NYC Controller Urges All Brooklyn Residents To "Make Out A Will ASAP!" To Avoid Risk Of Getting Fleeced By Public Administrator's Office

In Brooklyn, New York, the New York Daily News reports:

• Brooklyn's scandal-plagued court system gets a new black eye in a scathing audit that found the borough's public administrator's office riddled with "mismanagement and laziness." The city controller's office uncovered shoddy recordkeeping, suspicious real estate deals and auctions run by a shadowy company that vanished when auditors started asking questions.

• "From the time my auditors began this audit, there seemed to be one startling revelation after another with regard to the lack of detail paid to the process of distributing and accounting for the estates of the deceased," Controller William Thompson said.

• Surrogate judges in each borough appoint a public administrator to oversee the estates of people who die without wills. Thompson's auditors found a "culture of mismanagement and laziness" in Brooklyn's public administrator office. Things were such a mess that Thompson urged all Brooklyn residents to "make out a will as soon as possible" - avoiding the risk of being bilked by the office.

For more, including descriptions of a couple of fishy-smelling deals involving real estate owned by deceased property owners, see Audit reveals shady shenanigans in Brooklyn courts.

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For an example of what happened to one alleged victim of the Brooklyn public administrator's office, see:

• Brooklyn Daily Eagle: Were Funds Pilfered from a Retired Judge’s Estate? (Supporters Say Accounting Should Reopen Criminal Probe),
• Retired NY Judge Reportedly Left Homeless & Broke By Guardianship Process,
• NYC Lawyer Suspended For Alleged Mismanagement Of Retired Judge's Estate.

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It appears that the Brooklyn office of the public administrator should be getting used to allegations of the "grave robbing" ripoffs of the dead, the near-dead, and others who are otherwise incapacitated, based on an April 8, 2006 story in the New York Daily News (see B'KLYN TOMB-RAID PROBE: EX-JUDGE FOCUS IN THEFTS FROM VICS WITH NO WILLS):

• A WIDE-RANGING SECRET PROBE of the Brooklyn public administrator's office, its booted surrogate judge and contractors hired by the office has uncovered brazen thefts from the assets of people who died without wills, the Daily News has learned.

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Based on the following excerpt from a June 29, 1988 story in The New York Times, shenanigans in the office of the public administrator may have been taking place for decades. See 3 in Surrogate's Office Charged With Thefts:

• Three investigators from the Brooklyn and Bronx Public Administrators' offices were arrested yesterday and charged with falsifying public records and stealing valuables from rooms they believed had been occupied by people who died without leaving a will. The arrests ended an elaborate two-year sting investigation into the city's Public Administrators' offices, said the city Investigations Commissioner, Kevin B. Frawley, who conducted the inquiry with State Attorney General Robert Abrams and State Comptroller Edward V. Regan. An inspector for the Queens Public Administrator's office was arrested in March. The city's Public Administrators' offices handle the estates of people who have died without leaving a properly executed will.(1)

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According to a June 1, 2009 Daily News story, the Bronx public administrator's office hasn't been so hot lately, either. See Audit Court invested Bronx estate cash illegally.
Go here for other posts on the escapades of public administrators' / public guardians' offices when taking over the assets of the dead and incapacitated.
(1) For other stories involving the Brooklyn Public Administrator's office, see:

• New York Daily News (August 18, 2002): WRINGING OUT THE DEAD IN BROOKLYN (If there's no will, court grabs big hunk of estate),
• New York Daily News (May 29, 2002): Spitzer to probe legal fees (Eying payouts to Brooklyn Surrogate Court counselor),
• New York Daily News (October 28, 2005): 31G RAISE FOR COURT OFFICIALS: SOME ADMINISTRATORS UNDER FIRE,
• New York Daily News (May 15, 2002): B'KLYN COURT PANEL CLOSED TO THE NEWS (The oversight commission for state Surrogate Court administrators marked its first meeting in five years yesterday by barring a Daily News reporter from the session),
• New York Daily News (May 9, 2006): L.I. LAND SALE SCANDAL. COURT OKD AUCTION OF DEEDED SITE (Officials in Brooklyn Surrogate's Court improperly sold off a piece of East End real estate - never notifying the property's rightful owners, the Daily News has learned),
• New York Daily News (December 16, 2008): AG seeking payback on estate fees (Attorney General Andrew Cuomo is seeking to reopen 170 estates of deceased people in order to reimburse heirs who were gouged by a greedy Brooklyn lawyer, the Daily News has learned. Legal papers were filed yesterday in Surrogate's Court to recover exorbitant legal fees charged by Louis Rosenthal, former counsel to the Brooklyn public administrator),
• New York Times (February 3, 1988): Wider Inquiry Into Stealing From the Dead (New York State and city investigators, expanding their inquiry into thefts of property from the dead, seized accounting records yesterday from Public Administrators' offices in Brooklyn, Queens and the Bronx),
• New York Law Journal (July 1, 2005): Judge Loses Seat After Showing 'Shocking Disregard' for Law (New York state's high court finds actions constituted removable misconduct). daily eagle retired judge

NYC Controller: Bronx Public Admisistrator's Office Plays Fast & Loose With Dead People's Property

In The Bronx, New York, the New York Daily News reports:

• Bronx court officials broke the law by investing $21 million in risky securities with money from the estates of dead people, a new audit charges. City Controller William Thompson charged the public administrator's office in Bronx Surrogate's Court violated state law three years ago, when it placed 30% ofthe cash it was holding for heirs with a brokerage firm to buy exotic securities said to be "safe as cash."

• The investments turned sour and were worth nothing for much of last year. That temporarily put taxpayers on the hook for paying the heirs their due. The risky investment was outlined in a July Daily News report. Thompson's audit confirmed The News' findings and said the investment decision reflected overall sloppy management that plagued the office.

• Public administrators in each borough manage millions of dollars from estates of people who die without wills. Thompson found "a severe lack of management" in the Bronx. [...] Meanwhile, politically connected lawyers like Michael Lippman, then the administrator's general counsel, earned $2.1 million in fees on the auction-rate securities deals made through a broker.

For more, see Audit: Court invested Bronx estate cash illegally.

Based on the following excerpt from a June 29, 1988 story in The New York Times, shenanigans in the office of the public administrator could potentially have been taking place for decades. See 3 in Surrogate's Office Charged With Thefts:

• Three investigators from the Brooklyn and Bronx Public Administrators' offices were arrested yesterday and charged with falsifying public records and stealing valuables from rooms they believed had been occupied by people who died without leaving a will. The arrests ended an elaborate two-year sting investigation into the city's Public Administrators' offices, said the city Investigations Commissioner, Kevin B. Frawley, who conducted the inquiry with State Attorney General Robert Abrams and State Comptroller Edward V. Regan. An inspector for the Queens Public Administrator's office was arrested in March. The city's Public Administrators' offices handle the estates of people who have died without leaving a properly executed will.

Go here for other posts on the escapades of public administrators' / public guardians' offices when taking over the assets of the dead and incapacitated. daily eagle retired judge

The BC Public Guardian's Office: A Ruthless Organization Abusing The Rights Of The Very People It Claims To Protect?

