazaro Solis, deputy property appraiser for Miami-Dade County, said investigators had limited ability to track property ownership outside of Florida. This blind spot led to a number of illegal homestead claims.
  
  With 67 counties in Florida, Solis said it was virtually impossible for his team to accumulate and analyze all the needed information. “We would need an army of investigators to go nationwide and pull all the information,” Solis said. “It’d be like a needle in a haystack.”
  
  The new software is giving investigators a wealth of cross-referenced nationwide data at their fingertips. The simply enter a person’s name and Social Security number. Designed by Manatron Inc., the technology also prioritizes cases by weighting the evidence. The software attempts to weed out false positives that otherwise would be flagged for investigation.
  
  The software also contains a case management function that essentially handles all the paperwork associated with placing a lien on a homeowner’s property when an illegal exemption is confirmed. Almost every clerical function is performed, except for providing the official signatures required for the documentation.
  

***

• The basic agreement is that Manatron receives 10 percent of the penalties and interest assessed to the back taxes owed by a property owner, but only after the funds are recovered. The only caveat is if the property owner doesn’t pay within 30 months the county is still on the hook for the percentage owed to Manatron.
  
  For example, if a property owner has back taxes of $10,000 due to an improper exemption claim, Florida law requires the county to impose a flat 50 percent penalty — bringing the total to $15,000 — plus an accrual of 15 percent interest for each year in question.
  
  “In terms of cost to the county, there really is none because the taxes are going 100 percent back to each taxing authority,” Solis said. “So [the money goes] not just to the county, but the school board and cities as well. What the vendor recovers is 10 percent of the penalties and interest only.”

For more, see Fraud Tech Uncovers $5 Million in South Florida.

In another story on tax scams using fraudulent homestead exemption claims, see County Uses Fraud Solution to Unearth $1.5 Million:

• A fraud solution that combines analytics technology and investigative research has helped Delaware County, Ind., uncover $1.5 million in lost property tax revenue.

Scammer Who Ran Short Sale Ripoff By Recycling Homes Earlier Used In Straw Buyer Racket Cops Plea, Then Points Prosecutorial Spotlight Onto Cohorts

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

• A young entrepreneur who struck it rich in New Haven real estate in his early 20s only to land in federal investigators’ crosshairs admitted to a judge that he broke the law—as Part II of a massive mortgage fraud case begins to take center stage. Menachem Joseph “Yossi” Levitin made the guilty plea [last week] in U.S. District Court in Bridgeport. He copped to committing mail fraud, wire fraud and bank fraud.
  
  He faces up to 30 years in jail and $20 million in fines for helping arrange to bilk lenders out of $10 million while leaving a trail of rundown New Haven properties. As part of Thursday’s plea deal, Levitin will give up ownership in 19 properties and forfeit about $160,000.
  
  The feds arrested him in 2010. They seized 51 of his properties—properties he and allies bought with the proceeds from alleged mortgage scams on 40 other properties perpetrated between October 2006 and November 2008.
  
  However, since then Levitin has remained in business as the feds have continued building a case against his alleged co-conspirators, two of whom were subsequently indicted last October.

***

• A New Haven Realtor, Charles Lesser, also pleaded guilty to the same charges in the case Thursday. Lesser, who’s 30, acted as a broker in “at least 20 fraudulent transactions” connected to at least $2.8 million in lender losses, according to the government.
  
  How long Levitin and Lesser might have to spend in jail may depend on whether, and to what extent, they have been cooperating with the federal investigation.(1) Levitin’s case, and those of the others indicted, will come before U.S. District Court Judge Janet Hall. Hall is scheduled to sentence Levitin on Sept. 26.
  
  Which means months of waiting—and pressure—in the meantime. Levitin is believed to face enormous pressure, both from government prosecutors making cases against other targets, and from the tight-knit New Haven Chasidic community in which he was raised.

***

• According to the federal complaint in the Levitin case, he and his partners ran two alleged scams, according to the feds: “seller assistance scams” and “short sale scams.”
  
  Here’s how the former allegedly worked: Levitin found owners eager to unload rundown properties. He allegedly acted as a middleman—agreeing on a sales price; finding a buyer; arranging for the appraisal. He got an appraiser to prepare an appraisal document for $30,000 to $145,000 more than the value of the house. He allegedly had a sale document drawn up to reflect the higher, pretend price.
  
  The fraudulent documents, plus fake leases and rent payment records, were used to obtain mortgages at the inflated price. The alleged schemers allegedly pocketed the difference between the real sales price and the inflated price.
  
  Meanwhile, the new owner wouldn’t pay the mortgage. The lender would foreclose; it wouldn’t be able to sell the house for the inflated value of the mortgage.
  
  That problem—a house with a mortgage higher than its value—has plagued properties throughout New Haven neighborhoods, leaving them empty and deteriorating. The situation opened the door for another scam the Levitin crew allegedly undertook: the short sales.
  
  Levitin would allegedly step in and offer to take the property off the lender’s hands for less money than the mortgage was worth. The lender, wishing to cut its losses, would agree, unaware that Levitin had allegedly orchestrated the whole deal.

***

• Much of the case is built around secret recordings and other information provided by an unidentified undercover “cooperating witness” who allegedly bought properties through Levitin.

For the story, see Scammer Pleads Guilty.

For the U.S. Attorney press release, see New Haven Man Pleads Guilty To Role In $10 Million Mortgage Fraud Scheme.

(1) Another example of squealing schemers abandoning a 'sinking conspiratorial ship', winning the race to the prosecutor's office and seeking to take down fellow co-conspirators by 'throwing them under the bus' to score a better break on a plea deal. As noted by one learned Federal judge in referring to the not-uncommon 'race to the prosecutor's office' that breaks out among participants in an 'about-to-fall-apart' criminal conspiracy:

• "When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed." United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring).

Idaho Regulator Imposes Cease & Desist Order On 'Phantom' Unlicensed Online Escrow Outfit Involved In Timeshare Peddling

From the Idaho Department of Finance:

• Gavin Gee, director of the Idaho Department of Finance, [] announced the issuance of a cease-and-desist order against All Net Escrow, a purported online escrow company engaged in timeshare escrow transactions. All Net Escrow was the subject of a department consumer alert less than two weeks ago because the company claimed to be located at an Eagle, Idaho, address that actually houses an unrelated business.
  
  
• That business has no knowledge of All Net Escrow and became concerned after an individual came into its business inquiring about escrow services. All Net Escrow is not licensed by the department as an escrow company or as any other financial service provider. An Idaho “escrow company license” provided by All Net Escrow to one customer is phony.
  
  
• [The] cease-and-desist order alleges violations by All Net Escrow of the Idaho Escrow Act for its actions purporting to operate as a licensed Idaho escrow company. The order also alleges violations of the Idaho Financial Institutions Fraud Prevention Act, which prohibits leading the public to believe you are a financial institution, such as an escrow company, for the purpose of obtaining money.
  
  As noted in the earlier alert, All Net Escrow appears to be working with a company called Castle Wealth Management, purportedly located in Oklahoma City, Oklahoma. The department has confirmed that no business by that name is located at the Oklahoma City address used by Castle Wealth. (Please note there is a legitimate investment advisory firm located in Florida called Castle Wealth Management that has no relationship to this investigation.)

