Equity Stripping Victim To Stay In Home Pending Outcome Of Civil Case Alleging Fraud Against Recently-Indicted Foreclosure Rescue Operator

In Honolulu, Hawaii, the Honolulu Star Bulletin reports:

• Whatever happened to Debbie Aurelio and her family, who lost title to their Ewa Beach home and faced eviction after allegedly being swindled by mortgage scammers?

• Aurelio and her family have been able to stay in their home, after the Legal Aid Society [of Hawaii] staved off eviction proceedings. Her civil case alleging fraud and deception by the mortgage broker and others is still pending in Circuit Court. The defendants in the case have been filing cross claims against each other, and no trial date has been set.

• But on Feb. 11, one defendant, John Dimitrion, was indicted in U.S. District Court on criminal charges involving mortgage loan transactions on the Aurelio home and two other houses, one in Ewa Beach and one in Kapolei.(1)

For more, see Family allowed to remain in home as mortgage fraud case proceeds.

(1) According to the story, Dimitrion and others are accused of a criminal scheme in which they solicited homeowners facing foreclosure and offered to help them. Instead they allegedly arranged fraudulent loans for straw buyers for the homes and drained equity from the properties, then tried to evict the homeowners.

Senate Committee Hearings On Foreclosure Rescue, Debt Management, Credit Counseling Scams

The Senate Committee on Commerce, Science, and Transportation Thursday held a full committee hearing on Consumer Protection and the Credit Crisis and enforcement against fraudulent credit repair schemes under the Credit Repair Organization Act (CROA).

The Committee examined consumer protection in credit counseling, debt management, and foreclosure rescue programs and fraud. The Committee also examined oversight of the federal authorities, protecting distressed consumers from mortgage fraud scams, and steering families away from these fraudulent schemes toward a path of financial stability.

To watch the proceedings, see Consumer Protection and the Credit Crisis (fast forwarding the video by about 10 minutes may be required).

Debate On Judicial Role In Loan Modifications Continues

The National Law Journal reports:

• Congress and the president have been immersed in attempts to solve the economic and housing crisis. Will judges soon take their turn? President Obama's recent proposal to address the rising tide of home foreclosures calls for legislation to allow bankruptcy judges under Chapter 13 of the bankruptcy code to modify the terms of home mortgages when families run out of other options.

For more, see Debating judges' role in foreclosure remedy (Proposal lets them modify mortgages).

Virginia Lawmakers Revise Statute Prohibiting Upfront Fees By Loan Modification, Foreclosure Rescue Firms; Bill Awaits Governor's Signature

In Petersburg, Virginia, The Progress-Index reports:

• The General Assembly has passed a bill tightening the rules for companies that offer to help struggling homeowners. [...] Last year, the Legislature passed a law meant to stop widespread abuses in the foreclosure-rescue industry, including the practice of charging an upfront fee for services. However, because language in the law could be read to mean that it applied only if the home was sold, legislators returned to the issue this year.

• The revised law prohibits "the supplier of service to avoid or prevent foreclosure" from charging or receiving "a fee prior to the full and complete performance of the services it has agreed to perform if the transaction does not involve the sale or transfer of residential real property."

• The bill, which the state Senate passed unanimously Monday after the House approved it by the same margin earlier this month, now waits Gov. Tim Kaine’s signature.

For more, see Bill comes too late for local woman.

New Jersey Couple File Suit After Loan Servicer Screw-Up In Handling Mortgage Payoff Results In Damaged Credit Score

In South Jersey, the Gloucester County Times reports:

• When Paul and Heidi Wexler sold their West Deptford Township home two years ago, they made their final payment to the mortgage company and thought that was it. Some six weeks later, however, they learned something was amiss after being denied store credit to purchase furniture for their new home in Florida. The final payment on the home had not been processed, and the lender, Option One Mortgage Corporation, had filed pre-foreclosure proceedings.

***

• The couple, married nearly eight years, has now filed a lawsuit against the mortgage company, claiming the mistake damaged their credit. The case was scheduled for trial this past week but has been put on hold while the two sides try to come to an out-of-court agreement.

***

• "We're trying to make a statement here that the mortgage company's actions have real consequences for real people," said Pitman-based attorney Christopher Manganello. "It's the mentality of the big corporation thinking it can get away with anything. We're not going to let that happen here." [...] Option One has acknowledged that the Wexlers were not at fault, the couple's attorney said, but has done nothing more to repair the damages.

For more, see Couple runs into a different mortgage morass.

Another Meth Nightmare As Recent Homebuyers Walk Away From Home After Discovering Toxic Residue In Home; Leaves Lender With Contaminated Collateral

In Grapevine, Texas, the Fort Worth Star Telegram the story of the Rodriguez family, whose purchase of a home last October quickly turned from a dream into a nightmare:

• It didn’t take long for them to regret their purchase. Just weeks after they moved in, their dog, Bruin, started having seizures and had to be put to sleep. After the dog’s sudden death, they began to hear rumors that methamphetamine may have been used in their house. The couple hired a company to check the house for chemicals and discovered traces of meth contamination. While the cause of the dog’s death was not determined, the couple believe their house is not safe to live in.

***

• The Rodriguezes, who have three children, are now renting about a block away while they figure out what to do with the 1,430-square-foot house, which is under foreclosure.

• Experts say methamphetamine contamination of apartments, hotel rooms, houses, storage sheds and even cars is more common than people may imagine. Meth-making or heavy use can leave chemicals in carpets, air ducts and attics. And without proper cleanup, experts say, the chemicals linger and expose people to health risks.

For the rest of the story, see Meth left a residue of trouble for Grapevine home buyers (After dog dies, family moves out as tests reveal traces of drug in Grapevine house).

In a related story, see The National Law Journal: Meth Lab Residue in Homes Triggers Litigation (Lawsuits over contaminated homes focus on failure to disclose issue).

Go here and Go here for other posts on home-based methamphetamine labs. meth lab yak

Illinois Woman Accused Of Swiping Deed, Looting Bank Account Of Her Widowed, 81-Year Old Mom; Abused POA, Says Civil Suit

In St. Clair County, Illinois, the Madison County Record reports:

• An elderly St. Clair County woman is suing her daughter for converting substantial sums of money for personal obligations, as well as fraudulently converting the deed to her house. Rose Hamkammer, an 81-year-old widow, is suing Lydia Funk in St. Clair County alleging Funk took money from her accounts to pay personal obligations, including a Belleville attorney for child custody and traffic violation matters.

***

• The reason Funk had a power of attorney was that in the event Hamkammer was hospitalized her bills could be paid, the complaint states. [...] Hamkammer claims her daughter breached fiduciary duty and abused her power of attorney. She also claims she was exploited financially in that as an elderly person her resources were abused.

For more, see Elderly woman claims daughter converted funds to pay lawyer and converted deed to house.

