Rush Is On For Payday Lenders Seeking Out, Striking Associations With Indian Tribes For Legalized Loan Sharking Rackets

From a recent post on Credit Slips:

• Think about what happens when you pit tribal sovereign immunity against effective consumer protection laws. In my view, no one wins. Yet payday lenders are now very actively seeking tribes with whom to partner, in order to get the benefits of tribal sovereign immunity. As one might expect, the payday lenders make out big and in most cases, the tribes get very little, at least so far.

For more, see Payday Loans and the Tribal Sovereignty Model.

See also, The Fresno Bee: Payday loans the latest venture for Chukchansi tribe:

• The payday loan industry generates $52 billion worldwide each year, and Chukchansi officials hope to get a piece of it. They're not alone; about three dozen tribes are in the business across the United States, said Allen Parker, a California consultant who works with tribes nationwide.

***

• Although tribes expect to turn a profit, competing payday lenders complain that it's at their expense because tribes are sovereign nations that can ignore state regulations. While California sets a cap of $300 and a 15% interest rate for nontribal payday loans, Blue King's maximum loan is $1,000 -- and the sky's the limit for its interest rate.

See also, The Alliance between Payday Lenders and Tribes: Are Both Tribal Sovereignty and Consumer Protection at Risk?:

• This article explores how tribal sovereign immunity is being used in the context of payday lending to avoid state law and explores the ramifications of this for both consumer-protection regulation and tribes.

WV Court Order Temporary Temporarily Stalls Business For Auto Title Lender Accused Of Falsely Threatening Slow-Pay Consumers With Arrest, Etc.

In Charleston, West Virginia, The West Virginia Record reports:

• Virginia-based Fast Auto Loans Inc. has been ordered to stop collecting payments, seizing vehicles and entering into new loans with West Virginia residents, according to Attorney General Darrell McGraw's office. That is, until a hearing on Aug. 24, the attorney general said in a news release []. Jefferson County Circuit Court Judge David H. Sanders entered the four-page order July 3.
  
  The order also requires defendants Fast Auto Loans; its parent company, Community Loans of America; and their owner, Robert I. Reich, to produce all records of their loans to state consumers, including records of their marketing activities, to the Attorney General's Office within 30 days.
  
  A lawsuit filed by McGraw's Consumer Protection Division against the defendants prompted the circuit court order. The suit, filed June 14, sought to prohibit them from "victimizing" state consumers who travel to neighboring Virginia to obtain title loans. Such loans are made to people who own motor vehicles. The loan is secured by a lien on the borrower's vehicle.
  
  The loans in question charge interest rates of 300 percent Annual Percentage Rate, or APR. Consumers' vehicles are seized when they default on the loans.

***

• In his lawsuit, the attorney general alleged the defendants engaged in various unlawful debt collection activities and other unfair or deceptive practices, including repeated telephone harassment, disclosure of debts to employers and other third parties, and false threats of arrest or criminal prosecution to force consumers to relinquish possession of their vehicles without a court order.

For the story, see W.Va. court enters order against company over title loans.

HOAs Add Nonlitigious Tactics To Collection Efforts Against Unit Owners Owing Back Due Maintenance Fees

In New York City, The New York Times reports:

• A SUCCESSFUL condominium depends, in large part, on owners’ paying their monthly fees promptly and in full. Delinquencies can mean less money for maintenance and amenities — and draw the ill will of fellow residents. While the sheer size of larger buildings can often blunt their impact on the budget, small buildings with a high number of delinquencies can be toxic for buyers and a millstone for sellers.
  
  Now, with New York’s economy seemingly recovering, condominium boards are growing more aggressive in cracking down on delinquent owners, according to brokers, lawyers and board members.
  
  Some are publicly shaming deadbeats by posting their names on hallway bulletin boards or barring them from facilities like health clubs and concierge services. Others are reflexively filing liens against owners who are more than 60 days in arrears. And boards are writing requirements into their bylaws to provide additional protections.

***

• [C]ondominiums have begun employing [] nonlitigious tactics to persuade the delinquent owner to pay up. This can include barring the owner — or the owner’s tenant, if the unit is being rented — from using nonessential services in the building like the health club or the pool. Doormen may be required to stop accepting packages and deliveries. Some buildings even resort to public humiliation by posting names in common areas.
  
  “A number of our buildings, especially those with high-level amenities, are now passing house rules that revoke the privileges of owners or their tenants who are in default for more than 60 or 90 days,” said Dan Wurtzel, the president of Cooper Square Realty, which manages more than 500 buildings in New York City.
  
  One complex, Zeckendorf Towers at 1 Irving Place, recently instituted a rule that prohibits a tenant from paying the unit owner advance rent, so that if the owner becomes delinquent it will be able to collect directly from the tenant.
  
  “Now, in the event the owner doesn’t keep up with the common charges, this gives the board the ability to go directly to the tenant and have them pay us,” said Lynda Deppe, a senior vice president of City Connections Realty and a resident broker at Zeckendorf Towers. “If they had already paid their rent, we wouldn’t have that leverage.”

For more, see Condo Boards Take a Stand on Delinquencies.

Suit: Lawyer Letter Demanding Back Rent, Failing To Include Required Disclosure In Connection w/ F'closed Homeowner's Eviction Violates FDCPA

In St. Louis, Missouri, Courthouse News Service reports:

• Deutsche Bank and a Missouri law firm evict people from their homes illegally, a couple claims in a class action in City Court. Sonja Lawson and Ross Schuman sued Boyd Law Group, of St. Peters, Mo., and Deutsche Bank National Trust. They claim the defendants evict people in violation of the Fair Debt Collection Practices Act.
  
  Lawson and Schuman say they got a letter from the defendants on March 19, threatening legal action for back rent.(1) They say the letter failed to disclose that it was from a debt collector trying to collect a debt, and that though trustee's deeds claim their home was bought at a foreclosure sale, that was not the case.
  
  "Thus contrary to the express representation in defendant's form letter, Deutsche Bank National Trust did not purchase the plaintiff's home, but was assigned an illegal credit bid," the complaint states.
  
  "This representation by defendant is grossly misleading in that it not only conceals the true nature of the foreclosure sale from plaintiff, but also actively covers up the whole process of the credit bid being assigned by representing that Deutsche Bank 'purchased' the property."

For more, see Class Challenges Deutsche Bank Evictions.

For the lawsuit, see Lawson, et ano. v. Boyd Law Group, L.C., et al.

(1) According to the lawsuit, the Defendants had earlier obtained a final judgment on the merits in an Unlawful Detainer action, and that said judgment was entitled to res judicata effect. The lawsuit then alleges that, six days after obtaining the final judgment, Defendants sent a letter to the foreclosed homeowners threatening to commence another action for back rent. The suit claims that, because Defendants threatened an action barred under principles of res judicata, they threatened an action they could not legally take. See lawsuit, paragraphs 8-14.

