Newark Feds Score Another Foreclosure Rescue Guilty Plea; Suspect Admits Role In Peddling Sale Leaseback Ripoffs To High Equity, No-Cash, Financially Distressed Homeowners

From the Office of the U.S. Attorney (Newark, New Jersey):

• A Middlesex County, N.J., man [] admitted his part in a phony foreclosure rescue scheme that was part of a $4.4 million mortgage fraud, U.S. Attorney Paul J. Fishman announced.
  
  Frederick “Freddie” Grippo, 32, of Old Bridge, N.J., formerly a loan officer at Worldwide Financial Resources and an officer of Vanick Holdings, pleaded guilty before U.S. District Judge Kevin McNulty in Newark federal court to an Information charging him with one count of conspiracy to commit wire fraud.
  
  According to documents filed in this case and statements made in court:
  
  Between January 2008 and February 2010, a coconspirator of Grippo(1) was the president of Morgan Financial Equity Shares and Vanick Holdings, both based in Holmdel, N.J. Morgan Financial was held out to the public as a company that could help homeowners in financial distress who faced foreclosure on their homes through something called the “Equity Share Program.” As described by Morgan Financial and its president, the Equity Share Program involved creating a limited liability company in the name of the homeowner’s house in which the homeowner would supposedly own a 90 percent interest, with the rest to be owned by one or two private investors.
  
  In reality, the so-called investors invested nothing and were instead straw buyers recruited by Grippo or his coconspirator because they had good credit. Grippo and his associates then made out mortgage loan applications in the names of the phony investors for the purchase of the distressed properties.
  
  A homeowner in distress would come to a closing at the Morgan Financial office in Holmdel at which he or she would be given a stack of documents to sign that the homeowner thought would prevent foreclosure, but which actually transferred title to the investor. The new mortgage loan applications filled out in the name of the investor by Grippo or his associates contained materially false information about the loan applicant’s monthly income, his assets and whether the residence to be “bought” would be his primary residence.
  
  Once the new loan application was filled out, it would be submitted to Worldwide Financial Resources for processing, and Grippo, a loan officer at Worldwide, would see to it that the loan was approved. Once the loan was approved and the loan money was wired to the settlement agent for a given transaction, Grippo’s coconspirator would direct the settlement agent to forward a portion of those loan proceeds to bank accounts that the coconspirator controlled.
  
  The scheme succeeded in obtaining $4.4 million in mortgage loans. Properties whose original owners fell victim to the Equity Share Program are located throughout the metropolitan area, including in Rutherford, N.J., Monroe, N.J. and Brooklyn, N.Y.

For the U.S. Attorney press release, see Middlesex County, N.J., Man Admits Mortgage Fraud Scheme.

Go here for the Information filed by the Feds in this case, which describes the racket in detail.

(1) According to a recent story in The Star Ledger (see Middlesex man admits role in fraudulent home-foreclosure rescue scheme), Grippo along with his father, Vito Grippo, were both slammed by the office of the New Jersey Attorney General on state criminal charges for a racket peddling alleged foreclosure  rescue ripoffs:

• The office of state Attorney General Jeffrey Chiesa announced in late September that Grippo and his father, Vito Grippo, 57, were charged in state court with promising to help homeowners facing foreclosure, only to sell the properties to unwitting investors and filing for $4.5 million in fake mortgage applications.
  
  Chiesa’s office also said the scheme was run through Morgan Financial Equity Shares, a company allegedly operated by Vito Grippo. According to Chiesa’s office, the elder Grippo, of Jackson, would persuade struggling homeowners to transfer their deeds temporarily to his business in exchange for financial relief.

(2) 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).

Critical Look At Role Of Negotiability In The Foreclosure Crisis

From a recent issue of The Florida Bar Journal:

• Contemporary negotiable instruments law developed hundreds of years ago, before every important institution of the modern financial world: incorporated banks, business corporations, developed capital markets, global monetary systems, electronic transfers, and even paper currency.1
  
  It is counterintuitive that this ancient law of negotiable instruments would have any relevance to one of the world’s most sophisticated, cutting-edge tools of high finance — the pooling and securitization of mortgage loans. Yet, the courts routinely look to such law to resolve a foreclosure crisis spawned by the collapse of mortgage-backed securitization, a process which is as strained as trying to decide First Amendment issues using cases pre-dating the Constitution.
  
  It is all the more extraordinary that, just as the nation begins to awaken to “robo-signing” and other such pervasive and methodical abuses of the court systems, judges should find themselves slavishly compelled to apply a body of law shaped (and then abandoned) by the very authors of such scandals: the financial institutions.
  
  This article explores the historical underpinnings of negotiability and whether the evidentiary shortcut that negotiability appears to offer as a means of proving a plaintiff’s standing to sue can or should be applied in the context of the foreclosure cases facing the courts today.
  
  Examination of the original purposes of negotiability, as well as recent changes to the Uniform Commercial Code, leads to the conclusion that mere possession of a negotiable instrument (the promissory note) is insufficient to enforce a mortgage. The possessor or “holder” must prove ownership of the instrument — a complete chain of title from the original creditor — to invoke the equitable remedy of foreclosure.

For more, see Negotiating the American Dream: A Critical Look at the Role of Negotiability in the Foreclosure Crisis.

Thanks to Deontos for the heads-up on this article.

Losing the Paper – Mortgage Assignments, Note Transfers and Consumer Protection

From Public Citizen's Consumer Law & Policy Blog:

• CL&B blogger Alan M. White of CUNY has written Losing the Paper – Mortgage Assignments, Note Transfers and Consumer Protection, 24 Loyola Consumer Law Review 468 (2012). Here's the abstract:
  
  In this article, I survey the state of the mortgage loan transfer system, the legal rules that govern it, and the widening gap between those rules and the practices in the secondary mortgage market just prior to the 2008 crisis.
  
