Thursday, May 02, 2013

Chase's Failure To Pay $620 County Impact Fee Allows Opportunistic Investors To Score Waterfront Home For $4350 At County Tax Lien Foreclosure Sale; Servicer's Screw-Up Wipes Out Mortgage, Elderly Former Owners

In Fort Myers, Florida, WTSP-TV Channel 10 reports:
  • A pair of Fort Myers men who invented Bagel Bites have left a bad taste in the mouths of a Cape Coral couple being evicted from their house by the culinary duo.

    Stan Garczynski and Bob Mosher, who created the bite-size pizza bagels in 1985, bought the waterfront home of Nickie Haggart, 70, and Jim Haggart, 83, at a foreclosure auction in January for $4,350.

    Before the real estate market crashed, the 2,991-square-foot home was listed for $1.2 million. It is currently assessed at $387,906.

    The house was placed on the auction block after Cape Coral foreclosed on an unpaid water assessment impact fee lien that totaled $620 plus unspecified interest, penalties and attorney fees, according to court records.

    The assessment was levied by the Cape as part of the utilities expansion project, which was suspended in 2009 because of concerns over costs to residents and management methods but is set to restart this year.

    Nickie Haggart, who was notified Wednesday she and her husband must vacate by Friday morning, said the couple were hit hard by the economic downturn and stopped paying their mortgage five years ago after buying the house in 2004.

    It went into foreclosure, but they thought the lender would pay the taxes, assessments and property insurance until the property could be sold, she said. She admits they may have received notices about a foreclosure auction but were preoccupied with health issues.

    In February, two days after undergoing a mastectomy to remove a cancerous lump in her breast, she found a note on her door. She then received a call that turned her life upside down, she said.

    "(Garczynski) called me and he said, 'I need to get in the house to take pictures,' because he wanted to see what he had to repair before they moved in that weekend," she said.

    She said she told Garczynski she had no idea what he was talking about and he explained he now owned the home. She told him they couldn't leave because she was still fighting cancer and her husband was in the hospital with congestive heart failure. "They said, 'We're sorry for your misfortune, but we really don't care what your circumstances are because we own the house,'" she said.

    Though her lawyer has bought them extra time since then, she said the final deadline is Friday.

    "Can you think of anything more humiliating? The police are gonna come to our door," she said. On Wednesday, she was still looking for a place to move.

    Garczynski and Mosher referred comment to their lawyer, Gordon Duncan, who said his clients own the home fair and square.

    Duncan said it's been more than 100 days since the home was purchased and the Haggarts have yet to move out. He said Garczynski and Mosher even offered to rent the house to the Haggarts, but the couple refused. Nickie Haggart denied a rental offer was made.

    "Here we are now in April. They've known since October that that was going to happen," he said. "To suggest that anyone has been unfair to them I think is misplaced."

    He also pointed out Jim Haggart was an attorney and that the Haggarts were previously evicted from a Sanibel home in 2010 for not paying rent.

    "I don't think my clients want to be painted as callous but, at some point, they're entitled to possession what they bought 100 days ago," he said.

    Marshall Cohen, the Haggarts' attorney, said his clients knew they'd eventually have to move from the home, just not under these circumstances.

    And Cohen said it's Chase Bank that really got hosed on the deal. The bank owned the property once it went into foreclosure and should have received several notices about the lien and the impending auction but, for some reason, never acted, he said.

    He said the bank apparently overlooked the water assessment.

    As a result, it let a property likely valued around $500,000 slip through its fingers over a $619.58 lien, he said.

    Though he's not sure what happened in this case, he said paperwork is sometimes lost during the frequent switching of law firms representing banks.

    Nickie Haggart, meanwhile, said she still can't believe how she's been treated.

    "It's a really slimy way to make a living," she said.
Source: Bagel Bites inventors upset Florida couple with eviction.

See also:

Woman Gets 81 Months For Forging Signatures Of Unwitting In-Laws, Others To Score $228K HELOC; Suspect Also Bagged In Effort To Delay Trial By Forging Doctors' Notes Alleging Her Child Had Serious Health Problems

From the Office of the U.S. Attorney (Reno, Nevada):
  • A woman who fraudulently obtained a $228,000 home equity loan in her father and mother-in-law’s names by forging their signature and the signatures of others, has been sentenced to 81 months in prison and ordered to pay $228,000 in restitution for her guilty pleas to identity theft and money laundering charges, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

    Tandy Anne Kertanis, 33, of Reno, Nev., was sentenced on Thursday, April 11, 2013, by U.S. District Judge Larry R. Hicks. Kertanis pleaded guilty on Aug. 20, 2012, to one count of money laundering and one count of aggravated identity theft.

    According to the court records, on about June 19, 2007, Kertanis called Wells Fargo Bank and identified herself as Joann L. Kertanis and applied for a home equity loan in the names of Robert P. Kertanis and Joann L. Kertanis, her father and mother-in-law. Neither Robert nor Joann Kertanis was aware of the application, nor did they authorize Tandy Kertanis to apply for the loan. In late June 2007, Tandy Kertanis returned a package of loan documents to Wells Fargo. The documents contained the forged signatures of Joann L. Kertanis and/or Robert P. Kertanis, as well as forged signatures of a notary public and the defendant’s mother.

    The defendant submitted updated loan request documents on July 3, 2007, again containing the forged signatures of her father and mother-in-law, as well as the forged signature of the notary public, her mother, and a Reno attorney with whom she had consulted on a prior occasion. On about July 6, 2007, Wells Fargo Bank approved the home equity loan and electronically deposited $228,000 into the defendant’s U.S. Bank account in Reno.
***
  • On Feb. 22, 2012, while Kertanis was awaiting trial in this case, her attorney filed a motion to continue the trial alleging that Kertanis’ young child was suffering from several serious health problems.

    Attached to the motion were letters from four medical specialists in Reno and California. These medical specialists were contacted and stated that the letters were false and that the young child was not suffering from any serious disease.

    Kertanis is free on a personal recognizance bond and must self-report to federal prison on June 10, 2013.
For the U.S. Attorney press release, see Reno Woman Sentenced To Over Six Years In Prison For Loan Fraud.

Fraudulent Purchase & Financing Of Three Homes Using Stolen IDs Among Ripoffs Subject Of Guilty Verdict For Now-Convicted Straw Buyer Scam Operator

From the Office of the U.S. Attorney (Las Vegas, Nevada):
  • Following a six-day jury trial, Nicholas Lindsey, 40, of, Billings, Montana, was convicted [] of nine counts of wire fraud and one count of aggravated identity theft for his role in a mortgage fraud scheme, announced Daniel G. Bogden, United States Attorney for the District of Nevada.
***
  • In addition to the [fraudulently-financed purchases of]  five homes of which the [straw] buyers were aware, Lindsey stole two buyers’ identities and used their personal information to purchase three additional properties in their names.

    The evidence established that Lindsey leased two of these properties and collected rental income and used the third as his own personal residence.

    After collecting profits, Lindsey stopped making the mortgage payments on the properties and allowed all eight homes to default in the borrowers’ names, causing an estimated loss to lenders of $1.6 million.

