Illinois AG Files Civil Charges Against Upfront Fee Foreclosure Rescue Operator

The Illinois Attorney General announced:

• Illinois Attorney General Lisa Madigan today continued her aggressive battle against those taking advantage of homeowners in crisis by filing a lawsuit against an Ohio-based company(1) allegedly engaged in a mortgage rescue fraud scheme. The lawsuit claims the company violated the [Illinois] Mortgage Rescue Fraud Act and the [Illinois] Consumer Fraud and Deceptive Business Practices Act by preying on vulnerable homeowners on the verge of foreclosure. This is the 13th lawsuit Attorney General Madigan has brought against mortgage rescue fraud companies.

For more, see Illinois AG Sues Ohio Company For Mortgage Rescue Fraud (Madigan Alleges Company Takes Advantage of Homeowners on the Verge of Losing their Homes to Foreclosure).

(1) According to her press release, Madigan filed suit against Foreclosure Solutions, LLC and company president Timothy Buckley of Maineville, Ohio, based on allegations that the defendants falsely promised to help consumers save their homes after falling behind on their mortgage payments. The defendants charged consumers $1,250 and promised to provide mortgage foreclosure rescue services, which either were never performed or proved to be ineffective, according to the complaint.

Missouri AG Launches "Operation Stealing Home" - Targets Foreclosure Rescue Scams, Predatory Lenders; Seeks To Void Deeds, Obtain Victim Restitution

From the Missouri Attorney General's Office:

• Attorney General Jay Nixon is taking legal action to stop those who are preying on Missouri homeowners left vulnerable to mortgage fraud because they are facing foreclosure or other financial difficulties. Nixon today launched Operation Stealing Home by filing seven lawsuits [...] aimed at individuals and businesses Nixon said had defrauded consumers through refinancing, advance fee and foreclosure consulting scams.

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• Four of the defendants(1) operate what Nixon termed "foreclosure rescue scams." [...] The companies [...] convince the homeowners to deed their property over and rent it back from the company so they can still live in the home, on the premise that the rent goes to make the mortgage payment, plus a modest profit for the company. Unfortunately, the homeowners discover that the companies are not using their rent payments to make mortgage payments, causing the lenders to initiate foreclosure proceedings.

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• Nixon is asking the courts to void the deeds the companies illegally obtained; to award restitution to consumers who suffered losses; to impose appropriate penalties; and to issue injunctions to prohibit the defendants from future violations of Missouri consumer protection laws.

For more, see Operation Stealing Home: Nixon goes after mortgage fraud targeting those facing foreclosure or other financial woes.

(1) According to the Missouri AG press release, four of the lawsuits targeted foreclosure rescue firms and were filed against: (I) St. Anthony Avenue LC, based in St. Louis County; (II) Private Funding Solutions, based in St. Charles, and its president, Mike C. Rothweiler; (III) Brian J. Thompson, of Springfield, who does business as "All Decked Out"; and (IV) Access Mortgage and Financial Corp., of Lansing, Mich., and its agents, David Snyder and Josh Nowell. This lawsuit was filed in Henry County.

Jacksonville Foreclosure Rescue Operator Faces Criminal Charges; Allegedly Stripped Equity From Homeowners, Allowed Mortgages To Go Into Default

In Jacksonville, Florida, The Florida Times Union reports:

• [Thomas] Cuomo wasn't a white knight of the souring housing market, prosecutors and victims say. He was one of its villains. Cuomo ran a private company, soliciting one desperate person after another and offering them help: The chance to sell him their homes and rent them back. Foreclosure Counselors Inc. is listed as a nonprofit with the Florida Division of Corporations, but not on the Internal Revenue Service's list of 501(c)3 charities.

• Prosecutors say Cuomo bought homes, lied on mortgage applications to buy them, took what equity the former owner had built up, and then let the houses go into another foreclosure. In some cases he took out a second loan on the house, documents show. The [Jacksonville area] State Attorney's Office has charged him with mortgage fraud and schemes to defraud.

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• While other victims have ultimately been evicted, [Jacksonville Area Legal Aid Society's April] Charney has challenged Cuomo's foreclosure on [homeowner/victim Lester] Thomas' behalf. She believes his salvation could be the very cause of the mortgage collapse: Cuomo's loan was already in default when it was bundled with others and sold to securities. Often, in cases like this, no one can produce the original loan to prove who it belongs to. The trustee bank, Wells Fargo, has asked for an extension of time in the case.