  The review includes some empirical assessment of the extent of errors and execution problems; the damage done by “robo-signing;” the Mortgage Electronic Registration System (MERS) and note delivery practices; and the extent to which courts will prevent or reverse foreclosure sales based on those errors and problems.
  
  I then examine why existing legal structures, for both paper-based and electronic transfers, are not working, and the extent to which they have failed, I also identify the key consumer and investor protection values and interests (finality, transparency, fraud protection, and so forth) that must be addressed by the law governing secondary market transfers of home loans.
  
  I conclude by outlining options for reforming the mortgage loan transfer system, including the use of a single document merging the note and mortgage, and a structure for the registration of a single authoritative electronic version of the mortgage/note and of all changes in parties to, and terms of, the transaction.

Source: Alan White on the Mortgage Loan Transfer System.

WV High Court Says Quicken Loan Terms "Unconscionable", Violate State UDAP Statute, But Nixes Mortgage Cancellation & Directs Lower Court To Reconsider Screwed Over Homeowners' $2.8M Damages Award

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

• The West Virginia Supreme Court has agreed with a trial court finding that Quicken Loans, Inc. committed fraud and violated various provisions of the West Virginia Consumer Credit and Protection Act in a mortgage loan with an Ohio County woman, but it sent the case back to the circuit court to adjust the approximately $2.8 million dollar award.

***

• [Lower court] Judge Arthur M. Recht found that Quicken “committed fraud and violated various provisions of the West Virginia Consumer Credit and Protection Act(1)… regarding unconscionability … unfair and deceptive acts … and regarding illegal balloon notes.”
  
  The [lower] court also found that Quicken had violated West Virginia law regarding illegal appraisals and concluded that the “Note and Deed of Trust were unenforceable as a matter of law, awarded restitution of payments made by Plaintiff to Quicken in the amount of $17,476.72 … and enjoined them from attempting to collect any further payments under the loan.”
  
  Recht subsequently awarded Brown attorneys fees and litigation costs of $596,199.89 and punitive damages of $2,168,869.75.

***

• After an analysis of all the evidence presented at trial, the [West Virginia Supreme] Court concluded that, “given the particular facts involved in this case, the terms of the loan described above and the loan product, in and of itself, were unconscionable.”
  
  The Court then moved to the “cancellation of the loan obligation” issue and found that the circuit court had overstepped its bounds when canceling the obligation of Brown to pay back the principal of the loan – “It is Quicken’s contention that the legislature has strictly limited the circumstances under which this remedy may be awarded under the West Virginia Consumer Credit and Protection Act and that those circumstances are absent in the case sub judice. We agree.”
  
  Regarding punitive damages, “Quicken argues that the circuit court deprived it of procedural due process by failing to perform the required analysis of punitive damage pursuant to [Garnes v. Fleming Landfill, Inc]” and the Court again agreed with Quicken, ruling “Because the circuit court failed to conduct a proper analysis under Garnes, such an analysis must be conducted upon remand.”
  
  Quicken next argued that the circuit court should not have included attorneys fees in the calculation of the punitive damages award.
  
  Recht had added the compensatory damages together and then multiplied by three to determine the amount of punitive damages. Quicken argued that the attorneys fees should not have been part of the compensatory damages. If Quicken was right, then the punitive damages award would have been much lower according to Recht’s formulation.
  
  The Court agreed with Recht – “[W]e hold that attorneys fees and costs awarded under West Virginia Code §46A-5-104 (1994) of the West Virginia Consumer Credit and Protection Act shall be included in the compensatory to punitive damages ratio in cases where punitive damages are available.”

For more, see Supreme Court affirms judgment against Quicken Loans.

For the ruling, see Quicken Loans, Inc. v. Brown, No. 11-0190 (WV. November 21, 2012).

(1) The Consumer Credit and Protection Act is West Virginia's version of the state laws that prohibit unfair and deceptive acts and practices in trade and commerce (generically referred to as state UDAP statutes).

For more on UDAP statutes across the U.S., see Consumer Protection In The States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

Defending Foreclosure Actions

From Public Citizen's Consumer Law & Policy Blog:

• Marcia Johnson of Texas Southern and Luckett Anthony Johnson have written Defending Foreclosure Actions, 49 Real Estate Law Journal 516 (2012). Here's the abstract:
  
  With the rising incidences of residential foreclosures, many homeowners are overwhelmed by the foreclosure process and anticipated costs and often opt to vacate the premises without offering any defense.
  
  The American justice system rests on the premise that no person will be deprived of their liberty or property without due process. Procedural due process requires that a person have notice of the charges against them as well as a reasonable opportunity to defend against them.
  
  Reasonable opportunity is circumvented when the defendant is effectively without the means to defend. This is especially offensive to our notions of justice when the defendant has legitimate bases for defense but is effectively denied the opportunity to urge such defenses because of finances.
  
  This article is written to examine the defenses available to homeowners facing foreclosure and to provide a practical approach to defending against foreclosure.

Source: Paper on Defending Foreclosure Actions.

Texas Law Firm Agrees To Stop Trying To Clip West Virginia Residents Eligible For Nat'l Foreclosure Fraud Settlement Cash For Fees To Submit Simple One-Page Claims Form

From the Office of the West Virginia Attorney General:

• Attorney General Darrell McGraw announced [] that Murray LLP, a Texas law firm, agreed to permanently discontinue offering a service to West Virginia foreclosure victims that a lawsuit filed by his office characterized as unscrupulous and deceptive. The agreement with Murray is reflected in a final order recently entered on November 1, 2012 in the Circuit Court of Jefferson County that settles the suit filed against Murray.
  