Wednesday, May 01, 2013

Report: Insider Says Allegations Of Incompetence, Malevolence & Larceny Are All In A Day's Work For Trash-Out Contractor That Screws Over Distressed Homeowners

The Huffington Post reports:
  • Outside in the world, Safeguard Properties was supposed to be protecting millions of homes that had slid into foreclosure, shoring up and repairing abandoned properties for the banks that were responsible for tending to all this real estate gone bad.

    But inside the offices of Safeguard’s complaint department, Kevin Kubovcik says he gained a starkly different perspective on his company's pursuits as allegations of incompetence, malevolence and larceny rolled in day after day.

    People with legal title to their property called to complain that Safeguard contractors had broken into their homes and carted off family heirlooms, valuable artwork and weapons, he recalled. People living next door to foreclosed properties complained that Safeguard mixed up the addresses and locked them out of their own homes.

    Complaints came in seemingly without end. "I'd pick up the phone, put it down, and then it would ring again," Kubovcik said.

    A recent Huffington Post investigation focused on Safeguard as the largest player in a little-scrutinized industry spawned by the American housing bust: the contractors tasked with the gritty work of maintaining a veritable empire of distressed real estate.

    Safeguard has been the target of dozens of lawsuits alleging that its contractors have wrongly broken into properties and carted off people’s property.(1)

    In response to previous questions from HuffPost about break-ins at occupied properties, Safeguard dismissed such incidents as "extremely rare" compared to the sheer volume of jobs the company manages. But Kubovcik, who logged and investigated complaints for more than two years until he left the company in April 2010, said his experience attests to precisely the opposite.

    "It was a constant barrage," he said.

    Kubovcik provided HuffPost with Excel spreadsheets that he said he had personally maintained during the time that he tracked complaints. Though the records are incomplete -- a four-month stretch from September through December of 2009 is missing -- they provide a detailed window into the frequency and types of complaints flowing into the company at the peak of the foreclosure crisis.
(1) For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:
For examples of filed lawsuits involving illegal bank break-in, "trash-out" lockout cases, see:

Ordinance-Required, Bankster-Paid Security Deposits For Property Upkeep Due When Initiating Foreclosure Process Create Another Opportunity To Screw Over Homeowners Seeking Loan Modifications

In Worcester, Massachusetts, the Worcester Telegram reports:
  • A city ordinance intended to force far-flung banks to see to the upkeep of foreclosed properties here has had the unintended consequence of adding to the financial burden of some struggling mortgage borrowers, much to the dismay of City Hall.

    The Vacant and Foreclosing Property Ordinance requires a bank or other company that files a foreclosure petition on any property in Worcester to notify the city and deposit $5,000 for each foreclosure petition in a special account controlled by the city treasurer.

    If the bank doesn’t maintain the property to the satisfaction of the Department of Inspectional Services, the city spends the money to see to the upkeep of the property itself. If the bank properly maintains the property, it gets the money back, less an administrative fee, when it sells or otherwise transfers responsibility for the house to another party.

    The ordinance has been effective in fighting urban blight caused by national and international financial institutions unwilling or unable to secure and maintain their portfolios of foreclosed properties in the city.

    But there’s just one problem.

    Banks and other financial institutions increasingly are lumping the $5,000 cost of the property registration bond into what the borrower owes, making it less likely that struggling homeowners can catch up on their payments and end the foreclosure process before losing their homes.

    That’s the predicament in which Marjorie Evans finds herself after years of frustrating calls and numerous letters to Bank of America Corp. of Charlotte, N.C., one of the largest holders of foreclosed properties in Worcester.

    “If the city is going to do this, they have to understand the banks don’t pay anything. We pay that,” Ms. Evans said. “It’s coming back on folks. The bank is just passing it on to us.”

    What’s more, she said, it appears to her from her statements that Bank of America, which has since transferred her mortgage to a Texas company, was applying the entirety of her monthly payments to such fees, not to her loan balance. Ms. Evans was not aware that $5,000 of the fees that appeared on her account without explanation were related to the city’s property registration ordinance until she was contacted by the Telegram & Gazette for this story.

    “I kept saying to the bank, ‘Explain these fees,’ but they never would,” she said, sitting at her dining room table with a pad of notes she has compiled from years of dealings with bank officials and federal financial regulators.
***
  • Bank of America spokesman Richard Simon said the company was within its rights to then tack on $5,000 in fees to the account of Ms. Evans.(1)

    The standard mortgage contract required by state law places the responsibility for maintenance of a property prior to foreclosure on the borrower, Mr. Simon said.

    “The mortgage agreement also clearly allows a servicer to charge the borrower for out-of-pocket costs incurred by the servicer related to the borrower’s default or vacancy,” Mr. Simon said. “The bond required in the Worcester ordinance is such a charge, the same as legal fees, filing fees, direct property inspection and preservation costs, appraisal fees and other costs advanced by the servicer.”

    But City Manager Michael V. O’Brien is blunt in his outrage over the cost shifting, which he says penalizes borrowers for the bad behavior of big banks, some of whom have allowed foreclosed properties to deteriorate and undermine neighborhoods.
***
  • Worcester Anti-Foreclosure Team organizer Jon Marien also criticized the bond cost-shifting, noting that banks are recouping from customers money that they will eventually get back from the city.

    “It’s just another dirty trick that we see. It’s ridiculous,” Mr. Marien said.

    The city now holds 861 property registration bonds totaling $4.3 million from more than a dozen banks, credit unions and other financial or real estate firms, according to the treasurer’s office. Bank of America’s bonds, at $1.8 million, account for more than a third of the total.

    Paul Vigneau, assistant commissioner of inspectional services, said the city has no way of knowing which banks and other financial institutions are passing on the cost of the bond to customers, except when borrowers complain.

    “People have called us and said, ‘Your bond cost me $5,000,’” Mr. Vigneau said.

    Anecdotally, the practice seems to be becoming more common and not limited to Bank of America, he said.

    The $5,000 bond Bank of America posted when it initiated foreclosure proceedings against Ms. Evans was recently returned to the bank, according to city records. That’s because Bank of America sold the servicing rights on a large portfolio of Freddie Mac loans, including that of Ms. Evans, to Nationstar Mortgage Holdings Inc. of Lewisville, Texas, according to Nationstar Mortgage.

    The city now holds a $5,000 bond on the property posted by Nationstar Mortgage’s subcontractor, Safeguard Properties of Cleveland, Ohio, according to city records.

    But it’s not clear if the $5,000 that Bank of America charged Ms. Evans was ever removed from her account when Bank of America got its money back from the city.

    “There have been situations where we’ve released the bond back to the bank and then had to work with homeowners to help them get their $5,000 back,” Mr. Vigneau said.

    Ms. Evans said it doesn’t appear to her from her statements that the fee was ever removed from her account before Nationstar Mortgage took over the account from Bank of America, forcing her to start over in contesting the foreclosure proceeding with yet another company. She continues to live in the duplex and dispute the basis of the foreclosure proceeding against her.

    You can’t get them to take these fees off. That’s what the city has to realize,” Ms. Evans said. “Even if the city says the bank doesn’t owe the money any more, it’s still on your loan.”