For more, see Mortgage aide accused of scam on homeowners (Prosecutors say he let homes be foreclosed after buying out owners).

Go here for more on criminal prosecutions of foreclosure rescue operators.

Wall Street Journal On Stalled Foreclosures, Legal Standing & Sloppy Paperwork

The Wall Street Journal reports:

• A cadre of state-court judges scrutinizing foreclosure actions in a string of recent rulings have discovered flaws in documents that borrowers may be able to use to keep their homes. The judges, including a committee from the Kings County Supreme Court in Brooklyn, N.Y., are highlighting shortcuts taken by mortgage companies in court filings, which borrowers might be able to exploit when facing foreclosure.

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• About six judges from the supreme court in Brooklyn, the state's lowest court, which handles most of the New York City borough's foreclosure actions, have been digging into the problem and finding new issues that they can use to dismiss cases.

• The work of the Brooklyn court -- which formed a committee to discuss foreclosures about five years ago, long before the housing crisis emerged -- looks prescient now as it has rejected dozens of foreclosure actions since the crisis began by identifying mistakes or suspicious information. Among the most energetic members of the Brooklyn committee is Justice Arthur Schack,(1) 63 years old. Justice Schack says barely any of the foreclosures he has denied eventually are completed.(2)

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• Elsewhere, in Suffolk County on Long Island, several judges have taken up scrutiny of mortgage documents. Justice Jeffrey Arlen Spinner wrote recently in a ruling that he found "glaring discrepancies and unexplained issues of substance" in a foreclosure lawsuit filed last year by GMAC Mortgage LLC.(3)

For more, see Some Judges Stiffen Foreclosure Standards.

See also, Wall Street Journal Law Blog: Subprime Legal: Judges Scrutinize Mortgage Docs, Deny Foreclosures.

For a story on the efforts of the Brooklyn judiciary in search of an effective approach to deal with the local foreclosure problem, see Brooklyn Daily Eagle: Brooklyn Justices Fight Foreclosure Crisis From All Angles.

(1) Go here for list of links to over thirty of Justice Schack's decisions denying foreclosure.
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(2) Among Justice Schack's colleagues on the Brooklyn court who haven't hesitated to deny foreclosure when the paperwork was screwed up are the Honorable Donald Scott Kurtz (see LaSalle Bank NA v Smalls, Jan. 3, 2008; PHH Mortgage Corp v Barber, Jan. 15, 2008; US Bank NA v Villaruel, Feb. 1, 2008; Wells Fargo Bank NA v Hampton, Jan. 3, 2008); and the Honorable Jack Battaglia (go here for links to his cases where foreclosures were denied).
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(3) For another of Justice Spinner's rulings denying foreclosure, see Wells Fargo Bank NA v Whitworth, Jan. 2, 2008. Not to be outdone, Justice Spinner's colleague on the Suffolk County court, the Honorable Joseph Farneti, has issued a couple of foreclosure denials of his own. See Aurora Loan Services v MacPherson, March 11, 2008; and CitiMortgage Inc. v Brown, March 13, 2008.

Lender's Lack Of Standing, Murkiness Surrounding Promissory Note Ownership Means Favorable Settlement For Elderly Atlanta Homeowner In Foreclosure

The New York Times reports:

• [I]n some mortgage circles, Ms. [Mamie Ruth] Palmer, a 74-year-old former housekeeper, has earned her moment of fame. After enduring six years in foreclosure hell, almost losing her home twice, Ms. Palmer has escaped intact.

• Last month she received a settlement from the Bank of New York, the trustee for a vast pool of mortgages that included hers. Under the terms of the deal, the bank reduced Ms. Palmer’s loan balance to $59,000 from about $100,000 and has agreed to accept the proceeds of a reverse mortgage in full satisfaction of her obligation.(1)

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• Ms. Palmer’s case is hardly unique. It’s just one of a swelling number that revolve around the thorny issue of who owns the note on a home when it’s forced into foreclosure proceedings.

• In the seemingly long-ago era when banks held on to the mortgage loans they made, this was a straightforward matter. But today, amid the freewheeling packaging of mortgage loans into securities that are sold off to investors, it’s much less clear who controls the note — all of which promises to cause banks enormous legal and financial headaches as foreclosures mount. The added twist is that some judges are taking the borrowers’ side in foreclosure disputes, precisely because of murkiness surrounding notes.

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• Loans were heaped into trusts with little documentation of ownership or proper loan assignments — it was all about volume and the fees that came with it — and now that sloppiness is hurting both lenders and borrowers.