  The suit alleged that Murray, through its website, www.bringaclaim.com, sought to charge consumers a fee of 20% to assist them in processing a claim for benefits they were already guaranteed to receive under the National Mortgage Settlement (“NMS”) reached earlier this year by the federal government and 49 state attorneys general with the nation’s five largest mortgage loan servicers.
  
  The only requirement to receive the payment, estimated to be $1,500 to $2,000, is completion of a simple one-page form that was mailed directly to all eligible persons. Attorney General McGraw’s suit alleged that Murray attempted to wrongfully profit from this process by leading consumers to believe that its services were necessary to obtain the money when, in fact, the claims process was intended to be simple and free.
  
  In the final order entered by the court, Murray agreed that it would not represent or collect payments from West Virginia consumers in relation to the NMS claims process or any other non- litigation foreclosure services. Murray also agreed to place a notice on its website, www.bringaclaim.com, advising that its services were not available in West Virginia.

For the West Virginia AG press release, see Texas Law Firm, Murray LLP, Agrees to End its Controversial Services to 5,222 West Virginia Families Who Lost Homes Through Wrongful Foreclosures (AG McGraw’s Suit Against Murray’s www.bringaclaim.com Settled).

Go here to view the complaint filed against Murray LLP.

Go here to view the Agreed Final Order.

Crackpots Peddling Sovereign Citizen Scams To Purportedly Halt Foreclosure, Wipe Out Mortgages, Liens, Car Loans Continue Making The Rounds

In Anaheim, California, The Orange County Register reports:

• Faced with foreclosure after falling $19,000 behind on his mortgage, an Anaheim man took matters into his own hands. Sitting at his keyboard, he tapped out an official-looking, one-page document stating that his mortgage didn't exist.
  
  This picture shows the aftermath of a February 2012 incident in which anti-tax activist Joseph Andrew Stack flew a private airplane into the Austin, TX offices of the IRS, killing himself and a federal employee. Stack is believed to have been tied to the sovereign citizen movement.
  
  "I have searched and inquired of your records and found that you have no such record," he wrote. "Therefore, I demand that you remove this recording immediately." The homeowner then took his document to the county and attempted to file it at the Orange County Clerk-Recorder's Office.
  
  Had he succeeded, more than $300,000 in debt would have vanished. His four-bedroom, 2.5-bath condo would be his free and clear. Instead, the county rejected his filing as "unrecordable." His property is in the early stages of the foreclosure process.
  
  Influenced by the "sovereign citizen" movement, the Anaheim homeowner is among a growing number of people filing liens and notices seeking to wipe out mortgages, eliminate car loans, cancel credit card debt and halt foreclosures, according to county and law enforcement officials.
  
  The filings are worthless, officials say. But some sovereign citizen followers charge fees for seminars or foreclosure assistance and the FBI cautions that their approach amounts to foreclosure fraud. Like other loan-modification and foreclosure-rescue scams, these operators make money by promising relief, but fail to deliver, the FBI says.

For more, see Sovereign citizens inspire rise in real estate filings.

See also How to spot sovereign citizen scams.

Appeals Court To Address Arizona Lawmakers' Move To Snatch State's $50M Share From Foreclosure Fraud Settlement For General Purposes; Critics Say Loot Should All Be Used To Help Borrowers, Troubled Homeowners

In Phoenix, Arizona, The Assoociated Press reports:

• An appellate court panel is considering a court case involving Arizona's use of $50 million from a multistate foreclosure settlement to help balance the state budget.
  
  Critics of the Legislature's decision to put $50 million into the general state budget wanted all of the money to be used for programs and services for borrowers and troubled homeowners.
  
  Housing advocates are appealing a Maricopa County Superior Court judge's ruling in favor of the state, and a three-judge panel is scheduled to hear arguments [this week].
  
  The judge said the Legislature decides how to spend the state's money. Housing advocates contend that the attorney general could decide how the money is used.
  
  Some of the settlement money paid the state by lenders is being used for programs and services for borrowers.

Source: Arizona court weighs challenge to use of settlement.

See also, Horne lawyer: Client was entitled to surrender funds.

Eligible NJ 'Sandy' Victims May Qualify For Free Legal Help

In Edison, New Jersey, The Jersey Journal reports:

• An Edison-based legal services firm is providing free legal help for victims of Hurricane Sandy.
  
  Legal Services of New Jersey(1) president Melville D. Miller Jr. said the storm left many residents facing eviction or foreclosure, and others struggling with applying for federal disaster aid.
  
  “Although our resources are badly stretched, Legal Services will find a way to assist Sandy victims,” Miller said in a statement. “It is essential to bring the expertise of our staff to bear on those problems.”
  
  Sandy victims in need of legal assistance can call LSNJ’s new hotline, (888) 222-5765, to determine if they are financially eligible. They can also visit the firm’s website at www.lsnj.org.
  
  “We are here to help,” said Linda Babecki, LSNJ’s chief coordinator of its Sandy response.

Source: Hurricane Sandy victims can get free assistance from Legal Services of New Jersey.

See also Legal Services of NJ offers free advice to hurricane victims.

(1) Legal Services of New Jersey is the coordinating office for the state’s system of Legal Services programs, which provide essential legal aid in civil matters to low-income people in all of the state’s 21 counties.

