Michigan Couple Loses Home In Equity Stripping Scam

Reprinted from The Home Equity Theft Reporter - 7-26-07

In Royal Oak, Michigan, The Daily Tribune reports that a local couple face eviction from their home as a result of a bank foreclosure on their home.

Reportedly, their trouble started in 2004 when they sought to obtain a $10,300 home equity loan to pay off back taxes. According to the story, they were referred to Hispanic Financial Group, Inc., and its agent, Gustavo Aguilar, in April 2004, who not only paid the outstanding taxes but also slipped a purchase agreement into the paperwork and recorded an affidavit of interest against the property for $82,000. When all the dust settled, the couple say they unknowingly sold their house to the lender's accomplice without receiving a penny from the sale, and the lender walked away with a forged check for $33,000, cashed at LaSalle Bank. (LaSalle Bank subsequently repaid the money to the homeowner.) The accomplice ultimately let the house go into foreclosure and it was acquired in foreclosure by U.S. Bank.

The homeowners tried to get their house back in Oakland County Circuit Court. They claimed the mortgage was defective because it was obtained through a fraudulent transaction so U.S. Bank wasn't a bona fide purchaser. However, the judge ruled in April there wasn't enough evidence to support the homewowners' claims and U.S. Bank was ruled to be the rightful owner of the property. For more, see Couple faces eviction again (They lack funds to buy back house lost in shady deal).

See story updates:

• Couple scraping up money to repurchase house
• Vet group helps scammed couple (One-time homeowners face eviction unless they buy back their house)
• Home may be cost of misplaced trust (The Detroit News)

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This story, appearing in a general circulation newspaper, is understandably skimpy on the details of the litigation involving the homeowner's attempt to void the mortgage on the basis that the lender wasn't a bona fide purchaser for value, without notice. Generally, actual, open and visible occupation of the premises, whether known to the purchaser (or subsequent encumbrancer) or not, is deemed sufficient notice to the purchaser of the rights and equities of such occupant. I think it reasonable to infer from what was reported in the media story that the homeowner's possession, both before and after they were defrauded, was actual, open and visible. Possibly, they weren't able to sufficiently prove the fraud itself, which may have been the reason they didn't prevail in voiding the mortgage (or maybe, it could also be that the judge just flat out ruled incorrectly, and the homeowners don't have the money to appeal; based on the subsequent media reports, their main concern appears to be to scrape up the cash to buy back the home from the bank, not pursue further litigation). In any event, it appears that the homeowners' attorney had the right idea in at least trying to void mortgage on the basis that the bank providing the mortgage in the equity stripping transaction wasn't an innocent purchaser without notice.

For an example of a recent case (involving a homeowner asserting a claim of equitable mortgage in the context of a foreclosure rescue, sale leaseback deal) where the homeowner had to rely on an appellate court to reverse an incorrect decision of a lower court, see Minalla v. Equinamics Corp., (Fla. App. Ct., 3rd Dist. March 21, 2007) (Court decision made available online courtesy of the Florida Third District Court of Appeal). This case was previously reported in the companion blog to this blog, The Home Equity Theft Reporter (see Florida Court Rules That "Foreclosure Rescue Eviction" Not A Landlord-Tenant Matter).

Go here for other posts on this blog that references the issue of "bona fide purchaser."