Southern Alabama Feds Score Seventh Guilty Plea In Foreclosure Sale Bid Rigging Racket As Ongoing Probe Continues

From the U.S. Department of Justice (Washington, D.C.):

• An Alabama real estate investor pleaded guilty [] for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in southern Alabama, the Department of Justice announced.
  
  Charges were filed on June 25, 2012, in the U.S. District Court for the Southern District of Alabama in Mobile, Ala., against David R. Bradley. Bradley was charged with one count of bid rigging and one count of conspiracy to commit mail fraud. According to the plea agreement, Bradley has agreed to cooperate with the department’s ongoing investigation.
  
  According to court documents, Bradley conspired with others not to bid against one another at public real estate foreclosure auctions in southern Alabama. After a designated bidder bought a property at the public auctions, which typically take place at the county courthouse, the conspirators would generally hold a secret, second auction, at which each participant would bid the amount above the public auction price he or she was willing to pay. The highest bidder at the secret, second auction won the property.
  
  Bradley was also charged with conspiring to use the U.S. mail to carry out a scheme to acquire title to rigged foreclosure properties sold at public auctions at artificially suppressed prices, to make and receive payoffs to co-conspirators and to cause financial institutions, homeowners and others with a legal interest in rigged foreclosure properties to receive less than the competitive price for the properties. Bradley participated in the bid-rigging and mail fraud conspiracies from as early as June 2003 until at least September 2008.

***

• Including today’s plea, to date, six individuals—Harold H. Buchman, Allen K. French, Bobby Threlkeld Jr., Steven J. Cox, Lawrence B. Stacy and Bradley—and one company—M & B Builders LLC— have pleaded guilty in the U.S. District Court for the Southern District of Alabama in connection with the investigation. Additionally, on June 28, 2012, real estate investors Robert M. Brannon and Jason R. Brannon, and their company, J & R Properties LLC, were indicted with participating in bid rigging and conspiracy to commit mail fraud at public real estate auctions in southern Alabama.
  
  Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine. [...]

For the Justice Department press release, see Alabama Real Estate Investor Pleads Guilty to Conspiracies to Rig Bids and Commit Mail Fraud for the Purchase of Real Estate at Public Foreclosure Auctions.

Backfiring 1031 Deal Leaves Investors In Hot Water; Despite Positive Cash Flow, 'Exploding' Balloon Payment & Low Appraisal Put Building In F'closure

In Las Vegas, Nevada, the Las Vegas Review Journal reports:

• If Randy Ghezzi had it to do all over again, he would have paid the capital gains tax on the sale of some inheritance property, instead of investing the money in a Las Vegas office building through a 1031 exchange.
  
  Ghezzi now has about $550,000 tied up in the medical office building at 2716 N. Tenaya Way, near Mountainview Medical Center, that's facing foreclosure. "I would have personally walked the check to the IRS office," said the investor, who works for the city of Pocatello, Idaho.
  
  Ghezzi, 50, is one of 34 investors suing Wells Fargo Bank and its special servicer, LNR Partners, to stop the foreclosure. In documents filed in Clark County District Court, they allege fraud, conspiracy to secure an inflated appraisal and unlawful foreclosure. They're seeking more than $30 million to cover their investment, attorney's fees and lost profits.
  
  In one regard, the lawsuit is no different than countless others spawned by the Las Vegas real estate bust, recession and overhyped expectations.
  
  But in this case, the 34 relatively small investors may lose everything even though they've never missed a loan payment, and are in no danger of doing so. The building generates about $440,000 in monthly rental income, more than enough to cover the their interest-only loan payment of $235,000 per month, attorneys for the investors said.
  
  Problems arose when the $50.7 million loan came due in full last August. The investors were unable to refinance because the property, appraised at $74 million when they bought it, now is valued at about $44 million.

For more, see Fledgling investors fighting foreclosure in Las Vegas.

NJ Homeowner's Tab To Recover Home Lost In Municipal Lien Foreclosure Stemming From Unpaid $140 Sewer Bill Could Top $50K

In Middletown, New Jersey, NBCNews.com reports:

• For Dominick Vulpis, a $140 sewer bill has become a $50,000 nightmare. Vulpis didn’t know he had a big problem with the four-year-old bill until last December, he said, when he was served with papers notifying him that he had lost his Middletown, N.J., home to foreclosure. Neither he nor his wife were notified of the foreclosure process until the final judgment was granted last December, he said.
  
  “It was never brought to my attention until it was too late and we were served with papers saying we had to move out of our house,” said Vulpis, a 60-year-old plumber. “I may pay a bill late, but I pay them. I’m not trying to beat anyone for $140.”
  
  Incredibly, that $140 debt snowballed to the loss of his home after the town sold the lien on his property to an investor, an increasingly common practice as cash-strapped cities and towns try to raise badly needed revenues to close widening budget gaps.
  
  Vulpis eventually got the foreclosure overturned and didn't have to move out of his house, but not before his attorney negotiated a settlement with the investor. His mortgage company put up $37,500, which was paid to the investor and will be added to Vulpis’ mortgage balance, according to his attorney, who is now negotiating a loan modification with the lender. Combined with attorney fees and added interest for the higher mortgage balance, Vulpis’ total tab could top $50,000.

***

• [A]ttorneys say homeowners often aren’t given proper notice to defend their home from seizure before it’s too late.
  
  Two years ago, the District of Columbia sold a tax lien on the home Stanley Stefan lived in for nearly 40 years. The problem started six years ago, after district tax officials erroneously revoked a homestead exemption, which has since been restored, he said.
  
  But Stefan, a 68-year-old retired chauffeur, said he didn’t learn until this year that there’s still an unpaid balance on his tax bill, which an investor is now trying to collect, with interest. Stefan has hired an attorney to try to reverse the tax sale.
  
  “I want my property and no payment: I don’t think I’ve done anything wrong,” he said. “I paid what I owed. I shouldn’t be held accountable for a mistake the district made.”

***

• Some states and local governments have moved to protect homeowners from the harshest outcomes. Last year, New York City passed an ordinance that allows homeowners to work out payment plans when they fall behind, caps the rate investors can charge on uncollected tax bills and banned tax lien sales for debts of less than $2,000.
  
  The law also made it easier for homeowners to apply for an exemption that prevents their liens from being sold. As a result, the number of tax lien sales has dropped 24 percent so far this year, according to the New York City Comptroller's office.

For more, see How a $140 bill snowballed into foreclosure.

Judge Slams Brakes On Condo Lien Foreclosure Where HOA Pocketed Substantial Payment From Delinquent Unit Owner, Then Failed To Tell Court

In New York City, Habitat Magazine reports:

• Most condominium boards and their managers and attorneys act in what they perceive to be the best interests of their condo associations. But when one Manhattan board in an arrears foreclosure tried to not let the owner pay, and then tried to not tell the court when it did let the owner pay, the judge called the board's actions "inexplicable." You really, really don't want a judge to say that.