Bay Area Man Loses Home To Foreclosure Despite Remitting $27K To Reinstate Mortgage; Misplaced Cashier's Check, Failure To Apply Payment = More Of The Same At BofA

In San Francisco, California, the Center For Investigative Reporting and NBC Bay Area report:
  • Joji Thomas was desperate to save his home. The San Francisco mechanical engineer sold his car, tapped into his wife’s savings and begged friends for money. In July, to stave off foreclosure, he bought a $27,777.85 cashier’s check and mailed it to Bank of America.

    Joji Thomas (right) directs movers as he packs up his home in San Ramon. Bank of America foreclosed on the house after the bank lost a $27,777.85 cashier’s check Thomas had sent in an effort to save the home.

    A bank representative acknowledged receiving the check two days later, Thomas said. But the payment went missing later that week and was not applied to his mortgage. Bank of America foreclosed on his home and sold it at auction. He moved out April 13.

    “I was forced into this,” he said as he cleared the furniture from his home. “I had no other choice.”

    Thomas is one of thousands of Bay Area homeowners fighting in court to save their homes from a foreclosure system rife with mistakes, mismanagement and even fraud, a joint investigation by the Center for Investigative Reporting and NBC Bay Area has found.

    Despite recent settlements with state and federal regulators and a new California law that tightens rules for the mortgage industry, banks and their subsidiaries continue to file invalid documents and foreclose on properties to which they appear to have no legal right, an analysis of thousands of pages of property records and wrongful foreclosure lawsuits shows.

    At the center of much of this is Bank of America, which plays the largest role of any bank in Bay Area foreclosures. From July 2008 through October, Bank of America's foreclosure trustee, ReconTrust, handled 1 in 5 defaulted properties in the Bay Area, roughly 70 percent more than the next biggest trustee, according to RealtyTrac Inc., a real estate information company. During the past five years, 184,000 Bay Area properties went into default; last year, the value of these loans exceeded $11.6 billion.

    Jay Patterson, a forensic accountant and certified fraud examiner in Arkansas; Ben Weber, who formerly worked for the city of San Francisco analyzing property records; and Marie McDonnell, a private auditor in Massachusetts, reviewed hundreds of loan documents and property records for this story at the request of CIR and NBC Bay Area.

    All three agreed there is evidence that Bank of America and its subsidiaries skirted proper procedures in foreclosure filings. These practices included lying on fraudulent loan transfers and altering dates on property records, which allowed Bank of America to initiate foreclosure and collect payments and fees for home loans it did not own.

    Patterson said an average homeowner looking through property records cannot tell if they are fraudulent; a public document that appears to transfer ownership of a mortgage can be fabricated. Patterson traced the true chain of ownership for mortgages on behalf of CIR and found that in many cases, banks were filing false documents.

    “Banks didn’t have them and were making them up to foreclose,” said Patterson, who serves as an expert witness for plaintiffs' attorneys in wrongful foreclosure lawsuits.

    “Land records are supposed to be the true representation of who owns the land," he said. "But what you’ve seen in the last 10 years is the bastardization of these records, and it might take another 100 years to straighten them out.”
For more, see Error claims cast doubt on Bank of America foreclosures in Bay Area.

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

Tuesday, April 30, 2013

Poorly-Baked Cakes, Collapsing Buildings, ... & Unperfected Mortgages Challenged By Bankruptcy Trustees

From the blog Bankruptcy-RealEstate-Insights.com:
  • Whether one is baking a cake, building a house, or recording a mortgage, sometimes even the slightest deviation from the directions can lead to catastrophe. Cakes don’t rise, buildings fall down, and … mortgages aren’t perfected.”(1)  So starts the opinion in Couillard.

    The Coulillards refinanced a purchase money mortgage. The legal description attached to the refinancing mortgage included an easement parcel, but omitted the two principal parcels. A couple of months after the mortgage was recorded, an “affidavit of correction” to correct an “error” in the mortgage legal description was recorded that attached the missing parcel descriptions. A few years later the Couillards filed bankruptcy.

    The bankruptcy trustee brought an adversary proceeding to avoid the mortgage using the “strong arm” powers under Section 544(a) of the Bankruptcy Code. Specifically, this section allows a trustee to assert the rights of a hypothetical bona fide purchaser of real estate that has perfected the property transfer (i.e. recorded a conveyance document) as of the commencement of the bankruptcy case.

    Under applicable state law, a conveyance that is not recorded is generally void as against a subsequent purchaser who records first.

    Outside of bankruptcy, there is generally an exception if the purchaser has either actual or constructive notice of unrecorded claims.

    However, in exercising a purchaser’s rights in bankruptcy, a trustee is subject to only constructive notice, not actual notice. Under applicable state law regarding constructive notice, purchasers are deemed to have notice of claims that are revealed by use or occupancy of the property or by a review of the “chain of title (i.e., the records in the office of the register of deeds and other public records)” for the property.

    So, this case turned on whether the Section 544(a) hypothetical purchaser would have had constructive notice of the refinancing mortgage based on a combination of the defective mortgage and the corrective affidavit.
For more, see Mortgage Errors - How Not to Correct a “Boo-Boo."

For the court ruling, see Seelen v. Couillard (In re Couillard), 486 B.R. 466 (Bankr. W.D. Wis. 2012).

(1) The court continued by noting that, outside the bankruptcy context, the bankster's error may not have been a big deal, but within a bankruptcy proceeding, it's a completely different story:
  • In this case, a lender made a mistake in recording its mortgage and then attempted to fix the problem. But for the debtors’ bankruptcy, the error might have been considered inconsequential.

    However, the bankruptcy trustee believes that the mistake invalidates the lender’s mortgage as against a subsequent purchaser under state law and brought this adversary proceeding to avoid the mortgage pursuant to 11 U.S.C. § 544(a).
--------------------------------------------------
By the way, the court's use of hyperbole associating a mortgage screw-up with the catastrophe of a fallen building or an uncooperative cake is addressed in footnote 1 of the opinion:
  • Yes, in the grand scheme of things, not quite as dramatic as a collapsing building, but nonetheless upsetting for the creditor who suffers such a fate. The trauma associated with poorly baked cakes, meanwhile, is proportionally related to the importance of the event involved.

Pension Loans: The New 'Payday-Type' Loan Duping Seniors Into Debt With Hidden Usurious Interest; Deal Disguised As A 'Signing Away Of Retirement Benefits;' Loan Sharks' Response: 'We Don't Make Loans ... We Make Advances!'

The New York Times reports:
  • To retirees, the offers can sound like the answer to every money worry: convert tomorrow’s pension checks into today’s hard cash.

    But these offers, known as pension advances, are having devastating financial consequences for a growing number of older Americans, threatening their retirement savings and plunging them further into debt. The advances, federal and state authorities say, are not advances at all, but carefully disguised loans that require borrowers to sign over all or part of their monthly pension checks. They carry interest rates that are often many times higher than those on credit cards.

    In lean economic times, people with public pensions — military veterans, teachers, firefighters, police officers and others — are being courted particularly aggressively by pension-advance companies, which operate largely outside of state and federal banking regulations, but are now drawing scrutiny from Congress and the Consumer Financial Protection Bureau.
***
  • A review by The New York Times of more than two dozen contracts for pension-based loans found that after factoring in various fees, the effective interest rates ranged from 27 percent to 106 percent — information not disclosed in the ads or in the contracts themselves. Furthermore, to qualify for one of the loans, borrowers are sometimes required to take out a life insurance policy that names the lender as the sole beneficiary.