For the press release, see Unlicensed Internet Company Ordered to Cease and Desist (Purported escrow company, All Net Escrow, said to have violated Idaho laws).

More Homeowner Casualties From The Frontlines Of Banksters' Force-Placed Insurance Racket

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:

• Florida led the country in its share of force-placed insurance premiums the past three years, including 35 percent, or $1.2 billion, in 2011 — more than three times the amount sold in the next-largest state, California.
  
  That's according to sworn testimony provided last month for the United States Judicial Panel on Multidistrict Litigation.
  
  Florida has one of the country's highest numbers of foreclosures, and most people stop paying insurance premiums when they default on mortgage payments. That means a lot of policies are imposed on consumers without coverage.

***

• The policies should cost less because they typically exclude coverage offered by most homeowners and the insurers don't have to pay agent commissions and advertising or customer service costs to attract and keep policies, said David "Birny" Birnbaum, a former insurance regulator in Texas who is now an economist and consumer advocate with the Center for Economic Justice in Texas.
  
  Birnbaum provided the testimony on Florida and other states' shares of force-placed insurance policies, calculating the numbers using thousands of records from the National Association of Insurance Commissioners. "Some of these charges are so outrageous that they push people into default and foreclosure," Birnbaum said.
  
  Just how much are South Floridians paying?
  
  Lord Toussaint said he's being charged a whopping $90,000 a year for coverage that used to cost $5,600 for his home in Coral Gables. Toussaint, owner of an electronics business, said he has been trying to get the mortgage servicer to reduce the coverage since he was notified last year of the higher cost.
  
  The problem, he said, is the imposed policy covers the home for $3 million — what may be considered the new value of the home since he made major renovations — instead of the $560,000 amount of the loan.
  
  Christina Ulbrich, of Fort Lauderdale, was allegedly billed $12,787 and $9,708 for a year of force-placed hazard insurance and windstorm insurance, respectively, when she already had hazard coverage for the same period. Nationwide Insurance had charged her $892, and her mortgage doesn't require windstorm, according to a lawsuit she filed in November in U.S. District Court for the Southern District of Florida. The policies were backdated up to 17 months, and the windstorm policy had expired months before the mortgage company purchased it on her behalf, the suit alleges.
  
  Hilda Sultan, of Davie, was charged $33,199, including a $7,138 commission for an insurance agency that is a subsidiary of her mortgage servicer, according to 2009 court documents in a lawsuit pending against the mortgage company.
  
  She "always maintained appropriate insurance coverage," but the servicer imposed the policy anyway — costing her eight times more than the roughly $4,000 it should have cost, according to the suit. "I had no awareness whatsoever that anything lapsed. I thought it was coming out of my mortgage payment and the escrow [account]. They didn't notify me. I didn't know until I was refinancing my loan ... during my divorce," said Sultan, a full-time mother who said she spends her spare time working on child advocacy legislation. "I felt devastated, absolutely devastated. I was counting on that money for my children's education."
  
  Jeff Golant, an attorney representing borrowers in about 20 lawsuits over force-placed coverage, including Sultan's, said even when companies provide notice, it doesn't give them the right "to rip people off."

For the story, see Florida tops the nation in force-placed insurance.

Family's Lawsuit: Bankster's Advice To Default On Loan Payments To Qualify For Loan Modification Only To Then Begin Foreclosure Led To Daddy's Death!

In Dallas, Texas, Courthouse News Service reports:

• JP Morgan Chase killed a retired minister by giving him a stress-induced heart attack, seized the home days later and wrongfully evicted his widow - all because they accepted the bank's offer and followed its advice, the man's wife of 57 years claims in Dallas County Court.(1)
  
  Harry Engel, of Grand Prairie, died in July 2010. His widow, Wanda Jo Engel, and his adult children, Steve, Debra and Josh Engel, sued the bank, and EMC Mortgage and LPS Field Services on a host of charges, including wrongful death, wrongful foreclosure, trespass, gross negligence, and intentional infliction of emotional distress. The family also sued Chase alone for fraud, fraudulent inducement and deceptive trade.

***

• "With regard to Chase, the Engels believed what any reasonable bank customer should believe-complying with a lender's advice should be safe and should not put them at risk from the lender. In contrast to how a lender should behave, however, Chase and the other defendants' subsequent conduct proximately caused Mr. Engel's untimely death and the loss of the Engel home," the family says.

For more, see Bank Killed Minister, Evicted Wife, Family Says in Foreclosure Horror.

For the lawsuit, see Engel v. J.P. Morgan Chase & Co., et al.

(1) Expect Chase and its bankster-confederates to 'forum-shop' this case out of state court and into a Dallas Federal court.

BofA At Center Of Another Foreclosure Screw-Up; Boots Homeowner Despite Mortgage Having Already Been Paid Off Thru Refinance; Bankster: Not Our Fault!

In Conyers, Georgia, The Atlanta Journal Constitution reports:

• A red scarf draped over a bannister is one of the few clues that Sidnetta Smith and her children lived in the sandy-gray, two-story Conyers home. It was taken by a bank, even though that bank didn't hold a valid mortgage on it.
  
  Bank of America has since tried to rescind its April 2010 foreclosure. But hitting the reset button can't undo uprooting her kids or replace family photos, jewelry and kids' honor roll certificates. "I miss it. I miss it a lot," a stoic Smith, 41, said of the still-vacant home on Wall Street.
  
  Smith's case highlights how few protections borrower advocates say Georgia offers during foreclosure. Georgia, like most states, has no "judicial review" in which a judge verifies basic facts before a bank can take a house. In the "non-judicial" system, bankruptcy or a lawsuit are the main means of disputing a foreclosure.
  
  Advocates for borrowers say it's impossible to know how many improper foreclosures have occurred because no one is monitoring the validity of the paperwork.

***

• Smith's attorney, Charles Pekor, said a check of Rockdale County property records before her home was foreclosed should have shown that she already had a new mortgage by then.
  
  Proper documentation had not been filed to cancel her first loan, but a second security deed should have bolstered Smith's assertions that Bank of America did not hold her mortgage. She also contends she was current on her new loan until she was forced out of her house.
  
  A bank spokesman blamed Taylor Bean & Whitaker, Smith's original mortgage lender. Taylor Bean was a Florida firm that collapsed in August 2009. Its chairman was convicted last year on charges related to a $3 billion mortgage fraud scheme.
  
  Eight days after Taylor Bean was closed, Smith refinanced her Taylor Bean loan with Freedom Mortgage. The payoff of the Taylor Bean loan wasn't recorded in Rockdale until December 2010, eight months after Bank of America foreclosed on Smith's house.
  
  The government transferred thousands of Taylor Bean mortgages after it was closed to Bank of America, and records of monthly payments and mortgage payoffs were temporarily lost in the confusion. Bank of America said it is working with regulators and borrowers to fix problems.
  
  That's little solace to Smith. She says her health deteriorated from the stress and she took medical leave from work.
  
  The mother of four is suing Bank of America. She's also suing Freedom Mortgage, contending it mishandled canceling the Taylor Bean mortgage, and another company that she alleges violated state law when it seized many of her belongings from the house.
  
