Thursday, January 17, 2013

Screwed Over S. Florida Houseboat Owner Scores Big Win In U.S. High Court; Supremes Say Contraption Used As Floating Home Was A Non-Vessel Not Subject To Federal Maritime Law; City Wrong In Seizing, Auctioning, Destroying It

In Riviera Beach, Florida, The Palm Beach Post reports:
  • Fane Lozman, a Marine turned multi-millionaire inventor turned thorn in the side of Riviera Beach officials, has won his long-running legal battle against the city over his floating home.

    In a 7-2 decision, the U.S. Supreme Court on Tuesday declared that Lozman’s 60-foot, two-story home that was once anchored at the Riviera Beach Marina was not a vessel. As Lozman has argued for years, the court ruled that the city shouldn’t have been able to seize it using centuries-old maritime law.

    The decision sets the stage for Lozman to return to court to seek damages against Riviera Beach for destroying his home, which he valued at more than $50,000. He said he will also ask the city to reimburse him for more than $300,000 in legal fees he spent since the fight began nearly seven years ago.

    “It’s an amazing day in my life,” said Lozman, who represented himself in the early stages of the legal battle. “Today is a day to celebrate that the legal process works. It shows if you’re a stubborn enough son of a b—— you can win. You have no idea what’s going through my mind. Just to actually get a reversal — it kind of blows your mind.”

    City officials were understandably less effusive about the decision. “We are disappointed with the Supreme Court’s ruling,” City Attorney Pamala Ryan said in a statement. “However, we respect and accept the decision, and we will abide by legal implications that flow from it.”

    Maritime lawyers, who have been watching the case closely, said the ramifications are potentially far-reaching. In deciding the case, the high court struck down lower court rulings(1) that turned on a simple concept that if it floats, it’s a boat.

    Writing for the majority, Justice Stephen Breyer said such an interpretation is overly broad. “Not every floating structure is a ‘vessel,’ ” Breyer wrote.

    To state the obvious, a wooden washtub, a plastic dishpan, a swimming platform on pontoons, a large fishing net, a door taken off its hinges or Pinocchio (when inside the whale) are not ‘vessels,’ even if they are ‘artificial contrivances’ capable of floating.”

    Instead, he wrote, the key is whether a “reasonable observer, looking to the home’s physical characteristics and activities, would consider it designed to a practical degree for carrying people or things over water.” Because Lozman’s strange craft had no engine, no steering ability and could neither generate nor store electricity it clearly was not designed as a means to transport people or cargo, he said.

    The test as outlined by Breyer, which came with a sharply worded dissent written by Justice Sonia Sotomayor and joined by Justice Anthony Kennedy, is likely to spur additional litigation, predicted Boca Raton attorney Michael McLeod, chairman of the Admiralty Law Committee for the Florida Bar.

    By midday, his email box was filling up with messages from attorneys across the nation who said they would be advising marinas, marine bankers and others they represent to review their operations in light of the ruling. It could arguably be a factor in the types of vessels allowed to dock at marinas and the types of non-traditional craft that are approved for maritime loans. It could also affect how creditors can recover unpaid bills.

    The distinction — what is and isn’t a vessel — is important because of laws that have developed since the nation’s founding to deal with the unique characteristics of boats, namely that they can be easily moved, leaving workers stranded or creditors unpaid. As a result, people have been given the power to “arrest” boats to recover debts. In some cases, that option may no longer be available.

    To illustrate the import of the case, dozens of groups, such as the National Marine Bankers Association, the American Gaming Association, the United Brotherhood of Carpenters and Joiners of America, and Floating Home Associations in Seattle and Sausalito, Calif., filed briefs.

    Even the U.S. Solicitor General chimed in. He worried that if the court found Lozman’s home was a boat, the U.S. Department of Homeland Security, the U.S. Coast Guard and myriad other federal agencies could be forced to change policies and possibly increase manpower to regulate and inspect floating structures that were never intended for navigation.

    Breyer acknowledged that the new test of what constitutes a boat isn’t exact. Admitting it is “neither perfectly precise nor always determinative, it is workable and consistent and should offer guidance in a significant number of borderline cases,” Breyer wrote.

    Sotomayor disagreed. In a 12-page dissent, she countered that the court muddied the waters. “In its haste to christen Lozman’s craft a non-vessel (the court) delivers an analysis that will confuse the lower courts and upset our longstanding admiralty precedent,” she wrote.

    Like McLeod, Lozman said the case’s legal questions are complex. His own legal path isn’t clear-cut. But, he said, he is prepared to do whatever he can to recover the money he lost simply because, he claims, the city wanted to silence him.

    The high court noted that lower courts forced Riviera Beach to post a $25,000 bond which Lozman could seize if he ultimately proved the city wrong. Ryan made no mention of the bond in her prepared statement Tuesday. Instead, she said, the city would reimburse Lozman the $300 he spent filing the case with the nation’s high court and pick up some of his printing costs. City spokesman William Jiles said city officials aren’t certain about the fate of the bond.

    Lozman said he’s not surprised the city isn’t ready to give up the fight.

    Vindictiveness has fueled the battle from the start, he said. Upset by his vociferous opposition to their failed plan to transform the poverty-wracked city into an upscale yachting community, Riviera Beach officials just wanted to get rid of him, he said. The easiest way was to use maritime law to tow his home out of the city.

    “To punish someone just because they’re a city activist, that’s not what America is all about,” he said. “Where does the city get off saying we’re just going to squash this guy?”

Ex-State AG's 11th Hour 'Sellout' Of Utah Homeowners In Foreclosure On Eve Of Joining Law Firm Representing BofA Not Binding On Successor In Future Cases

In Salt Lake City, Utah, The Salt Lake Tribune reports:
  • Despite former Attorney General Mark Shurtleff’s decision to personally sign onto a settlement in a foreclosure lawsuit that Bank of America seemed to be losing, his successor will continue to pursue other suits pending against the bank.

    It isn’t clear what new Attorney General John Swallow thinks about Shurtleff’s reversal of the state’s position in a suit brought by Holladay homeowners Timothy and Jennifer Bell that ReconTrust- — BofA’s foreclosure arm — illegally began foreclosure proceedings against their property when their $3 million loan went into default.