    LumpSum Pension Advance and Pension Funding did not return calls and e-mails for comment.

    While it is difficult to say precisely how many financially struggling people have taken out pension loans, legal aid offices in Arizona, California, Florida and New York say they have recently encountered a surge in complaints from retirees who have run into trouble with the loans.

    Ronald E. Govan, a Marine Corps veteran in Snellville, Ga., paid an interest rate of more than 36 percent on a pension-based loan. He said he was enraged that veterans were being targeted by the firm, Pensions, Annuities & Settlements, which did not return calls for comment.

    “I served for this country,” said Mr. Govan, a Vietnam veteran, “and this is what I get in return.”

    The allure of borrowing against pensions underscores an abrupt reversal in the financial fortunes of many retirees in recent years, as well as the efforts by a number of financial firms, including payday lenders and debt collectors, to market directly to them.
***
  • “The cost of these pension transactions can be astronomically high,” said Stuart Rossman, a lawyer with the National Consumer Law Center, an advocacy group that works on issues of economic justice for low-income people. “But there is profit to be made on older Americans’ financial pain.”

    The oldest members of the baby boom generation became eligible for Social Security during the recent housing bust and recession, and many nearing retirement age watched their investments plummet in value. Some are now sliding deep into debt to make ends meet.

    The pitches for pension loans emphasize how difficult it can be for retirees with scant savings and checkered credit histories to borrow money, especially because banks typically do not count pension income when considering loan applications.
***
  • Financial products like pension advances, which promise quick cash, appear especially enticing because their long-term costs are largely hidden from the borrowers.

    Federal and state regulators are spotting fresh examples of abuse, and both the Consumer Financial Protection Bureau and the Senate’s Committee on Health, Education, Labor and Pensions are examining these loans, according to people with knowledge of the matter.

    Though the firms are not directly regulated by states, officials from the California Department of Corporations, the state’s top financial services regulator, filed a desist-and-refrain order against a pension-advance firm in 2011 for failing to disclose critical information to investors.

    That firm has since filed for bankruptcy, but a department spokesman said it remained watchful of pension-advance products.
***
  • Borrowing against pensions can help some retirees, elder-care lawyers say. But, like payday loans, which are commonly aimed at lower-income borrowers, pension loans can turn ruinous for people who are already financially vulnerable, because of the loans’ high costs.
***
  • Lawyers for service members argue that pension lending flouts federal laws that restrict how military pensions can be used. [...] Pitches to military members must sidestep a federal law that prevents veterans from automatically turning over pension payments to third parties.

    Pension-advance firms encourage veterans to establish separate bank accounts controlled by the firms where pension payments are deposited first and then sent to the lenders. Lawyers for retirees have challenged the pension-advance firms in courts across the United States, claiming that they illegally seize military members’ pensions and violate state limits on interest rates.

    To circumvent state usury laws that cap loan rates, some pension advance firms insist their products are advances, not loans, according to the firms’ Web sites and federal and state lawsuits. On its Web site, Pension Funding asks, “Is this a loan against my pension?” The answer, it says, is no. “It is an advance, not a loan,” the site says.

    Rhode Island AG Tags Attorney-Led Foreclosure Rescue Outfit In Suit Alleging Fraudulent Loan Modification Ripoffs

    In Providence, Rhode Island, Courthouse News Service reports:
    • A Long Island attorney runs a "Legal Network" under many names that hurts people through a nationwide "fraudulent loan modification scheme," Rhode Island claims in court.

      Rhode Island sued these defendants in Superior Court: R.M.A. Legal Network aka R.A. Legal Group aka Alarcon Law Group aka Professional Legal Network, Bruce A. Thomas, Robert Michael Alarcon and Rory Alarcon.

      Rory Alarcon, a New York attorney, runs the "network" of companies, most recently out of Holbrook, Long Island, according to the complaint. The other defendants are his agents or employees.

      The complaint states: "The Rhode Island Attorney General's Consumer Protection Unit has received at least twenty-one (21) complaints from consumers and/ or names of customers provided by defendant Rory Alarcon through the Civil Investigative demand process who have been defrauded out of thousands of dollars by defendants, whose risk of foreclosure has increased, and/or have been notified that the foreclosure process has begun, all as a result of fraudulent loan modification schemes executed by defendants.

    Monday, April 29, 2013

    Even More On The Feds' Bungling Of The Nationwide Foreclosure Fraud Settlement

    Rolling Stone Contributing Editor Matt Taibbi writes:
    • The obscene greed-and-arrogance stories emanating from Wall Street are piling up so fast, it's getting hard to keep up. This one is from last week, but I missed it – it's about the foreclosure/robo-signing settlement that was concluded earlier this year.

      The upshot of this story is that in advance of that notorious settlement, the government ordered banks to hire "independent" consultants to examine their loan files to see just exactly how corrupt they were.

      Now it comes out that not only were these consultants not so independent, not only did they very likely skew the numbers seriously in favor of the banks, and not only were these few consultants paid over $2 billion (over 20 percent of the entire settlement amount) while the average homeowner only received $300 in the deal – in addition to all of that, it appears that federal regulators will not turn over the evidence of impropriety they discovered during these reviews to homeowners who may want to sue the banks.

      In other words, the government not only ordered the banks to hire consultants who may have gamed the foreclosure settlement in favor of the banks, but the regulators themselves are hiding the information from the public in order to shield the banks from further lawsuits.

      Secrets and Lies of the Bailout ...

    Antitrust Feds Ring Up 30th Conviction In Ongoing Northern California Foreclosure Sale Bid Rigging Probe

    From the United States Department of Justice (Washington, D.C.):
    • A Northern California real estate investor has agreed to plead guilty for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

      Felony charges were filed [] in the U.S. District Court for the Northern District of California in San Francisco against Mohammed Rezaian, of Novato, Calif. Rezaian is the 30th individual to plead guilty or agree to plead guilty as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

      According to court documents, Rezaian conspired with others not to bid against one another, but instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in San Francisco and San Mateo counties, Calif .

      Rezaian was also charged with conspiring to use the mail to carry out schemes to fraudulently acquire title to selected properties sold at public auctions, to make and receive payoffs, and to divert to co-conspirators money that would have otherwise gone to mortgage holders and others. According to court documents, a forfeiture allegation was also included in the charges against Rezaian.
    ***
    • The charges today are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties, Calif.

      These investigations are being conducted by the Antitrust Division’s San Francisco office and the FBI’s San Francisco office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco office at 415-436-6660 , visit www.justice.gov/atr/contact/newcase.htm, or call the FBI tip line at 415-553-7400.

    Investor Cops Guilty Plea For Role In Bid Rigging Conspiracy At New Jersey Tax Lien Auctions

    From the U.S. Department of Justice (Washington, D.C.):
    • A financial investor who purchased municipal tax liens pleaded guilty [] for his role in a conspiracy to rig bids for the sale of tax liens auctioned by municipalities in New Jersey, the Department of Justice announced.