Go here, Go here, Go here, Go here, Go here, and Go here for other posts related to deed or refinancing scams by forgery, swindle, power of attorney abuse, etc. DeedGammaTheft

Mo. Homebuyer In Failed Contract For Deed Gets Deposit Refund From Rent-Skimming Owner/Agent After Notification That TV Station Was Running Story

In Republic, Missouri, KY3 reports:

• With credit getting ever tighter, you might be considering a contract for deed to try to buy a home. One woman hopes you'll reconsider. After thinking she'd be in her home for years, Edna Nelson had to pack up her life this montlh after living in her dream house for just eight months. “January 28, I received a call saying my property had been foreclosed and I had 30 days to move."

• Eight months ago, she signed a contract for deed. She paid $2,000 down and $926 a month. [...] Despite making her payments on time, the seller didn't make his payments - and the bank foreclosed on the home late last month. “It was a shock,” she said.

• She tried for nearly a month to get her money back to no avail. Finally a Contact KY3 reporter called the owner to tell him we were running a story. That same day, she had a check in her hand.

• Nelson got lucky. Many others see their contracts for deed fall through without ever getting a penny back. That's why she wants to warn others to consider every possibility before signing a contract for deed.

For the story, see Consider options before renting to own home (read story) (watch video).

Go here and go here for stories on how easy some tenants found it in getting screwed over in these lease/option, "rent to own" and contract for deed real estate deals. rent to own lease purchase option scams yellowstone

Owners Of $1M+ Downtown NYC Apartments Face The Boot As Condo Developer Faces Foreclosure; Association Broke, Utilities Shutoff Threatened

In Battery Park City, the New York Post reports:

• Dozens of financial-industry professionals may lose their new Battery Park City condos because the building's developer allegedly defaulted on debt payments, which forced the property into foreclosure and threatens an immediate shut-off of heat and electricity. It's a bitter irony for the residents of 225 Rector St. - many of whom made fortunes on Wall Street - that the nationwide bank-fueled foreclosure crisis has come full circle to hit them in their own homes.

***

• The common fund to pay for doormen, heat and electricity is nearly broke and all services could be cut off by the end of the week, [one owner] said. [...] New buyers, who paid more than $1 million for a one-bedroom, started moving in last summer as construction on the building's common areas continued. But suddenly in mid-December, all work stopped and the sales office closed.

• "People spent millions to live in a first-class building, and they're living in a permanent construction zone," says Marc Held, an attorney for Lazarowitz & Manganillo, who represents the buyers.

Reportedly, the developer only sold about 70 units in the 306-unit building.

For the story, see CONDO CRISIS HITS WALL ST. HIGH ROLLERS.

Anatomy Of An Equity Stripping, Sale Leaseback Foreclosure Rescue Scam

An appellate brief filed a couple of years ago in the District of Columbia Court of Appeals tells the story of Maria Wilson, a Washington, D.C. homeowner who was victimized by foreclosure rescue operators Vincent Abell and Calvin Baltimore. The narative gives a step-by-step description of how Abell And Baltimore expropriated Wilson's home from her for practically no consideration.

As ugly of a story that it is, Ms. Wilson ultimately found herself the beneficiary of some pretty effective lawyering. Somehow or other, the parties wound up back in a D.C. trial court and, after a week-long jury trial, Ms. Wilson obtained a substantial jury verdict, including $3.3 million in punitive damages, against the perpetrators on account of the fraudulent sale-leaseback transaction. The eight-person jury found that the defendants — Vincent Abell, his company Modern Management, and his agent Calvin Baltimore — defrauded the plaintiff Maria Wilson and wrongfully took her home for a tiny fraction of its value.

For the story, see:

• Appellate Brief: Wilson v. Modern Management, et al. (available online courtesy of Legal Aid Society of the District of Columbia),

• Press Release: Hogan & Hartson Wins $3.3 Million Verdict in Pre-Foreclosure Scam Case.

Shortly after the successful verdict in Maria Wilson's case, law firm Hogan & Hartson obtained very favorable settlements from many of the same defendants for five other D.C. homeowners victimized in similar sale-leaseback "expropriations" of their homes. Under the terms of the settlement, the defendants returned the homes of several of the victimized homeowners (many of them cleared of their old mortgages), plus more than $455,000 in cash compensation. See Hogan & Hartson Lawyers Save Homes for Washington D.C. Homeowners Victims Fall Prey to Mortgage Lending Scam.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Traveling Foreclosure Defense Seminar Featuring Florida Legal Aid Attorney To Make "Broadway Debut" Next Month

The New York Post recently ran a story on Florida foreclosure defense attorney April Charney from Jacksonville Area Legal Aid, who is traveling the country spreading the word on a well publicized strategy(1) for hammering lenders and servicers in foreclosure actions.

• [C]harney has held seminars in Ohio, Oregon, South Carolina and throughout Florida to educate lawyers on how to implement the courtroom defense. [...] She is scheduled to [...] hold her first New York seminar next month.

For the story, see THE LOAN RANGER (Lawyer Outwits Banks In Foreclosure Battles).

Go here for a diagram of the complicated, convoluted mortgage securitization process that is now making it difficult for foreclosing entities to prove they actually own the promissory notes.

(1) According to the story, she asserts that the loan servicers bringing most of the foreclosure actions in the country don't own the mortgages and have no standing to take away a person's home. The strategy has spread virally around the country and now thousands of foreclosure lawsuits are sitting idly - in legal limbo. "I have one case from 2004 where the bank has not returned to court and where my client now has deposited more money into a trust account than the house is worth," Charney noted. The legal issue is that banks turn the mortgages into bonds, which are put into trusts, like collateralized debt obligations, or CDOs. The bank "sells" the CDOs the right to collect the revenue stream but, according to Charney, not the right of ownership of the loan/promissory note itself. ThetaMissingDocsMtg

Delinquent Debt Lawsuits Keeping Process Servers Busy

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:

• With foreclosures at an all time high in Nevada, those who serve foreclosure notices have been busier than ever. In some cases, letting people know they are about to lose their homes has turned into a dangerous job for process servers.

***

• [Norma] McMahan runs a legal process service that serves people with legal notices -- a job that isn't getting any easier, "It's all having to do with collections, people losing their homes, people losing their vehicles, people who can not make ends meet." Hard times are keeping her servers busier than ever, "Before all this happened, I rarely saw a foreclosure. We didn't see them very often, in all honesty."(1)

For more, see Busy Times for Las Vegas Process Servers (read text) (watch video).