    But Shurtleff’s change of mind in the last weeks of his term disheartened lawyers in his office, which previously had intervened in the case as a plaintiff, arguing that ReconTrust had violated state law by carrying out foreclosures on its own instead of going through a Utah attorney or title company.

    "Mr. Shurtleff made the decision that he did. Not everyone in the office would agree to that, and people would come to different conclusions about whether or not the state should dismiss the case," assistant attorney general Thom Roberts said after a hearing Tuesday before U.S. District Judge Bruce Jenkins to decide whether the settlement between BofA and the Bells should be approved.

    Shurtleff’s about-face came some time between Dec. 17, when the Bells agreed to settle without support from the Attorney General’s office, and 11 days later when a BofA lawyer filed documents carrying Shurtleff’s signature to dismiss the case.

    Shurtleff’s term ended Jan. 7, and he will go to work for a law firm that regularly represents BofA. Shurtleff has said his new job had nothing to do with his decision, adding that he changed his mind because it made no sense for Utah to continue to be involved at taxpayer expense in a case that the Bells had settled.
For more, see Shurtleff’s BofA about-face won’t bind new A.G. (State intends to fight other foreclosure suits involving bank).

U.S. Army Dentist's Suit Accuses BofA Of Violating Sevicemember's Rights When Foreclosing On Her Home While On Active Duty

In Los Angeles, California, KNBC-TV Channel 4 reports:
  • For two years, U.S. Army reservist Diana Zschaschel has been fighting foreclosure against the West Los Angeles condo she shared with her husband, citing the Servicemembers Civil Relief Act, which protects active military personnel from financial hardship while on duty.

    Zschaschel and husband Paul Garcia have filed a lawsuit against Bank of America, which claims was exempt from abiding by the Servicemembers Civil Relief Act because Zschaschel wasn’t eligible for the protection at the time.
***
  • The Servicemembers Civil Relief Act protects active military personnel from financial hardship while on duty and specifically denies banks the ability to foreclose on a property during that time.

    Zschaschel said she's willing "to embarrass myself and expose my personal situation to help other people going through the same thing. Because it sucks."

    In a statement to NBC4, Bank of America said it checked Zschaschel’s status with the Department of Defense. Because she was in her two-week training, the bank said, the U.S. Army dentist was not considered active military and therefore she did not qualify for the benefits.

    An NBC4 investigation into the code found that "active duty" does include training, a point now under scrutiny in the lawsuit filed by Zschaschel against the bank.
For more, see Citing Federal Protection, Army Dentist Fights Foreclosure (U.S. Army reservist Diana Zschaschel has filed suit against Bank of America, which claims she was not eligible for federal protection while a foreclosure went through).

Wednesday, January 16, 2013

Now-Scrapped Independent Foreclosure Review Doomed From The Start: Insiders

The Huffungton Post reports:
  • Last January, dozens of independent contractors showed up for their first day of work at a large, single-story Bank of America building in Tampa to right the wrongs of a foreclosure crisis that many had witnessed firsthand. Or so they thought.

    They were lawyers, paralegals and other mortgage industry veterans. Along with thousands of other contractors working at banks and auditing firms like Deloitte and PriceWaterhouseCoopers, the Tampa crew was to comb through the mortgages of people whose homes were in foreclosure at the height of that crisis, in 2009 and 2010. They were looking for lost paperwork, overcharges, botched loan modifications -- evidence of the kinds of errors and misconduct widely alleged by foreclosed borrowers.

    It was called the Independent Foreclosure Review, and it was one of the most ambitious and costly auditing projects in U.S. history.

    It was also, some of the contractors soon came to believe, a fiasco in the making. At Bank of America, contract employees were to answer more than 2,000 questions written by Promontory Financial, the consulting firm the bank hired to audit its mortgage loan files. Those questions, the contractors said, were confusing and open to interpretation. Training was spotty and mistakes were frequent, they said. Sometimes, when they noted bank-caused mistakes, they were told by Bank of America managers not to believe their own eyes.

    That last serious irregularity, which has not been previously reported, was described by three of the five contract employees who spoke to The Huffington Post. All asked that their names not be used for fear of not getting future work in the industry.

    "We knew what we were looking at," said one employee. "But we were told under threat of losing our jobs to not report what we saw."

More On The Federal Government Sellout Of Homeowners Screwed Over In Banksters' Foreclosure Fraud Scandal

Op-Ed Columnist Joe Nocera writes in The New York Times:
  • It’s been five days since Jessica Silver-Greenberg’s article on the latest bank settlement was posted on The New York Times’s Web site. I’m still shaking my head. Her “story behind the story” of the $8.5 billion settlement between federal bank regulators and 10 banks over their foreclosure misdeeds illustrates just about everything that is wrong with the way the government has handled the Great Foreclosure Crisis.

    Shall we count the ways?

    1. It is more about public relations than problem-solving. Pick a program — any program — that the Obama administration unveiled to help troubled homeowners over the past four years. Not one has amounted to a hill of beans.

    This settlement is no different. The country’s primary bank regulator, the Office of the Comptroller of the Currency — which, along with the Federal Reserve, engineered the settlement — is trying to make it look like a victory. Of the $8.5 billion, $3.3 billion will go directly to foreclosed-upon borrowers, making it “the largest cash payout to date,” according to Bryan Hubbard, the O.C.C.’s chief spinmeister. (The rest of the money will consist of reduced interest payments and loan modifications.)

    In truth, the O.C.C. needed to save face after a foreclosure review process it had mandated had become an expensive fiasco. As amply demonstrated by Silver-Greenberg and American Banker, the government insisted that the banks hire expensive consultants to do a review of every foreclosure that took place in 2009 and 2010. The consultants racked up more than $1 billion in fees, while proceeding at such a molasseslike pace that the feds and the banks finally threw up their hands. The settlement made the whole thing go away.

    2. Accountability? What’s that? We have known for a long time that overwhelmed bank servicers took shortcuts, like robo-signing, that violated many state laws. They also put people through hell who were trying to get a modified mortgage. “I’ve seen marriages break up because of what banks put families through,” says Elizabeth Lynch of MFY Legal Services. All this settlement does is push those misdeeds under an $8.5 billion rug.

    3. It won’t actually help anybody. The settlement will cover some 3.8 million foreclosures. The government is going to distribute $3.3 billion dollars. It comes to around $1,150 per lost home.

