Saturday, December 22, 2007

Title Transfer To Bona Fide Purchaser Devolving From Forged Instrument Held Void; Mortgage Also Voided

In Toronto, Canada, The Toronto Star reports:

  • For Paul Reviczky, a 90-year-old victim of mortgage fraud, it's the best possible ending to a two-year nightmare. In a precedent-setting decision, Ontario superior court has taken another step toward protecting victims like Reviczky from being on the hook for hundreds of thousands of dollars. The court ruled this week that the Hungarian immigrant isn't responsible for the $300,000 mortgage taken out on his home, after it was sold in 2005 without his knowledge.


  • The decision is the first of its kind in the province since a landmark Court of Appeal ruling in February. That decision found that even a bona fide purchaser can't legally buy property from a fraudster.

  • This decision expands on the previous one by finding that a $300,000 mortgage, obtained by the people who purchased Reviczky's home, was invalid because the basis for the transaction was a fake power of attorney document forged by the fraudsters who sold the elderly man's home.


  • Justice John Macdonald's ruling hands the weighty bill back to the mortgage dispenser, which is HSBC and its insurer (presumably the title insurance underwriter).

For more, see Man, 90, off hook for loan: Court (Landmark ruling lifts $300,000 burden).

To view the decision of the Ontario Superior Court, see Reviczky v. Meleknia, et al. (pdf format; go here for html format - contains embedded links to the relevant Canadian statutes; cases available online courtesy of the Canadian Legal Information Institute).

For follow-up stories, see:

For those looking to get some idea of what the concept of "bona fide purchaser" is all about, see The Bona Fide Purchaser for Value of a Legal Estate Without Notice, and then check the case law of your home state to see how your state's judiciary has applied the legal principles that underlie "bona fide purchaser" status.

Friday, December 21, 2007

Ohio Feds Indict Landlord On Equity Skimming, Other Charges; Allegedly Pocketed Tenant Rent & Allowed HUD-Insured Mortgages To Go Into Default

In a recent press release, Gregory A. White, United States Attorney for the Northern District of Ohio, announced that a federal Grand Jury in Cleveland returned a nine-count indictment charging three individuals and one property management company with various offenses involving fraud against the United States Department of Housing and Urban Development (HUD).

Among the charges was a charge of equity skimming, in which, according to the press release:

  • The indictment [...] alleges that the defendants defrauded HUD by failing to make timely payments on the HUD-insured mortgages for [two housing projects], resulting in additional multi-million dollar losses to HUD. Moreover, the defendants used project funds to pay personal expenses and other unauthorized expenditures in violation of regulatory agreements between the projects and HUD. The total loss to HUD was more than $5 million.Charged in the indictment were Martin L. Shulman, 54, his wife, Gail R. Shulman, 53, Keyetta L. Williams, 35, and S.B.G. Management, Inc., the management company that the Shulmans operated.

For more, see the U.S. Attorney News Release.


For those looking for some Federal case law applying the federal equity skimming statute in cases where Federal authorities have prosecuted landlords / property owners who collected rent from houses and stiffed FHA-insured or VA-guaranteed mortgage lenders, see:

For a California state appellate court case convicting a property owner for pocketing rent while stiffing mortgage lenders and allowing houses to go into foreclosure, in violation of the state's rent skimming statute, Section 890 through Section 894 of the California Civil Code, see People v. Lapcheske (Cal. App. Ct. 1999) (may require free registration).

Go here for Sample Indictment -- Equity Skimming, 18 U.S.C. § 157 (Source: U.S. Attorney Criminal Resource Manual - Title 9 - #882).

Thursday, December 20, 2007

More Publicity For NYC "Home Savers" Rescue Operator

In New York City, WABC-TV Channel 7 ran a follow-up story on Monday on the now well-known area foreclosure rescue operator, Home Savers Consulting Corp. Two separate criminal investigations are reportedly (still) underway into the rescue firm. Channel 7 investigative reporter Sarah Wallace speaks with two more homeowners who fell victim to the alleged equity stripping scam orchestrated by Home Savers' principal, Phil Simon, by unwittingly signing over their homes to a straw buyer.