(1) This story should serve as a reminder to foreclosure defense attorneys to carefully scrutinize the affidavits of service that process servers file in connection with foreclosure actions. It's not unreasonable to believe that the busier the process servers are, the more screw-ups there will be in serving the court papers. Process servers and foreclosing lenders' attorneys may fail in exercising the required diligence necessary to find and serve defendants before resorting to the use of service by publication, or the "nail & mail" approach (where allowable). They may also take the lazy approach to serving unknown occupants in a property subject to foreclosure by simply identifying them as John and Jane Doe without exercising the appropriate level of diligence in attempts to ascertain the occupants' true names. See, for example,

• Lack Of Diligence Means Another Process Server Screw-Up, Another Void Foreclosure (improper use of service by publication);
• B'klyn Foreclosure Sale Set Aside, Judgment Vacated As Process Server Screw-Up Leaves Court With No Personal Jurisdiction Over Defaulting House Owner (improper use of "nail & mail" service);
• NY Court Denies Tenant Eviction After Foreclosure Sale; Failure To Name, Serve All Occupants As Parties In Foreclosure Action Fatal To Removal Attempt (failure to serve all occupants, including 12 year old child);
• Failure To Name Tenant In Home Foreclosure Action Thwarts Subsequent Eviction Attempt; Use Of "John Doe" Alias Ruled Ineffective Absent Due Diligence (improperly identifying unknown tenant as "John Doe" without first establishing that a genuine effort was made to ascertain the name of the party but has been unable to do so);
• John & Jane Doe Lawsuits Prohibited In Connecticut? (court ruled that, unlike other states, Connecticut has no statute permitting the use of "John Doe" identification for an unknown defendant).

Further, to the extent there may be any unscrupulous process servers, the chances of "sewer service" taking place goes up. Go here for posts on process server screw ups. foreclosure faulty notice ScrewUpProcessServing

Mandatory Mediation Program To Go Into Effect For Florida Treasure Coast Foreclosure Actions

On Florida's Treasure Coast(1) (ie. Martin, St. Lucie, & Indian River Counties), TC Palm reports:

• Thousands of distressed Treasure Coast homeowners could have a better chance to stave off foreclosure as a result of a judicial order set to go into effect on March 13.(2) The order would require all lenders filing home mortgage foreclosure lawsuits involving owner-occupied houses to participate in a mediation program to see if they can work out a deal with the borrower, said 19th Circuit Chief Judge William Roby (Editor's Note: The 19th Judicial Circuit also includes Okeechobee County).

For more, see Mandatory mediation in new foreclosures starts March 13 on Treasure Coast.

Go here for more information regarding Florida's 19th Judicial Circuit Administration Order for Residential Foreclosure Mediation.

(1) For those unfamiliar with the location of Florida's "Treasure Coast," it's just north of the state's "Gold Coast" (Dade (Miami), Broward (Fort Lauderdale), and Palm Beach Counties), on the southeastern coast of the peninsula).

(2) One requirement in the administrative order is that, where a home against which a foreclosure action is owner-occupied, the lender's attorney is required to file a copy of the promissory note, mortgage and the pooling and servicing agreement. What strikes me as somewhat curious about this requirement is that this filing requirement:

• is silent as to requiring copies of any addendums/allonges to the note, as well as any assignments of the note that constitute the chain of title showing title to the note being properly held by the entity bringing the foreclosure action. In contrast thereto, see the Ohio Supreme Court's 11-Step Foreclosure Mediation Program Model, which, in step 2, specifically requires filing of evidence of any assignments or other evidence that the plaintiff is the holder or servicer of the note and mortgage if the plaintiff is not identified in the note and mortgage as the holder or servicer.

Florida AG Vows Continued Pursuit Of Firms Collecting Upfront Fees From Homeowners Facing Foreclosure

From a recent newletter from Florida Attorney General Bill McCollum:

• My office has seen a substantial increase in the number of scams based on offers to modify homeowners' loans or rescue them from impending foreclosures. Last year I worked with our Legislature to pass a new law protecting consumers from foreclosure rescue fraud, and my Mortgage Fraud Task Force has already sued several companies for allegedly collecting up front fees and not providing any promised services.

***

• My office will continue to aggressively pursue companies and individuals who are targeting Florida's homeowners and trying to profit from their desperate situations.

For the Florida AG's newsletter, see Saving Florida Homeowners from Foreclosure Rescue Fraud. loan modification

B'klyn Judge Slams Brakes On Another Foreclosure As "Standing-Lacking" Lender Fails To Prove Ownership Of Note, Right To Sue

In Brooklyn, New York, the New York Post reports:

• Aquila Rose got a $475,000 mortgage from Fremont Investment & Loan for her Flatbush home in January 2007 and made exactly one payment before defaulting. When Fremont started a foreclosure action on Oct. 15 that year, it seemed like a slam dunk - like Rose would soon be forced from her East 35th Street home.

• But Rose has not been foreclosed upon, according to court papers. Her case in Brooklyn state court is assigned to Justice Arthur M. Schack, one of a growing number of judges in the country creating a new front in the foreclosure epidemic by forcing banks and mortgage-service agents to prove they own the mortgage.

• In Rose's case, as in most mortgages, the lender, Fremont, sold the loan and, when pressed by Schack, couldn't prove it owned the mortgage - therefore didn't have the right to sue.(1) So Schack stopped the proceedings in its tracks.(2)

For the story, see HOW B'KLYN WOMAN KEPT HER HOME.

For Justice Shack's decision, see Fremont Inv. & Loan v Rose, 2008 NY Slip Op 52409 [21 Misc 3d 1137 (December 2, 2008).

Justice Schack received an "honorable mention" in this recent New York Post article.

Go here for other posts referencing Justice Arthur M. Schack.

(1) According to the story, Fremont claimed, according to court papers, that it sold the loan to GRP Loan. But Schack wanted to know why Fremont and GRP share the same White Plains office. The judge was also curious why the GRP lawyer also represents Fremont in the transfer of ownership - and threatened to sanction the lawyer for an apparent conflict of interest. Schack gave GRP until Feb. 2 to come back to court and prove that it owned the mortgage. They never showed. Meanwhile, Rose continues to live in her house.

Apparently, Fremont and GRP have a similar office-sharing arrangement that Justice Schack uncovered and referred to in another foreclosure action involving a different lender. In his written decision in HSBC Bank USA, N.A. v Charlevagne, 2008 NY Slip Op 51652 [20 Misc 3d 1128]; (August 4, 2008), he found it curious that, according to court documents filed in a number of cases he has presided over, the financial behemoths HSBC Bank USA, N.A., Ocwen Loan Servicing, LLC, Mortgage Electronic Registration Systems, Inc., Deutsche Bank and Goldman Sachs all share the same office space at "the ever popular Suite 100" at 1661 Worthington Road, West Palm Beach, Florida 33409.