    Of course, the O.C.C. says that is the wrong way to look at it: Some people — military personnel, for instance — could get as much as $125,000 while others won’t get much at all. People denied a modification will be eligible for up to $40,000 or $50,000, said Hubbard. I have no doubt that money will be welcome. But for those who lost their homes because of bank misconduct, it doesn’t come close to making them whole.

    4. The money is being distributed with no regard to whether a borrower suffered harm. In some ways, this is the sorriest part of the whole episode. The foreclosure review never answered the key question: which borrowers had legitimate claims against their bank and which didn’t. Thus, the settlement doesn’t make that distinction. If you lost your house in 2009 and 2010, you are going to get money — whether the bank was culpable or not. “The notion of error is not involved in this settlement,” conceded Hubbard.

    As a result, those who really were truly harmed by bank behavior will be shortchanged. As Karen Petrou, the well-known banking consultant, puts it, the government has “come up with something that gives every borrower — maybe — a pittance and leaves the truly hurt — and there were many — as much in the lurch as before.”

    This is hardly the only time in recent months that a settlement that is publicized as righting a wrong instead hands money to people who were never victimized. Think back to the $4.3 billion fund established by Congress to compensate people who became sick because of their exposure to toxic dust created by the 9/11 attacks. Even though there is no scientific evidence that the dust caused cancer, the government added cancer to the list of diseases that would be compensated. The result will be less money for those who truly did become sick because of their exposure to the 9/11 aftermath.

    Or take Toyota, which recently paid $1 billion to settle a lawsuit claiming that an electrical flaw caused some accelerators to stick — even though there turned out to be no evidence to support that claim.

    People who do these kinds of settlements regularly say that the world has become so complicated that, more often than not, it is simply too expensive to figure out who was harmed and who was not. So best just to throw a little money at everybody and make the problem go away.

    That is what the federal government did last week in its settlement with the banks. It’s nothing to be proud of.
For the column, see The Foreclosure Fiasco.

Federal Appeals Court: Mortgage Foreclosure = Debt Collection Under Fair Debt Collection Practices Act

From Law360:
  • The Sixth Circuit on Monday said mortgage foreclosure actions are debt collections under the Fair Debt Collection Practices Act, reversing the dismissal of a property owner's claims against an Ohio law firm that attempted to foreclose his property on behalf of a JPMorgan Chase & Co. unit.
For more, see Foreclosures Are Debt Collections Under FDCPA: 6th Circ.

For the court ruling, see Lawrence Glazer v. Chase Home Finance, LLC, No. 10-3416 (6th Cir. January 14, 2013).

See also Credit Slips: Is enforcement of a security interest (e.g. a foreclosure) "debt collection" under the FDCPA?:
  • Yes, says the Sixth Circuit, in Glazer v. Chase Home Finance, issued yesterday. This is good news for FDCPA plaintiffs, who have had to contend for years with a district court consensus that the enforcement of a security interest is not subject to most of the provisions of the Act.

    An odd type of split is developing on this issue: most district courts are getting it wrong, whereas most courts of appeals are getting it right. Usually, one expects the districts to follow the circuits, but the narrow view of debt collection continues to prevail at the district court level. (The circuits also have the better reading of the statute, in my view, which makes it all the more strange that the split seems to have persisted for so many years.)

Tuesday, January 15, 2013

Now-Disbarred Lawyer Gets Hand Slap After Pleading No Contest To Charges He Allegedly Pocketed Cash From Upfront Fees In Loan Mod Scam Among Other Client Ripoffs

From the Office of the District Attorney (Sacramento County, California):
  • District Attorney Jan Scully announced [] that 71-year-old Frank Ferris pled no contest to one felony count of grand theft and three misdemeanor counts of collecting illegal up-front fees for loan modification services.

    Ferris was a licensed attorney. While representing a victim in a civil case, he received $10,000 in trust to apply towards a settlement of the victim’s legal matter. Instead, Ferris misappropriated the funds for his own personal use, causing a default judgment to be entered against the victim. The victim later discovered the judgment and had to hire another attorney to vacate the judgment and resolve the matter.

    In addition, Ferris failed to return $50,000 he received as an investment from another client and instead wrote that client non-sufficient fund checks.

    In a separate matter, Ferris was involved with Turbo Mortgage Modification, a business that provided mortgage modification services. On multiple occasions, Ferris demanded and collected illegal up-front payments from clients before services were performed.

    The Honorable Kevin J. McCormick sentenced Ferris to five years of formal probation and ordered him to serve one year in the county jail. Given his age and health conditions, the Sheriff’s Department may allow Ferris to serve his time through alternative sentencing.

    In addition, Ferris was ordered to pay $72,271.90 in victim restitution. Ferris has been disbarred from practicing law by the State Bar of California.

    Ashik Azeez and Vicente Perez, who were involved in the loan modification business with Ferris, were previously convicted and sentenced on misdemeanor charges.

DC City Council Considers Bill To Minimize Inflated Fee Scams That Target Homeowners In Connection With Delinquent Real Estate Tax Foreclosures

In Washington, D.C., The Blog of Legal Times reports:
  • District of Columbia Councilmember Jack Evans (D-Ward 2) introduced legislation this week aimed at changing how the city manages the sale of properties with delinquent taxes, from requiring more notice to homeowners to lowering the interest rate and placing caps on attorney fees.

    The bill (PDF) stems from a recent push for reform by a relatively new coalition of legal service providers, law firms, and advocates known as the Alliance to Help Owners Maintain Equity, or AT HOME. Proponents say existing laws don't always protect the due process rights of homeowners, especially elderly and low-income residents, and can require them to pay much more than they owed in taxes to redeem their home.

    But lawyers for investors who participate in tax sales have warned that making some of the proposed changes, such as lowering the interest rate on unpaid taxes and capping attorney fees, could push away investors who generate revenue for the city.
***
  • Once a property is sold [at a tax foreclosure sale], the bill would require the city to notify the homeowner within two months. Under the current law, owners are notified when they're served with the investor's complaint, at which point attorney fees are on the table. The law would reduce the interest rate from 18 percent to six percent and place caps on attorney fees.