      A felony charge was filed [] in U.S. District Court for the District of New Jersey in Newark, against Norman T. Remick, of Barnegat, N.J. According to the charge, from in or about the beginning of 2007 until approximately February 2009, Remick participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to allocate among certain bidders which liens each would bid on. The department said that Remick proceeded to submit bids in accordance with the agreements and purchased tax liens at collusive and non-competitive interest rates.

      “The conspirators illegally met and engaged in anticompetitive discussions to allocate bids amongst themselves at tax lien auctions in New Jersey, depriving distressed homeowners of competitive interest rates at a time when they most needed them,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “Prosecuting these types of bid-rigging schemes remains a top priority for the division.”

      The department said that the primary purpose of the conspiracy was to suppress and restrain competition in order to obtain selected municipal tax liens offered at public auctions at non-competitive interest rates. When the owner of real property fails to pay taxes on that property, the municipality in which the property is located may attach a lien for the amount of the unpaid taxes. If the taxes remain unpaid after a waiting period, the lien may be sold at auction. State law requires that investors bid on the interest rate delinquent property owners will pay upon redemption. By law, the bid opens at 18 percent interest and, through a competitive bidding process, can be driven down to zero percent. If a lien remains unpaid after a certain period of time, the investor who purchased the lien may begin foreclosure proceedings against the property to which the lien is attached.

      According to the court documents, Remick was involved in a conspiracy with others not to bid against one another at municipal tax lien auctions in New Jersey. Since the conspiracy permitted the conspirators to purchase tax liens with limited competition, each conspirator was able to obtain liens that earned a higher interest rate. Property owners were, therefore, made to pay higher interest on their tax debts than they would have paid had their liens been purchased through open and honest competition, the department said.

      A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act violation may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than the $1 million statutory maximum.

      Today’s plea is the 12th guilty plea resulting from an ongoing investigation into bid rigging or fraud related to municipal tax lien auctions. Eight individuals – Isadore H. May, Richard J. Pisciotta Jr., William A. Collins, Robert W. Stein, David M. Farber, Robert E. Rothman, Stephen E. Hruby and David Butler – and three companies – DSBD LLC, Crusader Servicing Corp. and Mercer S.M.E. Inc. – have previously pleaded guilty as part of this investigation.
    For the Justice Department press release, see New Jersey Investor Pleads Guilty for Role in Bid-Rigging Scheme at Municipal Tax Lien Auctions (Investigation Has Yielded 12 Guilty Pleas).

    Sunday, April 28, 2013

    Federal Regulators Continue Applying Heat On Big Banksters For Targeting Cash-Strapped Consumers With Payday-Style Loans

    The New York Times reports:
    • Federal regulators on Thursday admonished some of the nation’s largest banks for offering payday-style loans, short-term costly credit tied to customers’ checking accounts.

      The guidance from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation urged the banks, including Wells Fargo and U.S. Bank, to ensure that borrowers can repay the loans, which otherwise can mire customers in debt and result in a slew of fees.

      Banks offer the loans linked to checking accounts with the understanding that the lender automatically withdraws the full cost of the loan when it is due. Factoring in fees, the loans, called deposit advances, can come with interest rates that exceed 300 percent.

      The moves on Thursday come as state and federal officials ratchet up their efforts to clamp down on payday lending at storefronts and at large banks. Across the nation, 15 states impose strict interest caps on the loans, effectively banishing payday lenders.

      On Wednesday, the Consumer Financial Protection Bureau, which has been examining the loans, issued a report that found the payday and direct-deposit loans can quickly morph from short-term credit into a seemingly unending burden for low-income customers. “For too many consumers, payday and deposit advance loans are debt traps,” Richard Cordray, the agency’s director, said in a statement when the report was issued.

    Philadelphia Woman Who Had Home Stolen Out From Under With Forged Deed Finally Regains Title; "I Had To Go Through Hell For 5 1/2 Years To Get My House Back!"

    In Philadelphia, Pennsylvania, the Philadelphia Daily News reports:
    • IT WAS THE HARDEST, longest fight of Teresa Isabella's life.

      After five years of navigating the civil-court system mainly on her own, Isabella, 66, regained ownership last year of the massive four-story rowhouse just blocks from Rittenhouse Square that was stolen from her.

      "It took so many years out of my life, and at what cost, when it could have been done simpler," Isabella said in a recent interview, surrounded by years' worth of court filings, tears streaming down her cheeks. "My full-time job was this."

      In 2007, Isabella discovered that a bogus deed had been recorded showing that she had sold the decaying house on 18th Street near Delancey to Maureen McClay for $50,000. The city valued the house at $250,000.

      That kicked off a series of fake deeds and sale agreements in which the house changed hands three times from McClay to Hien Nguyen and Anna Nguyen for $90,000, and then to Jack Trung Nguyen for $150,000, all in the space of a year. "By the time I got the paperwork, a new owner had popped up," said Isabella.

      She said she called the police, the District Attorney's Office, the state attorney general, the FBI and several legal groups for help. "I wanted help from the city, and no one helped me," she said.

      Tasha Jamerson, spokeswoman for the D.A.'s Office, said Isabella had contacted the office and was referred to Central Detectives in the Police Department. The case made its way to the Major Crimes Unit, which handles fraudulent deeds, but it has not been successful, said Sgt. Joseph Cella.

      Cella says he urges victims to file an "action to quiet title," a civil complaint that is the only way the rightful owners can get their properties back under their names.

      Isabella studied the court system and how to file various legal documents. Five years and thousands of dollars later, Common Pleas Judge Esther Sylvester ruled in Isabella's favor last year, after Jack Trung Nguyen challenged an earlier ruling.Nguyen is now trying to get back money for expenditures.

      Isabella has taken all that she has learned from that terrible experience to help fraudulent-deed victims and friends facing foreclosure.

      "I had to go through hell for 5 1/2 years to get my house back," she said. "Those are the steps I had to take to get to where I am today. [But] how many people don't know what to do?"

    Postal Inspectors: Con Artist Duped 88-Year Old Woman Into Giving Him POA, Then Used It To Score Reverse Mortgage On Victim's Free & Clear Home; Suspect Pocketed $51K, Leaves Premises In Foreclosure

    In St. Louis, Missouri, WOAI-TV Channel 4 reports:
    • Senior citizens are often prime targets for con artists. In one case, an 88-year-old woman is on the verge of losing her home.

      "My uncle and aunt purchased this house in 1948," explained Jackie Keller-Smith, who is the woman's niece. "It was paid off in the 70's." Jackie is trying to help her aunt save her home from foreclosure after a con artist stole it right out from under her. "He said 'If you let me stay, I will give you $50 a week,' I think he said," victim Agnes Dismuke recalled. "He didn't give me nothing."

      "He" is a man named Larry Bradshaw who investigators say convinced Agnes to give him her power of attorney - according to postal inspectors.

      "He used the Power of Attorney to obtain credit cards, loans, and for his own personal gain," said U.S. Postal Inspector Don Washington.

      In fact, postal inspectors say Bradshaw refinanced Agnes's home with a reverse mortgage, made off with $51,000, and Agnes never saw a dime.

      "He didn't see any husband here, and he just took advantage of me," said Agnes.