In Vancouver, British Columbia, CBC News reports:

• When Winifred Hall entered her friend Sheila Scholnick's home in Vancouver's west side after she was locked out, the place looked as though there had been a burglary. "The house had been ransacked," the elderly B.C. woman told CBC News, her voice shaking.

***

• The culprits: British Columbia's Public Guardian and Trustee, a provincial agency set up to protect the financial and legal affairs of those declared mentally incapable of handling it themselves. While the public guardian is supposed to protect society's most vulnerable citizens, Hall and several others are describing it as a ruthless organization abusing the rights of the very people it claims to protect.

• It was late 2007 when Hall came home to padlocks on the door of the Blenheim Street house where she had lived with the owner and her late friend, Sheila Scholnick, for the past two years. The public guardian allowed her briefly back into the building to retrieve her belongings, but that was all.

***

• For about six months before being turfed from the home, Hall had Scholnick's enduring power of attorney after Scholnick was admitted to a nursing home following a fall in May 2007. With that enduring power of attorney, she had the ability to act in her friend's name even when Scholnick lost decision-making capacity, but that right was nullified by the public guardian when it assumed control of the elderly woman's finances. In fact, it was Hall who called the public guardian, concerned that Scholnick was being swindled by a man who had begun visiting Scholnick at the nursing home. She alleges the man manipulated Scholnick into withdrawing money from her debit account to give to him.

***

• Hall hoped the agency would freeze Scholnick's account to keep it from happening again. But instead, the Public Guardian took control of Scholnick's affairs, emptying all but $50 out of her accounts and informing Hall that her power of attorney had been revoked.

For the entire story, see B.C. public guardian accused of abusing rights (Last months of elderly woman's life made miserable by agency: friends).

Go here for other posts on the escapades of public administrators' / public guardians' offices when taking over the assets of the dead, the near dead, and those incapacitated to the point where they can't care for themselves. daily eagle retired judge

Defeated Bankruptcy Cramdown Proposal Being Reconsidered By Some Lawmakers In Light Of Failing Voluntary Loan Modification Program

The Washington Independent reports:

• The Obama administration has all but abandoned it, and the Senate has already voted it down. But a proposal to allow struggling homeowners to escape foreclosure through bankruptcy got a boost [last week] from a small band of House Democrats convinced that voluntary mortgage modifications aren’t alone solving the housing crisis.

• They have a point. Despite White House efforts to entice mortgage lenders and servicers to alter the terms of mortgage loans at their own discretion, participation in the program has been meager. As a result, hundreds-of-thousands of homeowners continue to face foreclosure months after the program took effect. That instability in the housing market has, in turn, stifled federal efforts to heal the banks and get them lending prolifically again. In the eyes of some Democratic lawmakers, the combination of trends is evidence enough that Congress needs to return to its bankruptcy proposal to save the homes that the voluntary strategy is not.

For more, see Band of House Dems Revisits Cramdown (As Foreclosure Crisis Worsens, Critics of Voluntary Loan Modification Program Speak Up).

Orlando Cops, Ex-Wife Nab Alleged ID Thief Accused Of Defrauding Non-Profit Home For The Mentally Challenged; Took Out Loan, Leaving It In Foreclosure

In Orlando, Florida, WFTV-TV Channel 9 reports:

• Police say a man took identity theft to a whole new level. He didn't steal a person's identity. He stole it from a non-profit house that helps mentally challenged people. Police say Afries Rodriguez even took out a second mortgage on the Kat Cadogan Home for the mentally challenged. Now, Rodriguez has been captured thanks to his ex-wife, who helped his victims lure him back to Florida after he was hiding out in Georgia. [...] The house is the Kat Cadogan Home, a place where mentally-challenged adults and children can live safely. But those who run the home say Rodriguez likely destroyed it all by posing as the non-profit's president and essentially stealing its identity.

***

• As smart as his scams were, his ex-wife would outsmart him. Tuesday, she lured Rodriguez to a parking lot, with a promise of lawsuit settle[ment] money, where Orlando police took him down. He's being held without bond on 19 different charges with more to come.

For more, see Man Steals Non-Profit Organization's Identity. DeedContraTheft

Onslaught Of Chapter 11 Filings Expected From Condo Associations Suffering From Decrease In Maintenance Fee Collections, Deadbeat Unit Owners?

In South Florida, the Daily Business Review reports:

• In a move an increasing number of condo associations are expected to follow, the Maison Grande in Miami Beach has filed for bankruptcy.(1) Facing almost $1 million in claims by unsecured creditors, a troublesome recreational lease, and at least 100 unit owners [out of 502] delinquent on payments of their fees, the association filed a Chapter 11 petition last month in U.S. Bankruptcy Court in Miami. As one of the first condo association bankruptcies of the current economic crisis, “it’s definitely cutting edge,” said attorney Mark Schorr, a solo practitioner in Fort Lauderdale who represents the Maison Grande association.

***

• [Attorney Robert] Kaye represents a Tamarac condo association that is considering bankruptcy. With half of its 280 unit owners delinquent on their maintenance fees, the association is in the red to the tune of $50,000 per month, he said. Kaye also represents a Palm Beach County condo association that is likely to file for bankruptcy after losing a court case against a roofing contractor. A judgment of $130,000 could grow to more than $300,000 after attorney fees and court costs are added, he said. “They can’t afford that, and 20 percent [of 120 unit owners] already are delinquent in paying fees,” Kaye said. These associations, which he declined to name — and many more — are likely to file for bankruptcy protection as they run out of funding options, he said.

***

• As foreclosure filings have soared in the wake of the housing and financial market bust, they can take almost two years to complete. That means condo associations still must maintain the foreclosed units, and the remaining condo owners must pick up the tab of their non-paying neighbors. “As long as lenders are extending foreclosures into 18 months and two years, the associations are pretty well stuck because there is no cash flow and they can’t raise funds necessary to operate,” Kaye said.(2)

For more, see $1 million debt sends condo association into Chapter 11.

(1) Go here for the Maison Grande's Chapter 11 Case Management Summary, filed with the Federal Bankruptcy Court in Miami pursuant to Local Rule 2081-1(B), and which provides the facts and circumstances surrounding the filing of its bankruptcy petition.

(2) In a related story, see South Florida Sun Sentinel: Community associations confront squatters (Options are limited for associations):

• In some cases, squatters are owners of units in foreclosure who stop paying mortgage or maintenance fees and leave their electricity, cable and water bills for the rest of the association residents to pick up while they live cost-free. In others, they are holdover renters in units or homes in foreclosure who stay put without paying a dime in rent or other fees.

Judge Refuses To Reduce 14-Year Sentence For Disbarred Attorney Guilty Of Looting $1.7M+ In Clients' Escrow Funds; Laments Inability To Increase Term

In Central Florida, the St. Petersburg Times reports:

• Disbarred Clearwater lawyer Richard Da Fonte, who asked a judge to reconsider his 14-year sentence for stealing more than $1.7 million from clients, has been denied his request for shortened prison time. "I think the defense is very lucky that the law is that I cannot increase the sentence,'' Pinellas-Pasco Circuit Judge Joseph A. Bulone said Friday.