    Attorney fees are often the biggest obstacle for homeowners, [supervising attorney for the Legal Counsel for the Elderly Amy] Mix said. Fees can run as much as $4,000 or $5,000, which she said is prohibitive for a homeowner who had trouble paying $1,000 in taxes.

Players In Offshore Loan Modification Score Big Win; Despite $2.39M Judgment, Feds Let Scammers Walk After Latter Turn Over Remaining $17K In Outfit's Assets

From the Federal Trade Commission:
  • As part of its continuing crackdown on scams that target consumers in financial distress, the Federal Trade Commission obtained a settlement order resolving charges against a nationwide scam operating from the Dominican Republic and banning the defendants from providing mortgage assistance relief.

    Pretending to be in Chicago, the Freedom Companies operation allegedly peddled fake mortgage assistance relief to financially distressed Spanish-speaking homeowners in the United States. At the request of the FTC, a U.S. district court halted the operation in July.

    The FTC settlement order bans the eight defendants – David F. Preiner, Daniel Hungria, Freedom Companies Marketing, Inc., and five other companies controlled by Preiner and Hungria – from marketing any mortgage assistance relief products or services. The settlement also prohibits the defendants from making misleading claims about any product, service, plan, or program that they market or advertise.

    Filed in July 2012, the FTC’s complaint charged the defendants with violating the FTC Act and the Mortgage Assistance Relief Services Rule, known as the MARS Rule. According to the complaint, the defendants promised to dramatically lower homeowners’ monthly mortgage payments in exchange for a hefty upfront fee, and collected more than $2 million in fees in three years, but failed to provide homeowners with the promised services.

    Speaking in Spanish and targeting homeowners behind in their payments or facing foreclosure, telemarketers empathized about the tough economy and claimed to provide information about federal mortgage assistance programs, according to the complaint. In lengthy sales calls, the telemarketers falsely claimed to be affiliated with or approved by the consumers’ lenders or the federal government, “making sure to mention President Obama or the (federal) Making Home Affordable Program by name,” according to documents filed with the court.

    The settlement also imposes a $2.39 million judgment, which reflects the full amount of consumer injury during the three years before the operation was shut down.

    The judgment will be suspended due to the defendants’ inability to pay after they turn over the operation’s remaining $17,337 in assets. If it is determined that the financial information the defendants gave the FTC was untruthful, the full amount of the judgment will become due.

    Charging what they said was a one-time advance fee of $995 to $1,500, the callers allegedly falsely promised homeowners a mortgage modification in 30 to 90 days, often advising them to stop paying their lenders.
For the FTC press release, and links to relevant court documents, see Defendants in Dominican Mortgage Assistance Scam that Allegedly Defrauded Spanish-Speaking U.S. Homeowners Settle FTC Charges (Telemarketers Who Allegedly Falsely Claimed Affiliation with Federal Mortgage Assistance Programs Are Banned from Mortgage Assistance Business).

Monday, January 14, 2013

Feds Tighten Mortgage Lending Rules; Banksters Get Some Wiggle Room In Making Loans, Phase-In Period To Lessen Chances Of Getting Hammered By Homeowner Lawsuits For Screw-Ups

The New York Times reports:
  • Homeowners got their first big chance to judge the fledgling regulator charged with policing abusive lending after the introduction of a broad set of mortgage rules on Thursday.

    The regulator, the Consumer Financial Protection Bureau, gets mostly high marks for the policies, which are intended to prevent the practices that fueled the subprime debacle and the foreclosure crisis. But the agency made a few concessions to banks that consumers advocates say could leave borrowers vulnerable.

    "While the bureau's new rules promote" affordable loans and better products, "they still leave the door open for abuses," said Alys Cohen, a lawyer at the National Consumer Law Center.

    The new rules, broadly outlined in the Dodd-Frank regulatory overhaul, will have enormous influence on the mortgage market. They are intended to ensure consumers don't receive home loans with deceptive terms or onerous debt burdens.

    In short, banks have to make affordable mortgages, and if they don't, they face a greater legal liability. Under the new rules, it will be much harder for banks to give out mortgages without properly checking income, or with interest payments that suddenly jump to much higher levels.

    "These rules now require lenders to determine that borrowers have enough income to repay loans," said Michael D. Calhoun, the president of the Center for Responsible Lending. "This common-sense requirement would have prevented much of the damage of the mortgage and financial crisis."

    Even so, lenders managed to put their stamp on the regulation, winning some important features.

    As part of a fervent lobbying effort, banks warned repeatedly that strict regulations could crimp lending at a time when the housing market was just starting to get back on its feet. Regulators seemed to give some credence to that concern. Citing the "fragile state" of the housing market, the bureau said it would allow new mortgages to meet more flexible standards for affordability during a phase-in period of up to seven years.

Dubious Mortgage Cancellation Outfit Loses Key Battle To Unfreeze Assets, Remains Target Of Heavy Judicial Scorn

In West Palm Beach, Florida, The Palm Beach Post reports:
  • A South Florida company that persuaded scores of troubled Palm Beach County homeowners to give up their property deeds is facing more legal problems as state and federal judges challenge its plan to help borrowers beat the bank.

    In three recent court decisions, the firm’s actions were condemned.

    Fidelity Land Trust, which was shut down by the state in September, lost a key battle in circuit court last week to unfreeze its operations.

    The Jan. 7 order from Broward Circuit Judge Michael Gates follows a blistering report issued last month by a federal magistrate that said the company’s legal theories attempting to cancel underwater mortgages are meritless, frivolous and have “absolutely no chance of success.” That conclusion was affirmed by a federal judge in a Dec. 27 order.

    The company, along with an affiliated firm, the Sunshine State Land Trust, owns about 84 homes in Palm Beach County, deeded to them by homeowners believing that they offered a solution to the borrowers’ housing woes. The properties range from a million-dollar Boca Raton mansion on the Intracoastal Waterway to a $60,000 condominium west of Florida’s Turnpike.

    Statewide, an estimated 250 homeowners signed over their deeds to the trusts, whose operations were halted in September by the Florida Attorney General’s Office. The civil complaint brought by the office under Florida’s Deceptive and Unfair Trade Practices Act said the land trusts wrongfully guaranteed they could cancel the homeowner’s mortgage, misrepresented that homeowners can void their mortgage through a quiet title action that purports the land trust is a third-party buyer, and charged an advance fee before completing foreclosure rescue services.