***

• Judge Joan A. Madden, in her July 10, 2012, decision rejecting the board's request for summary judgment, scathingly wrote that, "Even though [the board's] Updated Tenant Ledger clearly shows that defendant made a $7,397.91 payment … [the board] simply seeks the relief … without mentioning such payment and acknowledging that defendant satisfied a substantial portion of the lien for unpaid common charges ... [or that the board] has been charging defendant for 'legal fees.' ... [The board's] silence as to the foregoing payment and charges is inexplicable."

For more, see Court Tells Board in Foreclosure Case: The Guy Paid. What Else You Want?

For the ruling, see Board of Mgrs. of the Clinton West Condominium v. Desmond, 2012 NY Slip Op 31791(U) (Sup. Ct. New York County, July 2, 2012).

Idaho Supremes: Right To Be Seen From Roadway Not A Compensable Property Right In Condemnation Proceeding

In Boise, Idaho, The Associated Press reports:

• The Idaho Supreme Court has upheld a lower court’s ruling favoring the state in an eminent domain case where a business contended it lost customers because the loss of land resulted in the loss of visibility of signs to passing motorists.
  
  The Idaho Business Review in a story published Wednesday reports the court ruled June 29 that businesses in the state can’t seek damages from the state for a loss of visibility.
  
  The owners of the former airport Holiday Inn in Boise sought $7.5 million in compensation following the Vista Avenue widening project that included a sound wall. The state offered about $40,000.(1)
  
  Justice Jim Jones wrote that the lower court was correct in its ruling, which read: “The existence of a ‘right of visibility’ has not yet been expressly recognized as a property right in Idaho. Neither the legislature nor any Idaho cases have expressly recognized a compensable property interest in ‘visibility’ or a right ‘to be seen’ from a roadway.”
  
  Thomas J. Lloyd III, the attorney for the former Holiday Inn owners, known as HI Boise, said the ruling could harm businesses that rely on locations to attract customers. “A company that invests in location and visibility in the present may, in the future, find itself with neither the visibility bargained for nor any recourse from the political entity that destroys that property benefit,” Lloyd said in a written statement.
  
  HI Boise filed the lawsuit in 2009, and has since lost the hotel in foreclosure.

For the story, see Idaho court backs state in eminent domain case.

For the ruling, see State of Idaho v. HI Boise, LLC, 2012 Opinion No. 103 (June 29, 2012).

(1) According to the ruling, the dimensions of the strip of land that was condemned and taken by the state of Idaho from the HI Boise was approximately 7 feet wide and 133 feet long, totaling approximately 960 square feet. It was pointed out in the litigation (see footnote 3 of the ruling) that the condemned land equated to 0.24% of HI Boise’s 398,574-square-foot property.

Trailer Park Owner Says City's Unfair Application Of Local Land Use Rules Nothing But A Land Grab; Officials Deny Inverse Condemnation Charge

In Panama City, Florida, the News Herald reports:

• Over the last eight months, the Waldrop Trailer Park has slowly been dismantled. The 30 mobile homes that made up the park are down to four. Only one is occupied, and Bay County Builders Services reported none are habitable.
  
  It won’t be long before all the trailers are gone. While not everyone is disappointed by this, at least one person is: Joe Sikes. Sikes and Cameron Skinner are principals of Waldrop Park LLC, the company that purchased the Waldrop in 2010 with the hopes of running the trailer park before selling the land at a profit.
  
  Instead, Sikes said, the property is headed to foreclosure, and he believes it is because the city wants to take possession of the land, a charge city officials deny.

***

• Waldrop Park LLC purchased the property in October 2010, and it didn’t take long before the new owners were informed of code violations. [...] The code enforcement issues at the park weren’t insurmountable, Sikes said. The death knell was a new business license was required.
  
  Panama City regulates where mobile homes can be located, and the mobile homes must meet state requirements. After a change in city regulations, the Waldrop Trailer Park became a nonconforming use but was grandfathered in. When the park sold, it lost that status.
  
  The trailer park is located in a mixed-use area, so approved mobile homes would be allowed, but only after a development order was obtained and the park reconfigured to meet new regulations.
  
  An Aug. 3, 2011, email from Wade Reynolds, a planner for the city, states Sikes can call him for information about obtaining a development order to develop the property as a manufactured home subdivision. Sikes said doing that would have reduced the number of mobile homes allowed on the land.
  
  “All of our lots were inhabited by families, by low-income families,” he said. “How do I go tell these people they have to move?”
  
  Because the trailer park didn’t meet land use requirements, Sikes said the city planning department would not sign off to allow the business license to be approved. Sikes said he responded by calling Mayor Greg Brudnicki and explaining the situation to him.
  
  A code enforcement investigation narrative notes the day after Reynolds sent Sikes the email, Brudnicki asked the planning department to back off the complaint, but the business license was never issued. Sikes said he knew he wouldn’t be able to obtain the business license, so he told city officials he would have the trailers moved off the land.
  
  Of 30 trailers, Sikes said he moved 20, six were torn down and four are still there. It won’t be long until the property becomes vacant, and it likely will go into foreclosure.
  
  George Wilson, who identified himself as the mortgage holder during the code enforcement hearing, said he plans to initiate foreclosure proceedings and expects to take possession soon.
  
  Sikes said he believes Waldrop Park LLC was unfairly targeted with mobile home requirements, although the city disagrees. “We’ve been effectively shut down because we have the last big piece of property that the port can get,” he said. “The port can only grow … toward the trailer park.”
  
  Sikes said other sizable trailer parks in the city have been sold after the city’s manufactured home regulations were put in place and it wasn’t enforced. “I personally bought and sold another trailer park in Panama City, and they never enforced it on me over there,” he said. He said he believes it is part of larger plan for the city to obtain the property for the port.

***

• The city has denied having any ulterior motive. In a June 27 email to City Manager Ken Hammons, City Attorney Rowlett Bryant wrote that when Sikes proposed selling the land to the Port Authority, representatives weren’t sure how to respond because they didn’t want to buy the property.
  
  “I told them that it would be neighborly to respond and I wrote them and told that (the) port was not interested in the purchase of the property. The port does not need this parcel of property for its operations,” he wrote.
  
  Bryant also said he “gives no credence” to the suggestion the city was taking part in inverse condemnation action.
  
  Still, Sikes believes the action was less about the condition of the property and more about its location. “It’s a land grab,” he said. “It’s exactly what it is.”

For the story, see Troubled trailer park nearly empty.

FBI: Fraudulent 'Secret Government Fund' Program To Thwart Foreclosures Based On Bogus "Redemption Theory"

In Wethersfield, Connecticut, the Hartford Courant reports:

• The sales pitch offered people who were drowning in debt a miraculous life jacket. It went like this: There's a U.S. Treasury fund that can be used by individuals to stop foreclosure actions, pay off debts and end their money worries.
  
  But the Treasury Department keeps the fund a secret. There's a special way to get the loot, but to find out how will involve a fee.
  
  The fund, of course, doesn't exist, a life preserver filled with rocks. People who paid thousands of dollars for help ended up in worse financial shape than before.
  