For more, see Prison term of disbarred lawyer Richard Da Fonte sticks.

Go here for other posts on disbarred lawyer Richard Da Fonte.

(1) If a Florida attorney is representing you and screws you out of money or property through dishonest conduct and you seek some financial reimbursement for the screwing over, go to The Florida Bar's Clients' Security Fund for more information. For other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Chicago-Area Homeowners In Foreclosure Urged To Show Up To Court "Case Management Call" To Seek Assistance

In Chicago, Illinois, the Southwest News Herald reports:

• Cook County Circuit Court Clerk Dorothy Brown said a recent administrative order issued by a Chancery Court judge represents a second chance for many homeowners facing foreclosures to have their cases heard in July and August, noting that some may be able to save their homes through mediation. Brown is getting the word out about Chancery Division Presiding Judge Dorothy Kinnaird’s administrative order, which provides that a “case management call” be set for the mortgage foreclosure section of all pending mortgage foreclosure cases filed prior to April 1, 2009.(1)

***

• A few of the issues case management hearings will consider are: whether the necessary requirements have been met to foreclose; whether an Access to Justice attorney should be appointed; whether credit counseling is appropriate; and whether the case is appropriate for a court-ordered mediation.

For more, see Second Chance To Hear Cases Of Foreclosures.

(1) Brown especially urges people whose banks are not willing to do modifications to come to court for case management. She said people who show up for the case management hearings in July and August will automatically be given a 30- to 45-day continuance to allow them to go to the Pro Se Advice Desk for assistance with their cases. Brown noted that individuals do not need attorneys in order to come to the case management calls. Defendants may also seek to have the $188 appearance fee waived.

Trustees In Mortgage Securitizations May Begin Finding Themselves In The Crosshairs As "Joint Venturers" In Lawsuits Seeking To Impose Fraud Liability

The New York Times reports on the hot water facing many of those big institutions who played any part in the creation and peddling of mortgage securitized interests in toxic loans:

• Some legal experts point to a number of cases in which plaintiffs contend that firms involved in the securitization process, like trustees hired to oversee the pools of loans backing securities, worked so closely with the lenders that they should face liability as members of a joint venture. And these experts see a rising receptiveness to this argument by some courts.(1)

Among the cases referred to in the story is current litigation brought by the Atlanta Legal Aid Society on behalf of a couple fighting foreclosure of an allegedly abusive and predatory loan. They seek punitive damages from the lender, NovaStar Mortgage Inc., as well as from the original trustee (JPMorgan Chase) and the subsequent trustee (Bank of New York Mellon).(2)

Another lawsuit referred to in the story was one targeting lender First Alliance, in which its main backer, Lehman Brothers, found itself hammered with some of the liability.(3)

A third lawsuit referred to involving the issue of liability for abusive lending going beyond the original lender resulted in a settlement after the court denied two motions to dismiss it.(4)

For the story, see Looking for the Lenders’ Little Helpers.

(1) From the story:

• “As we are unpeeling what was happening on Wall Street, we may see that Wall Street didn’t find the safety from litigation risk that it hoped to find in securitization,” said Kathleen Engel, a professor at Cleveland-Marshall College of Law at Cleveland State University. “I think there is potential for liability if borrowers can engage in discovery to see exactly how much the sponsors were shaping the practices of the lenders.”

(2) From the story:

• “We contend that the trustee has direct liability on the theory that even though they were not sitting at the loan closing table, they were involved in the securitization and profited from it,” said Sarah E. Bolling, a lawyer in the Home Defense Program at the Atlanta Legal Aid Society who represents the [homeowners]. “The prospectus had been written before the loan was closed. If this loan was not going to be assigned to a trust, it would not have been made.”

(3) From the story:

• More than 7,500 borrowers had successfully sued First Alliance for fraud, and in 2003 a jury found that Lehman, which had lent First Alliance roughly $500 million over the years to finance its lending, “substantially assisted” it in its fraudulent activities. Lehman was ordered to pay $5.1 million, or 10 percent of damages in the case, for its role.

(4) From the story:

• That matter turned on the language in the securitization’s pooling and servicing agreement, which provides details not only on the types of loans in a pool but also on the relationships of various parties involved in it. Diane Thompson, a lawyer with the National Consumer Law Center, said that the meaning of the agreement was that “the trustee was a joint venture with the originator and was therefore responsible for everything that happened in that joint venture.” Many such agreements, she said, create a joint venture by force of law. “Everybody I know that has tried this argument has had pretty good success. Absolutely we are going to see more of these cases.”

Long Island Man Found Guilty Of Hijacking Homes In Foreclosure & Renting Them Out To Unwitting Tenants

In Riverhead, New York, North Country Gazette reports:

• After a three week trial and three hours of deliberations, a Suffolk jury convicted a Medford man Friday of burglary, grand larceny and fraud charges for breaking into foreclosed houses in Patchogue, Medford, Shirley, and Holbrook and renting out the homes to unsuspecting tenants. Paul Salamone, 28, smashed lockboxes, changed locks, removed For Sale signs, and put guard dogs in the homes to keep realtors and the rightful owners of the property away while he searched for potential tenants.

***

• District Attorney Thomas Spota said evidence turned up by DA fraud investigators found that Salamone filed a total of 13 fraudulent liens with the county clerk’s office and the New York Department of State. “These liens were based on phony debts that, even if they were valid, would not have allowed Salamone to break and enter the houses in question, much less rent them out,” DA Spota said. The district attorney said Salamone’s scheme relied on fraudulent liens, receipts and other paperwork that falsely legitimized “a con game that victimized tenants and the legal owners of the houses”.

Source: Jury Convicts Man Of Foreclosure Scam.

See also:

• Long Island Press: Medford Man Convicted of Renting Foreclosed Homes He Didn’t Own,
• Newsday: Medford man convicted of rental fraud,
• Long Island Press: Local Man In the Doghouse In Housing Rental Scheme,
• Newsday: Lawyer: Man dumb, but no crook in real estate case.

Notice Of Disciplinary Charges Filed By State Bar Against California Attorney In Connection With Disgruntled Loan Modification Client

In Southern California, the Orange County Register reports:

• One state regulator has faced a hurdle in trying to stop companies from scamming people who need help avoiding foreclosure. But this week another agency stepped in to join the fight. The California State BAR on July 7 filed its first disciplinary case against an attorney related to the burgeoning, and sometimes messy, loan modification business. [... O]n Tuesday it filed a notice of disciplinary charges against Sean Rutledge, a lawyer with United Law Group in Irvine.

• The notice accuses Rutledge of taking $1,750 from a homeowner in November 2008 but never making an effort to get his loan modified. After the client requested a refund, it took months to get his money back and the client had to first sign a document releasing Rutledge of all legal liabilities, according to the filing.

For more, including Rutledge's response, see Irvine attorney is first to face discipline over loan mods.

Court Rules Against Bank In Attempt To Make Closing Attorney Pay For Fraud Committed By Woman Borrowing $180K Secured By Home Belonging To Another

In Wellington, New Zealand, The National Business Review reports:

• Westpac Bank has failed to persuade the Supreme Court to reverse a decision in lower courts that a solicitor should be liable for a mortgage fraud which cost it $180,000. The Supreme Court today dismissed an appeal by Westpac and ordered it to pay solicitor Alan John Clark $15,000 costs, plus "reasonable disbursements."