    Defendants have offered various defenses. Some have said Fidelity’s legal theories should be allowed to run their course in court, not curtailed by the state. At stake are dozens of properties in Fidelity’s possession whose homeowners are in legal limbo — no longer title owner, and either trying to regain their property or hoping Fidelity still will triumph.

    The recent orders, however, reflect disdain for Fidelity’s arguments.

    “A state judge has told plaintiff (Fidelity) that its legal theory is meritless; a federal judge has told plaintiff its legal theory is frivolous; and the Florida Attorney General has obtained injunctive relief against plaintiff,” wrote federal District Judge Roy Dalton in the Dec. 27 order. “Yet even in its objection, plaintiff clings to the notion that its claims have merit. They do not.”

    Dalton also warned Fidelity’s attorney, Boca Raton-based Howard Feinmel, that if he continued to prosecute claims based on the theories presented, he may be referred to a grievance committee. A message left at Feinmel’s office was not returned.

Philly Cops Bag Four In Alleged Home Title Hijacking Racket That Swiped Deeds To 22 City Houses

In Philadelphia, Pennsylvania, WPVI-TV Channel 6 reports:
  • Four men, including the son of a former Philadelphia police commissioner, have been arrested for forging the deeds of 22 properties in Philadelphia, enabling them to effectively steal the houses.

    "All too often, people who are unsuspecting were buying properties and the people selling them had no right to be selling them," Philadelphia District Attorney Seth Williams said.

    A lengthy investigation by the Philadelphia District Attorney's Office revealed that the deeds of 22 uninhabited properties across the city were forged and recorded, transferring the properties from the true owners to the codefendants or fictitious persons.

    Officials say, in many instances, the signature of the Notary Public on the deed was forged and a counterfeit stamp used. "As with everything, people find ways to lie, cheat and steal and these four defendants were caught," Williams said.

    Authorities allege the following four men were the orchestrators of the home theft ring: 55-year-old Zachary Stokes, 42-year-old Oscar Ketter, 48-year-old Elhadi Ibrahim and 49-year-old Steven Johnson, a son of former Philadelphia Police Commissioner Sylvester Johnson:

    "I have a lot of respect for Commissioner Johnson. I have three children. He has one son that is a former FBI agent, but this son is allegedly involved with this crime," Williams said.

    The properties were being sold to innocent buyers, and in some cases, the purchase price was just $1.

    "If criminals were rational, I'd be out of business. I hope one day to be out of business, but people do stupid things for a lot of stupid reasons," Williams said.

    The men face a number of charges including Criminal Conspiracy, Theft, Forgery and Tampering with Public Records.

Sunday, January 13, 2013

Use Of Eminent Domain To Bail Out Underwater Homeowners Coming To Bay State?

In Brockton, Massachusetts, The Huffington Post reports:
  • In a move that’s pitting grassroots housing activists against Wall Street interests, the City Council of Brockton, Mass., decided this week to commission a study into the feasibility of using eminent domain powers to seize the mortgages of local residents struggling to pay off their loans.

    The plan being studied would essentially use municipal government’s prerogative of eminent domain to take possession of foreclosed residential mortgage notes, selling them back to residents, as the City Council resolution put it, “for the purpose of removing blight and restoring family home-ownership within the city.”

    The city would also focus on seizing the mortgages of “underwater” homeowners, those who owe more on their homes than their current appraised worth and would greatly benefit from a new loan that resets the value of their property.

    Such a framework would amount to “using government power to do social good,” Steve Meacham, an organizer with non-profit advocacy group City Life/Vida Urbana said, adding that such “social good is something the banks should have been doing in the first place anyway.”

    Brockton's move is the latest revival of an idea that has been unevenly embraced by some of the communities worst hit by the collapse of the housing bubble in 2007. Fittingly enough, using eminent domain did not have its genesis with the community organizers now pushing it forward in places like Brockton, San Bernandino, Calif., or Detroit, but in high finance, where a firm called Mortgage Resolution Partners -- which hopes to make a tidy profit providing financing for the schema -- first suggested the plan.

Suspect Pinched For Fraudulently Operating As Loan Broker; Cops Say Operator Pocketed Thousands Of Fees For Unmet Loan Modification Promises

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Nelson Posada offered struggling homeowners his expertise to help them avoid foreclosure. But authorities say the Wellington man’s company instead took thousands of dollars in fees without getting the mortgage loans modified in return.

    Posada, 45, was arrested Saturday on one count of fraudulently operating as a loan broker, authorities said. Posada was released from the Palm Beach County jail on Sunday on $3,000 bail.

    Posada was a managing member of Loss Mitigation Professionals, a purported loan-modification company that incorporated in West Palm Beach in April 2008, the state Office of Financial Regulation said.

    From January 2010 to March 2011, Posada and an unidentified partner operated the company without a proper license, according to the probable-cause arrest affidavit. The company received a final cease-and-desist order on March 8, 2011.

    According to the affidavit, Posada and his partner engaged in an advanced fee scheme targeting Hispanics. They persuaded customers that their experience and knowledge of the industry could help them save their homes through some form of loan modification, such as a lower interest rate, a lower payment or a reduction in principal.

    A review of bank records provided by the company showed that about $375,000 in advanced and processing fees and commissions had been collected from clients and affiliates, according to the affidavit.

    Investigators contacted about 100 people from the company’s client list and interviewed 22 of them. Those 22 had paid more than $49,000 in advanced fees were collected for loan modification services.

    Loss Mitigation Professionals appears to have made contact with banks in some cases but not all, the affidavit said. It doesn’t appear that any customer received a loan modification as a result of its services, the affidavit said.

Lawsuit Settlement To Cost Landlord $22.5K Over Alleged Discrimination Against Potential Tenant Who Intended To Use Section 8 Subsidy For Bulk Of Rent

From the Office of the New Jersey Attorney General:
  • The Division on Civil Rights announced [] that a Middlesex County apartment complex has agreed to pay a total of $22,500 to resolve allegations it discriminated against a potential tenant who intended to pay the bulk of his monthly rent with federal Section 8 housing assistance.