  The alleged scam, based on a well-worn fabrication, was revealed last month when federal tax agents arrested Deowraj Buddhu, 69, and his daughter, Sunita Buddhu, 41, both of Wethersfield, on mail fraud and conspiracy charges. The pair are jailed, waiting for trial.
  
  The "program" they peddled, police said, was a version of a fraud based on "Redemption Theory," a type that pops up so often that the FBI routinely warns the public not to fall for it.
  
  The FBI says the theory was introduced by Roger Elvick, a white supremicist, it in the 1980s. He claimed that since abandoning the gold standard in the 1930s, the U.S. government has used its citizens as collateral, issuing Social Security numbers and birth certificates to register people in trade agreements with other countries. In conjunction with "registration," a secret fund was established that is funded with $630,000 for every U.S. citizen, the theory goes.
  
  Elvick's theory has been embraced by the sovereign citizen movement, whose extremist adherents claim they are essentially a nation unto themselves and have no obligation to the American government, including paying taxes, possessing a driver's license or obeying the law.

For more, see Alleged 'Redemption Theory' Scam Has Roots In Ultra-Right-Wing Dogma (Wethersfield Father And Daughter Charged With Persuading People A Secret Government Fund Would Pay Their Debts).

Vulture Outfit Buys Distressed Junior Real Estate Liens, Then Uses 'Shakedown-Like' Move To Squeeze Profit From Proposed Short Sales

Bloomberg reports:

• Tom Axon’s mortgage-collection firm gets about 25 calls a day from delinquent homeowners’ brokers seeking approval to sell their houses for a loss and avoid foreclosure. We’ll help, his staff tells them, as long as we get paid enough.
  
  Axon, working with co-investors, buys distressed U.S. home- equity loans and other junior real estate liens, often for pennies on the dollar. Investors like Axon have to be dealt with whenever a home is sold in a short sale, a transaction in which the lenders agree to accept less than what’s owed on the property.
  
  “The short-sale brokers know us -- they know we’re not cupcakes,” Axon, 60, chairman of Jersey City, New Jersey-based mortgage-servicer Franklin Credit Management Corp., said in an interview. “At the end of the day, my friend, you signed a contract. You owe money and we’re willing to reach an accommodation that is commensurate with your ability to pay.”
  
  Tough bargaining by second-lien holders is delaying deals and killing some short sales, even as banks embrace the practice to avoid costly foreclosures and help clear the market of homes that are worth less than the loans on them, said Vicki Been, a New York University law professor who has studied mortgages.
  
  “It’s an opportunity for the second-lien holder to charge a price for their cooperation, because it’s needed for a short sale,” Been, a director at NYU’s Furman Center for Real Estate & Urban Policy, said in a telephone interview. “If they’re too greedy, it may squelch the whole deal.”

For more, see Home Sales Held Hostage by Junior Lien Holders: Mortgages.

Settlement Agent Admits To $684K Real Estate Escrow Ripoff; Loot Intended To Fund Existing Mortgage Payoffs

From the Office of the U.S. Attorney (Baltimore, Maryland):

• Sandy P. Kim, age 43, of Ellicott City, Maryland, pleaded guilty [] to wire fraud. [...] According to her plea, from 2005 to 2008, Kim was employed as a title agent at a title insurance company, and was the owner and chief operating officer of EK Settlements. Kim was required to maintain an escrow account in order to receive real estate settlement funds from buyers and pay off mortgage lenders.
  
  Starting in 2006, Kim stole money from the escrow accounts to pay her personal bills, including taxes and private school tuition for her children. She also used the stolen funds to pay prior loans she had failed to pay off, in order to forestall discovery of her theft.
  
  On August 20, 2007 Kim performed a closing for a client and caused $175,136 to be wired to an account she controlled. Instead of paying off the client’s prior mortgage, Kim used the money for her own purposes. To conceal the theft, she made several monthly mortgage payments to the prior mortgage lender.
  
  In 2008 when her employer began to suspect problems and sought to audit her accounts, Kim submitted fraudulently altered bank records. When subsequently interviewed by law enforcement, she admitted to the scheme.
  
  Kim stole a total of $684,283 from the escrow accounts which were intended to pay off mortgage lenders. As part of her plea agreement, Kim has agreed to entry of an order of forfeiture in such amount.

For the U.S. Attorney press release, see Ellicott City Title Agent Admits to Stealing over $684,283 From Mortgage Escrows.

Settlement Agent Gets 51 Months For Role In Scheme To Rip Off $4.9M+ In Mortgage Payoff Funds From Real Estate Closings

From the Office of the U.S. Attorney (Baltimore, Maryland):

• U.S. District Judge Catherine C. Blake sentenced Todd R. Bettin, age 42, of Crofton, Maryland, to 51 months in prison, followed by three years of supervised release, for conspiracy to commit wire fraud in connection with a five year scheme to divert or hold mortgage payoff funds from clients’ closings on 17 Maryland properties. Judge Blake also ordered Pierce to pay restitution of $3,392,047.51.

***

• According to his plea agreement, Bettin was the assistant manager of At Home Mortgage owned by co-conspirator Gary Pierce, who also owned and managed At Home Settlements, LCC, in Gambrills, Maryland. At Home Settlements provided settlement services and sold title insurance policies to clients who were buying homes or refinancing existing properties.

***

• Beginning in 2007, Bettin and Pierce diverted or held mortgage payoff funds from clients’ closings for a matter of days, weeks and sometimes years. Pierce falsely represented on HUD-1 forms sent to the borrower’s lender that the payoff was made, when in fact Pierce intended to divert the funds.
  
  Bettin and Pierce fabricated wire confirmation reports, which purported to be a bank record of the transfer, to include in loan files. These were created in advance of audits in order to deceive the title insurers.
  
  Additionally, to forestall discovery by the lenders, Bettin and Pierce contacted the mortgage lender who should have been paid off and posed as the borrower/homeowner. Bettin would either create an on-line profile for the borrower and stop any mail from being sent to the borrower, or he would tell the lender that his, the borrower’s, address had changed and he would re-direct the lender to send all correspondence to a post office box owned by Pierce.
  
  Bettin would then make monthly mortgage payments to the existing lender. Believing that the bank had been paid off as a result of the settlement, the borrower stopped making monthly payments on that mortgage. And since that lender was receiving monthly payments, it had no reason to notify the borrower of any delinquency. With no delinquency in the account, the scheme went undetected.
  
  Because the existing mortgages were not paid off, the liens against the property were not removed and clear title could not be passed to the new lender and borrower. The total amount of diverted or otherwise improperly obtained funds totals $4,971,380.

For the U.S. Attorney press release, see Assistant Manager of Gambrills Mortgage Company Sentenced to over 4 Years in Prison in $4.9 Million Mortgage Fraud Scheme.