• Associate Judge Anthony Christiansen, in the High Court, rejected a Westpac bid for summary judgment against Mr Clark, and said he considered Westpac's loss may have been a result of "slack lending practices". His decision was upheld by the Appeal Court, and Westpac took its case to the Supreme Court, where it also lost.

• The bank was caught out by a "clever imposter" who impersonated Marie Antoinette Fenech, and used a false passport to obtain a $180,400 mortgage on her Remuera house. The same conwoman apparently used similar tactics at three other banks and three other lawyers.

For more, see Westpac fails in bid to recover cash from fraud. DeedContraTheft

Ohio Woman Gets Help From Non Profit Law Firm In Saving Home From Foreclosure, Filing Suit Alleging Loan Modification, "Rescue" Scam,

In Hamilton, Ohio, the Middletown Journal reports:

• A Middletown woman filed suit Thursday, July 9, in Butler County Common Pleas Court against two Cincinnati-based companies and a Kentucky attorney alleging a foreclosure rescue scam, according to the Legal Aid Society of Southwest Ohio. The lawsuit alleges the defendants were running a scam that promised to save Marsha Fuller’s home but did little or nothing in exchange for the $1,200 fee. Foreclosure Assistance USA and a related company, American Foreclosure Professionals(1) preys upon homeowners desperate to save their homes from foreclosure, according to the complaint filed in court.

***

• The company did hire an attorney to represent Fuller, but she alleges that attorney failed to independently investigate the case and instead relied on information received from Foreclosure USA, according to a news release from the Legal Aid Society of Southwest Ohio. When the attorney discovered the Ohio Attorney General’s Office sued both companies for running a deceptive business, he withdrew from the case and left Fuller without an attorney to respond to the lender’s motion for a foreclosure judgment, according to the complaint.(2)(3)

Source: Woman files suit in foreclosure rescue scam.

(1) For more on the Ohio AG's civil suit against these operators, see Foreclosure Rescue Companies Sued for Deceptive Practices.

(2) Reportedly, Fuller received assistance from legal aid, which negotiated a loan modification and saved her home from foreclosure.

(3) Two relatively recent rulings of the Ohio Supreme Court illustrate how attorneys who allow themselves to be pimped out by upfront fee loan modification firms and foreclosure rescue operators can find themselves in hot water. For more, see Attorneys Incur License Suspensions For Fee Sharing, Other Violations In Arrangement With Loan Modification, Foreclosure Rescue Operator.

Rent Skimming Landlords Pocketing Gov't Rent Subsidies While In Foreclosure, Forcing Section 8 Tenants Out Onto Street With Trampled Legal Rights

In Central Florida, WFTV-TV Channel 9 reports:

• A growing number of Central Florida's poorest residents are being forced out of their rental homes because their landlords aren't making the mortgage payments. Eyewitness News reporter Berndt Petersen found out that more and more Section 8 landlords are taking the federal rent payments while they default on the mortgages.

***

• Stacey Kleinfeld runs Lake County's Section 8 Housing program, which helps lower income tenants pay their rent. However, a growing number of Section 8 landlords aren't paying their mortgages. "The federal government is being taken advantage of," Kleinfeld said. [...] Kleinfeld says some landlords are pocketing the federal rent money, sometimes more than $1,000 per month, while defaulting on the mortgages. Kleinfeld's office has had a tough time finding the landlords.(1)

For the story, see Landlords Accused Of Pocketing Rent Money.

(1) A federal foreclosure law signed this spring by President Barack Obama requires, with one exception, property owners who come into land through foreclosure to honor all existing leases and to provide a 90-day window for any month-to-month tenants. See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009.

In addition, in the case of a tenant who receives a Section 8 federal rent subsidy (ie. a "Section 8" tenant), it has been reported that federal law prohibits a new owner, including foreclosure purchasers and foreclosing lenders, from evicting Section 8 tenants unless they first go to court and prove they’re being economically harmed by having a tenant remain in a building, or show other good cause. However, many Section 8 tenants panic and don’t fight eviction notices, not realizing they have these special rights granted by Federal law (even if they do, may be unable to find and/or afford competent legal representation. For more on this point, see Foreclosures hit tenants (Activists: New owners trample on renters’ rights).

For the specific federal regulation on this point, see 24 CFR 982.310(d)(1). Go here for the regulations (24 CFR 982) regulating the Section 8 rent subsidy program. RentSigmaSkimming

Tenants In Foreclosed Boarding House To Fight Off Eviction; Say New Law Prohibits Landlord From Giving Them The Boot

In Hyannis, Massachusetts, the Cape Cod Times reports:

• A group of tenants who received eviction notices last week at a local lodging house may be among the state's first to find protection under a federal foreclosure law signed this spring by President Barack Obama. As many as a dozen tenants in six rental units at Park Square Village, a 36-unit boardinghouse on Main Street in Hyannis, received eviction notices Friday threatening legal action if they did not vacate their units within seven days.

• The notices, issued by new property owner Bass River Properties of West Dennis, offer no reason behind the evictions. But with a stated July 11 deadline, they may be in violation of the new foreclosure law, which requires property owners who come into land through foreclosure to honor all existing leases and to provide a 90-day window for any month-to-month tenants,(1) experts say.

For more, see Cape evictions test new federal law.

(1) See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009. RentSigmaSkimming

Loan Servicer Coughs Up $674K+ In Refunds After Allegedly Beating Baltimore Borrowers Out Of Improperly Imposed Prepayment Penalties

In Baltimore, Maryland, the Baltimore Business Journal reports:

• Ocwen Loan Servicing, one of the U.S.’s largest servicers of residential mortgage loans, has voluntarily refunded $674,137 to more than 180 Maryland borrowers after a state examination found violations of Maryland law restricting the imposition of prepayment penalties.

For more, see Ocwen Loan Servicing refunds $674K to Md. mortgage borrowers.

Maine Regulators Issue Cease & Desist Orders To Fifteen Out-Of-State Loan Modification Firms Accused Of Pocketing Upfront Fees, Failing To Deliver

From the Maine Bureau of Consumer Credit Protection:

• State regulators [Tuesday] issued orders directing 15 separate foreclosure rescue companies to cease doing business with Maine consumers.(1) The companies, all located out of state, enticed consumers with radio, television and internet advertisements promising to help the consumers avoid foreclosure but then took the consumers’ advance fees and did nothing to assist the consumers.

• “Many debt management companies comply with the law and become licensed and bonded for the protection of consumers,” said Will Lund, Superintendent of Consumer Credit Protection. “These 15 companies, on the other hand, made false promises and then took money from desperate folks who could least afford to lose those funds.” The companies took a collective $36,000 in advance fees from 30 Maine households, but have not saved a single home in the State from foreclosure nor reduced a single debt for a Mainer, said Lund. Further, he said, the companies have ignored all communications from state regulators. “It’s heartbreaking to talk to consumers who have sent their last $495, $995 or $1,495 to a company that does nothing to help them,” said David Stolt, Chief Field Investigator for the Bureau.