    The Glenwood Apartments and Country Club, owned by the Brunetti Organization and located in Old Bridge, has agreed to pay the mother of the late Lyle Rosen $15,000 to settle Rosen’s discrimination Complaint. The Complaint was rooted in Rosen’s attempt to lease an apartment and pay about 70 percent of his rent using Section 8 housing vouchers. Lyle Rosen, of Old Bridge, has since passed away, and his mother Irene Rosen is the administratrix of his estate.

    In addition to paying $15,000 to Irene Rosen, Glenwood also has agreed to pay the State $7,500. Along with the monetary terms of settlement, Glenwood has agreed to require training in the Law Against Discrimination (LAD) for any rental or management company it employs to screen applicants. Glenwood also must keep detailed records of rental applications and rental inquiries for three years -- including an explanation for any applicant’s rejection -- and make those records available to the Division on Civil Rights.

    “The importance of this settlement goes beyond the dollars because of the issue involved,” said Division on Civil Rights Director Craig Sashihara. “First and foremost, it's illegal for any landlord to refuse to rent to someone simply because he or she is receiving a rent subsidy. Landlords want assurance that prospective tenants will have sufficient funds to make rent, and that’s perfectly understandable. But federal rent subsidies are like guaranteed payments – it's money sent directly from the federal government to the landlord. So a landlord can't ignore those funds when calculating whether a potential tenant has enough money to pay the rent.”

    Lyle Rosen filed a Complaint with the Division on Civil Rights after he applied to rent an apartment at Glenwood in October 2005 and was rejected within days of applying.

    The Division issued a Finding of Probable Cause against Glenwood in March 2007. The Finding meant that DCR had determined, in effect, that Glenwood’s denial of Rosen on the basis of its $40,000-a-year annual income requirement was likely discriminatory, because Section 8 housing vouchers guaranteed payment of most of Rosen’s rent, and he’d shown sufficient assets to pay the rest.

    Lyle Rosen passed away in July 2007. In August 2009, an Administrative Law Judge issued an Order allowing his Complaint to be amended to include his mother, Irene, as a Complainant.

Saturday, January 12, 2013

After Saving Home From Bank Foreclosure, Homeowner Blows Off HOA Over Two Years Of Unpaid Fees, Loses Home At Court-Ordered Auction Anyway

In Jacksonville, Florida, First Coast News reports:
  • Ken Baxley lived in his East Arlington house four years, but in 24 hours, it was no longer his home. "I called the police and said 'Is this for real?' and they said 'Yes,'" he said.

    It was real, but Baxley says still hard to believe. Checking the court files only added to his nightmare. "The court records said my house is no longer in our name but it is in the name of some Duval trust group," said Baxley.

    Baxley lives in a deed restricted community. Like all the other homeowners he has to pay Homeowners Association fees. For two years, he didn't.

    "I didn't think they were that threatening," said Baxley. "I basically blew them off. That was my mistake. I blew off the homeowners association."

    Baxley saved his home from a mortgage foreclosure in 2009, but ignored the HOA notices. A few days before Christmas, the HOA evicted Baxley from his home. The HOA and filed and won a foreclosure lawsuit against him.

    "I had no clue in my mind that for $532, they would take my house from under me and make me move," said Baxley.

    Baxley is now leasing an apartment, but attorney Fred Elefant said the chances of Baxley getting his home back are remote.
***
  • The court record reveals Baxley can recover the difference between what he owed the HOA and how much the home was sold for, but he has to file with the Clerk of Courts.

    Elefant said it is not over for Baxley. If the buyer fails to pay the mortgage, Elefant said the bank will file a mortgage foreclosure lawsuit against Baxley even though he no longer owns the house.

Disbarred Lawyer Recently Released After Doing 3 Years For $4M Client Trust Account Ripoff Pinched Again On New Charges In Unrelated Straw Buyer Scam; Latest Case Spurred By Two Alleged Co-Conspirators Turned Stool Pigeons

In Lyndhurst, New Jersey, The Record reports:
  • A disbarred attorney from Lyndhurst was arrested [], four months after he was charged in connection with a long-running mortgage-fraud scheme that caused losses of more than $30 million, authorities said.

    Michael Rumore, 54, was charged in September with conspiracy to commit bank fraud and money laundering, U.S. Attorney Paul J. Fishman said in a statement.
***
  • Rumore handled real estate closings, falsely indicating that the buyers were making substantial down payments when they never did, and diverted funds to the co-conspirators, authorities said.

    The scheme was aided by a tax preparer and document creator who became one of two cooperating witnesses in the case, authorities said.

    The unidentified cooperator also operated several shell companies that were used to create between 75 and 150 bogus tax documents and employment verification forms for the straw buyers, authorities said.

    The second cooperator specialized in making phony bank statements, driver’s licenses, permanent resident cards and Social Security cards.

    Loan companies funded more than 60 fraudulent mortgages worth more than $30 million, authorities said.

    Rumore was initially charged in September along with seven alleged co-conspirators. Another Lyndhurst resident, Klary “Patty” Arcentales, 44, a loan officer at Premier Mortgage Services, was among co-conspirators arrested in September.

    Rumore was released in September from South Woods State Prison in Bridgeton, where he served three years after pleading guilty to state charges in an unrelated scheme to steal more than $4 million entrusted to him for real estate closings. Rumore transferred the $4 million to his personal and business accounts and used the money to gamble at casinos in Atlantic City, state officials said.

Driver For Corrupt Mayor Cops Guilty Plea For Role In Rigging Public Housing Lottery That Landed Him 2-Family Home

From the Office of the New Jersey Attorney General:
  • Attorney General Jeffrey S. Chiesa announced that a man who served as personal driver to former Perth Amboy Mayor Joseph Vas was sentenced [] in connection with a scheme involving Vas to rig a public housing lottery.

    Anthony S. Jones, 51, of Perth Amboy, was sentenced to five years of probation by Superior Court Judge Anthony J. Mellaci Jr. in Monmouth County. Jones pleaded guilty on Aug. 18, 2011 to a criminal accusation charging him with third-degree falsifying or tampering with records.

    In pleading guilty, he admitted that he falsified personal financial information that he submitted in order to qualify to buy an affordable two-family home on Market Street in Perth Amboy through the Perth Amboy Home Program. Previously, Vas admitted that he rigged the public lottery for the home so that Jones won the opportunity to buy it. Jones forfeited his job with the city and is permanently barred from public employment in New Jersey.