Ex-LPS Exec Tagged Again, Accused Of Racketeering For Role In Littering Property Recorders' Offices With Bogus Mortgage Docs; Michigan AG Joins Feds, Missouri AG With Criminal Charges As Prosecutorial Piling On Begins

From the Office of the Michigan Attorney General:

• Michigan Attorney General Bill Schuette [] announced he charged Lorraine Brown, former president of mortgage document processor DocX, with racketeering for her alleged role in authorizing the fraudulent signing of mortgage documents filed in Michigan. The felony charge comes as the result of an ongoing Attorney General investigation into questionable mortgage documentation filed with Michigan's Register of Deeds offices during the foreclosure crisis.
  
  "Shortcuts like robo-signing are just one piece of the mortgage foreclosure crisis," said Schuette. "Our investigation remains ongoing, and we will bring to justice every lawbreaker we find."
  
  In April 2011, Schuette launched an investigation after county officials across the state reported that they suspected Assignment of Mortgage documents filed in their offices may have been forged. A "60 Minutes" news broadcast had shown that the name "Linda Green" was signed to thousands of mortgage-related documents nationwide, but with many different variations in handwriting. County officials in Michigan reviewed their files and found similar documents, thus raising questions about the authenticity of the documents filed.
  
  As part of his investigation, Schuette reviewed documents filed in Michigan and prepared by DocX, a document processing company located in Georgia. DocX processed mortgage assignments and lien releases for residential lenders and servicers nationwide. Schuette's investigation revealed that former DocX president Lorraine Brown, 51, of Alpharetta, Georgia, allegedly established and orchestrated a widespread scheme of "robo-signing," a practice in which employees were directed to fraudulently sign another authorized person's name on mortgage documents in order to execute these documents as quickly as possible.
  
  Internally, DocX identified this practice as "facsimile signing" or "surrogate signing." Schuette alleges that from 2006 through 2009, these improperly executed documents were created and recorded at Brown's direction. Schuette's investigation revealed that more than 1,000 unauthorized and improperly executed documents were filed with county registers of deeds throughout Michigan.
  
  Lorraine Brown has been charged with one count of Conducting Criminal Enterprises (Racketeering), a 20-year felony, in Kent County's 61st District Court. Arrangements are being made for Brown to surrender to Michigan authorities, and arraignment will be scheduled at a later date.
  
  In 2010, DocX suspended operations, halting its work as a mortgage document processor. Schuette noted that while the criminal charges against Brown address her role in the scheme, his office's overall investigation into robo-signing remains ongoing and is not yet complete.

For the Michigan AG press release, see Schuette Files Criminal Charges Against Former Mortgage Processor President for Role in Fraudulent Robo-Signing.

For an earlier post on the Feds', Missouri AG charges against Brown, see Feds, Missouri AG Announce Guilty Pleas In Separate Criminal Prosecutions Of Ex-LPS Exec For Her Role In Flooding Property Recorders' Offices Throughout U.S. With Crappy Mortgage-Related Paperwork.

Real Estate Broker Pinched For Allegedly Ripping Off Clients Of $600K+; Two Victims: He Pushed Us Into Foreclosure Over Unkept Promise To Make Our House Payments From Investment Proceeds

In Harbor City, California, KTLA-TV Channel 5 reports:

• A real estate broker has been charged with three counts of grand theft in connection with a scheme that officials say defrauded clients more than $600,000.
  
  According to Lomita Sheriff's officials, 57-year-old Mario Hernandez used his company, OPM Capital Group, Inc. as a front for a tax preparation service that he did not have proper certification for.
  
  Between March and December of 2007, Hernandez allegedly convinced three clients to invest funds from their 401K accounts into his company and promised they would receive returns as much as 20 percent. Hernandez also told clients that he was a Certified Public Accountant and a former employee of the Internal Revenue Service.
  
  Investigators found that Hernandez instead spent his clients' money on gifts and loans to family members, mortgage payments on several properties, payments to previous investors and on personal business expenses.
  
  He also allegedly told two of his clients that he would make payments on their mortgage accounts from their investment proceeds, but when his funds were depleted in 2008, their homes went into foreclosure.
  
  The investigation also revealed that the acronym in his company name stood for "Other People's Money."
  
  Charges were filed against Hernandez in October and he was arrested at his Harbor City home in early November. He is scheduled to appear in court on Dec. 18. Anyone with information is asked to contact detectives at (562) 233-8204.

Source: Sheriff's: Real Estate Broker Stole $600K from Clients.

Employee Blows Whistle On Aussie Bankster's Alleged Effort To Squeeze Slow-Paying Borrowers With Foreclosure Threats

From the land Down Under, The Australian reports:

• ANZ has denied illegally harassing customers who are late on their mortgage payments after an internal whistleblower referred its collection practices to the corporate watchdog for investigation.
  
  The whistleblower, who works in the bank's collections department, has accused ANZ of engaging in unconscionable conduct and misrepresentation in pursuing late mortgage payments, in contravention of corporate regulations and its own guidelines.
  
  The staffer alleges ANZ is telling customers who are behind in their payments by as little as 20 days that it has engaged lawyers to begin foreclosure proceedings, when the bank's own policy is to wait at least 60 days.
  
  "It's ridiculous telling a customer that you're going to lose your house when you're only behind by a month or less -- you have to be at least two or three months behind for the solicitor to accept the account," the whistleblower said during an interview on Seven News.
  
  The Australian Securities & Investments Commission requires lenders to give borrowers 30 days to make payments after being served with a default notice, and to inform them about their rights and options to apply for relief on the grounds of financial hardship.
  