(2) For a list of links to over thirty of Justice Schack's decisions denying foreclosure to foreclosing lenders who lacked standing to initiate the legal action, see Brooklyn Trial Judge Nixes "Rubber Stamp Method" Of Adjudicating Foreclosures; Lenders, Lawyers Lacking Legal Standing To Bring Actions Get Bounced. ThetaMissingDocsMtg

ABC News On The "Produce The Note" Approach To Holding Foreclosing Lenders' Feet To The Fire

ABC News' Good Morning America broadcast a story this morning on the "Produce The Note" strategy of hammering sloppy lenders and their attorneys attempting to foreclose on homes without first establishing in court that they have the legal standing to do so.

For the story (approx. 5 minutes), see Fighting Against Foreclosure (Some homeowners have found a new tactic to keep the banks at bay).(1)

Go here for helpful legal documents that can be used in fighting foreclosure.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) For the related Associated Press story published last week, see Homeowners' Rallying Cry: Produce the Note (AP Enterprise: Homeowners stave off foreclosure by demanding the bank produce the note). ThetaMissingDocsMtg

Ponzi Schemes, Ski Masks, Uzis & The "Standing-Lacking" Foreclosure Interlopers

In Jacksonville, Florida, The Florida Times Union recently ran a story that contained this observation about foreclosing lenders from attorney April Charney, head of foreclosure defense with Jacksonville Area Legal Aid:

• [B]anks, investors, securitized trusts filled with home loans, rating organizations and others - all, according to Charney, were involved in and continue to facilitate a Ponzi scheme in which originating lenders did not transfer loans legally. In many cases, she says, the foreclosing entity has neither loaned money to a homeowner nor collected any payments.

• "These court interlopers might as well be wearing a ski mask and carrying an Uzi for as much right as they have to force homeowners out of their homes," Charney said Wednesday.

***

• Charney travels across the country, training other lawyers in how to stop foreclosures. She said she has trained at least 1,500. "Even judges are getting it now," she says. "In a case in California, the judge told the plaintiff, 'You can't even show me why you're here.' "(1)

For more, see 'Interlopers' in mortgages find foe in Legal Aid (April Charney fights shady lenders to help residents save homes).

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) Apparently, the "Rocket Docket - judicial rubber-stampers" blasting their way through foreclosure actions at the Lee County, Florida (Fort Myers) courthouse have yet to get the memo. See:

• The Wall Street Journal: A Florida Court's 'Rocket Docket' Blasts Through Foreclosure Cases (2 Questions, 15 Seconds, 45 Days to Get Out; 'What's to Talk About?' Says a Judge), and
• CBS Evening News: Pay Up Or Move Out. ThetaMissingDocsMtg

Central Florida Chief Judge Gives "First Responder" Training To Local Attorneys Assisting Homeowners Facing Foreclosure

In Central Florida, the Sarasota Herald Tribune reports:

• The chief judge in Manatee and Sarasota counties spent his lunch [Friday] training what he called the "first responders" for home rescue -- about 80 private attorneys willing to help homeowners in foreclosure on the cheap.(1) The attorneys will represent homeowners who don't qualify for free legal representation. They will help homeowners during a meeting with lenders to try to settle foreclosure cases outside of the court system.

For more, see Legal-Ease: 911 for those facing foreclosure.

(1) Contrast this approach to handling foreclosures by Manatee/Sarasota/Desoto County (Florida's 12th Judicial Circuit) Chief Judge Lee Haworth, who also already requires mandatory mediation, with that of Lee County Chief Judge G. Keith Cary, whose "Rocket Docket" approach to blasting through foreclosure cases recently drew attention in a recent Wall Street Journal story as well as in a recent CBS Evening News report (here and here).

"Courtroom 676" - Home Of Philadelphia's Residential Mortgage Foreclosure Diversion Pilot Program Back In The News

Philadelphia, Pennsylvania's Courtroom 676 - Home of the city's Residential Mortgage Foreclosure Diversion Pilot Program received mention in recent media reports. For the stories, see:

• CBS Evening News: Glut Of Foreclosures Clogs Courts (A Look At "Fast-Court" In Florida And An Innovative Program In Philly For Those Facing Losing Their Homes), and

• WPVI-TV Channel 6 (Philadelphia): Save Your Home Philly Hotline (Inside Courtroom 676 at Philadelphia City Hall, homes and families are saved from foreclosure every Thursday).

For an earlier story reported in the Philadelphia Daily News (1-28-09), see The miracle of Courtroom 676: Saving lives, one address at a time.

Massachusetts Foreclosure Defense Class Action Asks Lenders, "Who The Hell Owns These Promissory Notes???"

In Mattapan, Massachusetts, WBZ-TV Channel 38 reports:

• "I thought this was going to be my American dream," said Deborah Nicholas, looking at her Mattapan home. But two years after purchasing the green-trimmed two-family house, Deborah Nicholas is living the new American nightmare. "We are in foreclosure right now."

• Foreclosure attorney Gary Klein argues it wasn't done legally. "We're arguing there have been hundreds, maybe thousands of unlawful foreclosures in Massachusetts because the lenders don't actually own the mortgage at the time of the foreclosure," said Klein.

***

• In a class action lawsuit, Klein argues her mortgage holder and others moved to foreclose before they actually had the paperwork. "Our research shows that 15 to 30 percent of foreclosures are affected by this problem. That is, in 15 to 30 percent of these cases, the lenders don't have the legal authority to foreclose at the time they begin the foreclosure process."

For more, see Thousands Of Unlawful Foreclosures In Mass.? (read story) (watch video).

For earlier articles on this story, see

• Boston Herald: Lawyer to lenders: Prove you own mortgages (or try here for a free version), and
• The Boston Globe: Lenders' right to foreclose is challenged. KappaMtgDocsMissing

"Rubber Stamp" Method vs. Mandatory Mediation: CBS News Goes Into The Courtroom For A Look At Foreclosure Adjudication

The CBS Evening News has a story on its website contrasting the approaches being taken in adjudicating foreclosures in two different courtrooms:

• The "Rocket Docket" in Fort Myers, Florida (described in The Wall Street Journal article, A Florida Court's 'Rocket Docket' Blasts Through Foreclosure Cases (2 Questions, 15 Seconds, 45 Days to Get Out; 'What's to Talk About?' Says a Judge)), and

• The swap meet-like affair that meets every Thursday in Courtroom 676 in Philadelphia, Pennsylvania (described in the Philadelphia Daily News article, The miracle of Courtroom 676: Saving lives, one address at a time).

For the CBS Evening News' story, see Glut Of Foreclosures Clogs Courts (CBS Evening News: A Look At "Fast-Court" In Florida And An Innovative Program In Philly For Those Facing Losing Their Homes).

For the CBS' Evening News video on the "Rocket Docket" foreclosure proceedings in Fort Myers, Florida (1:40), see Pay Up Or Move Out.