    Jones was ordered, as a condition of probation, to refrain from entering the property, which he has vacated, to perform 100 hours of community service, and to pay various amounts as restitution related to his illegal acquisition of the property. The home is currently in foreclosure.

    Jones was ordered to pay $147,600, representing principal and interest on a second mortgage which secures HUD grant funds that were provided to make the property affordable housing. He must pay $2,000 to reimburse the City of Perth Amboy for closing costs it paid when Jones took title to the property. He must pay the state $127,123, representing rent he collected by leasing the second unit of the property. Finally, he must pay $6,020 in rent for his occupancy of one unit of the property for four months after he was supposed to have vacated the property. Jones entered a consent judgment to pay all of those amounts.

Friday, January 11, 2013

JPM Chase Abandons Home In Foreclosure Limbo; Bankster's Handiwork Leaves Homeowner With 'Zombie Title', Dying & Ineligible To Get Social Security Disability Benefits Needed In Effort To Dodge Early Grave

Reuters reports:
  • Joseph Keller doesn't expect he'll live to see the end of 2013. He blames the house at 190 Avondale Avenue.

    Five years ago, Keller, 10 months behind on his mortgage payments, received notice of a foreclosure judgment from JP Morgan Chase. In a few weeks, the bank said, his three-story house with gray vinyl siding in Columbus, Ohio, would be put up for auction at a sheriff's sale.

    The 58-year-old former social worker and his wife, Jennifer, packed up their home of 13 years and moved in with their daughter. Joseph thought he would never have anything to do with the house again. And for about a year, he didn't.

    Then it started to stalk him.

    First, in 2010, the county sued Keller because the house, already picked clean by scavengers, was in a shambles, its hanging gutters and collapsed garage in violation of local housing code. Then the tax collector started sending Keller notices about mounting back taxes, sewer fees and bills for weed and waste removal. And last year, Chase's debt collector began pressing Keller to pay his mortgage, which had swollen, with penalties and fees, from $62,100.27 to $84,194.69.

    The worst news came last January, when the Social Security Administration rejected Keller's application for disability benefits; the "asset" on Avondale Avenue rendered him ineligible. Keller's medical problems include advanced liver disease, hepatitis C and inactive tuberculosis. Without disability coverage, he can't get the liver transplant he needs to stay alive.

    "I can't make it end," says Keller. "This house, I can't get out."

    Keller continues to bear responsibility for the house because on December 23, 2008 - about two months after he received Chase's notice of sale - the bank filed to dismiss the foreclosure judgment and the order of sale. Chase said it sent Keller a copy of its court filing on December 9, 2008. Keller says he never received any notification. Either way, his name remained on the property title.

    WITH IMPUNITY

    The Kellers are caught up in a little-known horror of the U.S. housing bust: the zombie title. Six years in, thousands of homeowners are finding themselves legally liable for houses they didn't know they still owned after banks decided it wasn't worth their while to complete foreclosures on them. With impunity, banks have been walking away from foreclosures much the way some homeowners walked away from their mortgages when the housing market first crashed.

    "The banks are just deciding not to foreclose, even though the homeowners never caught up with their payments," says Daren Blomquist, vice president at RealtyTrac, a real-estate information company in Irvine, California.

    Since 2006, 10 million homes have fallen into foreclosure, according to RealtyTrac, a number that in earlier, more stable times would have taken nearly two decades to reach. Of those foreclosures, more than 2 million have never come out. Some may be occupied by owners who have been living gratis. Others have been caught up in what is now known as the robo-signing scandal, when banks spun out reams of fraudulent documents to foreclose quickly on as many homeowners as they could.

    And then there are cases like the Kellers, in which homeowners moved out after receiving notice of a foreclosure sale, thinking they were leaving the house in bank hands. No national databases track zombie titles. But dozens of housing court judges, code enforcement officials, lawyers and other professionals involved in foreclosures across the country tell Reuters that these titles number in the many thousands, and that the problem is worsening.

    "There are thousands of foreclosures in limbo, just hanging out there, just sitting, with nothing being done," says Cleveland Housing Court Judge Raymond Pianka, whose pending court cases tied to derelict properties have doubled in the past two years, to 1,000. He says the surge is due largely to homes vacated by people who fled before an imminent foreclosure sale, only to learn later that they remain legally responsible for their house.

    When people move out after receiving a notice of a planned foreclosure sale and the bank then cancels, municipalities are left to deal with the mess. Some spend public funds on securing, cleaning and stabilizing houses that generate no tax revenue. Others let the houses rot. In at least three states in recent months, houses abandoned by owners and banks alike have exploded because the gas was never shut off.

    THREAT OF JAIL

    Unsuspecting homeowners have had their wages garnished, their credit destroyed and their tax refunds seized. They've opened their mail to find bills for back taxes, graffiti-scrubbing services, demolition crews, trash removal, gutter repair, exterior cleaning and lawn clipping. At their front doors they've encountered bailiffs brandishing summonses to appear in court.

    In some cities, people with zombie titles can be sentenced to probation - with the threat of jail if they don't bring their houses into compliance.

    "These people have become like indentured serfs, with all of the responsibilities for the properties but none of the rights," says retired Cleveland-Marshall College of Law Professor Kermit Lind.
***
  • Cases against zombie-title holders are rising due to everything from sewer bills to tilting chimneys, and they are clogging the courts. In Milwaukee, Wisconsin, about 900 cases in the foreclosure process involve zombie titles. In South Bend, Indiana, the number is 1,275, up from 600 in 2006. In Memphis, Tennessee, cases have doubled in the past two years to 1,500.

    In Cleveland, 15 percent of foreclosures between 2005 and 2009 stalled out in foreclosure limbo, more than a third of them involving homeowners who had fled foreclosure notices, according to the Case Western Reserve study.
***
  • Once a bank walks away from a foreclosure, the real rot begins. Living rooms turn into meth labs. Falling shingles menace passers-by. Squatters' cooking fires turn into infernos. The latest iteration of the trend: gas explosions.

    Electric companies usually shut off the juice when homeowners tell the utility they are moving. But natural-gas companies usually don't. In recent months, abandoned homes have exploded in Chicago, Cleveland and Bridgeport, Connecticut. In all cases, foreclosed homeowners had moved out. With no one home to smell the gas, it went undetected - until the houses blew.