Channel 7 was able to catch up with Phil Simon (I mean, they literally caught up with him - when Simon saw the Channel 7 camera, he started running away. Wallace, with microphone in hand and camera person in tow, chased Simon down a Brooklyn street before he relented and consented to speak to her). Simon had little to say, however, other than to refer questions to his attorney. Home Savers' co-principal, Garth Celestine, was conspicuous by his absence in this report.

For the transcript of the story, and the link to the Channel 7 video, see Homes stolen by 'Home Savers'? (Heartbroken people lose homes, equity to "Home Savers").

For the earlier Channel 7 report on Home Savers which aired in late November, see A Home Mortgage Mess (transcript) (video).

Go here for other posts on Home Savers Consulting Corp, including links to a couple of the civil lawsuits it has been recently facing.

For a related post, see Foreclosure Rescue - For Criminal Prosecutors Only.

Editor's Note:

According to, what at one time, was the law in the State of New York (see Marden v. Dorthy, 160 N. Y. 39 (NY 1899)):

  • fraudulently procuring the signature of another to an instrument which he has no intention of signing constituted forgery on the part of the procurer. It was not necessary that the act of forgery be done by the hand of the person being charged. It was sufficient that the forgerer caused or procured it to be done; and
  • if the scammed homeowner, during all the time covered by the fraudulent transactions, was in possession of the real property in question, the legal effect of the homeowner's possession constituted notice of the homeowner's rights to the property to all the world, including subsequent purchasers and encumbrancers.

If this is still the law in New York, state and local law enforcement authorities may have grounds to charge these foreclosure rescue operators with forgery. Further, inasmuch as it is generally considered that a forged deed is void, it conveys no title. Accordingly, the scammed homeowners would still own their homes. The burden of the foreclosure rescue scam would be borne by the foreclosure rescue operator, the straw buyer, and the financial institution who financed the equity stripping transaction (and, possibly, the title underwriter who issued the owner and the mortgagee title insurance policies).

If anyone knows for sure that Marden v. Dorthy no longer is reflective of New York law, please drop me a line at and enlighten me as to why not (while I understand that the case is over 100 years old, that in itself doesn't make the case obsolete. Unlike a loaf of bread, court decisions of the highest court of the state don't grow stale by the mere passage of time).

One final note. Even if the deed is not considered a forgery, the foreclosure rescue transaction would still have to withstand scrutiny as an equitable mortgage (and, depending on how much profit the operator pocketed, the claim may be that of a usurious equitable mortgage). Possession by the homeowner throughout the transaction would appear to, as noted above, constitute "notice to the world" of the scammed homeowner's rights in the home, thereby denying "bona fide purchaser / bona fide encumbrancer" status to the straw buyer, the lending institution financing the deal, or anyone else who subsequently acquired an interest in the home.

Tuesday, December 18, 2007

Bear, EMC Accused Of Race Discrimination, Civil Rights Violations In Mortgage Servicing Suit; Class Action Status Sought

A lawsuit filed in a New Haven, Connecticut Federal Court last week alleges that Wall Street investment banking firm Bear Stearns and its EMC Mortgage servicing unit engaged in:

  • "[r]acially discriminatory practices ... in servicing near-prime and sub-prime residential home loans" and claims that "EMC and Bear Stearns intentionally sought out non-prime loans, predominanly made to Hispanics and African Americans, in order to reap profits from their predatory servicing practices."

The predatory servicing practices complained of in the suit include:

  • "[t]he imposition of unwarranted fees and costs, the pyramiding of late fees, the unjustifiable force-placing of insurance, the failure to properly credit payments, the unwarranted reporting of derogatory information regarding borrowers to credit reporting agencies, and the failure to properly administer escrow accounts."