For the entire press release, see State Regulators Order Foreclosure Rescue Companies to Cease Doing Business in Maine.

(1) The list of firms nailed by Maine regulators, which contains some of the "usual suspects," follows (with links to the corresponding cease & desist orders):

• Federal Loan Modification Law Center; Irvine CA,
• United Hope Alliance Corp.; Jacksonville, FL,
• National Foreclosure Counseling Services; Jacksonville, FL,
• Hope Now Modifications; Cherry Hill, NJ,
• Pathway Financial Management; Stanton, CA,
• Law Offices of Joel L. Schwartz; Northfield, NJ,
• BillsMadeSimple.com, Inc; San Diego, CA,
• Lewis Foreclosure Mediation Services, LLC; Phoenix, AZ,
• Apply 2 Save, Inc.; Coeur d’Alene, ID,
• HelpModifyNow.com; Newport Beach, CA,
• Ocean View Investment Services Co.; Ft. Lauderdale, FL,
• FHA All Day; Boca Raton, FL,
• Mason Capital Group, LLC; Encino, CA,
• The Hall Firm, LLC; New York City, NY,
• Michael Thomas Stoller, Esq. a/k/a Fresh Start Mortgage Solutions; Beverly Hills, CA and Clearwater, FL.

Wells Fargo Suing Itself In Foreclosure Actions Becoming Common??? Proliferation Of 80/20 Mortgages During Housing Boom Cited As Reason

In Hillsborough County, Florida, Dow Jones Newswires columnist Al Lewis opines:

• You can't expect a bank that is dumb enough to sue itself to know why it is suing itself. Yet I could not resist asking Wells Fargo Bank NA why it filed a civil complaint against itself in a mortgage foreclosure case in Hillsborough County, Fla. "Due to state foreclosure laws, lenders are obligated to name and notify subordinate lien holders," said Wells Fargo spokesman Kevin Waetke.

***

• In this particular case, Wells Fargo holds the first and second mortgages on a condominium, according to Sarasota, Fla., attorney Dan McKillop, who represents the condo owner. As holder of the first, Wells Fargo is suing all other lien holders, including the holder of the second, which is itself. "The primary reason is to clear title and ownership interest in a property to prepare it for sale," Waetke said in an email exchange. "So it really is not Wells Fargo vs. Wells Fargo."

• Yet court documents clearly label "Wells Fargo Bank NA" as the plaintiff and "Wells Fargo Bank NA" as a defendant. Wells Fargo hired Florida Default Law Group., P.L., of Tampa, Fla., to file the lawsuit against itself. And then Wells Fargo hired another Tampa law firm -- Kass, Shuler, Solomon, Spector, Foyle & Singer P.A. -- to defend itself against its own lawsuit, according to court documents. Wells Fargo's defense lawyers even filed an answer to their client's own complaint.

***

• Rather than suing itself -- a stunt that was never even attempted on the MTV show "Jackass" -- wouldn't it be easier for Wells Fargo to release one of the liens to itself? Or pursue some other internal accounting strategy rather than tie up the court with nonsense?(1)

***

• Still trying to comprehend this legal lunacy, I called the Florida Bar, which put me in touch with Florida mortgage foreclosure lawyers. One of them, Tampa attorney Kristofer Fernandez, said he's seen several cases where a large bank has sued itself for foreclosure as the holder of both first and second mortgages. "Four or five years ago, you would have never seen this," Fernandez said. "Now, it's very common."(2)

For the story, see Wells Fargo Bank Sues Itself.

(1) "This is just folks cranking out paperwork without conscious thought," said Anthony Sabino, a law professor at St. John's School of Law in New York City. Sabino added that it is possibly more confirmation of the old saw that a lawyer is one who can speak from both sides of the mouth.

(2) According to the column, in the final years of the housing boom, banks were lending to homeowners with no money down. To do this, they often made 80/20 loans, giving homeowners an 80% first mortgage and a 20% second mortgage.

Cleveland Housing Judge Continues Hammering Wells Fargo In Its Attempts To Dump Dilapidated Foreclosed Home Inventory

In Cleveland, Ohio, a recent op-ed column in the The Plain Dealer states:

• Cleveland Housing Court Judge Ray Pianka continues to impress with his proactive approach to fighting the foreclosure crisis. His decision last week to compel Wells Fargo Bank to post $1 million bond if it wants to rehab and sell distressed properties it owns in the city shows the kind of creative tactic required to protect the interests of Cleveland and its residents. Along with posting the bond -- which would cover the cost of demolition should Wells Fargo fail to meet its obligations -- the bank must list all of the properties it owns in the city, and board up and secure any homes that are vacant.

• Pianka's order supersedes an earlier one requiring that the San Francisco-based bank rehab or demolish all substandard holdings and prove that properties listed for less than $40,000 are up to code. Wells Fargo appealed that decision.

For the column, see Requiring Wells Fargo to post bond on distressed properties makes sense for Cleveland.

In a related story, see The Washington Independent: Banks and the Blight They Leave Behind: It’s Not Just Cleveland Anymore. BetaVacantForeclosure

More On Lien Stripping Of Wholly Unsecured 2nd Mortgages Encumbering Underwater Homes In Chapter 13 Bankruptcy Proceedings

White Plains, New York bankruptcy attorney Jeffrey M. Binder writes the following in the Poughkeepsie Journal on lien stripping of "wholly unsecured" second mortgages on underwater homes(1) in Chapter 13 proceedings in Federal bankruptcy court:

• During the lien stripping process you are required to file a Chapter 13 Bankruptcy and it can only be filed if your property value is less than the balance owed on your first mortgage which has to be less than one million dollars. You must arrange and pay for an appraisal of your property.

• For example, if your home is worth $500,000 and your first mortgage payoff balance is $525,000, you have no equity. If you have a second mortgage loan balance of $50,000, this second loan is a wholly unsecured mortgage and you can strip the lien in a Chapter 13 case. The lien now becomes an unsecured debt just like a credit card debt which can be wiped out after a period of time. If, however, the home is worth $530,000, you cannot strip off the second lien because it is merely undersecured, not wholly unsecured.

• Chapter 13 lien stripping is ideal for the large pool of borrowers who took out 80/20 loans or HELOCs where the 2nd lien is completely underwater. If such a lien is stripped, it can be treated as an unsecured debt in the Chapter 13 payment plan and paid a fraction over 5 years. (The actual percentage paid depends on several factors, including the value of the homeowner's assets and disposable income.) Homeowners don't have to fall behind on payments to be eligible for lien stripping.

For more, see Learn the Secrets of Lien Stripping ... and Save Your House!

See also: Cramdowns & Lien Stripping Of Home Mortgages Under Existing Bankruptcy Law.

(1) Underwater home = property that is worth less than the amount owed on the existing mortgage(s) encumbering the real estate; also referred to as property with "negative equity."