*************

Editor's Note: CBS News could have spiced up their story a little had they included something on the courtrooms of:

• Brooklyn, New York jurist Arthur Schack, a judge who has unequivocally rejected the "rubber stamp" approach to handling foreclosures, and has demonstrated no reluctance at giving unprepared lenders and their attorneys the boot from his courtroom (at times threatening sanctions on lenders' attorneys when their paperwork is garbage) when they fail to file the proper paperwork (see Brooklyn Trial Judge Nixes "Rubber Stamp Method" Of Adjudicating Foreclosures; Lenders, Lawyers Lacking Legal Standing To Bring Actions Get Bounced), and

• Miami, Florida Judge David C. Miller, who, in a recent denial of a foreclosing lender's motion to proceed with foreclosure because it hadn't complied with a pro se homeowner's document request, reportedly punctuated his decision by tearing the lender's motion in half and throwing it over his shoulder in open court (see The home you save could be your own (In foreclosure crisis, more Americans representing themselves in court)). ThetaMissingDocsMtg

Maryland Feds, State, Local Law Enforcement Form Mortgage Fraud Task Force; Bogus Foreclosure Assistance Firms Among The Targets

The Washington Post reports:

• Maryland U.S. Attorney Rod J. Rosenstein yesterday announced the formation of a task force linking federal, state and local agencies in the fight against mortgage fraud, a group whose goals will include seizing assets from scam artists and paying restitution to victims.

***

• The task force brings together representatives of 17 agencies, including members of the FBI, state regulators, federal housing officials and local prosecutors from Montgomery County, Prince George's and Baltimore. It is similar to three dozen federally coordinated mortgage fraud task forces that have been created nationwide. Amid the continuing financial crisis, the Justice Department has made mortgage fraud and other financial crimes a priority.

For more, see More Muscle Against Mortgage Fraud (U.S., State, Local Agencies Form Task Force).

See also, The Associated Press: Task force targets Md.'s high mortgage fraud areas:

• The task force is attacking a spectrum of fraudulent acts, from phony home appraisals and loan documents to dubious foreclosure-prevention specialists who prey on those who've lost the equity in their home and need to rebuild credit. loan modification

Mississippi Public Interest Law Firm, NCLC Training Attorneys, Counselors In Battle Against Foreclosure

In Jackson, Mississippi, WLBT-TV Channel 3 reports:

• [T]he [non-profit, public interest law firm] Mississippi Center for Justice with the help of the National Consumer Law Center in Washington is training attorneys, housing counselors and financial professionals to negotiate on behalf of troubled homeowners. "What we're trying to do is catch people who are delinquent before they're facing foreclosure," said [a spokesperson]. More than 130 attorneys have already signed up to help in foreclosure prevention.

Mississippi residents having trouble with their lenders renegotiating payment terms on home loans are asked to call the Mississippi Center for Justice at 877-352-2269. They can put you in touch with one of their professionals to help negotiate better terms for your mortgage.

For more, see Local group training attorney to help negotiate for hurting homeowners.

Legal Aid To File Predatory Lending, Fraud Suit On Behalf Of Foreclosed California Homeowner In Attempt To Prevent Loss Of Family Home

In Chico, California, the Chico Enterprise Record reports:

• A woman facing eviction from the home her parents left her may be able to remain there at least temporarily. Emily Fisher, a staff attorney with Legal Services of Northern California [...] said she and other lawyers are working to enable Jan Poythress to stay in her house and, they hope, to get it back.

• Poythress said her problems started after she ran up a large credit-card debt and then allowed a telemarketer to persuade her to take a loan that would pay off what she owed. Poythress is disabled and lives on a small income from Social Security.(1) Because she couldn't pay off the loan, her house was foreclosed upon.

***

• Fisher said a petition was filed in court in Chico Tuesday asking that the eviction be "stayed until some of these issues can be worked out." She said it's hoped a judge will cancel the eviction and allow a new trial to be held over whether Poythress ought to be evicted. [...] "We are planning to file an affirmative complaint on the predatory lending issues and the fraud that appears to have happened," she said.

For more, see Lawyers hope to halt woman's eviction.

For an earlier report describing how the homeowner was allegedly screwed over by the loan originator, see On the edge: Chico woman faces loss of home, uncertain future.

For other posts on homeowners using state & federal law to try and undo bad mortgage loans, Go Here, Go Here, and Go Here.

(1) Reportedly, Fisher said Poythress has an income of around $900 a month in disability payments, yet the loan documents state her income as $4,000 a month and claim that she was able to repay $2,500 a month on the loan. This wasn't a case where a borrower got greedy and tried to buy more than she could afford, Fisher said. Rather, Poythress was in a vulnerable position and was taken advantage of. UndoMortgageLoans TILAdelta

Wachovia Hit With Class Action Over Option ARMs; Suit Calls Mortgage A "Neutron Bomb That Will Kill All The People But Leave The Houses Standing"

In a Federal District Court somewhere in Illinois, The Madison County Record reports:

• A class action lawsuit has been filed against three financial corporations, including banking giant Wachovia, alleging Illinois homebuyers were forced into negative amortization after the banks deceived them when they issued option adjustable rate mortgages. Lead class plaintiffs Michael and Jayme Brunkhorst claim the lenders and brokers that sold them an option ARM mortgage [...], touted the minimum payment and downplayed or failed to disclose the negative amortization that could result from making such payments, according to the suit filed Feb. 17 in U.S. District Court.

***

• "Option ARM loans have been called 'the riskiest and most complicated home loan product ever created' and have been termed a 'neutron bomb' that will kill all the people but leave the houses standing' by an economist at the Ford Foundation," the suit states.

For more, see Home owners file class action against Wachovia over option ARMs.

For other posts on homeowners using state & federal law to try and undo bad mortgage loans, Go Here, Go Here, and Go Here.

(1) Among other remedies, the Brunkhorsts and the putative class are asking the court grant equitable relief to restructure their loans through rate buy downs, principal reduction and conversion into conventional fixed rate loans. UndoMortgageLoans TILAdelta

Justice Trampling Over Homeowners' Rights As "Rocket Docket" Foreclosure Hearings Before "Rubber-Stamping" Judges Can Last Less Than 20 Seconds

In Fort Myers, Florida, The Wall Street Journal reports:

• Hoping to save her house, Saundra Hill Scott arrived at the county courthouse clutching dog-eared mortgage bills and letters from her lender. She need not have bothered. The foreclosure hearing lasted less than 20 seconds, with Judge John Carlin asking her two questions: Are you current on your mortgage and are you living in the home? She answered no and yes and then offered to show him her paperwork.

• "I don't need to see that. That's between you and the bank," he said as he gave Ms. Hill Scott, her husband and three grandchildren 60 days to work out a deal with their lender or vacate their three-bedroom house.

***

• To clear a huge backlog of foreclosures, judges are hearing "rocket dockets" of nearly 1,000 cases a day and calling retired colleagues back to the bench to help ease the workload.