    "We are seeing more and more close calls," says Mark McDonald, a former natural gas public safety worker who now runs the New England Gas Workers Association. "These houses are a formula for disaster."
***
  • In Columbus, Ohio, Joseph Keller recently paid a visit to the empty house on Avondale Avenue. In the living room, the floor was littered with dirty diapers, pill bottles, condoms, sooty mattresses and soda cans. In the kitchen, squatters had hung pink curtains.

    "They tore it to hell and back," Keller said, kicking at a dirty mattress. "We never would have left the home if we weren't told to get out."

    The Kellers live in their daughter's dining room, where their queen-size bed leaves little room to maneuver. Joseph can't sit, stand or sleep for more than 15 minutes at a time. He can't take pain medication because of his diseased liver. Every few months, he makes a trip to the emergency room, where doctors drain his abdomen of excess fluid.
***
  • At a hearing in early December, a Social Security administrative judge told the Kellers that he would review their appeal of the original denial of benefits, a process that he said could take two months. Joseph Keller responded that he might not be around that long. Earlier this month, the judge sent the case back to the local office after it determined that the house was virtually worthless. Keller still has no benefits.

    A Social Security Administration spokesperson declined to comment on the case.

    "He's dying," says Keller's daughter, Barbara. "He needs his name off this house."

Wisconsin Feds Convict Scammer Accused Of Using 'Sewer Service' Racket To File Small Claims Lawsuits, Score Default Judgments, Then File Wage Garnishments Against Multiple Unwitting Victims

In Madison, Wisconsin, The Chippewa Herald reports:
  • A scheme involving small claims courts has resulted in an Eau Claire man being found guilty of 50 counts of mail fraud in federal court, including cases from Chippewa County.

    Bernard C. Seidling, 61, was convicted by Judge Barbara B. Crabb on Dec. 26 for the scheme that ran from 2003 through 2009. He will be sentenced at 1 p.m. March 21. Seidling could face a maximum sentence of 20 years in prison on each of the 50 charges.

    According to the U.S. Department of Justice, Seidling filed suits in small claims courts where he lied about the defendants addresses and his attempts to serve them with court papers.

    Prosecutors said Seidling knew the attempt to serve papers either had not been made or could not be made, because the defendants didn’t live at the address Seidling gave.

    Seidling claimed $5,000, the maximum allowed, in each of the lawsuits and obtained default judgments. He would then use the judgments to file wage garnishments against the victims and their property.

    The victims included a couple who were renting a farm in Chippewa County in 2002 until moving in 2003. Seidling filed a lawsuit in Iron County and a transcript was sent to the Chippewa County Sheriff’s Department. Seidling eventually asked for an earnings garnishment of $5,141.79.

    Another victim was a man who owned an engineering firm that contracted with another company for surveying and subdivision design in Chippewa County in 2002. Six years later, a company run by Seidling filed a lawsuit against the engineering firm, claiming its address was now in Hayward. That wasn’t the case.

    Another Seidling company in 2009 sued Footsmart, a shoe retailer in Norcross, Ga. However, Seidling listed Footsmart’s address as Main Street in Chippewa Falls, and claimed a representative tried to serve papers to Footsmart there. The address he used for Footsmart in Chippewa Falls was instead a property in foreclosure.

    A nurse for the Barron County Public Health Department was sued in 2009 by Seidling, but listed the nurse’s address as East Columbia Street in Chippewa Falls. The nurse never lived in Chippewa Falls.

    Another victim was a lawyer working for the Legal Aid Society of Milwaukee. She and her son lived in a rental house.

    One of Seidling’s companies filed a lawsuit and listed the woman and her son’s address as Second Avenue in Chippewa Falls. Neither the woman or the son ever lived in Chippewa Falls. The property Seidling listed was in foreclosure at the time of the lawsuit.

    He filed notices of lawsuits with various publications, including some with Chippewa Valley Newspaper publications.

Michigan High Court Justice Suspected Of Illegal 'Short Sale Shuffle' Announces Retirement From Bench

In Lansing, Michigan, WXYZ-TV Channel 7 reports:
  • Amid an accusation of fraud and a move by the state's Judicial Tenure Commission to suspend her, it has been revealed that Michigan Supreme Court Justice Diane Hathaway will retire January 21.

    Her attorney Steve Fishman confirmed the development to 7 Action News. He says Hathaway began the process of retiring back in December.

    The Michigan Supreme Court released the following statement about Hathaway's retirement:

    "This afternoon, through her counsel, Justice Hathaway advised the court that she is retiring effective January 21. In the meantime, she has agreed not to participate in any matters before the court."
***
  • The revelation of Hathaway's retirement comes not long after she was hit with the formal complaint by the state's Judicial Tenure Commission, which asked that she be suspended from the bench.

    The JTC complaint accuses Hathaway of fraud and money laundering and comes on the heels of a November civil complaint filed by the U.S. Attorney, which also accused Hathaway of fraud.

    The feds began forfeiture proceedings to go after Hathaway's $750,000 Florida home, which they alleged she hid in a stepdaughter's name in order to have a short sale approved on her Grosse Pointe Park home. Last month, they put a stay on those forfeiture proceedings.

    The JTC has asked that Hathaway be suspended pending the resolution of their formal proceedings. Hathaway has 14 days to respond to the JTC's complaint.

    A short sale allows a homeowner to sell his or her property at a loss rather than go into a foreclosure. It can save the owner hundreds of thousands of dollars in mortgage payments, but he or she needs to prove a hardship to their bank, like a loss in income.

    But prior to Hathaway’s short sale, she shuffled two homes out of her name: a Florida home valued at almost three-quarters of a million dollars went to her stepdaughter, and one in Grosse Pointe Park went to her stepson.

     After the bank agreed to the short sale on Hathaway’s Lake St. Clair home, that Florida house went back into Hathaway’s name.

    The home where the Justice currently lives was recently put into her name, but its first owner was Hathaway’s stepdaughter. According to records, she bought it for $195,000 cash around the same time Hathaway’s bank was mulling over the short sale that they ultimately approved. Hathaway won’t say whose cash was used to buy that home.