Bank's Failure To Inquire Into Rights Of Persons In Possession Prior To Giving Loan In Connection With Sale Leaseback Ripoff Leaves It Holding The Bag

In another court ruling that has come down in recent years applying the age-old legal doctrine of bona fide purchase to a situation involving some form of home equity ripoff, the Minnesota Court of Appeals concluded that a mortgage lender that provided financing in connection with a sale leaseback equity stripping racket was not entitled to protection as a bona fide purchaser, and accordingly, voided its mortgage, when:

1. it failed to prove that it received purported lienholder's interest without notice of a violation of the state's anti-foreclosure rescue ripoff statute (Minn. Stat. §325N) and
2. it failed to fulfill its duty of inquiry as to the rights or interests of persons in possession [ie. the screwed-over homeowner in this case] of the residential real property in foreclosure.

In this case, the lower court found that, because the screwed-over victim was still in possession of his recently-foreclosed home when the mortgage lender extended credit to the then-title holding sale leaseback peddler, and it (the lender) failed to inquire into what rights or equities in connection with the home the victim may have had, the lender was deemed to be on notice of the violations of law committed against the victim by the sale leaseback operator.

The bottom line here was the lender was found not to be entitled to its purported lienholder's interest in the home it thought it received when it loaned money to the sale leaseback operator and, accordingly, was left holding the bag.

For the court ruling, see Graves v. Wayman, -- N.W.2d ----, 2012 WL 2685052 (Minn. App. 2012) (for publication) - (includes court syllabus, but no embedded links). Go here for Google version (includes embedded links, but no court syllabus).

Representing the successful homeowner was Jeramie R. Steinert, Steinert P.A., Minneapolis, Minnesota.

See Minnesota Bona Fide Purchaser, Possession, Duty Of Inquiry for some Minnesota case law addressing the duty to inquire of persons in possession of real estate that subsequent purchasers and encumbrancers are burdened with prior to taking title to property or taking a lien as a security interest for a loan.

For other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

************

For other posts on the application of the bona fide purchaser doctrine by the courts in recent years in connection with some type of a home equity ripoff where the victim's title is scammed out from under, see:

• Indiana: Failure To Inspect Property & Inquire Into Rights Of Parties In Possession Prior To Making Loan Leaves Indiana Lender With Voided Mortgage,
  
  
• Colorado: Lack Of Knowledge Or Partcipation In Fraud Not Enough To Sustain Bona Fide Purchaser Status In Equity Stripping, Foreclosure Rescue Deal,
  
  
• Illinois: Lender's Failure To Inquire Into Possession Disqualifies It For Bona Fide Purchaser Protection In Suit To Undo Foreclosure Rescue Sale Leaseback Scam,
  
  
• Pennsylvania: Pennsylvania B'kruptcy Court Voids Sale Leaseback Scam; Victimized Homeowners' Continued Possession Leads To Invalidation Of Subsequent Deed, Mortgage,
  
  
• Minnesota: Minn. Sale Leaseback, Equity Stripping Victim Wins Back Free & Clear Home With Help From Non-Profit Law Firm As Judge Voids Sale & Subsequent Mortgage,
  
  
• Texas: In re Hayes, Civil Action No.: SA-03-CA-1228-XR (W.D. Tx. 2004), (gives an extensive analysis on the Texas law involving the effect of the bona fide purchaser doctrine to subsequent purchasers and mortgage lenders where one is in possession of land under an unrecorded instrument and how it was applied to a case where a buyer who bought and took possession of a home under an oral contract (yeah, an oral contract!) for the purchase of real estate; subsequently, the former owner (and then-still ostensible owner of record) pledged the property as collateral for a loan; lender failed to inspect the property and otherwise made no diligent effort to discover if someone was in possession of the home and, if so, to inquire of the occupant as to any rights or equities in the home the occupant may have had); aff'd per curiam Bank of Am., N.A. v. Schwartz (In re Hayes), 194 Fed. Appx. 217; 2006 U.S. App. LEXIS 21139 (5th Cir. 2006) (unpublished).

'Rambo' Slams C. Pennsylvania Sale Leaseback Peddler; $2.4M+ Ripoff Tagging 3 Dozen Homeowners In Equity Stripping Racket Ends w/ 19+ Year Prison Stay

From the Office of the U.S. Attorney (Harrisburg, Pennsylvania):

• The United States Attorney’s Office for the Middle District of Pennsylvania, announced [] that a former York County woman has been sentenced to 238 months’ incarceration for defrauding 36 homeowners in Cumberland, York and Adams Counties out of $2,470,666 between 2006 and 2008.
  
  United States Attorney Peter J. Smith said that following a six-day jury trial in November 2011, Joanne M. Seeley, age 42, formerly of East Berlin, Pennsylvania, was found guilty in November of 2011 on four counts of Wire Fraud and four counts of Money Laundering.
  
  After a lengthy sentencing hearing [...], Judge Sylvia Rambo sentenced Seeley to the term. Judge Rambo also ordered Seeley to pay $2,470,666 in restitution to the 36 homeowners.
  
  Seeley, who now lives in South Carolina, was a Pennsylvania licensed real estate agent until December 12, 2006, when she permanently surrendered her license in lieu of disciplinary action. Testimony during the trial showed that between September 2005 and December 2008 Seeley perpetrated a wire fraud scheme that defrauded 36 homeowners plus dozens of mortgage lenders and several investors.
  
  The particular scheme Seeley executed is more commonly known as a Foreclosure Rescue/Equity Skim, operating under the name of a new business she created, S&D Property Solutions.
  
  Seeley would identify a residence scheduled for Sheriff's Sale and advise the homeowner he could avoid foreclosure by selling the home to her or one of her investor/buyers, who would then lease the property back to the homeowner after the sale.
  
  Seeley assured the homeowner she would use the equity in the property to pay off his personal debts, rebuild his credit rating, and allow him to buy his home within one year. Seeley also promised other homeowners that their equity would be held in escrow by the investor/buyer for their repurchase of their home.
  
  Before surrendering her real estate license Seeley would simply charge the distressed homeowner an extremely high commission equal to the exact penny of the homeowner’s proceeds from the sale. Later, Seeley would have the homeowner sign over their sales proceeds check to S&D Property Solutions.
  
  Contrary to what the homeowners were promised, no funds were ever escrowed on their behalf and no sales proceeds were ever applied against their personal, unsecured debts. As a result, no homeowner was ever able to buy back the home.(1)
  
  Seeley recruited and induced several investor/buyers into participating in her program by assuring them they would be reimbursed for all out-of-pocket expenses, including their down payment plus an $8,000 "fee" for engaging in the transaction.
  
  Seeley also promised the investor/buyers they would receive monthly rent from the homeowner that would cover most, if not all, of their mortgage payments. Some buyers were also promised an up-front payment designed to make up the difference between their mortgage payments and the rent they received.
  
  Seeley submitted a plethora of false documents to mortgage lenders in order to induce them into approving the investor/buyers’ loan applications, including false employment verifications, false leases, false rental income, and false occupancy verifications.
  
  Seeley also submitted redacted sales contracts to the lenders that concealed the fact the buyer and seller had entered into buy-back agreements and that the buyer’s down payment was being refunded to the investor/buyer from the loan proceeds.
  