Representing the homeowners are the firms Butler Norris & Gold, Hartford, Connecticut, and James, Hoyer, Newcomer & Smiljanich PA., Tampa, Florida.

To view the lawsuit:

See also, Bear Stearns Mortgage Unit Accused of Predatory Loan Servicing (Bloomberg News).

Go here for:

Monday, December 17, 2007

Mortgage Servicer Improperly Clips Consumer For $50K+ Violating Class Action Settlement, Says Lawsuit

According to a lawsuit recently filed in a West Virginia state court, Select Portfolio Servicing, Inc. (the firm formerly known as Fairbanks Capital Corp.) is being accused of collecting over $50,000 more than what was due from a West Virginia homeowner, whose mortgage balance had been previously reduced pursuant to a legal settlement in a previously litigated class action lawsuit. The current lawsuit, filed on November 14, 2007, alleges among other things:

  • "The Defendant [Select] failed to follow the ordered new payoff schedule consistent with the reduced loan. Despite the Court Order, the Defendant continued to treat the entirety of the loan as due, and have month-by-month demanded the full payment. Since January 2001, the Defendant has sent over eighty-two demands for payment that misrepresent the total amount due."

In a procedural maneuver, counsel for Select filed a request last week to move the case from the state court to a West Virginia Federal Court.

Representing the consumer is attorney Daniel F. Hedges, Charleston, West Virginia.

To view the lawsuit, see Helen B. Moss v. Select Portfolio Servicing, Inc. f/k/a Fairbanks Capital Corp.

To view the request to move the case, see Notice of Removal.

For posts on questionable mortgage servicing practices, go here and go here.

Sunday, December 16, 2007

CNN On Foreclosure Rescue

Some time ago, the CNN business program Open House with Gerri Willis featured a Florida couple facing foreclosure and their experience when they unwittingly signed over their home to a title-holding land trust in a deal arranged by foreclosure rescue operator Jack Moussa and his Florida Housing Council ("FHC"). Interviewed for the piece was Florida attorney David Silverstone, who represents the homeowners in a lawsuit against Moussa and FHC in which Silverstone seeks to void the deed transfer, alleging that the foreclosure rescue transaction was a disguised loan that violates the Federal Truth In Lending Act, the Florida Deceptive and Unfair Trade Practices Act, and the Florida usury statute. Based on the transaction the homeowners entered into with Moussa, Silverstone claims that the return on investment on the disguised loan was 300%, more than the maximum amount allowed by Florida law.

To watch the video, see Rescue or Ripoff? (Open House with Gerri Willis; CNN).

Go here for other posts on Florida foreclosure rescue operator Jack Moussa and the Florida Housing Council.

Editor's Note:

There is plenty of case law in Florida (and other places as well) that can be used to support a court's decision to recharacterize sale-leaseback foreclosure rescue deals as (possibly usurious?) secured loans / equitable mortgages. Go here for more on the Florida case law on equitable mortgage (some of which also addresses usury) to consider how the case law may be applied to foreclosure rescue transactions structured as a sale leaseback, or variations thereof, with a right to buy back the property in the future.

It may only be a matter of time before the Florida Attorney General's Office "steps up to the plate" and begins to prosecute foreclosure rescue operators who offer sale leaseback programs for violating Florida's usury statutes:
  • Civil usury - Section 687.03, which currently sets a maximum 18% per annum interest, and applies to advances up to $500,000;
  • Criminal misdemeanor usury - Section 687.071(2), generally applies on interest willfully and knowingly charged in excess of 25% per annum but not exceeding 45% per annum;
  • Criminal felony usury - Section 687.071(3), generally applies to interest willfully and knowingly charged in excess of 45% per annum.
  • Debt unenforceable - Section 687.071(7) states that a loan made in violation of the Florida criminal usury statute is unenforceable.
For more on foreclosure rescue and equity stripping arrangements, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.). florida equitable mortgage alpha