  Though her case is unusual, Smith is not the only Georgia borrower caught up in Taylor Bean's collapse. In February, the Atlanta Journal-Constitution reported on the documentation snafu in a Lithonia woman's mortgage refinance, which led to as many as three banks attempting to foreclose. She filed for bankruptcy to stop a foreclosure and is also suing Bank of America.
  
  John Bartholomew, an attorney with Atlanta Legal Aid Society, said his group has seen "dead mortgages" bite other borrowers when other lenders mishandled paperwork. He said a judicial review system might help root out documentation problems.
  
  "You have thousands of foreclosures being posted every month in a state where it doesn't take long to foreclose," Bartholomew said. "It makes these types of errors happen more often than they should be."
  
  Smith started receiving late notices from Bank of America within weeks of her refinance with Freedom Mortgage. She said Bank of America and Freedom Mortgage gave her the runaround and that the companies refused to talk to one another to confirm the payoff of the Taylor Bean loan. She claims one Freedom Mortgage representative even told her to ignore Bank of America's notices.
  
  James Blum, an attorney for Freedom Mortgage, denied his client did anything wrong. In an e-mail, he wrote, "In connection with that refinance transaction, Freedom Mortgage paid off Ms. Smith's prior mortgage loan, which Bank of America thereafter improperly foreclosed."
  
  Though Smith hasn't had a perfect finanical record — she filed for bankruptcy in 2003 — she contends she paid Freedom Mortgage every month until a law firm sent a notice to vacate the house, about five months after Bank of America foreclosed.
  
  After packing up half her belongings and moving them to North Carolina in November 2010, Smith returned to the home a few weeks later to find the locks changed and her remaining valuables gone. Today, Smith lives in a three-bedroom apartment about 20 miles north of Charlotte.
  
  "We have a roof over our heads. We're grateful," she said. "But it can never replace a dream home you thought you'd have forever."

For the story, see Botched transfer leads to foreclosure nightmare.

Conversations On Use Of Eminent Domain To Clean Mess Created By Underwater Mortgages Begin To Heat Up As Banksters, Others Begin To Sweat

In San Bernardino County, California, the Los Angeles Times reports:

• A plan by San Bernardino County to seize mortgages and restructure them for underwater homeowners using eminent domain is perhaps the most aggressive example of how local governments are seeking new ways to combat foreclosure.
  
  The cities of Ontario and Fontana are partnering with the county to create a Homeownership Protection Program that would use private funds to acquire underwater mortgages from investors. The county and the two cities have created a joint authority to explore and possibly enact the plan, and the first public meeting of that authority will be held [this] week.
  
  David Wert, a spokesman for the county, said the program is worth exploring because it could offer a solution to one of the region's most entrenched problems: the vast number of loans that are stuck underwater, with more money owed than the property is worth. If the program were to go countywide, it could benefit 20,000 to 30,000 homeowners, he said.
  
  "The only thing we are doing at this point is conducting a conversation," Wert said. "But the reason the county is interested in talking about this is because this is a proposal that could — if everything checks out — address the problem on a fairly large scale."
  
  Although still in its initial stages, the aggressive proposal has attracted controversy. A number of banking, financial and business groups oppose it, contending that seizing mortgages would raise constitutional issues and could increase lending costs in those cities.
  
  The California Mortgage Bankers Assn., the American Bankers Assn. and the American Securitziation Forum, along with several other financial groups, sent a letter of opposition to the county and the two cities.
  
  "We believe that the contemplated use of eminent domain raises very serious legal and constitutional issues," the letter read. "It would also be immensely destructive to U.S. mortgage markets by undermining the sanctity of the contractual relationship between a borrower and creditor, and similarly undermining existing securitization transactions."

For more, see San Bernardino County weighs eminent domain to fight foreclosures (The county, along with Ontario and Fontana, wants to use eminent domain to seize underwater mortgages from investors and restructure them to help borrowers keep the homes).

See also, KCBS-TV Channel 2: Realtors, Banks Warn Plan To Seize Distressed Homes May Backfire (Half of San Bernardino County homeowners 'underwater'):

• A controversial plan to help struggling homeowners in the Inland Empire by invoking eminent domain in order to rescue distress properties was under fire on Friday.

Maryland High Court: Gap In Mortgage Note's Chain Of Title Does Not Necessarily Constitute Fraud That Infects Deed Of Trust

From a news alert from law firm Saul Ewing LLP:

• An appellate court in Maryland(1) recently handed down a decision that makes it easier for a creditor holding a promissory note, secured by a deed of trust and with gaps in its chain of title, to foreclose.
  
  Last week, the Court of Appeals of Maryland rejected a borrower in foreclosure's argument that gaps in a promissory note's chain of title amounts to fraud that infects a deed of trust. The Court's holding makes it easier for creditors who hold notes that are not completely traceable to the original lender, to foreclose.
  
  In Thomas v. Nadel, No. 106, 2012 WL 2368881 (Md. June 25, 2012), the Thomases, a couple in foreclosure, challenged the sale of their home, in part, because there was a gap in the chain of title of the promissory note, which was secured by a deed of trust against their home. Biltmore Specialty Investments II, LLC ("Biltmore") held the promissory note and was also the winning bidder of the Thomases' home at a public foreclosure auction. Just how Biltmore came to hold the note is unclear.
  
  The borrowers' original lender indorsed the note to a mortgage corporation that subsequently went out of business. Before going out of business in 2008, the mortgage company made blank indorsements of all its notes, so they could be transferred. At some point, the mortgage company transferred the note to another company, but Biltmore did not exist until 2009, leaving a one-year period where ownership of the note was anyone's best guess.
  
  Maryland borrowers in foreclosure have two opportunities to challenge a foreclosure sale – before the sale is conducted or within 30 days following the sale. The general rule in Maryland is that a borrower challenging a foreclosure action must assert known defenses prior to the sale. After a foreclosure sale, a borrower is limited to raising only procedural irregularities.
  
  The Court of Appeals in Bates v. Cohen, 417 Md. 309, 9 A.3d 846 (2010), left open the possibility that following a sale, a borrower could assert a mortgage or deed of trust was itself a product of fraud. Seizing on this open question, the borrowers in Thomas argued the gap in the note's chain of title amounted to fraud that tainted the deed of trust and the sale should have been set aside.
  
  The Court was not convinced that a mere gap of ownership in a note's chain of title amounted to fraud. The Court noted that in the context of fraud relating to the execution of a document, Maryland courts recognize charges of forgery, alteration and misrepresentation.
  
  The borrowers in Thomas conceded that no forgery took place at any point during the note's assignment; they were not the victims of misrepresentation and all documents including the note and the deed of trust were genuine.
  
  The Court concluded that the couple's "general allegation" of fraud did not suffice and the question left in Bates is still an open one – whether fraud infecting the underlying mortgage or deed may be raised by a borrower following a foreclosure sale.
  
  In rejecting the borrowers' fraud argument in Thomas, the Court has made it easier for creditors holding a promissory note, secured by a deed of trust, with gaps in its chain of title to foreclose. A note that is not completely traceable to the original lender does not, by itself, rise to the level of fraud in the underlying mortgage or deed of trust.

Source: Maryland Appellate Decision Makes It Easier for Creditors Holding Notes with Gaps in the Chain of Title to Foreclose.