  The whistleblower said ANZ's own guidelines allowed customers in arrears to be given extra time to make repayments, but staff were being instructed to "be firm".
  
  "There have been instances where a staff member has given a customer what they're entitled to, then management has turned around and said 'why are you giving them three months instead of one month'," he said.
  
  Choice spokesman Matt Levey said ANZ's conduct "would seem to verge on bullying".
  
  ANZ spokesman Stephen Ries said the bank rejected any "suggestion of systemic issues with inappropriate conduct in its collections area". "We take our compliance obligations very seriously and continually monitor and improve existing policies and processes."

Source: ANZ denies harassing late mortgage payers (requires subscription; if no subscription, try here, then click the appropriate link for the story).

Insurers To 'Sandy' Victims: 'It Was A Flood, Not A Hurricane!' Damage-Claiming Homeowners Without Flood Policies Told To Take A Hike!

In the Rockaways section of Queens, the New York Daily News reports:

• Thousands of families still struggling in the aftermath of Sandy are learning that some insurance companies don’t seem to think the storm was a hurricane.
  
  Alex Savoie’s broker told her that her family’s Rockaways home was covered for hurricanes, so when Sandy trashed the place, she assumed she’d be okay.
  
  To Savoie’s surprise, the insurer said she wasn’t covered because the damage was caused by a flood — not a hurricane. Because she doesn’t have flood insurance, she’s out of luck.
  
  “They told me I’m at the end of the line,” Savoie, 41, said this week, standing inside the gutted remains of her first floor on Shore Front Parkway in the Rockaways. “The bottom line is very simple. I had hurricane insurance. It should cover a hurricane.”
  
  Homeowners in low-lying areas across the city have found themselves in the same situation. They’re turning to the feds in droves after their insurers won’t pay up.
  
  About 220,000 homeowners in New York City and Long Island have registered for emergency housing cash from the Federal Emergency Management Agency. FEMA has approved $557 million for homeowners. Some of the money is for temporary rent payments, but much of it is for emergency home repairs not covered by insurance. The insurance gap is an emerging issue along Savoie’s hard-hit stretch of Shore Front Parkway.
  
  The Oct. 29 Sandy surge busted up the boardwalk across the street, breaking it into thousands of wooden projectiles headed straight for their homes. A huge chunk of boardwalk slammed into Savoie’s three-story home. One long plank burst through her wall like a spear into a first-floor bedroom. The resulting hole allowed the Atlantic to bash its way in, tearing out walls and dragging in tons of beach sand.
  
  When Savoie and her partner, Peggyann Dubra, and their two small daughters returned after evacuating, they found the wall ripped apart and the house open to the elements.
  
  Savoie’s homeowners policy was typical, with coverage for “wind damage” and “falling objects” but not flood damage. She figured her home was covered for a huge piece of boardwalk crashing into her house.
  
  Before Hurricane Irene last year, she called her broker and was told that she was covered. But her Allstate adjuster showed up post-Sandy to say the plank that crashed through the wall was pushed by water, therefore the damage was, technically, from a flood. Allstate officials didn’t respond to requests for comment.

For the story, see Some insurance companies to Sandy victims: You are covered for hurricanes, not floods (To Alex Savoie’s surprise, the insurer said she wasn’t covered because the damage was caused by a flood — not a hurricane. Because she doesn’t have flood insurance, she’s out of luck).

For a similar story in neighboring Brooklyn on insurance companies stiffing their recently-victimized policyholders, see Storm-savaged Brooklynites fighting with insurers and the feds; free legal clinics offer them help (Thousands in need for legal help, official says):

• An an Allstate adjuster said [homeowner Evelyn Droz'] water-logged lower floor apartment is a basement and isn’t covered — even though Droz’ policy specifies the two family-house has no basement.

State High Court Justice, Hubby Accused Of Doing Illegal 'Short Sale Shuffle' To Hide Title To Orlando-Area Abode While Unloading Underwater Michigan Mansion; Gear Up To Fight Feds' 'Forfeiture-Snatch' Move

In Detroit, Michigan, the Detroit Free Press reports:

• Michigan Supreme Court Justice Diane Hathaway, who is facing political pressure to resign amid a real estate scandal, isn't going down without a fight, her lawyer said.
  
  Hathaway, who is accused of hiding assets to justify a short sale of a $1.5-million Grosse Pointe Park home, is preparing to fight the forfeiture of a Florida home that federal prosecutors say was hidden from a bank to justify the short sale.
  
  "Justice Hathaway and her husband will certainly fight to keep their home, as would anyone else if the government tried to take their home," Hathaway's lawyer Stephen Fishman said Wednesday.
  
  Fishman's comments came a day after the U.S. Attorney's Office filed a civil complaint that says Hathaway and her husband, attorney Michael Kingsley, transferred a home in Windermere, Fla. to Kingsley's daughter before seeking a short sale of a home in Michigan. That short sale allowed Kingsley and Hathaway to erase nearly $600,000 in mortgage debt on the $1.5-million house in Grosse Pointe Park, which sold for $850,000, public records show.
  
  Hiding assets to justify a short sale can be considered illegal because it is done to defraud the bank or financial institution that holds the mortgage.
  
  Hathaway and Kingsley have not been charged [criminally]. The U.S. Attorney's Office declined to comment on whether she could be charged down the road, but noted that the forfeiture complaint is a civil matter, and that such complaints don't necessarily precede criminal charges.

***

• According to the civil complaint filed in U.S. District Court, before Hathaway and Kingsley submitted a hardship letter to the bank in support of their request for a short sale, the couple "systematically and fraudulently transferred property and hid assets in order to support their claim to ING (Bank) that they did not have the financial resources to pay the mortgage on the Michigan property."
  