Southern California Loan Modification Scam Used Complicated Money Trail With $1M+ Flowing Into Mexico, Says State AG

In Southern California, the Los Angeles Times reports on an alleged loan modification scam which, according to authorities, is among the most sophisticated operating in California, that stymied investigators with a thicket of bank accounts, 1-800 numbers and wire transfers to Mexico until they finally busted the operation in October.

• The California attorney general's office had been fielding complaints for months from homeowners who had fallen victim to what one prosecutor termed a "brilliant scheme." Representatives of this operation allegedly induced homeowners to send them as many as three consecutive mortgage payments. More than $1 million flowed through a series of bank accounts, much of it eventually crossing the border to banks in Mexico, according to the attorney general's office.

• In some cases, people lost their homes because they did nothing to head off foreclosure, believing they had made a deal with their bank. Despite there being hundreds of victims, investigators found the trail confusing. The operation did not register its phone lines in its own name. Instead, investigators said, its 800-numbers ran through Internet phone companies. It was the same with the bank accounts.

• [Investigators] began working backward from the accounts where checks were deposited and postal boxes where victims sent their money. They determined that much of the money seemed to go to Juan Jose Perez and Isuara Hernandez, a married couple with three children who had recently lived in San Bernardino County. On Oct. 27, the attorney general's office filed a 39-count complaint charging Hernandez, Perez and several associates with grand theft, money-laundering and conspiracy.(1) Five of Hernandez and Perez's associates pleaded guilty;(2) but Hernandez and Perez, who authorities say are the ringleaders, have eluded capture. Investigators suspect they went to Mexico.

For the story, see In California, mortgage scammers find easy pickings (As foreclosures climb, so does fraud by schemers preying on desperate homeowners hoping to modify their loans. State investigators have 750 open cases -- up from just 10 a year ago).

(1) See California AG press release: Attorney General Brown Breaks Up Foreclosure Scam Ring.

(2) See California AG press release: Attorney General Brown Sends Perpetrators of Loan Modification Fraud to Prison.

License Now Required For Loan Modification & Foreclosure Consultants Working With Nevada Homeowners; New Law Closes Loophole

In Las Vegas, Nevada, the Las Vegas Review Journal reports:

• The Nevada Legislature this year showed it wants to regulate the loan-modification business when it passed Assembly Bill 152. The bill [...] requires both mortgage modification and foreclosure consultants to obtain state licenses.

• An earlier law required foreclosure consultants to obtain licenses, but some operators argued that they did not need a license until the client's home went into foreclosure, said Bill Uffelman, chief executive officer of the Nevada Bankers Association. The new law appears to close that loophole by requiring consultants for loan modifications and foreclosures to obtain licenses from the Mortgage Lending Division.

For the story, see Scams prompt call for licensure in mortgage-modification business.

See also Las Vegas Sun: Regulations allow controls on loan modification industry:

• Gov. Jim Gibbons has signed emergency regulations to allow the state to impose tougher controls to stop foreclosure and loan modification scams. The regulations permit the state Division of Mortgage Lending to license loan modification and foreclosure consultant companies and their agents. [...] The state will be able to charge $750 for an application for a company and $100 additional for each branch office. And there will be a $500 a year fee for a company. An agent application fee is $185. The division must adopt permanent regulations by Aug. 27.

Sentencing Phase Finally Begins In Maryland Equity Stripping, Straw Buyer, Sale Leaseback Foreclosure Rescue Scam; 1st Of 10 Defendants Gets 10 Years

From the Office of the U.S. Attorney (Maryland):

• U.S. District Judge Roger W. Titus sentenced Kurt Fordham, age 39, of Ft. Washington, Maryland, [Friday] to 10 years in prison, followed by five years of supervised release for conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Titus also ordered Fordham to pay restitution of $13,131,287.63, and forfeit three residential properties in Oxon Hill, Capitol Heights and Laurel, Maryland, and three vehicles.(1)

For the entire press release, see Metropolitan Money Store Conspirator Sentenced to 10 Years in Prison in over $35 Million Mortgage Fraud Scheme (Fordham Personally Responsible for Over $13.5 Million in Losses to Mortgage Lenders and Used Over $800,000 of Fraudulently Obtained Proceeds to Pay for His Wedding).

Go here for other posts on the Metropolitan Money Store sale leaseback foreclosure rescue scam.

(1) Nine other defendants have pleaded guilty to the conspiracy and are facing a maximum sentence of 30 years in prison: JoyJackson, age 41, President of Metropolitan Money Store, and Jennifer McCall, age 47, both of Ft. Washington, Maryland, a chief executive officer of Metropolitan Money Store and owner of JC and JC Investments LLC; Katisha Fordham, age 35, of Washington, D.C., a loan processor at the Metropolitan Money Store; Richard Allison, age 37, of Camp Springs, Maryland, an attorney and employee of the U.S. Census Bureau; Clifford McCall, age 47, of Lanham, Maryland, president of Burroughs & Smythe Financial Services, Inc., based in Lanham and a director of the Fordham & Fordham Investment Group, Ltd., a foreclosure consulting and credit servicing business based in Lanham and Greenbelt, Maryland; Carlisha Dixon, age 31, of Hyattsville, Maryland, vice president and a director of Burroughs & Smythe Financial Services, Inc.; Chandra Jones, age 31, of Lanham, Maryland, the daughter of co-defendants Jennifer and Clifford McCall; Ronald Aaron Chapman, Jr., age 34, of Washington, D.C., a loan officer at MMS; and Wilbur Ballesteros, age 33, of Lanham, Maryland, a licensed real estate agent, and closing agent on more than 60 straw buyer properties.

California AG Accuses Loan Modification Firm, Attorney Of Filing Phony Lawsuits To String Homeowners Along, Collect Upfront & Monthly Fees

From the Office of the California Attorney General:

• Attorney General Edmund G. Brown Jr. [Monday] sued a foreclosure consultant and an attorney -- Paul Noe Jr. and Mitchell Roth - who conned 2,000 desperate homeowners into paying exorbitant fees for "phony lawsuits" to forestall foreclosure proceedings.(1) These lawsuits were filed and abandoned, even though homeowners were charged $1,800 in upfront fees, at least $1,200 per month and contingency fees of up to 80 percent of their home's value.

• "Noe and Roth ripped off homeowners desperate for help by charging unconscionable fees for phony lawsuits," Brown said. "Instead of aggressively pursuing the lawsuits, Noe and Roth strung them along so they could continue to rake in fees."(2)

***

• After filing the lawsuits, Roth did virtually nothing to advance the cases. He often failed to make required court filings, respond to legal motions, comply with court deadlines, or appear at court hearings. Instead, Roth's firm simply tried to extend the lawsuits as long as possible in order to collect additional monthly fees.

• Under the terms of the agreement, United First charged homeowners approximately $1,800 in upfront fees, plus at least $1,200 per month. If the case was settled, homeowners were required to pay 50 percent of the cash value of the settlement. For example, if United First won a $100,000 reduction of the mortgage debt, the homeowner would have to pay United First a fee of $50,000. If United First completely eliminated the homeowner's debt, the homeowner would be required to pay the company 80 percent of the value of the home.

For the entire California AG press release, see Brown Sues Foreclosure Consultant and Attorney Who Conned Homeowners into Paying Thousands for Phony Lawsuits.