      She was unaware any of this was happening, and she is now in jeopardy of losing her home, which is in foreclosure.

      "This is despicable. She has been here all of her life," Agnes' niece Jackie said.

      City officials have halted plans to evict Agnes. But the possibility of her being forced out of her home is still a reality as courts, banks, and law enforcement try to reconcile all of the issues.

      Larry Bradshaw was arrested last month on wire fraud charges but has been released pending trial.
    Source: Officials: Con artist steals woman's home.

    For the U.S. Attorney press release, see Local Man Indicted On Fraud Charges.

    Saturday, April 27, 2013

    Homeowner Refuses To Pay Code Enforcement Fine, Vows To Demolish Home Instead; Says He Installed Bullet-Proof-Like Glass Without A Permit Because He Was Tired Of Golfballs Flying Through His Windows

    In Palm Beach, Florida, the Palm Beach Daily News reports:
    • The Code Enforcement Board postponed a foreclosure hearing Thursday on a Bahama Lane home, after hearing that owner Karl Wattenhofer plans to demolish the house rather than install proper windows.

      Wattenhofer, a native of Switzerland who has lived on the island for 20 years, installed bullet-proof-like glass 10 years ago at 264 Bahama Lane because he was tired of golfballs flying through his windows, according to his attorney Jason Evans.

      Officers found out about the windows last year and have since been fining Wattenhofer daily. The fine is “somewhere in the $56,000 range,” Evans said.

      Evans requested a 60-day postponement of the foreclosure hearing so he can seek approval from the Architectural Commission to demolish the house and so he can appear at a fine reduction hearing. He said the owner is fed up.

      “It’s an emotional issue for the owner,” Evans said. “He’s upset and decided he wants to return to his home country full-time. He feels as though it’s extremely unfair because it’s an extreme fine.”
    For the story, see Owner looks to demolish house rather than install different windows.

    For story follow-up, see Feud over unpermitted golf-ball-proof windows spikes (Homeowner to seek demolition rather than pay ‘unfair’ fine; town calls it ‘life-safety issue’).

    Senior Advocates: Sarasota Nursing Home A Poster Child For Sort Of Problems That Can Arise From Lack Of Government Oversight; State Lawmakers Push To Further Loosen Industry Regulations

    In Sarasota, Florida, the Sarasota Herald Tribune reports:
    • Two men imprisoned for health care fraud in the late 1970s slipped by a state agency's screening when they opened a Sarasota nursing home.

      The Harmony Healthcare and Rehabilitation Center later became one of the nation's prime examples of what can go wrong in senior housing before it was shut down by state regulators for failing basic safety measures and not accounting for the disbursement of narcotics.

      The state Agency for Health Care Administration approved a 2004 application from a company owned by brothers-in-law Benjamin Gelbtuch and Neil Ellman, each of whom was sentenced to three years in prison in 1979 for Medicaid fraud in New York.

      Six years after the pair opened Harmony Healthcare in 2006, the skilled nursing home on Courtland Street in Sarasota was shuttered after the death of a patient revealed widespread problems with the center's care.

      With the building now lost to foreclosure and the company run by Gelbtuch and Ellman in bankruptcy, advocates for seniors say the nursing home is a poster child for the sort of problems that can arise from a lack of government oversight.

      Meanwhile, state legislators are pushing to further loosen regulation of the nursing home industry and erode the recourse consumers might have, a move opponents fear will open the floodgates for problems like those identified at Harmony.
    ***
    • "People who committed fraud, gamed the system and went to prison should never be able to open these types of facilities," said Brian Lee, who directed Florida's Long-Term Care Ombudsman Program for eight years and now operates the nonprofit advocacy group Families For Better Care.

      "No convicted felon should be operating these homes. They're caring for our parents and grandparents."

    Landlord, Fannie Fight It Out Over Who Gets To Snatch Rent While Caught-In-The-Middle Tenants Say They're Wallowing In Building Facing Foreclosure With Pests, Mold, $2M In Code Violations, Etc.

    In Orlando, Florida, WFTV Channel 9 reports:
    • The owners of the Washington Shores Villages apartments owe the city of Orlando close to $2 million for code violations. People living in the apartment complex said they live in terrible conditions with pests, mold and other problems.

      Real estate attorney Karen Wonseter said the foreclosure proceedings between PDQ, the company that owns Washington Shores Villages, and Fannie Mae came to a head. "The court said, I don't believe you, I think the bank has shown that you are lying,’” Wonseter said.

      Court documents show Fannie Mae wants the rent from tenants in the apartment complex.

      According to documents, they've requested PDQ turn over the paperwork that shows how much they're entitled to numerous times. So far the company hasn't done it and had a number of excuses.

    Homeowner Facing Foreclosure Dodges Serious Jail Time, Gets Five Months Instead For Torching Home To Pocket Insurance Cash; Basement Blaze Set While Suspect's Wife Lay Asleep Upstairs

    In Rockland, Maine, the Bangor Daily News reports:
    • A 52-year-old South Thomaston man was sentenced [] to five months in jail after admitting he set fire to his home in an effort to collect insurance.

      Dana R. Benner was sentenced Monday morning in Knox County Superior Court to six years in jail with all but five months suspended for arson. Benner also will be placed on probation for three years. During that probationary period, Benner is prohibited from possessing incendiary devices including a cigarette lighter or cigarettes.

      Justice Jeffrey Hjelm cited the potential injury to first responders such as firefighters from the two towns that responded to the Sept. 2, 2008, fire.

      The judge also pointed out that Benner’s wife was asleep upstairs in the house when Benner used a match to set fire to clothes in the basement.

      Defense attorney Jonathan Handelman cited his client’s mental health issues in seeking no jail time for his client. Handelman said the Dana Benner before the court Monday was not the same man at the time of the fire.

      Assistant District Attorney Christopher Fernald cited evidence that Benner wanted to get rid of the house that was near foreclosure.

    Foreclosure Forces Reception Venue Shutdown, Leaving Dozens Of Brides Out Thousand$ & Without Place To Hold Weddings; Victims: Owner Knowingly Pocketed Upfront Deposits While Facing Imminent Boot

    In Chandler, Arizona, KNXV-TV Channel 15 reports:
    • A local Chandler wedding venue closed its doors leaving dozens of brides out of money and out of a place to hold their wedding.

      Inspirador, owned by Dilia Wood, emailed clients Saturday telling them they needed to shut down immediately, blaming a recent foreclosure for the problem.

      According to the company's bank, Inspirador has had financial problems since 2011. The bank took over the bank last week.

      Brides like Theresa Tanner aren't happy. Tanner has already paid for her wedding in full. It cost her $14,000 to host 170 guests at her wedding that's supposed to happen in 30 days.

      "We have to cancel her honeymoon," said Tanner. She's doing that to pay for her wedding.

      "It's the coldest thing you can imagine. This is the place where all my dreams would come true and this is the place that shattered them all in an email," said Tanner.

      Tanner, along with 60 other brides received the same letter saying the company had to close it's doors immediately.