***

• Many defendants in Fort Myers are speculators who never lived in the houses and don't bother to show up for the hearings or respond to court summonses. But some of the homeowners who do come to court are annoyed that they're given only a few seconds to speak to the judge. "The judge didn't want to hear from me," said a frustrated Reed Morgan, a self-employed business consultant, wearing loafers and a blue oxford shirt, after Judge Carlin gave him 60 days to work out a modification plan with his lender or vacate his three-bedroom house.

***

• Lee County judges say they are trying to screen for cases that would benefit from mediation, but Chief Judge G. Keith Cary opposes making such a requirement. "A guy hasn't paid his mortgage in over a year,'' says Judge Cary. "What's there to talk about?"(1)

For more, see A Florida Court's 'Rocket Docket' Blasts Through Foreclosure Cases (2 Questions, 15 Seconds, 45 Days to Get Out; 'What's to Talk About?' Says a Judge).

(1) Chief Judge Cary asks "What's there to talk about?" The obvious point to talk about is whether or not the foreclosing lenders have standing to bring the foreclosure actions in the first place, and whether the courts have any jurisdiction to hear these cases should the foreclosing lenders fail to establish proper standing to file them.

In Dep't of Revenue v. Daystar Farms, Inc., NO.: 5D01-1554 , 803 So. 2d 892; 2002 Fla. App. LEXIS 27 (Fla. 5th DCA 2002), a Florida appellate court, quoting from prior precedent, made this observation about standing and jurisdiction (bold text is my emphasis):

• "In the administrative context, '[s]tanding has been equated with jurisdiction of the subject matter of litigation and has been held subject to the same rules . . . .'" Grand Dunes, Ltd. v. Walton County, 714 So. 2d 473, 475 (Fla. 1st DCA 1998).

***

• "[C]ourts are bound to take notice of the limits of their authority and if want of jurisdiction appears at any stage of the proceedings, original or appellate, the court should notice the defect and enter an appropriate order." Polk County v. Sofka, 702 So. 2d 1243, 1245 (Fla. 1997).

I wonder if the court has taken it upon itself to specifically inquire of the foreclosing lenders as to their standing to bring these actions, or whether it simply opts for a "head in the sand" approach in dealing with the issue. I also wonder if Chief Judge Cary has given consideration to the possiblitity that foreclosure judgments granted by courts without having jurisdiction may be void. The above observation made in Dep't of Revenue v. Daystar Farms, Inc. appears to indicate that the court has an obligation to make some inquiry as to the foreclosing lenders' standing to sue and enter the appropriate dismissal order where standing is lacking, leaving it without jurisdiction to hear the case.

Given everything written in numerous media reports from across the country over the last couple of years on the carelessness of lenders, servicers, and their attorneys in their failure to establish having proper standing when bringing foreclosure actions, it would seem that judges hearing foreclosure cases, generally, should consider themselves to be on notice that the standing issue should, as a matter of practice, be automatically addressed in every foreclosure action. The rule that a litigant's standing to sue is a threshold issue to be resolved before the matter can be reached on the merits is so well established in jurisdictions throughout the country that citation of authority is hardly necessary. Apparently not, however, in the Fort Myers' courtrooms under Chief Judge Cary's supervision. KappaMtgDocsMissing

CBS News On Upfront Fee Loan Modification, Foreclosure Rescue Scams

The CBS News' The Early Show ran a story last week on loan modification, foreclosure rescue scams that are proliferating across the country. Interviewed for the story was Illinois Attorney General Lisa Madigan, and one Illinois homeowner facing foreclosure on her condo who wound up getting clipped for $2,000 from a company that approached her with a solicitor who appeared at her front door.

• [The homeowner] says she signed a contract with a company named Foreclosure Solutions. She initially gave them $695 and later paid them another $1400 which they said they'd forward to her lender. "The things he was telling me was just what I needed at that particular time," [she] said. [She] says she believed her mortgage problem was being addressed. So imagine her shock when she found out her home was just days away from being auctioned off. "I was really, really upset. I cried. Yes, I did," [she] said. [... She] lost $2,000 and had to file for bankruptcy in order to save her home.

Illinois Attorney Lisa Madigan has filed a lawsuit against Foreclosure Solutions, charging that they did not contact consumers' lenders immediately as promised and that instead of forwarding the mortgage payments, they kept the money.

For more, see Beware Of Forclosure Rescue Scams (People Facing Foreclosure Are Being Victimized) (read text) (watch video).

Connecticut AG Probes Loan Modification Firm Allegedly Masquerading As Reputable Non-Profit Clipping Homeowners For Upfront Fees For Bogus Help

From the Office of Connecticut Attorney General Richard Blumenthal:

• Attorney General Richard Blumenthal and U.S. Rep Joe Courtney [Thursday] announced an investigation -- and issued an urgent warning to homeowners -- about so-called mortgage rescue deals that may actually cost consumers their homes. [...] Blumenthal is investigating H.O.P.E. Alliance (HOPE Alliance), Inc. after Courtney alerted his office about the company's alleged false promises to rescue homeowners from foreclosure.

• Blumenthal said, "I am alarmed by allegations that HOPE Alliance is masquerading as a reputable non-profit and erasing all hope for homeowners. I thank Congressman Courtney for alerting my office and aiding victims. We are investigating HOPE Alliance because it allegedly took consumer money, convinced homeowners to stop mortgage payments and then left them with nothing."

***

• HOPE Alliance's name mimics that of HOPE NOW, a non-profit alliance of counselors, mortgage companies, investors and others that offers outreach to distressed homeowners free of charge.

For more, see Blumenthal, Courtney Warn About Harmful Mortgage Rescue Deals Hitting Connecticut.

For the story of the two women who were clipped for a total of $3,000 that precipitated the Connecticu AG's announcement, see WFSB-TV Channel 3: Women: We Fell For Foreclosure Scam (Hope Alliance Masquerading As Conn. Nonprofit, AG Says).

Moving Cases From State To Federal Court: A Defense Ploy To Make Filing Suit More Costly, Burdensome On Individual Plaintiffs?

A recent story in the Toledo Blade involved an Ohio couple fighting off foreclosure by challenging the right of mortgage servicing companies and trustees to commence foreclosure proceedings. The foreclosing lender responded to the challenge by employing a defense tactic not uncommon in consumer cases: it is seeking to move the case from a state court to a federal court.

An article in the ABA Journal offers this observation on the defense tactic commonly used in civil cases of moving a case from a state to a federal court:

• [I]t is widely believed that plaintiffs, particularly individuals rather than corporations, fare better in state courts where they have greater likelihood of getting to a jury and often benefit from more favorable interpretations of law. Defendants in turn tend to prefer the federal courts. Thus removals can become a cat-and-mouse game in which a plaintiff names a party having nothing to do with the matter as one of the defendants to prevent the other side from removing the matter to federal court. That court can find fraudulent joinder and keep the case or remand it.