For the California AG's lawsuit, see People v. United First, Inc., et al.

Go here for other posts related to this operation.

(1) Brown's lawsuit contends that Noe, Roth and United First:

• Violated California's credit counseling and foreclosure consultant laws, Civil Code sections 1789 and 2945;
• Inserted unconscionable terms in contracts;
• Engaged in improper running and capping, meaning that Roth improperly partnered with United First, Inc. and Noe, who were not lawyers, to generate business for his law firm violating Section 6150 of the California Business and Professions Code, and
• Violated Section 17500 of the California Business and Professions Code.

(2) In addition to the current hot water this pair is in, Paul Noe Jr. was convicted of wire fraud in 1989 and the subject of a California Department of Insurance Cease and Desist Order in 2004; and Mitchell Roth resigned for the California State Bar in late May 2009, after the State Bar closed his law firm (see SF Weekly: State Bar Takes Over 'Son of Super Swindler' Law Firm -- 2,000 Con Jobs Too Late).

Arizona AG Files Suit In Alleged Straw Buyer Scheme Coupled With "No Qualifying" Rent To Own Program Leaving Investors, Tenants, Banks Holding The Bag

From the Office of the Arizona Attorney General:

• Attorney General Terry Goddard has filed a consumer fraud lawsuit against numerous Tucson real estate professionals and businesses(1) alleging a sophisticated, multi-million-dollar real estate fraud scheme. The lawsuit, filed in Pima County Superior Court, alleges that the defendants engaged in a sophisticated system of fraud that led to the filing of foreclosure notices on more than 130 homes and caused substantial harm to investors, lenders and rent-to-own homebuyers.

***

• The complaint states that the defendants participated in a scheme that used deceptive tactics to entice under-qualified, novice investors into purchasing homes and then sold them to rent-to-own buyers. However, investigators say the scheme was designed to fail because it targeted rent-to-own homebuyers with credit problems and ignored whether they could qualify to purchase the homes.(2)

Among the Arizona AG's allegations are that the operators:

• deceived more than 130 investors with assurances of a legitimate and "worry free" investment system requiring little or no capital investment and virtually no involvement in the transaction or in the subsequent management of the investment,

• defrauded and deceived lenders in order to fraudulently obtain the financing for the millions of dollars of "investment" properties purchased by the consumer-investors,

• offered the investment homes purchased by investors as legitimate rent-to-own opportunities with the offer of "no qualifying" and the promise of easy home ownership; and that the rent-to-own scheme deceptively targeted unqualified or under-qualified consumers and relied on a high turnover to obtain new "down-payments" as profit. Out of hundreds of rent-to-own transactions, apparently only one consumer out of 270 or more was able to buy a home in the fraudulent rent-to-own system. The rent-to-own purchasers were clipped for upfont money of $1,500 to $10,000 on rent-to-own homes they could not ultimately qualify for. Despite promises of "no qualifying," consumers still needed financing but could not repair their credit or qualify for financing to buy the home.(3)

For more, see Goddard Files Suit Against Massive Real Estate Fraud Scheme.

For the Arizona AG lawsuit, see State of Arizona v. AZI Rent2Own LLC., et al.

(1) The defendants named in the lawsuit are:

• Andrew Silverstein, former Re/Max All Executives real estate agent,
• Anthony Zandonatti, owner of AZI Rent2Own and owner of RTOSearch.com,
• AZI Rent2Own, LLC (d.b.a. Arizona Investments),
• RTOSearch.com,
• VinLan Ventures, LLC (d.b.a. Re/Max All Executives),
• Vince Volpe, designated broker of Re/Max All Executives,
• Tucson Mortgage, LLC (d.b.a.Tucson Mortgage),
• William "Bill" Anastapolous, owner of Tucson Mortgage,
• WGA Enterprises, LLC,
• Thomas Piazza, Tucson Mortgage loan officer,
• Amaury Leon, Infinity Funding loan officer,
• Darren Breen, Red House Lending loan officer,
• Dave Klein, former Tucson Mortgage loan originator.

(2) Regulators in Arkansas and Missouri recently invoked state securities laws to shut down a similar operation. See:

• Straw Buyer Scheme Coupled With Subsequent Sale Using Contract For Deed Constitutes Sale Of Unregistered Security, Says Arkansas Securities Regulator,
• Missouri "Contract For Deed" Operator Hit With C&D Order By Securities Regulator, Preliminary Injunction By State AG.

(3) If any of the allegations are even close to being true, the operators are going to have a tough time vigorously defending themselves in this civil lawsuit without opening themselves up to the exposure of possible criminal charges from the Arizona Feds. Invoking their "right to remain silent" and having their attorneys attempt to quickly reach a settlement acceptable to the Arizona AG may be the preferred route for them to take if they hope to have any chance of keeping the local Feds from showing up at their front door. A case like this illustrates the kind of leverage a state attorney general has when bringing a civil lawsuit of this type, knowing that the allegations can very easily be "copied & pasted" into a Federal indictment (ie. mail fraud, wire fraud, conspiracy, etc.) if the local Feds so choose. rent to own lease purchase option scams yellowstone

Manhattan DA Bags 25 Suspects In $100M+ "Cash Back" Metro NYC Mortgage Scam; 13 Charged w/ Multiple Felonies, Dozen Others Waive Indictment, Cop Pleas

From the Office of the Manhattan District Attorney:

• Manhattan District Attorney Robert M. Morgenthau announced [Wednesday] the indictment of 13 individuals and a mortgage origination company(1) for perpetrating over $100 million in mortgage fraud over a four-year period in the New York City metropolitan area. In addition, 12 individuals have already waived indictment and pleaded guilty to felonies relating to their participation in the mortgage fraud scheme.(2)

• The indictment charges 13 individuals and the mortgage company, AFG FINANCIAL GROUP, INC., with enterprise corruption, grand larceny, scheme to defraud and conspiracy involving 19 fraudulent mortgage transactions. The defendants include the principals and a number of employees of the mortgage company, as well as bank employees, appraisers, and three attorneys. Two other attorneys are among the defendants who already pleaded guilty.

***

• The 10-month investigation leading to today’s indictment revealed that AFG Financial Group (AFG), along with a network of co-conspirators and accomplices, located distressed residential real estate properties in New York City and surrounding counties. They then engaged in a fraudulent scheme to steal millions of dollars from lending banks in Manhattan and elsewhere using sham sales of those properties. The conspirators caused the banks to front millions of dollars to finance purchases of the properties. They then walked away with most of the cash, leaving behind over-valued properties and worthless mortgage papers.

***

• At the sham real estate closings, AFG brought in lawyers to play the roles of legal counsel for buyers, sellers and banks. Instead of looking after their clients’ interests, these lawyers made sure that the closings went smoothly, that no one asked any questions, and that the principals of AFG received the lion’s share of the funds obtained from the defrauded banks. Defendants MARC ZIROGIANNIS and FRED LAX generally represented the banks. In so doing, they betrayed their clients and caused their client’s funds to be stolen. ZIROGIANNIS and LAX also ran title companies that were employed as part of the scheme.

Go here for the entire Manhattan DA press release.