    Friday, April 26, 2013

    Ex-Real Estate Agent Gets 26 Years In Racket That Combined Illegal Foreclosure Rescue Schemes, Straw Buyer Scams & Short Sale 'Flopping' Ripoffs, Duping Financially Distressed Homeowners, Unwitting Lenders

    From the Office of the U.S. Attorney (Tampa, Florida):
    • U.S. District Judge Elizabeth A. Kovachevich sentenced John Lebron (33, Tampa) last week to 26 years in federal prison for conspiracy to commit wire fraud, wire fraud affecting a financial institution, and making false statements to a financial institution. Lebron was also ordered to serve a 5-year term of supervised release, following his release from prison. As part of his sentence, the court also entered a money judgment in the amount of $1,469,300. Lebron was found guilty on October 19, 2012, following a three-week jury trial.

      According to testimony and court documents, Lebron was a Florida-licensed realtor and worked as a loan officer. Taking advantage of the downturn in the real estate market, Lebron participated in mortgage foreclosure rescue fraud and short sale fraud, which is sometimes called “flopping” a house.

      As part of the scheme, Lebron had hand drawn signs placed on the side of the roads, usually in low income neighborhoods. These signs often advertised the sale of nonexistent houses. The purpose of the signs was to generate leads, to prey upon unsophisticated people, particularly those losing their houses in foreclosure.

      Working with another Florida-licensed real estate agent, Lebron opened up a company, called EZ Investments. During their first deal, they used a victim whose house was falling into foreclosure. Lebron arranged for a straw purchaser - his sister - to buy the house in a non-arm’s length transaction.

      That is, Lebron controlled both ends of the deal. Lebron also served as the loan officer, thus receiving the mortgage broker’s commission, although another loan officer’s name was placed on the paperwork to conceal what Lebron had done. Lebron also took the check that represented the proceeds of the sale of the home from the distressed home owner without her knowledge.

      After the straw purchaser “bought” the house, Lebron paid the original mortgage for a short time to prevent the victim from detecting the fraud.

      He then arranged a short sale of the house to his brother-in-law, in another non-arm’s length transaction. Six days later, using simultaneously recorded deeds, the property was resold to a “credit partner,” that is, another straw purchaser, who Lebron had arranged to buy the house before the short sale proposal was submitted to the bank. This straw purchaser, essentially unemployed, was added on to bank accounts under the control of the conspirators to make it appear that he had assets. The down payment for the transaction was funded through those bank accounts. Fake pay stubs were created to give the appearance that the buyer had an income to support the loan.

      In these deals, the conspirators pocketed the money that should have gone to the original distressed home owner. They also received the mortgage broker commission for arranging the first straw purchaser's loan and other commissions and fees, and got the difference between the short sale amount and the new loan. The straw purchasers were each paid $5,000 for their role in the scheme. In addition, Lebron acquired four other loans through fraud.

      During the course of the conspiracy, Lebron used stolen and false identities; fraudulently verified his own employment claiming jobs he never had; and, for at least one of the properties, bought it as his primary residence when he legally could not move into it. Lebron committed these crimes while on pretrial release and while on probation.

      "This case is particularly disturbing on several fronts," stated John Joyce, Special Agent in Charge, United States Secret Service - Tampa Field Office. "Mr. Lebron and his cohorts knowingly took advantage of homeowners who were in financial distress in order to advance their own financial well being. Mr. Lebron had the audacity to commit these fraudulent acts while on probation and he also defaulted on $1.4 million in loans. He will soon understand that 26 years is a stiff price to be paid for his actions.”

    Undoing A Sale Leaseback Foreclosure Rescue Ripoff: Screwed-Over Homeowner Entitled To Evidentiary Hearing Where Material Issues Of Fact Exist: Florida Appeals Court

    A Florida court case a few years back involving an alleged sale leaseback foreclosure rescue scam serves as a reminder of the type of difficulty screwed-over homeowners face in any foreclosure-related litigation when attempting to assert their rights, only to have a trial judge dispose of their case by summary judgment and without the benefit of an evidentiary hearing.

    Further, and perhaps more importantly, the case highlights the homeowners' need to be represented by counsel who is prepared to take the matter to an appeals court in the event of an unfavorable (and often, incorrect) ruling by the trial judge.

    In this case, the homeowners owned a townhouse with a fair market value of $250,000. They could not keep up with their mortgage payments, and their lender foreclosed. The final judgment of foreclosure required the payment of $89,526, although their mortgage permitted them to reinstate for a payment of $32,290.

    After a couple of weeks of contacts, the homeowners finally entered into a purported sale leaseback arrangement with a foreclosure rescue operator. The homeowners signed over title to their home for a deed-recited price of $32,300, with the operator contemporaneously cutting a check to the foreclosing lender for $32,290 to obtain a reinstatement of the mortgage.

    As described in the opinion, the homeowners (the "Bernsteins") defaulted on their rent payments to the operator ("New Beginnings"), and the litigation between the two sides in this case began. From the Florida appellate court's opinion:
    • New Beginnings filed a motion for partial summary judgment as to its count seeking a declaratory judgment that the effect of the transaction documents was a sale and leaseback and also as to its count seeking to evict the Bernsteins from the property for failure to pay rent. It argued that the transaction documents were clear and unambiguous on their face and that they contained no latent ambiguities.

      Moreover, even if the court were to allow the Bernsteins to introduce parole evidence of their intent in signing the documents, the deposition transcript reflected that the Bernsteins knew they were selling their property with the option to repurchase it within twelve months.

      In opposition to the motion, the Bernsteins argued that the transaction documents created a substantial question as to whether the transaction was a sale or a mortgage.

      They alleged that communications with New Beginnings led them to believe that it would help them save their home through a refinance.

      Additionally, they asserted that, when read together, the documents contained all of the hallmarks of a mortgagor-mortgagee relationship, specifically a wrap-around one year interest only balloon mortgage.

      In support, they pointed to the various obligations imposed on the tenant in the lease agreement, including requirements that the Bernsteins maintain the interior and exterior of the house, and pay taxes, insurance, and homeowner's fees.

      Moreover, there was no settlement statement in connection with the transaction, no title insurance, no tax or insurance prorations, and New Beginnings did not satisfy or assume the first mortgage. All indicia of ownership remained with the Bernsteins. New Beginnings did not even receive a set of keys from the Bernsteins.

      The [trial] court granted partial summary judgment determining that the transaction was a sale and leaseback and that the Bernsteins had knowingly entered into the transaction.
    ***
    At this point, and perhaps unlike most screwed-over homeowners victimized by a crappy ruling by a trial judge, the Bernsteins sought a review of said order by filing an appeal with a state appeals court.

    In a rather short and sweet opinion setting forth its reasoning, the Florida appeals court reversed the trial judge's order, saying that, when taking the record in the light most favorable to the Bernsteins, material issues of fact remained.(1)

    Accordingly, the case was not ripe for summary judgment, and the appeals court booted the case back to the trial judge for an evidentiary hearing on the merits.

    For the ruling, see Bernstein v. New Beginnings Trustee, LLC, 988 So. 2d 90 (Fla. 4th DCA 2008).

    Go here for a non-all-inclusive survey of Florida cases applying the doctrine of equitable mortgage to real estate conveyances that may have ostensibly been sale leaseback or other financing transactions.