(1) While, technically, it is considered an 'appellate' court, the Court of Appeals of Maryland is the actually highest court in the state, as opposed to the state's 'intermediate' appellate court (ie. the Maryland Court of Special Appeals).

Title Insurers Red-Flag Homes w/ Quiet Title Suits In Ownership History; Add'l Scrutiny Required As One R/E Operator Peddles Mortgage Elimination Plan

In West Palm Beach, Florida, The Palm Beach Post reports:

• Alerts issued by two of Florida’s largest title insurers are drawing scrutiny to a complex bank bypass tactic that dozens of Palm Beach County homeowners are attempting by signing their deeds over to the Fidelity Land Trust Co.
  
  Old Republic National Title Insurance, which carries the largest share of Florida’s market at 30 percent, according to the Florida Land Title Association, first circulated its warning in November. It requires additional review for new policies on homes with a so-called “quiet-title” action in their history.
  
  An April 19 alert from the Jacksonville-based Fidelity National Title Group, identifies the land trust by name, saying agents are not to close or process transactions from the company without written authorization from underwriters.
  
  Title insurance protects homeowners and lenders against financial loss from defects in the title, liens, or if someone tries to challenge ownership. Most banks will not approve loans without title insurance. Fidelity National Title Group, which carries 10 percent of Florida’s title insurance market, has no relation to the Fort Lauderdale-based Fidelity Land Trust Co.
  
  The Palm Beach Post first wrote about the trust last month after it had quietly amassed more than 150 deeds in Palm Beach, Broward and Miami-Dade counties since it registered as a limited liability company in December. The land trust is heavily soliciting South Florida’s underwater homeowners through several marketing firms including the North Palm Beach-based Lincoln Property Consultants, previously called Lincoln Financial Group.
  
  Under the land trust’s plan, homeowners sign their deed into a trust, with themselves as beneficiary, while also signing a contract to pay the trust an up-front fee of thousands of dollars. The trust then sues the homeowner’s lender claiming flawed or fraudulent loan practices in an attempt to cancel the mortgage and get a quiet title judgment naming the trust as owner.
  
  At this point, the homeowner still owes the mortgage debt, or note, but because it is no longer secured by the home, the idea is the lender will be more willing to sell the debt for pennies on the dollar to the trust.
  
  Some attorneys say what the trust is doing is an unproven tactic that relies on the banks not responding to the lawsuit within a 20-day period, which can result in a default judgment in favor of the trust. Default judgments are routinely overturned if the defendant can show good cause as to why they didn’t respond.

***

• [T]itle insurance experts said the warnings from Old Republic and Fidelity National Title Group are red flags. Getting clear title on a property where the mortgage was canceled without a full trial may be difficult, they say. Neither title company returned phone calls for this story.

***

• Marlyn Wiener, a real estate attorney with an office in Boca Raton, said title insurers fear they will have to pay off a reinstated mortgage if the cancellation is overturned. “If a mortgage was extinguished through a full trial of the quiet title action and court order after a judge heard all of the arguments, I imagine that the underwriters would approve issuance of new policies,” she said.
  
  “What we have, ironically, is a quiet title action, which is supposed to clean up title issues, having the potential to cloud the title and create more issues.”

For the story, see Two title insurers flag land trust property transactions.

Cops Bag R/E Operator Accused Of Duping Strapped Homeowners Into Signing Away Deeds To Avoid Foreclosure, Then Looked To Flip Them On Craigslist

In Brooksville, Florida, WTVT-TV Channel 13 reports:

• Authorities have arrested a man they say scammed homeowners with promises of rescuing their homes from foreclosure. Gaetano Antonelli, 62, was arrested on June 27 at his house in Hernando County and was charged with organized fraud amounting to less than 20,000.
  
  Investigators say that Antonelli targeted homeowners under financial pressure with foreclosure proceedings looming over their heads. They say he lured one set of victims by assuring them he could rescue their homes from foreclosure; and he approached another set of victims as a home seller advertising properties for sale on Craigslist. The sheriff's office says the victims were in Hernando and Citrus counties.
  
  Reports say Antonelli deceived his victims into signing the deed of their property over to him by an attorney so he could save them from their mortgage. Once he falsely received the deed to the property, he ran an ad on Craigslist, trying to sell the property that was not legally in his name.
  
  His victims were suspicious of his activities and reported him to authorities. When Antonelli was interviewed by detectives, reports say he told them that "mortgages are not legally binding contracts and are a scam backed by the federal government."
  
  Detectives believe that there may be more victims out there. Anyone with information is asked to contact the Hernando County Sheriff's Office at 352-754-6830.

Source: Con man targeted desperate homeowners, investigators say.

See also: Hernando Today: Home sales fraud alleged:

• June and Robert Nestlerode didn't waste time moving into their new home off Naomi Drive. They signed on the dotted line — after meeting the home seller in a parking lot off U.S. 19 — and wrote him a check for $73,000.
  
  The next day they moved in belongings. Then they spent $3,000 on a new roof, bought homeowners insurance, purchased an air-conditioning unit, had landscaping done and installed a fence.
  
  Unbeknownst to them, the house was in foreclosure. The man they purchased it from duped them — and duped the previous owner into thinking he was going to sue the mortgage company on her behalf and make her a large sum of money, according to the Hernando County Sheriff's Office.
  
  Authorities in Hernando and Citrus counties said they have connected the devious home seller to three schemes — and they are still investigating to see whether others have been victimized.
  
  Gaetano Antonelli, 62, was arrested on three counts of organized fraud. He was booked June 27 at the Hernando County Jail and released later that day after posting $17,300 bail.
  
  The house Antonelli sold to the Nestlerodes was owned by Chauna Adorni, who was interviewed by economic crimes detectives, according to sheriff's office reports. Adorni, who according to deputies had gone through difficulties in her personal life and could no longer make the payments on her home, saw an advertisement for mortgage rescue and called the listed number. Antonelli answered, deputies said.
  
  Adorni agreed to meet Antonelli — in the same parking lot off U.S. 19 — and several documents were signed, according to sheriff's reports. Detectives said they acquired copies of the paperwork, including power of attorney, a warranty deed and a compliance agreement.
  
  Adorni said Antonelli promised he would sue the mortgage company and get a large settlement. "Chauna advised that (the suspect) never mentioned to her that he was going to sell the property to anybody else and advised that if she knew those were his intentions, that she would never have entered into any agreement with him," wrote Detective Dustin Mormando in his report.

Failure To Set Up, Pay Into Tax Escrow On Refinanced Mortgage Ambushes Servicemember/Landlord; Now Seeks To Recover House Lost In County Tax F'closure

In Pamelia, New York, the Watertown Daily Times reports:

• A Pamelia homeowner who owed Jefferson County about $8,000 in back taxes faced the fate that is common among delinquent property taxpayers: His home was put up for sale at an auction in June and sold.
  
  But word of the months-long foreclosure process, a safeguard put in place to give homeowners a chance to pay what they owe before they lose their properties, didn’t make it to Christopher G. Hurlburt until the new owners showed up at the house to start the eviction process. That’s because he is a soldier who was stationed in Rwanda for almost two years.
  