  The trial also showed Seeley used a large portion of the homeowners’ equity she stole to live a lavish lifestyle, including the purchase of a 23-acre York County horse farm; several Jaguar automobiles; a $200,000 truck and horse trailer; a built-in swimming pool; a Caribbean cruise; and a Rehoboth Beach, Delaware rental property.
  
  The evidence also showed Seeley spent more than $400,000 on horses and other animal expenses between 2006 and 2008. Judge Rambo directed Seeley to begin serving her 238-month sentence on August 20, 2012.

For the U.S. Attorney press release, see Former York County Woman Sentenced To Nearly 20 Years For Fraud.

(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).

Alabama Judge: City Court System That Could Reasonably Be Characterized As A 'Debtors' Prison' Amounts To A "Judicially Sanctioned Extortion Racket!"

In Harpersville, Alabama, The Birmingham News reports:

• A Shelby County judge shut down what he called a "debtors prison" run by Harpersville Municipal Court and a private probation company that he said amounted to a "judicially sanctioned extortion racket," court records show.
  
  Circuit Judge Hub Harrington took control of all cases in Harpersville involving people jailed for failing to pay court fines and fees. He also ordered the city's mayor and all council members to attend an Aug. 20 injunction hearing and future court hearings in the case.
  
  Harrington filed the order Wednesday afternoon on a lawsuit filed in 2010 on behalf of Dana Burdette, contending that Harpersville Municipal Court routinely violated defendants' Constitutional rights. If they were unable to immediately pay court-imposed fines and fees, defendants often were trapped by the system into paying several times that amount, the judge found.
  
  The judge wrote in a scathing five-page order that he reviewed sworn statements filed by Burdette's lawyers during the Fourth of July holiday and was appalled by the evidence he saw of systematic abuses in Harpersville.
  
  "Most distressing is that these abuses have been perpetrated by what is supposed to be a court of law," Harrington wrote. "Disgraceful."
  
  The judge found evidence that the city would turn over to the private probation company, Judicial Corrections Services, cases in which Municipal Court defendants could not immediately pay the court-imposed fine and costs.
  
  Many defendants later were locked up, some on bogus failure-to-appear complaints, resulting in more charges that led to more fines, court costs -- and more debt, the judge wrote.

For more, see Judge halts 'debtors prison' by Harpersville city court, calls it 'judicially sanctioned extortion'.

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

BofA Duped Me Into Loan Modification When It Really Wants To Foreclose, Says Texas Woman In Lawsuit

In Jefferson County, Texas, The Southeast Texas Record reports:

• A woman claims Bank of America wrongly foreclosed on her property despite its agreement to work out a modification with her.
  
  Shayla Zuzukin claims that after she fell behind on her mortgage payments to Bank of America, it agreed to enter into a modification with her to allow her to catch up on her note.
  
  On April 23, Zuzukin had arranged to meet with representatives from Bank of America to discuss the modification, but no one from the company arrived at her home, according to the complaint filed June 29 in Jefferson County District Court.
  
  "However, and much to her shock and chagrin, plaintiff found out that defendants never actually intended to modify her note, misrepresented facts to her that led her to rely on their statements, only to receive notice from defendants that her house was going to be foreclosed on July 3, 2012," the suit states.
  
  Since Zuzukin bought her home in March 2008, she has invested $30,000 and will lose all that money if the bank does foreclose on her property, the complaint says.
  
  Had she known of the bank's intentions, Zuzukin claims she would have made other plans instead of relying on a modification to help her out.
  
  She alleges breach of contract and misrepresentation against Bank of America. In her complaint, Zuzukin is seeking a temporary restraining order that prohibits the bank from foreclosing on her property and other relief the court deems just.

Source: Woman sues B of A for wrongful foreclosure.

MERS Foreclosure Issues To Be Heard By Oregon Supremes; High Court Will Address Four Certified Questions Sent By Federal Judge

The Oregonian reports:

• A day after a key ruling from a lower appeals court, the Oregon Supreme Court said it will resolve uncertainty surrounding the mortgage industry's controversial loan tracking system and its role in out-of-court foreclosures.
  
  The state's highest court on Thursday officially accepted questions sent to it by U.S. District Court chief judge Ann Aiken. The questions stem from four cases challenging the legality under Oregon law of the Mortgage Electronic Registration Systems Inc. and non-judicial foreclosures.
  
  On Wednesday, the Oregon Court of Appeals ruled in a separate case that a record of past mortgage sales must be filed publicly in Oregon before an out-of-court foreclosure can begin. It also said that MERS, the industry's private registry of mortgage transactions, could not act as a stand-in for filing the mortgage assignments in county recorders offices.

***

• The Washington Supreme Court in March heard arguments on a similar set of questions but has yet to issue a ruling.

For more, see Oregon Supreme Court will tackle MERS foreclosure issues.

See the Oregon Supreme Court Order Accepting Certified Question for the four certified questions that will be addressed by the Oregon high court.

Florida Bankruptcy Court OKs 'Chapter 20' Junior Lien Strip-Off From Debtor's Home; Ch. 13 Case Filed Less Than 2 Months After Scoring Ch. 7 Discharge

From the Florida Bankruptcy Law Blog:

• [A Florida bankruptcy] judge held that a Chapter 13 debtor may strip a wholly unsecured junior lien from his homestead even though the debtor filed a prior Chapter 7 case and is therefore ineligible for the Chapter 13 discharge.
  
  However, the court also said that the Chapter 13 must have been filed in good faith, and a debtor is not proceeding in good faith if he files a Chapter 13 primarily to strip the second mortgage. The issue is whether the Chapter 13 is designed mainly to achieve a lien strip that could not be obtained in the prior Chapter 7. In this particular case, the court did not find the debtor acted in bad faith.
  
  The debtor had initially filed a Chapter 13 case until the Chapter 13 moved to dismiss the case because the debtor’s unsecured debts exceeded Chapter 13 ceilings. The debtor then retreated into a Chapter 7 to discharge the unsecured debt.
  
  Subsequently, the debtor filed a Chapter 13 to strip the second mortgage.(1) The court noted that the debtor did not start off with plan to file Chapter 7 and a subsequent Chapter 13.

For more, see Chapter 13 Bankruptcy Strips Second Mortgage Notwithstanding Prior Chapter 7 Discharge: Court Holds.

For the ruling, see In re: Dang, 467 B.R. 227 (Bankr. M.D. Fla. March 12, 2012).

In a 'somewhat' related post, see Another Fully Underwater 2nd Mortgage Holder Gets Wiped Out As Federal Appeals Court OKs Lien Stripping Of Subordinate Loan In Ch. 7 Bankruptcy, which addresses a recent ruling by the U.S. Court of Appeals for the 11th Circuit (the court that has appellate jurisdiction over cases coming from the lower Federal courts in Florida - as well as from Georgia and Alabama) that stamped its approval on a junior mortgage lien strip-off in a Chapter 7 bankruptcy case.