  The complaint says Hathaway and Kingsley quit-claimed the Florida property to Kingsley's daughter. The daughter then quit-claimed the property back to them after the short sale.
  
  The hardship letter was written Dec. 10, 2010. The house sold almost a year later.

For more, see State Supreme Court Justice Diane Hathaway fights to keep home amid scandal; denies rumors of resigning.

Controversy Over County's Refusal To Allow Montana Couple To Sell Home Due To Interpretation Of Montana's Mortgage Parcel Exemption Law Reaches State High Court

In Missoula County, Montana, the Missoulian reports:

• Say “mortgage exemption” and most eyes turn glassy. But the interpretation and application of the state statute are bubbling topics in Missoula County right now.
  
  So much so, in fact, that the county has taken a couple of its residents to the Montana Supreme Court in an attempt to overturn a ruling that District Judge Ed McLean issued late last year.
  
  Final briefs were filed and the case went to the high court on Nov. 2. There’s no sure way to predict, but a decision could be rendered by year’s end. Meanwhile, the Missoula Organization of Realtors held their first “tele-town hall” last week on the topic. More than 2,000 landowners were invited to dial in to learn if and how the case could affect them.
  
  “We actually had so many in the feed we couldn’t take them all,” MOR spokesman Austin James said.
  
  At issue is an interpretation of the transfer of mortgage exemptions – pieces of land broken off from larger properties for financing purposes.
  
  They’re perfectly legal, but they aren’t parcels that can be sold unless the bank or other lending institution forecloses on them.
  
  Because of some hazy language in the state statute, for years Missoula County and others in Montana recorded mortgage exemptions as legal parcels. Many still do, though an act by the 2003 Legislature removed all doubt of the intent.
  
  “It’s very, very clear under the law that a mortgage exemption does not create a parcel unless or until there’s foreclosure on it,” Missoula County deputy civil attorney James McCubbin said. “So the question is whether that was the case prior to 2003 when the statute was changed to make it abundantly clear.”
  
  The county says yes, that the legislative action nearly 10 years ago simply clarified the language of the existing statute.
  
  Rob Braach says no. The Missoula certified public accountant maintains the law was rewritten and that he and his wife Dawn should be allowed to sell the house they built on a mortgage parcel they bought in 2002, one that was approved by the county.
  
  When the Braachs attempted to sell their house off Reserve Street last year, the title company balked and sought advice from the county attorney’s office. McCubbin and his superior, chief civil attorney Marnie McClain, advised Clerk and Recorder Vickie Zeier not to record the deed since it wasn’t a legal parcel.
  
  “What that means,” said Ruth Link, chief executive officer of the Missoula Organization of Realtors, “is if somebody wanted to sell their property, despite the fact that they’ve owned it for years, the property technically never existed, even though it was created completely legally back before 2003.”
  
  James, MOR’s public affairs director, said he’s combed through the Certificate of Surveys and found some 390 properties in Missoula County that were created before 2003 through mortgage parcel exemptions. He said that only a handful of owners have tried to sell such parcels.
  
  “The first one to pop up and make a scene was Mr. Braach,” he said.
  
  When Zeier refused to record their deed, the Braachs enlisted Colleen Dowdall, a Missoula land-use attorney who was a deputy civil attorney for Missoula County from 1993-2006, to file suit.
  
  “Because of this unusual retroactive interpretation, I suddenly was unable to sell my house, even though I had followed the law that was in effect at that time,” Braach told county commissioners in June. “We were forced, at considerable expense, to bring suit against the Missoula County Clerk and Recorder.”
  
  They were validated in district court by McLean, who ordered Zeier to record their parcel and also awarded the Braachs attorney fees of more than $27,000. The county was granted a stay of both actions pending the outcome of its appeal.
  
  McCubbin said there’s an easier way to do these things. “What we generally do is just agree with people to do a court-ordered split to recognize the equity of the situation for the purchaser,” he said. "I suggested to the title company we just go to court and get it done in a couple of weeks and be done with it.”
  
  The deputy county attorney said he doesn’t know why the Braachs and Dowdall didn’t choose that option, but it’s one his office will continue to offer for others who find themselves in the same situation.
  
  But according to James, a court-ordered subdivision doesn’t cut it for Missoula real estate agents or their clients. “The fact is, from the minute you sit down with the county attorney regarding your largest investment, you’ll need private counsel,” he said. “And the minute you speak to private counsel, you’ll have paid more than you ever should have been expected to in order to purchase that land.”
  
  The county’s decision to appeal to the Supreme Court was based on a couple of factors. “We didn’t feel that the judge’s order gave us a clear direction for future transfers,” Zeier said. Judge Jeffrey Langton ruled the other way in a similar case in Ravalli County a few years ago, McCubbin said.
  
  “Our feeling is that Judge Langton gave a very thorough legal analysis and was correct, and that Judge McLean did not give a correct legal analysis. It’s confusing and it’s unclear how it would implicate other properties. We felt we needed to appeal to make sure we had a clear understanding of the law.”
  
  By filing for a writ of mandamus in district court, the Braachs in essence claimed Missoula County was violating a clear legal duty. “That pretty much gives us no choice but to defend it,” McCubbin said. "We can’t very well say: Oh yeah, we violated a clear legal duty.”
  
  Link said that by appealing the Braach case to the state court level, the county is opening a can of worms – much as it did last year by pressing for Attorney General Steve Bullock’s take on Subdivision for Lease or Rent laws. Bullock’s sweeping opinion disappointed developers and Realtors.
  