  Complicating matters, the address posted on the mailbox outside the home didn’t match county records, meaning that mailed notifications of the foreclosure never made it to the home — though signs were posted outside in April. “There’s quite a story to this,” David J. Paulsen, Jefferson County’s attorney, told the Board of Legislators at its meeting Tuesday.
  
  The county now is seeking to cancel the foreclosure, on one condition: Lt. Col. Hurlburt must pay the back taxes and also pay the $7,500 fee that the auctioneer charged to sell his house last month.
  
  Attorney James A. Burrows, of the Watertown law firm Slye & Burrows, said his client already has paid the $8,000 in taxes and is willing to pay the $7,500 auctioneer fee, too. “I think they’ve made a good choice, and one that certainly is appreciated by Chris Hurlburt,” Mr. Burrows said.
  
  Col. Hurlburt is now stateside, Mr. Burrows said, awaiting deployment to Afghanistan. He is a lieutenant colonel and was the Defense Department’s attache, its highest-ranking official, to Rwanda, a nation in southern-central Africa.
  
  The Jefferson County Board of Legislators passed a resolution Tuesday that would cancel the foreclosure sale once Col. Hurlburt pays the auctioneer’s $7,500 fee.
  
  The Servicemembers Civil Relief Act, a federal law, makes it all but impossible to foreclose on the home of an active-duty soldier. The county, though, contends that the law applies only to a soldier’s residence, and not to homes that soldiers own as rental properties. Mr. Hurlburt didn’t live in the home when he was stateside, but rented it out.
  
  The law does indeed apply to active service members such as Col. Hurlburt, said Mr. Burrows, his attorney. So there are legal avenues open to him to fight the $7,500 fee. But Col. Hurlburt is willing to settle with the county, Mr. Burrows said. He said he’ll discuss the matter with his client, who will have to weigh the cost and risk of a lawsuit.
  
  Mr. Burrows said that the issue arose when Col. Hurlburt refinanced his home in 2008. Under the terms of the original mortgage, he placed the property-tax payments in an escrow account, which then were paid by the bank. The new mortgage, though, wasn’t arranged that way.
  
  During his deployment, Col. Hurlburt incorrectly believed he was making property-tax payments with his mortgage payments.

For the story, see Soldier just back from Rwanda must pay $15,500 to get house back.

Big Foreclosure Compensation, But Only For The Right Wrongs

Paul Kiel writes in ProPublica:

• Can you put a price on the damage caused by a wrongful foreclosure? Banking regulators have. And it’s $125,000. Or $60,000. Or $15,000. Or… it’s unclear.
  
  
• Last November, banking regulators launched a process to force the big banks to compensate homeowners victimized by their foreclosure abuses. Many crucial details remained unclear, including how much victims might receive.
  
  
• More than seven months later, regulators finally released a “framework” that shows some of the possible outcomes. It’s a list of thirteen mortgage servicing “errors,” each with its own associated form of compensation. In addition to fixing the bank’s errors, remedies include cash payments ranging from $500 all the way up to $125,000.
  
  
• It turns out that, for homeowners seeking compensation for those errors and abuses, it’s crucially important just how the servicer messed up. The logic for the differences in payment isn’t always apparent and in some instances seems to defy common sense.
  
  
• Two homeowners who each had their bid for a modification mishandled, for instance, could emerge with either $125,000 or $15,000 depending on just where in the process the error occurred.

For more, see Big Foreclosure Compensation, But Only for the Right Wrongs.

More Cities Consider Bandwagon Jumping Onto Robocalling Movement Targeting Roadside 'Bandit Signs' Peddling Foreclosure Rescue Ripoffs, Other Come-Ons

In Broward County, Florida, the South Florida Sun Sentinel reports:

• More Broward cities have found a new way to drive people crazy, but this time it's the scofflaws they're targeting.
  
  Following Hollywood's example, cities are going after businesses who scatter their advertising in the public right-of-way by starting a robocalling system — which is essentially serial calls.
  
  Now Tamarac has started the calls and says it sees a marked improvement. Pompano Beach has agreed to start soon, too.
  
  "We're hoping this will solve the problem by annoying them," said Pompano Beach Vice Mayor George Brummer. "That's the purpose, to upset them enough and to interrupt their business enough by making the phone calls."
  
  In Hollywood, where signs abound to buy gold and junk cars, fix your AC or rescue you from foreclosure, pre-recorded messages tell those businesses their signs were illegally placed in a public right of way and must be removed. And if they want the calls to stop, they must go to City Hall — where they'll receive a citation — and fill out paperwork confirming that the signs have been removed.
  
  Pompano Beach decided last week to jump on the robocall bandwagon. As soon as the city purchases the robocalling software, the snipe sign businesses can expect a few calls.
  

***

• In Hollywood, the calls have worked, said city spokeswoman Raelin Storey. The city's removed 117 signs in March, when it first started the robocalling program; 24 were removed in April and 13 in May.
  
  "Our code enforcement unit reports an estimated decrease in the number of signs of 90 percent," Storey said. "We believe that as the companies that place these signs began getting the calls, they made the decision that putting up illegal snipe signs in Hollywood was not worth the trouble. The calls have had a deterrent effect."
  
  Cities and departments from all over the country have called about the program, Storey said. Among them are Las Vegas, Nev.; the Delaware Department of Transportation; Salisbury, Maryland; Chattanooga, Tenn.; and Florida cities Oakland Park, Plant City, Lauderhill, Miramar, and Leesburg.

For the story, see Tamarac and Pompano Beach to use robocalls against snipe signs.

SW Florida Cops Focus Heat On Scams Using Vacant F'closures To Peddle Bogus Rentals To Unwitting Tenants; Tips Sought From Public In Crackdown Effort

In Collier Coumty, Florida, WINK News reports:

• Collier County Sheriff's Office's Organized Crime Bureau is investigating a rental scam ring, focusing on foreclosures. 21-year-old Yoandry Leiva was first arrested in April for allegedly breaking into a foreclosure, and renting it out to an unsuspecting tenant. Now, detectives say they've connected him to over a dozen more fraudulent rentals.
  
  Collier County detectives say Leiva acted as a middle-man to link tenants to foreclosed properties. He's accused of breaking into abandoned homes and listing himself as the landlord.
  
  "They were posting ads advertising homes for rent. When unsuspecting people called, thinking it was a legitimate ad, he would meet with these people," CCSO Detective David Spahl said Wednesday.
  
  Detectives say Emanoel Thermitus was one of Leiva's first victims. WINK News spoke to her in April, after deputies evicted the single-mom one week after she moved in. She was out thousands of dollars and left homeless. "It's a lot of money for me because I'm by myself and I've been by myself forever," Thermitus said back in April.
  
  Now, detectives say they've located more fraudulently-rented out foreclosures, linked back to Leiva. The majority of the properties are in East Naples. Tammy Daffron had no idea her home was being rented out. "I think he's trying to make money, just like we all are. Unfortunately, he's not doing it the right way, like 99% of us do," Daffron said Wednesday.
  
  Detectives suspect Leiva likely worked in a ring. They're now alerting anyone with a foreclosure to keep a protective eye on the property. "I don't think this is the only group that's doing it. We don't have direct evidence at this point but it would be reasonable to believe that this isn't the only person doing it," Spahl said.
  