• But studies have shown a greater increase in recent years of defendants removing cases to federal court, only for them to be dispatched back to state court for erroneous removal. One researcher, a third-year student at New York University School of Law, found that most often in such situations, the plaintiffs are individuals. And the rate of their cases being remanded back to state court is higher, too, wrote Christopher Terranova in last summer’s edition of the Willamette Law Review (PDF).

• He adds that “the delays and costs of that extra procedural step to federal court are more costly and burdensome for most individual plaintiffs than they are for bigger defendants with more assets.”

For more on the ABA Journal story, see Judge Says Firm Must Explain ‘Fraudulent’ Removals or Pony Up $25K.

For the Willamette Law Review article, see Erroneous Removal As A Tool For Silent Tort Reform: An Empirical Analysis Of Fee Awards And Fraudulent Joinder (article also available at http://ssrn.com/abstract=1073402).

"Multiple Hat-Wearing" Mortgage Servicing Exec Back In The News; May Be "Contemporary Millinery Rival" To Hopper, Abzug, Says Respected B'klyn Jurist

A recent New York Times' story on mortage companies offering financially strapped homeowners an opportunity to modify their mortgage loans contained the following blurb:

• “Our biggest hurdle is reaching out and talking to people,” said Margery A. Rotundo, Ocwen’s senior vice president for residential loss mitigation. “If a borrower has a desire and the ability to stay in the home, we can help them.” Ms. Rotundo said the company’s decades-long experience with borrowers with blemished credit histories informed its approach.

The last time Ms. Rotundo made the news (at least on this blog) was last summer, when Brooklyn, New York Supreme Court Justice Arthur Schack, in a foreclosure action over which he presided, commented in his written opinion that he found court documents filed in various foreclosure actions in which Ms. Rotundo swore that she was Senior Vice President for:

1. Residential Loss Mitigation of Ocwen Loan Servicing, LLC,
2. Residential Loss Mitigation of HSBC Bank USA, N.A.,
3. Loss Mitigation for Nomura Credit & Capital, Inc., and
4. an unnamed servicing agent for HSBC.

The perplexed Justice Schack then went on to make this observation on Ms. Rotundo's apparent knack to freely move from mortgage company employer to mortgage company employer, as the need appeared to demand ("Ms. Rotundo's merry-go-round of employment" as he referred to it):

• [T]he late gossip columnist Hedda Hopper and the late United States Representative Bella Abzug were famous for wearing many colorful hats. With all the corporate hats Ms. Rotundo has recently worn, she might become the contemporary millinery rival to both Ms. Hopper and Ms. Abzug. The Court needs to know the employment history of the peripatetic Ms. Rotundo. Did she truly switch employers or did plaintiff have her sign the "affidavit of merit and amount due" as its Senior Vice President solely to satisfy the Court?(1)

I don't know how this issue was ultimately resolved, but as of press time of the above-referenced New York Times' article, Ms. Rotundo was apparently wearing her "Ocwen corporate hat."

For Justice Schack's written opinion containing his observations on Ms. Rotundo's alleged "multiple hat-wearing activities," see HSBC Bank USA, N.A. v Charlevagne, 2008 NY Slip Op 51652 [20 Misc 3d 1128]; Decided on August 4, 2008.

(1) Justice Schack also commented on his discovery that multiple financial giants, including the plaintiff, were all listing "the ever popular Suite 100" at the same South Florida street address as their place of business. Inaddition to demanding an affidavit describing Ms. Rotundo's employment history for the last three years, Justice Schack also went on to demand an affidavit from the plaintiff explaining "why the plaintiff HSBC BANK USA, N.A., [...], shares office space at Suite 100, 1661 Worthington Road, West Palm Beach, Florida 33409, with Ocwen Loan Servicing, LLC, Mortgage Electronic Registration Systems, Inc., Deutsche Bank and Goldman Sachs." ThetaMissingDocsMtg

Utah AG Busts Alleged Equity Stripping, Foreclosure Rescue Ring; Hurting Homeowners Get Boot From Homes As Unwitting Straw Buyers Left Holding The Bag

From the Office of Utah Attorney General Mark Shurtleff:

• Four people were arrested [last week] for allegedly defrauding financially troubled homeowners out of more than $1 million in property.(1) The alleged victims were all Polynesian and were offered new mortgages to help save their homes from foreclosure. The defendants allegedly had straw buyers purchase the properties and then took out all of the equity.(2)

***

• Here is how the scheme allegedly worked: Polynesian homeowners were approached for help after they fell behind on their mortgage payments. The victim would sign a quit claim to give title to the property. Another Polynesian would be asked to purchase the property with the promise that all the mortgage bills would be paid. However, the monthly payments were not paid, the homeowners were evicted and the straw buyers were left with bad credit.

The suspects were variously charged with multiple felony counts of second degree:

• communications fraud,
• identity fraud, and
• racketeering.

For the Utah AG's press release, see Four Arrested In Mortgage Fraud Scheme Targeting Polynesian Victims.

(1) Those arrested were: Elenoa Moala, 46, Salt Lake City, Haloti Moala Liavaa, 42, Salt Lake City, Laura Solorio, 40, Salt Lake City, and Kathryn Thompson, 45, South Jordan.

(2) Should the homeowners victimized by the alleged fraud attempt to void or cancel the deed to the straw buyer, or the mortgage obtained by the straw buyer, central to such an effort (assuming the lender had no actual knowledge of the fraud) would be the ability to charge them with notice of the fraud and/or any other unrecorded rights and equities (ie. equitable mortgage) the victimized homeowners may have had at the time the straw buyer took title and the lender made the mortgage loan. Lack of participation in the fraud, and lack of any actual knowledge thereof, by subsequent purchasers & encumbrancers is not enough to sustain a claim of bona fide purchaser / encumbrancer. In this case, the homeowners' continued possession of the property after signing away the quit claim deed may have triggered a duty to inquire, upon both the straw buyer, and the the straw buyer's mortgagee, into the nature of the homeowners' continued occupancy. See Ault v. Holden, 2002 UT 33; 44 P.3d 781; 444 Utah Adv. Rep. 3; 2002 Utah LEXIS 60 (2002), where the Utah Supreme Court observed:

• [P]ossession requires [...] inquiry into any rights in the property the possessor may hold. Hottinger v. Jensen, 684 P.2d 1271, 1273 (Utah 1984). Traditionally, in race-notice states like Utah, a purchaser takes subject to rights of parties in possession that are open and visible. See, e.g., Mathis v. Madsen, 1 Utah 2d 46, 57, 261 P.2d 952, 959 (1953); Neponset Land & Livestock Co. v. Dixon, 10 Utah 334, 336-37, 37 P. 573, 574 (1894); Ayers v. Jack, 7 Utah 249, 252-53, 26 P. 300, 300 (1891). In other words, possession by someone other than the seller engenders a duty to inquire on the part of the purchaser into the rights of the party in possession. See Webster v. Knop, 6 Utah 2d 273, 278, 312 P.2d 557, 560 (1957); Salt Lake, Garfield & W. Ry. Co. v. Allied Materials Co., 4 Utah 2d 218, 222, 291 P.2d 883, 886 (1955); Williams v. Barney, 119 Utah 61, 84-85, 224 P.2d 1042, 1053 (1950); Meagher v. Dean, 97 Utah 173, 179, 91 P.2d 454, 456 (1939).