  “We’re talking about one lawsuit, but when you think of Missoula County you’re talking hundreds of parcels,” Link said. “I can’t even imagine statewide how many parcels that could affect, and there’s just no reason for it. What is accomplished by this interpretation? That’s our question.”
  
  James said the county’s actions change the way landowners, investors and potential investors look at land in Missoula County. “When a buyer purchases a piece of property,” he said, “they do not buy it with the intent that their rights as citizens will change by a simple interpretation by whoever’s at the county attorney’s office.”

Source: Transfer of mortgage exemptions in Montana Supreme Court’s hands.

State Bar Shuts Down Attorney Who Allegedly Rented Law License To Convicted Felon To Run Bankruptcy-Related Foreclosure Rescue Ripoff

The State Bar of California recently announced:

• The State Bar of California announced [] it has shut down the operations of an Ontario lawyer who allowed his name and law license to be used in a scheme to defraud distressed homeowners.
  
  The bar obtained a court order [...] to assume jurisdiction over the law practice of Gary David Tracy, 50, (bar # 167212). His firm, known as Realty Attorney Group APC and Realty Group & Consulting LLC, gave false hope to dozens of clients whose homes were already in foreclosure.
  
  Many of the clients’ homes had already been sold. In return for thousands of dollars in fees, the firm filed shell petitions in U.S. Bankruptcy Court that only delayed the inevitable loss of the clients’ homes.

***

• Tracy formed an illegal partnership with a convicted felon and abdicated responsibility and control of his law practice to non-attorneys, Deputy Trial Counsels Mia R. Ellis and Lara Bairamian alleged in their petition to assume jurisdiction of the practice. “The clients in these situations are desperate and in financial turmoil,” the petition said. “They are vulnerable and seeking a lifeline from a legal professional that can save their home.”
  
  In July, the U.S. Bankruptcy Court for the Central District in Santa Ana sanctioned Tracy $10,000 after it found his firm was responsible for 80 bankruptcy filings, most of which did not identify the firm as the preparer of the petition.
  
  The State Bar has identified at least nine clients who paid money to the firm and were abandoned. One woman paid the firm $12,400, including an $800 payment deducted from her account after she lost her home and was evicted. Many of the clients had never met Tracy.
  
  [The] order by San Bernardino County Superior Court Judge Brian S. McCarville authorized the bar to secure the firm’s files, freeze its bank accounts and notify its clients to seek new counsel. Clients who have additional questions are advised to call the State Bar at 213-765-1778.

For the State Bar press release, see State Bar Shuts Down Law Firm Involved In Bankruptcy Fraud Scheme.

Pair Busted For Allegedly Running Loan Modification Racket Under Guise Of Non-Profit Group; Pocketed Homeowner Cash They Promised Would Be Applied To Mortgage Payments: Cops

In St. Tammany Parish, Louisiana, The Times-Picayune reports:

• Two women who worked for a Mandeville nonprofit agency that was supposed to help homeowners in danger of foreclosure have been arrested and charged with theft. St. Tammany Sheriff's Office officials said the two women were pocketing money intended for mortgage payments.
  
  Shawn Singleton, 52, and Angela Lyle, 44, were booked last week into the St. Tammany Parish jail and charged with theft of more than $1,500. They each have been released on $10,000 bonds.
  
  Singleton, of Mandeville, and Lyle, of Biloxi, worked for Life Impact Center, a nonprofit organization affiliated with Life Church in Mandeville, Sheriff's Office Capt. George Bonnett said. The organization was billed as working with mortgage companies to restructure home loans and help homeowners avoid foreclosure, Bonnett said.
  
  According to GuideStar, a nonprofit organization that gathers and publicizes information about other nonprofit organizations, Life Impact Center was founded in 2010. It is listed as a financial counseling and money management organization.
  
  Bonnett said the Sheriff's Office received its first complaint about Life Impact Center in October 2011. Homeowners who were doing business with the organization said they had been making payments -- categorized as "good faith payments" -- to Life Impact Center, and believed the organization was in turn making payments to their mortgage company.
  
  Homeowners told Sheriff's Office investigators that their homes were foreclosed on even after they made those payments. Bonnett said when the mortgage companies were contacted, they said they never received money from Life Impact Center.
  
  Bonnet said the Sheriff's Office found that in the nearly 20 months the organization was in operation, it received $150,000 from clients. Of that money, 90 percent was spent on salaries for Singleton and Lyle, Bonnett said.
  
  The Sheriff's Office so far has received more than a dozen complaints about the organization, and Bonnett said the Sheriff's Office investigation into the organization continues. Singleton and Lyle are the only two people who have been identified as participating in this scheme, he said.
  
  If convicted of the theft charges, Singleton and Lyle each could face up to 10 years in prison.

Source: Mandeville nonprofit employees charged with stealing money intended for mortgage payments.

Jury Slams Delinquent Borrower With Arson Conviction For Torching His Own Home While In Foreclosure; Defense: Wrongful Verdict Based On Circumstantial Evidence

In Little Falls, Minnesota, WJON Radio 1240 AM reports:

• A Hillman man whose home was facing foreclosure has been convicted of setting the house on fire in 2010 for the insurance money.
  
  Jurors deliberated for four hours this week before finding 53-year-old Randy Donald Reed guilty of first-degree arson. He’s scheduled to be sentenced Jan. 9.
  
  Prosecutors say a fire marshal concluded that the cause of the fire was a butane torch. The investigator told authorities it appeared the torch was used to ignite gasoline at four different spots in the basement.
  
  Reed told investigators he had no idea who would have wanted to commit the arson. He also acknowledged that he and the property’s co-owner were behind on their mortgage.
  