Among the notables receiving mention in the story with regard to the problems some foreclosing lenders are facing because their loan documentation is all screwed up:

• Howard D. Rothbloom, a Marietta, Georgia consumer bankruptcy attorney who represented the homeowner in this story,
• April Charney, a consumer lawyer at Jacksonville Legal Aid Society in Florida,
• William J. Brennan Jr., director of the Home Defense Program of the Atlanta Legal Aid Society,
• The Honorable Arthur M. Schack, a justice on New York State Supreme Court in Brooklyn, who has been hammering foreclosing lenders appearing before him for sloppy paperwork for some time,(2) and on occasion, has excoriated lenders' attorneys for wasting the court's time for filing foreclosure actions on behalf of clients that lacked legal standing to do so.(3)

For more, see Fair Game: How One Borrower Beat the Foreclosure Machine.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here, and Go Here.

(1) According to the story, the settlement also eliminated about $12,000 in foreclosure fees added to her debt and called for the installation of central air-conditioning in Ms. Palmer’s home; and roughly $10,000 in legal fees billed over five years by Ms. Palmer’s lawyer, Howard D. Rothbloom, will be covered by payments she has made toward her mortgage while she was battling foreclosure.
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(2) Go here for list of links to over thirty of Justice Schack's decisions denying foreclosure.
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(3) In a 2007 decision in which he dismissed a foreclosure action with prejudice, Justice Schack makes this observation on the conduct of the law firm filing the suit on behalf of Aurora Loan Services in which legal standing was lacking:

• "[T]he Court is troubled that Aurora's counsel, Druckman & Sinel, LLP, and Robert S. Aronin, Esq., of counsel to Druckman & Sinel, appears to be wasting judicial resources in an action that could be construed as frivolous conduct. Druckman & Sinel, at the home page of their website, www.callthebestlawyer.com, has a headline, "Lawyering is a Difficult Business." It certainly is, if your client lacks standing and your firm engages in wasting of judicial resources". (emphasis added) Aurora Loan Servs., LLC v Sattar, 10/09/2007, 17 Misc 3d 1109(A), 2007 NYSlipOp 51895(U); (2nd paragraph).

Foreclosure Cases Swamp Non-Profit Legal Services Offices

The following links are to stories of how some non-profit law offices have their hands full handling foreclosures for the poor, disabled, and elderly:

• Louisville, Kentucky: Potential home foreclosures keeping Legal Aid swamped (case loads have reportedly tripled at Legal Aid Society - Louisville),

• Winston-Salem, North Carolina: Attorney helps those hurt by housing woes (number of foreclosure cases at Legal Aid of North Carolina Inc.'s Winston-Salem office reportedly increased from 25 a week to 50 a week(1)),

• Jacksonville, Florida: Getting tough on foreclosure (clients seeking relief from bankruptcy and foreclosure reportedly innundate Jacksonville Area Legal Aid - both issues are related and both mean standing room-only when JALA hosts its bankruptcy and foreclosure clinics).

(1) According to their website, Legal Aid of North Carolina's Mortgage Foreclosure Project ("MFP") includes a "team" of attorneys and staff who are located in LANC offices (and other legal services organizations) and who specialize in foreclosure defense and predatory lending law. The MFP team acts on referrals from Legal Aid of North Carolina offices and community organizations throughout North Carolina. Go here for MFP brochure.

Maryland Law Firm To Donate 1,000 Pro Bono Hours To Help Homeowners Hit By Foreclosure Crisis

According to their recent press release:

• Joseph, Greenwald & Laake, P.A. (http://www.jgllaw.com/), the largest law firm in Prince George’s County, has created The Thousand Hours Project, to assist local homeowners hit by the exploding foreclosure crisis. JGL will donate 1,000 hours of pro bono legal services to help local homeowners.

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• “While our initial efforts will center on cases referred from HIP [Housing Initiative Partnership, Inc., in Hyattsville] or Civil Justice,” said [JGL partner, Barbara A.] Jorgenson, “we anticipate doing cases throughout our practice areas in Montgomery, Prince George’s, Frederick, Anne Arundel, Howard, and the Southern Maryland counties.” Case referrals will also be accepted through the Community Legal Services of Prince George’s County, from which JGL received the award for Outstanding Pro Bono Service in 2007.

For more, see Maryland Law Firm Announces Formation of 1000 Hours Project to Assist with Nation's Foreclosure Crisis.