    Go here for a helpful resource from the National Consumer Law Center on how to approach undoing sale leaseback equity stripping foreclosure rescue scams (I suspect this resource may also come in handy for those underwater homeowners looking to undo a sale leaseback deals made in connection with short sale schemes offered by real estate operators of the type described in another of today's posts - and that have apparently become popular in recent years).

    (1) From the court's opinion:
    • The Bernsteins contend that the transaction documents establish a contractual relationship between the parties indistinguishable from a refinance wrap-around interest only one year balloon mortgage. They assert that the trial court incorrectly based its order on a patent/latent ambiguity analysis, instead of considering the facts and circumstances surrounding the transaction to discern the parties' intent.

      New Beginnings counters that the transaction documents were unambiguous, and that the record did not show the Bernsteins misunderstood them or did not know what they were signing.

      Pursuant to section 697.01(1), Florida Statutes, written instruments conveying or selling property for the purpose or with the intention of securing the payment of money are deemed to be mortgages. Deciding whether a conveyance should be declared a mortgage under the statute depends on the facts and circumstances surrounding the transaction and the parties' intent. Blanco v. Novoa, 854 So.2d 672, 674 (Fla. 3d DCA 2003) (citing Valk v. J.E.M. Distribs., 700 So.2d 416, 419 (Fla. 2d DCA 1997)). As the Valk court further explained:

      "In resolving this factual issue, courts will look beyond the terms of the documents themselves in order to determine the real intent of the parties at the time of the transaction." "[E]quity will look at and take into consideration all the facts and circumstances surrounding the transaction and will decree an instrument to be a deed or mortgage according to the real intentions of the parties."

      700 So.2d at 419 (citations omitted). See also Oregrund Ltd. P'ship v. Sheive, 873 So.2d 451 (Fla. 5th DCA 2004); Barr v. Schlarb, 314 So.2d 609, 610-11 (Fla. 1st DCA 1975) (noting that while there is a strong presumption in favor of the correctness of deeds and other official documents, "where the parties so intend, an instrument may be construed to be a mortgage although appearing to be otherwise on its face").

      It is the substance and not the form that is critical. Blanco, 854 So.2d at 674. Florida courts have liberally interpreted section 697.01(1) and, when in doubt, "have leaned in favor of construing the deed as a mortgage and have taken into consideration the entire transaction and circumstances in addition to the agreement and instrument of conveyance itself." Barr, 314 So.2d at 611.

      Under very similar facts, the Third District held in Minalla v. Equinamics Corp., 954 So.2d 645 (Fla. 3d DCA 2007), that an evidentiary hearing is required to determine whether a transaction constitutes a valid sale and lease or a mortgage. Minalla executed a deed conveying her residence to Equinamics in return for a one-year lease back of the residence with an option to repurchase. Just as the Bernsteins did, she also executed an assignment of escrow, bill of sale, and name affidavit in connection with the transaction. However, there was no settlement statement, title insurance, or tax or insurance proration. The first mortgage on the property remained undisturbed, and Minalla made payments on the mortgage. Additionally, she maintained the interior and exterior of the home, the structure, the electrical, plumbing, and all major appliances.

      Subsequently, when Equinamics attempted to evict Minalla for nonpayment of rent, she brought an action against Equinamics alleging that she was tricked into entering the transaction, which was not a sale but rather a disguised loan secured by her home. The trial court ordered her to pay rent into the court registry, which Minalla appealed.

      The Third District observed that this was not an ordinary real estate transaction or usual landlord-tenant relationship. The court further noted that there was a factual dispute concerning who was the true owner of the property. Because the order requiring payments into the court registry was made without conducting an evidentiary hearing concerning the nature of the transaction and who was the true owner of the residence, the Third District concluded that the trial court erred in imposing the payment requirement.

      Like Minalla, the transaction in this case is not an ordinary real estate transaction or landlord-tenant relationship. Material issues of fact remain.

      Taking the record in the light most favorable to the Bernsteins, New Beginnings approached the Bernsteins and led them to believe that it would help them save their home through a refinance. Ultimately, the Bernsteins signed the transaction documents two days before the foreclosure sale, having exhausted all avenues of financing. The lease agreement provided that New Beginnings was to use the rental payments to pay the existing mortgage on behalf of the Bernsteins. The mortgage remained in the Bernsteins' name, and New Beginnings did not assume the mortgage. It is not clear from this record that the mortgage holder even knew that the property had been transferred.

      Moreover, there was no settlement statement in connection with the transaction, no title insurance, and no tax or insurance prorations. At the same time, the Bernsteins were required to maintain the interior and exterior of the house, and pay taxes, insurance, and homeowner's fees. All indicia of ownership remained with the Bernsteins.

      Based on the facts of this case, it is apparent that the transaction by which New Beginnings received title to the Bernsteins' residence was clearly not an ordinary real estate transaction. Likewise, the circumstances under which the Bernsteins continued to remain on the property after they executed the warranty deed to New Beginnings was not possessed of the trappings of a usual landlord-tenant relationship. Minalla, 954 So.2d at 647.

      New Beginnings claims that all of the documents and the Bernsteins' deposition testimony prove that they knew exactly what the documents stated and agreed that they were not under duress. Aside from the fact that the documents themselves refer to the sale as a "distress" sale, the terms and conditions set forth are not consistent with a sale and leaseback. They may have known that they were executing the documents, but their legal effect depends upon the totality of the facts and circumstances. Despite the labels on the documents, it is the substance of the transaction and the real intent of the parties that controls.

      We therefore reverse both orders and remand for an evidentiary hearing on the merits. We do not address the remaining issues raised by the Bernsteins, as those do not involve non-final issues appealable pursuant to Florida Rule of Appellate Procedure 9.130.

    Atlanta Homeless Shelter & Its Clients Temporarily Dodge The Boot; State Appeals Court: Trial Judge Improperly Prevented Group To Present Evidence To Fight Foreclosure

    In Atlanta, Georgia, The Atlanta Journal Constitution reports:
    • The Metro Atlanta Task Force for the Homeless has collected a series of recent legal victories it hopes will result in something the group has sought for more than a year: a day in court where it can fight a pending eviction.

      A Fulton County judge had ordered the group to surrender its facility after it defaulted on its mortgage. But the Georgia Court of Appeals on Monday ruled the Fulton judge did not allow the Task Force to present evidence to fight the foreclosure.

      “We are feeling confident that we are on a path toward a complete trial with evidence presented,” said Anita Beaty, executive director of the Task Force. “We believe we will win. It looks like we will have our day in court.”

      Fulton County Superior Court judge Craig Schwall had originally ordered Beaty in February 2012 to turn over the shelter to a team run by the United Way of Metropolitan Atlanta, which would spend six months relocating the men who used the shelter. The facility would then be turned over to Premium Funding Solutions, a finance firm that acquired the deed after the task force defaulted on its mortgage.

      Known more commonly as Peachtree and Pine, the homeless facility is located in the heart of Atlanta where downtown meets Midtown.

      Beaty said that, depending on the weather, the facility usually served between 300-500 homeless people a daily. That does not include up to 150 more who were receive services or training there.

      “What we’re doing keeps me going,” said Beaty, addressing the weight of the center’s service coupled with the legal battle. “This place is really operating with a degree of self-sufficiency. To offer the services which have been offered is stunning and exciting.”