  Defense attorney Mark Kelly of St. Paul said Saturday his client was wrongfully convicted based on circumstantial evidence.

Source: Hillman Man Convicted of Setting Own House on Fire.

Foreclosed Homeowner Torches Home, Then Kills Himself While Being Served Eviction Papers

In Warwick, Rhode Island, WLNE-TV Channel 6 reports:

• A Warwick man committed suicide [] as he was being served with eviction papers. At first, Warwick firefighters were called to 88 Greylawn Avenue for a smoky house fire. As they were responding, police say they received calls about shots fired from the same address.
  
  A Constable had been serving foreclosure papers according to Warwick Police Capt. Joseph Coffey. The home was also for sale and under foreclosure according to Capt. Coffey.
  
  When firefighters reached the victim in the home, he was dead from a self-inflicted gunshot wound. As there was a concern about ammunition and suspicious packages in the home, the State Fire Marshal and the bomb squad were called in.
  
  A small remote control robot was used to check if any of the packages were explosives, and they were successfully neutralized and found not to be dangerous.
  
  Neighbor Diane Roberts said it was sad that foreclosure proceedings resulted in the man taking his own life.

Source: Warwick Man Faced with Eviction, Commits Suicide.

Prosecutor: Financially Strapped Homeowner Attempts Foreclosure Dodge By Torching Home In Effort To Score $400K In Insurance Cash

In West Pottsgrove, Pennsylvania, The Mercury reports:

• A West Pottsgrove man, who authorities claim fell behind on mortgage payments, must answer to charges in Montgomery County Court that he allegedly intentionally set fire to his Elm Street home with the hope of collecting $400,000 in insurance proceeds.
  
  Robert Francis Granger, 36, who owned the fire-ravaged home at 426 Elm St., waived his preliminary hearing [...] on charges of arson endangering persons and property, failure to control or report dangerous fire, conspiracy to commit arson and insurance fraud in connection with the July 2011 blaze that gutted the home. Granger, [...] is being held in the county jail in lieu of $50,000 cash bail.
  
  “He set the house on fire. He was way behind on his bills. He was way behind on his mortgage. He figured the house was worth more burnt than it was standing. He didn’t want the bank to foreclose,” alleged Assistant District Attorney John N. Gradel. “So he torched the place.”
  
  Granger’s fiancée, Heather J. Walters, who is charged as a conspirator in the crime, also waived her preliminary hearing. Walters, [...] was released on own recognizance bail to await further court action. Another alleged conspirator, Randy L. Eagle, 38, [...] previously waived his preliminary hearing on conspiracy to commit arson and related offenses in connection with the incident.

Source: West Pottsgrove man accused of torching home for insurance money.

Another Tenant To Get Pre-Xmas Boot As Foreclosed Landlord Pocketed Rent While Stiffing Bank Out Of House Payments

In St. Augustine, Florida, First Coast News reports:

• Lisa Easter loved living in her small St. Augustine rental. She rented the house for two years. But like thousands of other renters across the nation, even though she's paying her rent, she's getting kicked out. "Here's the notice of termination saying I have to be out by the first," she said.
  
  By law, as the tenant of the home, the bank sent Easter a copy of the papers, showing the owner of the property was facing foreclosure. But she opted to stay in hopes of a new buyer letting her remain as a renter after a conversation she said she had with her landlord.
  
  "He told me he was going to put the house up for sale, do a short sale, but he was only going to get an investor to buy it. That way, I could stay here," she said. So, the short sale happened and Easter was surprised by the next notice she received. Before the house went to sale, the bank kicked her out. "So I have like 15 days to find a new place to live," she said.
  
  "They really have very few rights," said real estate attorney Daniel Copeland. This is a growing problem for renters, Copeland said. The tenant pays the rent, but the landlord does not pay the mortgage.

For the story, see Renters, beware: You could be kicked out due to owner's foreclosure.

Diabetic Homeowner, Disabled Son Unable To Dodge Surprise Pre-Thanksgiving Foreclosure Boot Despite Having Received Dec. 31 Loan Mod Review Deadline In Writing From Bankster

In Miami, Florida, WPLG-TV Channel 10 reports:

• A Northwest Miami-Dade woman evicted from her foreclosed home spent Monday night sleeping on the driveway along with all the belongings from her house. "I can't believe this. I'm in complete total shock," said Santa Rosa Armas.
  
  Armas, 53, said police knocked on her door at 8565 NW 5th Ter. and evicted her, her disabled son, her four cats, and removed her things from the house she had called home for nearly a decade. "Honestly, I don't feel like I'm living in Miami or the USA. I feel like I'm in Germany with Hitler people," she said.
  
  Armas showed Local 10's Baron James documents that list a deadline date of December 31, 2012, to finalize the latest in a series of mortgage modification reviews so that she could try to keep her home. She stopped making payments back in 2007.
  
  Many of her neighbors were shocked by the way the eviction happened. Some neighbors stopped by to help Armas, who is a diabetic with a heart condition on disability, sort through her things to trash some and hopefully store the rest.
  
  "It's three days before Thanksgiving. It's just very difficult to watch this," said Carmen Corzo. "Families sometime have to wait on a list for years before they get assistance, and to see someone, especially an elderly woman, on the street and all her belongings, it really breaks my heart."
  
  "I think it's really hard. I would be willing to help her store some of her stuff," added Jeanette Suarez. "I feel total frustrated. I want someone to help me, please," Armas said. Her disabled son spent the night with his father, Armas' ex-husband.

Source: Woman's furniture tossed out into street (Santa Rosa Armas forced to sleep in her driveway).