(1) The approach of filing a bankruptcy petition under Chapter 13 shortly after obtaining a debt discharge under Chapter 7 is sometimes informally referred to as a "Chapter 20 bankruptcy." In this case, the Chapter 13 petition was filed about seven weeks after obtaining the debt discharge under the earlier-filed Chapter 7 case. According to the court ruling, the following timeline sets forth when the petitions were filed:

• On November 9, 2010, the Trustee filed a Motion to Dismiss the first case, and alleged that the Debtor was not eligible to be a debtor under Chapter 13 because her debts exceeded the limits provided by § 109 of the Bankruptcy Code. On November 15, 2010, the Debtor converted the first Chapter 13 case to a case under Chapter 7 of the Bankruptcy Code. She received a discharge in the Chapter 7 case on March 8, 2011. On April 25, 2011, the Debtor filed the petition that commenced the current Chapter 13 case.

Flawed Design For Letter Used To Notify Homeowners Of Foreclosure Settlement Cash Impedes Response, Say Critics; Form Too Complex, Looks "Like A Scam"

Reuters reports:

• Nothing about the letter that Keturah Miller received late last year indicated it could be worth as much as $125,000 to her. So she put it aside, forgetting about it for months until she stumbled across it while cleaning.
  
  Miller, 34, a family liaison worker with the New York City Department of Education, read it over four times. It still made no sense to her. "I can read the words, but the meaning of what they're saying? That's the confusing part for me," she said.
  
  The letter was one of 4.3 million forms sent under a flagship U .S. program to try to help people who may have experienced financial injury due to errors in their mortgage servicing. An estimated 4 million families lost their homes due to foreclosure from 2007 to 2012.
  
  So far, fewer than 5 percent of the potential beneficiaries - 214,000 - have requested a review of their cases, a number critics say confirms their suspicion that the process was designed to protect banks, not help consumers.

***

• FLAWED DESIGN
  
  Miller's struggle to understand the rights laid out in her review letter may not be unique.
  
  A report released last week by the Government Accountability Office found that the letters' complex language, their omission of important information about remediation, and a failure to consider that some recipients speak or read little English could "impede some borrowers' ability to respond."
  
  Miller, who is finishing her Master's in Business Administration this year, finally called a housing counselor. "It's like it's done for a lawyer to understand, or someone who's involved with mortgage loans," she said.

***

• Consumer advocates say the low numbers are indicative of the outreach's flawed design. While almost half of U.S. adults read at the level of a 13- or 14-year-old, the form is written at a second-year college level, according to an analysis by a consumer group.
  
  The letters and the review's website were not tested with target audiences, and the letters were sent out only in English, although 5.5 percent of the adult population in the United States reports they speak poor or no English.
  
  A Spanish-language advertising campaign was launched and translators for over 200 languages are available at a toll-free number, but the form itself remains available only in English.
  
  "By the time we were able to meet with the OCC and the Fed, a lot of things were too late," said Graciela Aponte, senior legislative analyst at the National Council of La Raza, a Hispanic civil rights organization.
  
  She told regulators that the form was too complex and looked "like a scam," but was told "there were absolutely no edits that could be made to it."
  
  [Walter] Walker, [a 20-year] Florida housing counselor, said his clients declined to fill out the form when they realized they were not guaranteed compensation, or were suspicious of it and unwilling to give out personal information.
  
  "Those were the two most common responses I got other than, 'What is this?' and throwing it in the trash can," he said.

For more, see Foreclosure review program befuddles borrowers.

Delaware Suit Targeting MERS Ends With A Wimper; State AG Scrambles To Save Face, Accepts Crappy Settlement

In Dover, Delaware, The Associated Press reports:

• The Delaware attorney general’s office has agreed to drop a deceptive trade practices lawsuit against a company that runs a nationwide electronic mortgage registry. Attorney General Beau Biden announced a settlement with Virginia-based Mortgage Electronic Registration Systems Inc. [].
  
  The settlement was reached after a judge expressed skepticism about the state’s claims at a May hearing on MERS’ motion to dismiss the lawsuit.
  
  MERS was set up by the banking industry to rapidly package and sell mortgages as securities without recording each transaction in county recorder offices.
  
  Biden’s office argued that the MERS registry is riddled with inaccuracies that raise questions about the rights of homeowners facing foreclosure, including trying to find out who owns the underlying loan.
  
  MERS argued that state officials couldn’t point to any deception of consumers because the registry operates solely for the benefit of its member financial institutions and does not provide any goods or services to homeowners.

For more, see Delaware attorney general settles lawsuit against nationwide electronic mortgage registry.

See also:

• American Banker: Delaware AG Settlement Secures MERS Audit Reports, But Little Else,
• Thomson Reuters: What's missing from Delaware's settlement with MERS?

Arizona Appeals Court: Homeowners' Post-Foreclosure Rights Under State Anti-Deficiency Statute Applies To Forced Sale Of Time-Share Vacation Homes

In Phoenix, Arizona, The Associated Press reports:

• A new state court ruling says Arizonans with partial ownerships of time-share vacation homes are entitled to the same post-foreclosure rights as owners of year-round homes.
  
  A mortgage company had sued a couple for the balance still owed on their mortgage for a Sedona condo after a foreclosure of the couple's one-tenth share of the property.
  
  However, the Court of Appeals rejected the company's argument that the vacation condo isn't a single-family dwelling covered by the state law prohibiting so-called deficiency judgments.
  
  The court says the purpose of that law is to protect consumers from financial ruin. It says the law places the risk of inadequate security on lenders rather than borrowers.

Source: Arizona ruling won't narrow post-foreclosure right.

Michigan Trial Court: No Right Of Redemption When Realty Sold By Court-Appointed Receiver; Rights Typically Associated With Foreclosures Not Available

From a news alert from the law firm Warner Norcross & Judd, LLP:

• In a victory for banks and other mortgagees, a Michigan circuit court recently held that a sale by a court-appointed receiver does not trigger a right of redemption.
  
  In First Financial Bank, N.A. v. Scott T. Bosgraaf, a court-appointed receiver sought court approval to sell mortgaged real estate and other property. The mortgagor objected, arguing that the proposed sale would “deprive” the mortgagor of its statutory right to redeem the property.
  
  The Ottawa County Circuit Court disagreed, concluding that a receiver sale is not a statutory foreclosure, and that the rights that accompany foreclosure, in particular the right of redemption, is "a creature of statute" that is not available following a sale by a receiver.
  
  The Circuit Court observed that this conclusion should not be surprising since the Michigan Supreme Court has held that a receiver succeeds to all property rights and interest of a debtor, including the debtor's right of redemption.
  
  It bears noting that the Bosgraaf ruling is an order of a Circuit Court and has no binding effect. It remains to be seen if other courts will follow suit.
  
  However, if the principle takes hold that a mortgagor has no right to redeem property sold by a court-appointed receiver, banks and mortgage lenders can be expected to turn to receivership sales as a strategy to avoid statutory redemption rights.
  

Source: Circuit Court: No Right To Redeem Property Sold By Court-Appointed Receiver.