Should a court determine that, had such an inquiry been pursued, the fraud upon the homeowners would have been discovered, both the straw buyer and the mortgage lender could find themselves being charged, by imputation, with notice of the fraud, thereby defeating any claim of bona fide purchaser / encumbrancer that they may assert. For support for the proposition that "the continued exclusive possession of a vendor after his formal conveyance of the legal title is a fact in conflict with the legal effect of his deed, and is presumptive evidence that he still retains an interest in the premises, and is sufficient to put a purchaser upon inquiry [...]", see Pell v. McElroy, 36 Cal. 268, 1868 Cal. LEXIS 186 (Cal. 1868).

For cases, generally, that support the proposition that possession of real estate by one other than the seller is enough to trigger this imposition of the duty to inquire as to possible unrecorded rights and equities of the possessor, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Developers, Construction Lenders Nervous As Buyers Begin To Claim Equitable Liens, File Lis Pendens, Threaten Foreclosure To Force Return Of Deposits

In South Florida, the Daily Business Review reports on a tactic some disgruntled customers of condo developers are using to force a return of deposits paid on purchase contracts that have yet to close:

• [F]rustrated contract holders [...] have stepped up their fights against construction lenders, claiming they have an equitable interest in the properties where they planned to buy a condo. They are not necessarily interested in foreclosing on projects but hope the new strategy will persuade developers and construction lenders to return their deposits — or, at least, a portion of them.

• The strategy could be troubling for lenders and developers because a lis pendens casts a cloud over the property title. And banks looking to sell the notes and mortgages secured by the projects may have a hard time finding buyers as a result.

***

• Several buyers have sued lenders claiming their deposits have seniority over the construction loan because their contracts were signed before the construction loan was obtained.(1) Often, developers had to line up contracts for at least half of a project’s units to secure a construction loan.(2) For that reason, some frustrated buyers are dragging construction lenders into their deposit recovery lawsuits.

For more, see Condo Meltdown: Latest strategy involves pursuing lenders.

For examples of two lawsuits in which disgruntled condo purchasers are, among other things, asserting equitable lien claims, and seeking foreclosure thereof, see:

• Duque, et al. v. W/K Sawgrass LLLP, et al. (count XIV - pages 40-41),
• Abercrombie, et al. v. SB Hotel Associates, LLC, et al. (count XII - page 33-34).

(1) The story quotes one local attorney involved in the deposit refund litigation as saying: “There is long-standing case law which holds that a buyer who pays money toward the purchase of a home receives an equitable interest in the property, and this interest can be legally superior to any interest in the property obtained by a construction lender[.]”

(2) Even if the construction lender recorded its mortgage in the county records before the contract holders recorded their interests, the contract holders' unrecorded interests (including any possible equitable liens a court may establish) could very well have priority over the recorded interest of the lender. The real estate recording statutes, which determine the priority of interests in property, only protect bona fide purchasers (buyers) and bona fide encumbrancers (lenders). If it can be shown that the lender either:

• had actual knowledge, or
• can be chargeable with notice

of the existence of the earlier purchase contracts, a case can be made defeating any claim/defense by the lender asserting bona fide purchaser/encumbrancer status, thereby making the construction loan inferior to the contract holders' equitable liens. See generally, Flanigan's Enters. v. Shoppes at 18th & Commer., Inc., 954 So. 2d 758; 2007 Fla. App. LEXIS 7065; 32 Fla. L. Weekly D 1241 (Fla. App. Ct., 4th Dist. 2007).

Inasmuch as the lender here required the developer to pre-sell half the units in the project before it would fund the loan, it may be tough for the lender to now say it had no knowledge of those existing contracts. I wonder if the purchase contracts contained a subordination clause making the purchasers' interests inferior to a future construction loan??? The story is silent on this point.

Go here for more on Bona Fide Purchaser in Florida. Florida bona fide purchaser

The Publicity Continues For The "Produce The Note" Strategy In Fighting Foreclosure

The Associated Press yesterday ran a story on the so-called "Produce The Note" strategy used in defending homeowners facing foreclosures against careless lenders and sloppy, "foreclosure mill, assembly-line" law firms who have contributed to a nationwide mess.

• Kathy Lovelace lost her job and was about to lose her house, too. But then she made a seemingly simple request of the bank: Show me the original mortgage paperwork.
  And just like that, the foreclosure proceedings came to a standstill.

• Lovelace and other homeowners around the country are managing to stave off foreclosure by employing a strategy that goes to the heart of the whole nationwide mess. During the real estate frenzy of the past decade, mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed.

• Persuading a judge to compel production of hard-to-find or nonexistent documents can, at the very least, delay foreclosure, buying the homeowner some time and turning up the pressure on the lender to renegotiate the mortgage.(1)

***

• Tom Deutsch, deputy executive director of the American Securitization Forum, a group that represents banks, law firms and investors, dismissed the strategy as merely a stalling tactic, saying homeowners are "making lawyers jump through procedural hoops to delay what's likely to be inevitable."

• Deutsch said the original note is almost always electronically retained and can eventually be found. Judges are often willing to accept electronic documentation. And lenders are sometimes allowed to produce other paperwork to establish they are the holder of a loan. Still, assembling such documents to a judge's satisfaction takes time, which to homeowners is the point.

For more, see Homeowners' rallying cry: Produce the note.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) It should be noted that, technically, it is impossible to renegotiate the loan terms with the foreclosing mortgage company until they have first proven, through the production of the appropriate paperwork, that they have the legal authority to do so. Negotiating the repayment terms with a mortgage company that subsequently is found to have acted with no authority to do so leaves a homeowner with an agreement that is null and void. An illustration of the current confusion existing with mortgage holders and servicers is contained in an account describing an incident where two different mortgage companies filed for foreclosure involving the same mortgage loan. See The Wall Street Journal Law Blog: Foreclosure Mess: Two Different Plaintiffs Claim to Own Same Mortgage.

At least one foreclosure defense attorney has reportedly pointed out that, because of the way mortgages have been securitized, it’s often unclear who actually owns the debt, and further, in many cases, the originating lenders only pledged these loans and didn’t actually transfer ownership of them to the trusts that are supposed to hold them and issue the securities. See 'Angel' of foreclosure defense bedevils lenders (Florida attorney trains hundreds of others to help troubled borrowers). KappaMtgDocsMissing