  CCSO is still investigating the crime and looking for more leads on fraudulently rented out foreclosures. If you have any information, you're asked to call Collier County Sheriff's Office at 239-774-4434. You can also leave an anonymous tip with Southwest Florida CrimeStoppers at 1-800-780-TIPS.

Source: Collier detectives investigating foreclosure rental fraud.

Pair Accused Of Running Bogus 'Cash For Keys' Racket, 'Phantom' Home Fix-Up Scam That Screwed Employer Out Of Nearly $1.8M

In Los Angeles, California, Los Cerritos News reports:

• Two Norwalk real estate agents have been arrested on 102-felony counts of grand theft and criminal fraud on Thursday afternoon.
  
  
• John Wesley Martynec, 38, of Long Beach, is a licensed real estate broker. Elek Andrade, 27, of Downey, is a licensed real estate salesperson. In a case investigated by the Commercial Crimes Bureau of the Los Angeles County Sheriff’s Department.
  
  
• Law enforcement officials, including the Los Angeles County District Attorney’s Office charged Martynec and Andrade with102 felony counts of Grand Theft and Identity Theft each, in connection with a complex and sophisticated fraud scheme resulting in the theft of nearly $1.8 million from their employer.

***

• It is alleged that between November, 2003, and July, 2008, Martynec and Andrade were employed by JTR Real Estate and Results Mortgage. While employed there, it is alleged that Martynec and Andrade committed theft in the following ways:
  
  
• JTR Real Estate purchased residential properties which were often occupied by renters. In order to avoid a lengthy eviction process, the company would offer cash pay outs to renters as incentive to move out voluntarily.
  
  
• It is alleged that Martynec and Andrade submitted false “move out” invoices to the company, claiming that cash pay outs were offered to renters, when in fact they were not. The identities of actual persons were stolen and placed on the fraudulent “move out” invoices. The suspects then diverted the money to themselves.
  
  
• It is alleged that Martynec and Andrade submitted false invoices to their employer for contractor costs associated with the rehabilitation of properties, when in fact the work was never done, and then diverted the funds to themselves.
  
  
• It is alleged that Martynec embezzled funds by creating false entries in financial ledgers and diverting funds to a company he controlled named JWM Enterprises.

For the story, see Two Norwalk realtors slammed with 102 Felony Counts of Grand Theft, Identity Theft ($1.8M Grand Theft, ID Theft alleged. Suspects include Elek Andrade, and John Wesley Martynec).

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

Ex-Girlfriends, Neighbors Pitch In With Assist In Crackdown On Landlords, Other Property Owners Scoring Improper Tax Exemptions For Homestead Claims

In Sunrise, Florida, the South Florida Sun Sentinel reports:

• City Hall is looking to crack down on tax cheats, with a little help from the Broward County Property Appraiser's Office.
  
  "It's an ongoing challenge," Property Appraiser Lori Parrish said. "Just when we think we have them all cleaned up, we get a batch of new ones."
  
  In 2009, fraud investigators nabbed 237 homeowners in Sunrise who were wrongly claiming homestead exemptions. The tax break, available only to Floridians on their primary residence, caps the annual increase in appraised value used to set tax bills.
  
  The crackdown put nearly $22 million in property value back on the tax rolls. The county was owed $726,000 in back taxes, with $181,000 going to Sunrise.
  
  The Property Appraiser's Office gets tips from neighbors who notice mail piling up, and even ex-girlfriends, Parrish said.

For the story, see Sunrise fishing for tax cheats.

Lawyer Hit With Disciplinary Action For Allegedly Filing Phony Pleadings Under Forged Signatures Of Opposing Counsel

In Galveston, Texas, The Southeast Texas Record reports:

• The Commission For Lawyer Discipline has filed suit against Houston attorney Calvin C. Jackson over allegations he committed forgery.
  
  According to a lawsuit filed June 18, Jackson "deceitfully" filed pleadings in a June 2010 lawsuit in Galveston County Court at Law No. 3 under the forged signatures of the plaintiff's counsel. Jackson was representing one of the defendants in the litigation, which was consolidated into another case.
  
  Recent court documents claim Jackson falsely signed Houston attorney Cedrick Muhammad's name on a motion to retain case on June, 2, 2011, and fraudulently put attorney Kendric Ceaser's, also of Houston, name on a motion to reinstate after dismissal without prejudice a month later.
  
  The defendant did not have either counsel's permission to sign on their behalf, the suit contends.

For the story, see Houston attorney accused of forging other lawyers' signatures.

Fla. Supremes Bench 'Touchy' Judge For Illegal Use Of Hands, Representing Mom In F'closure Case While Working As Jurist, Getting Illegal Campaign Loan

In Tallahassee, Florida, The Associated Press reports:

• The state Supreme Court suspended the law license of a former central Florida judge who had been removed from office for unethical and illegal conduct. The justices [...] ordered that N. James Turner be immediately suspended for 90 days.
  
  
• They removed him as a circuit judge in Osceola County in November for ethics violations that included hugging and kissing a female court worker without her permission.
  
  
• The high court also found Turner violated judicial ethics by representing his mother in a foreclosure case while a sitting judge.
  
  
• In addition, the justices ruled he violated the state's campaign finance law by accepting and failing to report a $30,000 campaign loan from her. The loan violated a limit of $500 per contribution.

Source: Florida justices suspend ex-judge's law license.

FTC Scores Judgment Against Loan Mod Scam Purporting To Be Affiliated w/ Gov't & That Exaggerated Lawyer's Role In Obtaining Relief For Duped Victims

The Federal Trade Commission recently announced:

• The Federal Trade Commission won a $2.6 million federal court judgment against three defendants behind a scheme that charged consumers large upfront fees and failed to deliver the mortgage modifications they promised.
  
  
• The court also banned the three defendants for 10 years from telemarketing financial products or services; from selling mortgage modification, foreclosure rescue, and debt-relief products or services; and from collecting or attempting to collect from consumers who had agreed to purchase a mortgage-assistance product or service. The court ordered the defendants to destroy any consumer information they have collected within 30 days after the order takes effect.
  
  
• The U.S. District Court for the Middle District of Florida, Tampa Division, entered permanent injunctions against three defendants. It also approved settlements with five more defendants in the case, and entered a default judgment against another defendant.
  
  
• The FTC filed a complaint against the nine defendants behind the Crowder Law Group in a 2009 law enforcement sweep as part of its continuing effort to keep homeowners from being targeted by mortgage-related scams.
  
  
• The FTC alleged that the defendants behind Crowder Law Group promised relief from burdensome mortgages by falsely claiming they could modify consumers’ mortgages and substantially reduce their monthly payments; exaggerating the role an attorney would play in obtaining a loan modification; and pretending to be affiliated with a government agency.
  
  
• All nine defendants were charged with violating the Federal Trade Commission Act and the Telemarketing Sales Rule. The operation involved a marketing company that contracted with a direct-mailing company to send oversized postcards to homeowners nationwide whose mortgage payments were at least two months in arrears.
  
  
• Each postcard offered financial relief to the homeowner and displayed a toll-free phone number and the signature of an attorney who was local to the homeowner and was paid $100 to accept the homeowner into the program. When homeowners called the toll-free number, a customer service representative collected financial documents and the $2,000 fee from the consumer.
  