See also, Michigan Court Authorizes Receiver Sale Of Real Property Free And Clear Of Redemption Rights:

• [I]n a substantial number of these cases, mortgagors will object to a receiver's motion to sell real estate free and clear of their redemption rights, arguing that such a sale is a disguised mortgage foreclosure sale for the sole benefit of the first mortgagee or that it is a "judicial sale" that is subject to the mortgagor's redemption rights.

Elderly Couple Include RICO Charges In Lawsuit Alleging They Were Duped Into Signing Over Their Home As Collateral For Loan

In Los Angeles, California, Courthouse News Service reports:

• An elderly couple claim in court that real estate agents bilked them into using their home as collateral for a new church.
  
  Erma and James Marshall and the Mt. Zion Missionary Baptist Church of San Bernardino sued Dan Bochner and Rolando DeArmas (also referred to as DeArmis in the complaint) and Bochner's foreclosure agent Reliable Trust Deed Services, in a federal RICO complaint.
  
  The Marshalls, with "ages exceeding 74 years," claim that in 2005 DeArmas tricked them into signing over their home as collateral for the purchase of a movie theater in San Bernardino, which the couple intended to use as a church. After the property was purchased, mortgage payments fell into arrears and the Marshalls' home was entered into a foreclosure sale, the couple says.

***

• "DeArmas knew that plaintiffs, Marshalls, were an elderly couple who were unfamiliar with real estate transactions and could easily be tricked and convinced into signing documents for their residence to be used as collateral for the Del Rosa church property," the complaint states.

***

• The Marshalls seek cancellation of instrument and damages for RICO fraud, negligent misrepresentation, usury, and elder abuse.

For more, see A Real Estate Deal From Hell, Old-Timers Say.

For the lawsuit, see Marshall v. Bochner, et al.

For some California case law on one legal approach to undoing a scam like the one alleged here, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.

Florida Man Gets 60 Months For Duping Victims Into Borrowing Against Their Home Equity In $2M Ripoff

From the Office of the U.S. Attorney (Albany, New York):

• United States Attorney Richard S. Hartunian and [another] announced that ARTHUR STRASNICK, age 64, of New Smyrna Beach, Florida, was sentenced [...] following his guilty pleas on two counts of mail fraud and one count of identity theft.
  
  STRASNICK was sentenced to 60 months of imprisonment to be followed by three years of supervised release. STRASNICK was also ordered to pay $1,994,620.32 in restitution.
  
  STRASNICK’s fraudulent activities in the Northern District of New York began in early 2003 when he lured a Saratoga Springs woman into investing money with STRASNICK’s firm, Backstreet Associates, Inc. Investors in Backstreet Associates, Inc. were “guaranteed” high fixed annual rates of returns ranging from 12.0% to 20.0% interest.
  
  STRASNICK’s investors were paid purported interest and principal payments, when in reality, the investors were receiving monies obtained from the same investor or other investors.
  
  In the Fall of 2006, STRASNICK also operated a mortgage fraud scheme in which he tricked other individuals, including the aforementioned Saratoga Springs woman, into providing him money representing equity in their homes.
  
  The mortgages were obtained after STRASNICK either made false representations to the homeowners or forged the signatures of the actual homeowners.

For the U.S. Attorney press release, see Florida Man Sentenced In Fraudulent Investment And Mortgage Schemes (Defendant Who Orchestrated a Ponzi-type Investment Scheme and Who Fraudulently Obtained Mortgage Proceeds Sentenced to 60 Months of Imprisonment and Ordered to Pay $1,994,620.32 in Restitution).

Head Federal Number Crunchers: Regulators Fall Short In Oversight Of Compliance By Banksters w/ Law Protecting Servicemembers From Being Screwed Over

MortgageOrb reports:

• The Government Accountability Office (GAO) has issued a report warning that regulatory oversight of compliance relating to the Servicemembers Civil Relief Act (SCRA) has been "limited."
  
  "At least 15,000 instances of financial institutions failing to properly reduce servicemembers' mortgage interest rates and over 300 improper foreclosures have been identified by federal investigations and financial institutions in recent years," says the GAO.

***

• The GAO notes that although the U.S. Department of Justice has explicit SCRA enforcement authority, the department has only brought three cases against mortgage servicers for SCRA violations during the past five years.
  
  The GAO also observes that the U.S. Department of Veterans Affairs (VA), the Federal Housing Administration and the Federal Housing Finance Agency respectively obtain SCRA compliance data, but do not share this information among themselves or with the regulatory agencies.

For more, see GAO Slams Regulators For 'Limited' SCRA Compliance Oversight.

For the GAO report (94 pages), see Mortgage Foreclosures - Regulatory Oversight of Compliance with Servicemembers Civil Relief Act Has Been Limited (or go here for the easy-to-read report highlights).

Lack Of Bankster Oversight When Contracting w/ Property M'gment Firms Problematic As Lawsuits Alleging Thug-Like Break-Ins Of Occupied Homes Pile Up

The Huffington Post reports:

• A review of court records by The Huffington Post turned up more than 50 homeowner lawsuits against banks and the two largest property management contractors in the U.S., Safeguard Properties and Lender Processing Services, stemming from break-ins of occupied homes.
  
  The allegations follow five years of generally woeful management of the foreclosure industry by all involved, as the inspector general for the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, is raising red flags about the lack of contractor oversight by the government-backed mortgage giants.
  
  A June report by the inspector general cited deficiencies "in key [foreclosed home] contractor management controls" at Fannie and Freddie, which own or guarantee more than half of all home loans in the United States. Kristine Belisle, a spokeswoman for the inspector general, said she could not comment on whether the potential misconduct described in the report includes instances of wrongful contractor break-ins.

***

• It isn't clear how often contractors are breaking into lived-in homes, but consumer lawyers say these legal complaints represent just a small sample of what is happening in communities across the country, as overzealous contractors whose earnings are pegged to the amount of work they do on a home are entering occupied houses, slapping new locks on doors and sometimes walking away with family possessions.

***

• Many of the problems with property inspections appear to stem from a lack of oversight and accountability. There are typically four layers of control between companies that own the loans, and the local contractors who actually do the work.

***

• Typically, a bank that services or collects the payments on a home loan will send an electronic notice to an independent contractor when a borrower is in default. The contracting company, in turn, will ask a local subcontractor in its network to conduct a "drive-by inspection." Abandoned homes are then supposed to be secured against the elements, vandalism or other types of damage.

***

• The decision about whether to enter a private home is up to a local contractor. That disturbs Pamela Campbell, a circuit court judge for Pinellas and Pasco counties in Florida. Campbell said banks should have to obtain a court order before one of their contractors can enter a home.
  
  "There should be due process," Campbell said. "When people borrow money to buy a house, they don't anticipate that someone may one day drive by their home and make a determination on their own about whether it is vacant or not, and then possibly change their locks and go through their stuff. That is a scary proposition to me."

For more, see Bank Contractors Break Into Occupied Homes, Terrify Residents, Lawsuits Say.