  
• The court found that the defendants, through the post cards and telephone procedures, assured homeowners that they had qualified for loan modifications. In fact, homeowners still had to go through the modification process with lenders, and it which was usually unsuccessful.

For the FTC press release and links to related court documents, see FTC Wins $2.6 Million Court Judgment Against Operation That Made Exaggerated Claims for Mortgage and Foreclosure-Relief Services (Defendants Charged Consumers $2,000 Each for Services They Did Not Perform).

Squatter Family Pinched For Hijacking Possession Of Vacant Home In Foreclosure & Turning It Into Mini Indoor Pot Farm

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

• A married couple found squatting in a Port Orange home were arrested and charged with growing marijuana in the house, police said [].
  
  
• Sean Pichelman, 41, and Jessica Pichelman, 38, were each charged with cultivation of marijuana, possession of marijuana and the possession or use of narcotic paraphernalia, Port Orange police arrest reports show.
  
  
• Jessica Pichelman got out of jail Saturday after posting $4,500 bail, court records show. Port Orange police said Sean Pichelman was taken to the Volusia County Branch Jail on $2,500 bail, but a booking officer had no record of him Monday.
  
  
• Police said a Realtor was checking on the home under foreclosure at 5955 Broken bow Lane over the weekend when he discovered Sean Pichelman, his wife and a 5-year-old daughter living there. Sean Pichelman said he had rented the house from one of the owners but when police contacted the property owners, they said they had not rented the home to anyone.
  
  
• Sean Pichelman came to the Port Orange Police department to be interviewed and after not being able to produce a lease agreement and proper documents, was arrested for trespassing. Jessica Pichelman said the family had only been living in the house for a week, police said.
  
  
• Police checked Sean Pichelman's pickup and found 26 small marijuana plants in a planter on the passenger side floor. About the same time, the Realtor called police to report he had found marijuana in the home.
  
  
• Inside the home, police found harvested marijuana in a pantry. In an attached mother-in-law suite, police found a grow operation in a closet complete with fans, power inverters and commercial lighting equipment.
  
  
• Seventeen additional small plants and three large plants were found. In all, slightly more than 13 ounces of marijuana was seized, police said.

Source: Couple squatting in Port Orange home arrested after marijuana found growing inside.

Homeless Man Scores Temporary Stay In Daytona Beach Jail After Being Pinched For Allegedly Using Vacant Foreclosed Home In Craigslist Rent Scam Ripoff

In Ormond Beach, Florida, the Orlando Sentinel reports:

• A homeless man used Craigslist to illegally collect more than $1,000 renting out a foreclosed home he didn't own in Ormond Beach, according to the Volusia County Sheriff's Office.
  
  
• "The man's new income stream came to an abrupt end Sunday," agency spokesman Brandon Haught wrote. "Eric Sisson …now has a place to stay in the Volusia County Branch Jail in Daytona Beach where he faces seven criminal charges."
  
  
• The case began last month when a 19-year-old Daytona Beach woman answered a Craigslist ad to rent the house on Arroyo Parkway. She toured the home and later met Sisson on June 25 and gave him a $400 cash deposit, followed the next day with $550 more in cash, records show.
  
  
• Later, she became suspicious, requested the return of her money and was given a check by Sisson that bounced at the bank, records show. By then, a 29-year-old Ormond Beach woman already had moved into the house after giving Sisson a $425 deposit, records show.
  
  
• When the women contacted authorities, deputies contacted the house's owner in Port Orange who said she didn't know Sisson and hadn't given anyone permission to rent the house that was in foreclosure, records show.
  
  
• On Sunday, Sisson, 27, returned to the house to collect remaining rent and was arrested by deputies. At first, he claimed to own the three-bedroom home but then admitted "he had scammed the victims because ... he needed the money he took to get a place to live."
  
  
• Sisson remains jailed on charges of obtaining property by fraud, uttering a worthless check, three counts of unarmed burglary and two counts of grand theft. Deputies also learned he had outstanding warrants in Brevard County for worthless checks and driving with a suspended license, as well as in Indiana for forgery and grand theft.

Source: Homeless man used Craigslist to dupe Ormond Beach renters.

Proof Of Common Law Fraud Not Needed To Maintain Suit Under "Catch-All" Section Of PA State Consumer Protection Law In Loan Servicer Jerk-Around Case

In a purported class action lawsuit filed in a U.S. District Court in Pittsburgh, Pennsylvania filed by two homeowners against a pair of mortgage servicers and a law firm/debt collector alleging conduct that is apparently now the standard for the servicing industry (jerk-arounds, conflicting communications, allegedly erroneous charges, etc.), a district judge recently granted the defendants' motion to dismiss several counts made against them, but allowed other counts to survive, thereby allowing the lawsuit to proceed.

Among the counts allowed to survive (specifically, count VII in the lawsuit) was one involving claims for violations under Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL").

The following excerpt is District Judge Mark R. Hornak's analysis of the applicable law and his assessment of the allegations in determining the the lawsuit should continue with regard to this count:

• The Unfair Trade Practices and Consumer Protection Law ("UTPCPL") is Pennsylvania's consumer protection law. Bennett v. A.T. Masterpiece Homes at Broadsprings, LLC, 40 A.3d 145, 151 (Pa. Super. Ct. 2012). Its purpose is to prevent "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce," as defined by the act. Id.; 73 Pa. Cons. Stat. Ann. § 201-3 (West 2008). The Pennsylvania Supreme Court has stated that the UTPCPL should be liberally construed in order to effect its legislative goal of consumer protection. Bennett, 40 A.3d at 151 (citing Pennsylvania ex rel. Creamer v. Monumental Properties, Inc., 329 A.2d 812, 814 (Pa. 1974),
  
  Homeowners rely upon two specific definitional provisions of the UTPCPL for their claims that PHS. Citi, and Seterus engaged in "unfair or deceptive acts or practices." § 201-2(4).
  
  The first, Section 201-2(4)(v), is inapplicable to the facts as alleged by Homeowners. This section labels as "unfair or deceptive" the act of "[representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation or connection that he does not have." In other words, section 201-2(4)(v) applies to cases where a defendant misrepresents the characteristics of a product, such as suits involving false advertising. See, e.g., Haggart v. Endogastric Solutions, Inc., No. 10-0346, 2011 WL 466684, at *6 (W.D. Pa. Feb. 4, 2011) (noting that Pennsylvania law requires a plaintiff to allege, among other things, that the challenged advertisement is false for liability under section 201-2(4)(v) to attach); Glover, 2010 WL 5829248, at *9 (W.D. Pa Oct. 21, 2010) (dismissing claim against a mortgage servicer, because the servicer did not make any deceptive representations regarding the "characteristics, uses, or benefits" of a loan modification agreement); Meyer v. Cmty. Coll. of Beaver Cnty., 2 A.3d 499, 549 (Pa. 2010) (noting that sections 201-2(4)(v) through (vii) relate to claims of nonconforming goods or services). Homeowners' allegations that they paid improper reinstatement fees when in default does not equate to an allegation that PHS, Citi, or Seterus misrepresented the actual characteristics or benefits of the note and mortgage themselves. Glover, 2010 WL 5829248, at *9. Accordingly, to the extent that Homeowners bring claims against Defendants under section 201-2(4)(v) of the UTPCPL, that claim is dismissed with prejudice.
  
  The second UTPCPL provision upon which Homeowners rely is the "catchall provision" of section 201-2(4)(xxi).
  
  This section is expansive in that it encompasses a wide range of circumstances because a defendant need only engage in "any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding" for liability to attach. Id.
  
  PHS argues that a heightened level of pleading akin to an allegation of common law fraud is required to bring an action pursuant to the "catch-all" provision, and Homeowners fail to meet this heightened threshold. See, e.g., Ross v. Foremost Ins. Co., 998 A.2d 648, 654 (Pa. Super. Ct. 2010) ("In order to establish a violation of the [UTPCPL's] catchall provision, a plaintiff must prove all of the elements of common-law fraud." (internal quotations omitted)). Similarly, Citi and Seterus argue, among other things, that Homeowners do not show that they relied upon any statements from either company. Justifiable reliance on a misrepresentation is an element of common law fraud, along with scienter, intention by the defendant to induce action, and damages to the plaintiff. Id.
  
  Recent developments in Pennsylvania law convince this Court that meeting a heightened "fraud pleading" standard is not required to maintain a cause of action under the "catch-all" section of the UTPCPL.
  
  In Bennett v. A. T. Masterpiece Homes at Broadsprings, LLC, 40 A.3d 145 (Pa. Super. Ct. 2012), the Pennsylvania Superior Court analyzed two conflicting lines of cases on this issue of the appropriate pleading standard. One line of cases relied upon the pre-1996 language of section 201-2(4)(xxi) to conclude that litigants must allege enough facts to satisfy the elevated pleading standard necessary for common law fraud. Id. at 152.
  
  However, the Bennett court noted that these cases had not considered the change to the "catch-all" provision's language in 1996, when the Pennsylvania legislature amended section 201-2(4)(xxi) to include the term "deceptive" in addition to the term "fraudulent." Id.
  
  In order to give effect to all words in the statute as required by the Pennsylvania rules of statutory construction, the Bennett court adopted the reasoning of an opposing line of cases, which held that the inclusion of the word "deceptive" in section 201-2(4)(xxi) "lessened the degree of proof needed to maintain an action under the "catch-all" provision. Id. at 153-55.
  
  The Superior Court concluded its reasoning by stating "we hold deceptive conduct which creates a likelihood of confusion or misunderstanding can constitute a cognizable claim under Section 201-2(4)(xxi)." Id. at 154-55.
  
  Accordingly, conduct that is capable of being interpreted as "misleading" falls within the reach of the UTPCPL. See id. at 156 (holding that the lower court correctly instructed the jury when it stated that "misleading conduct" was actionable under the UTPCPL's catch-all provision). Having reviewed the Bennett court's analysis and the cases underpinning its decision, this Court is satisfied that section 201-2(4)(xxi) does not require a litigant to plead the elements of common law fraud.
  
  Regarding the alleged deceptive conduct here, Homeowners have asserted sufficient facts at this stage in the proceedings to show that confusion or misunderstanding could reasonably arise from PHS's, Citi's, and Seterus's actions and that Homeowners were indeed misled by those actions.
  
  Homeowners allege that Citi referred Homeowners' mortgage to foreclosure while, at the same time, the company was representing to Homeowners that there was the possibility of an alternate payment arrangement. The purpose of this arrangement was to allow Homeowners to avoid the very foreclosure proceedings Citi initiated. PHS and Seterus then sent Homeowners multiple conflicting reinstatement letters, which Homeowners allege contain misrepresentations as to the amount of their debt. Homeowners further claim that they were damaged when they remitted a payment that included intentionally mislabeled fees. These allegations allow Homeowners to maintain a cause of action against all three Defendants under the UTPCPL's "catch-all" section.
  
  Citi and Seterus also advance another argument in support of their Motions to Dismiss regarding the UTPCPL. They claim that Homeowners lack standing to sue them under the UTPCPL, because neither Citi nor Seterus were original signatories to the note and mortgage, meaning that Homeowners cannot allege that they purchased any goods or services from either Citi or Seterus.
  
  However, the UTPCPL's reach is expansive, and, to that end, the Third Circuit in In re Smith, 866 F.2d 576 (3d Cir. 1989) emphasized that a district court should not limit the UTPCPL's application to only those circumstances where the unfair or deceptive conduct induced the consumer to make the initial purchase. Id. at 583.
  
  Such a reading of the statute "would insulate all kinds of practices from the [UTPCPL], such as debt collection, which occur after entering an agreement and which were not a basis for the original agreement." Id. (emphasis added). Similarly, liability can be imposed upon a mortgage assignee under the UTPCPL providing the plaintiff advances specific allegations of wrongdoing against the assignee, not simply against the original lender. See Murphy v. F.D.I.C., 408 Fed. App'x. 609, 611 (3d Cir. 2010) (emphasizing the UTPCPL does not impose liability on a loan assignee absent claims of an assignee's wrongdoing). Homeowners assert such allegations directly against both Citi and Seterus here. Therefore, the fact that Citi and Seterus were not parties to the original mortgage is not dispositive.
  
  For the foregoing reasons, all Defendants' Motions to Dismiss as they apply to Homeowners' claims under the UTPCPL are denied.

For Judge Hornak's ruling, see Trunzo v. Citi Mortgage, No. 2:11-cv-01124 (W.D. Pa. June 25, 2012).

Editor's Note: Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL") is that state's consumer protection law that generally prohibits unfair and deceptive acts and practices ("UDAP") in trade and commerce within the state. For similar UDAP statutes in other states, see Consumer Protection In The States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

Foreclosing HOAs Peddling 'Temporary Titles' To Rent Skimming Landlords Create Confusion, Uncertainty For Unwitting Tenants

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• Two renters in Sarasota's Park View condo complex have gotten a rude surprise over the past few weeks. They discovered their landlord -- Michael Kell of Canton, Ohio -- does not have firm title to the units he has been renting them since September.
  
  
• Kell bought the units from the Park View Condo Association, which had foreclosed on the former owners because they had not paid their association dues. Kell apparently made the purchases knowing the bank that provided loans for the former owners would some day foreclose and take possession of the units.
  
  
• But his tenants say Kell did not say anything to them about a pending foreclosure.

***

• An attorney representing the Park View Condominium Association said it is not uncommon for condo associations, which are owed condo dues, to take title to units through foreclosure.
  
  Some of those associations then rent them to cover their overhead expenses and a few sell their temporary title to private investors like Kell for a few thousand dollars, and the private landlords rent them out until the the banks that are owed money foreclose on former owners.
  
  
• "Everyone is taking a chance," said Kevin Edwards, an attorney with Becker & Poliakoff in Sarasota whose firm represents Park View. "But it usually takes a long time for the bank to complete the foreclosures."
  
  
• The problem [...] is that Kell never notified [the tenants] that their lives could be disrupted. "If he had approached me and explained the situation, I would have nothing to complain about," [tenant Lucia] Reid said. "My goal was to stay here and buy something down the road. But I can't live here with the uncertainty."

For more, see In nasty surprise, two Sarasota tenants face eviction.