For the indictment, see People v. AFG Financial Group, Inc., et al.

(1) Indicted Defendants:

• AFG FINANCIAL GROUP, INC., AARON HAND, Oyster Bay Cove, New York, EUGENE CULBREATH, Valley Stream, New York, ERIC SHIELDS, Media, Pennsylvania, MATTHEW MCDERMOTT, Merrick, New York, MARC ZIROGIANNIS, Levittown, New York, KENNETH LAW, Pelham, New York, KATHLEEN SCANLON, Baldwin, New York, JEFFREY PHELAN, Smithtown, New York, JERRY STRKLJA, Astoria, New York, MARILYN MATEO, Bronx, New York, DARLITA BOSTIC, ALLYSON HINDS, Middle Island, New York, RAJMOHAN AUTAR, Queens Village, New York.

(2) Convicted Defendants:

• MARIA ALBERTINA, EDMOND BEROOKHIM, CHRISTOPHER CARR, PATRICK KUHL, FRED LAX, STEPHEN MARTINI, FRANK MIALE, GIOVANNI MUNIVE, JENNIFER SCHIFF, WAYNE SISMAN, SHARON THOMPSON, SALVATORE TRAPANI.

Ex-Ohio AG Resurfaces In Cleveland Lending A Hand In Attempt To Retake Home Lost In Foreclosure; Says Void Judgment Means "No Sale"

In Cleveland, Ohio, The Wall Street Journal Law blog reports:

• When we last brought you word of Marc Dann, he was resigning as Ohio’s attorney general amid a sexual harrassment scandal. Where is he now? Turns out the former “Mortgage Cop,” as he was dubbed in this 2007 WSJ profile [requires subscription; those without a subscription, go here, then click the link for the full story], is back on the beat. What’s more, he hooked up with Cleveland activist Richard Davet, the pro se litigant whose 11-year foreclosure battle is the subject of this WSJ Page One story [those without a subscription, go here, then click link for the story]. (For prior LB posts on Davet click here and here.) Dann is trying to help Davet take back ownership of his six-bedroom home in the Cleveland suburb of Beachwood, from which he was evicted more than two years ago.

***

• As a pro se litigant, Davet held off foreclosure for 11 years but eventually lost. On July 2, Dann helped Davet file this complaint against the owners of Davet’s former home, saying they entered the home “in reliance on a void ab initio judgment of foreclosure.” Translation: the Ohio state court that ruled in favor of foreclosure had no standing to hear the case.

• The defendant in Davet’s suit, Paul Mikhli, a dentist who bought Davet’s home, once told the Law Blog he was “a little nervous” about the nonstop litigation over the house. Should Mr. Davet succeed, Mikhli told us, title insurance should cover his expenses.

***

• Dann, who now operates a solo firm in Cleveland, mostly does legal work for unions but also has four pro bono foreclosure-defense cases. He wouldn’t say whether Davet’s case is one of those four, but he did say the case is Property Law 101: “When a court doesn’t have jurisdiction, there can be no judgment.”(1)

For the full story, see Former Ohio AG Marc Dann Reprising Mortgage Cop Role.

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, Go Here, and Go Here.

(1) For some recent case law addressing the connection between a party in a court action not having the legal standing to bring a lawsuit and a court not having jurisdiction to entertain the lawsuit, see Subject Matter Jurisdiction, Lack Of Standing & Void Judgments. EpsilonMissingDocsMtg

Kansas AG Files Five Lawuits Against Outfits Allegedly Running Loan Modification & "Foreclosure Redemption Rights" Scams

From the Office of the Kansas Attorney General:

• Attorney General Steve Six is taking legal action to stop those who are preying on Kansans facing foreclosure or other financial difficulties. [Tuesday] Six launched Operation Homestead by filing five lawsuits, extending help to Countrywide customers, and increasing educational resources available to consumers.

• The lawsuits are aimed at businesses the attorney general alleges are defrauding Kansans by running redemption rights(1) and loan modification(2) scams. In several of the cases, the consumers lost their homes and ended up much worse financially than they were before. Six said the lawsuits send a strong message that his office will not tolerate mortgage fraud in Kansas.

For the entire press release, see Operation Homestead: AG Six goes after mortgage fraud and scams targeting Kansans (Six sues five companies, extends assistance to Countrywide customers, increases education on foreclosure).

(1) According to the press release, two of the defendants operate "Redemption Rights Scam," Six said. After a homeowner loses a home to foreclosure, the companies approach the homeowner and buy their rights to redeem the home, lease the house back to the homeowner, and then when the homeowner can't afford to buy the house back, they sell the house for a profit of more than $20,000. The companies Apple Asset, LLC, in Overland Park, and Rush Properties, LLC, in Olathe.

(2) According to the press release, three defendants allegedly operate loan modification scams, Six said. The companies offer to negotiate modifications to the homeowner's mortgage for a sizable fee. However, the extent of the service that the company provides is to mail in documents on behalf of the consumer. The companies are Kirkland Young in Florida, ABS Saveco in Georgia, and Helping Hands Support Services in California.

New State Law Allows Minnesota Homeowners In Foreclosure To Pay Off Back Payments Over Five Month Period In Exchange For Reduced Redemption Period

In St. Paul, Minnesota, Minnesota Public Radio reports:

• Struggling homeowners now have another chance to save their homes from foreclosure. A new Minnesota law makes it possible to delay the sheriff's sale - giving people behind on their mortgage payments more time to pay back what they owe. Until now, homeowners in foreclosure had one option - pay off the entire mortgage within six months or say goodbye.

• The new law gives homeowners another one: to postpone the sheriff's sale by five months. The new law says homeowners who pay back what they owe during the five months can reinstate their mortgage and cancel a sheriff's sale. [...] There is one tradeoff for delaying the sale: people who don't catch up in time get just five weeks [reduced from six months] at the end of the process to redeem their house.

For the story, see New law gives homeowners more time to escape foreclosure.

Schwarzenegger Squeezed By Lenders, Servicers To Demand Rule Prohibiting California Attorneys From Accepting Retainers For Loan Mod Negotiations???

A press release issued by three California consumer advocates(1) announces:

• The lending industry and loan servicing lobbyists have successfully pressured Governor Schwarzenegger to demand that language be included in SB 94 that would prohibit attorneys from accepting retainers for loan modification negotiations with their loan servicers.(2) The language, if adopted, will prevent homeowners from seeking legal representation to save their home from foreclosure.

For the rest of the press release, see Lending Industry Attacks California Homeowner's Rights to Legal Representation (California Governor Arnold Schwarzenegger told the legislature over the weekend that he would not sign AB 94, a law that would protect homeowners from mortgage modification companies, unless they included a clause that would prohibit attorneys from accepting retainers for performing legal services to prevent foreclosures).

(1) Martin Andelman, of mandelmanmatters on ml-implode.com; Alan Jablonski, a Long Beach, CA based consumer rights attorney, J. Arthur Roberts, a bankruptcy attorney located in Newport Beach, CA.

(2) Reportedly, the language proposed is as follows, according to Martin Andelman:

• "5) Prohibits persons including attorneys, until January 1, 2013, who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other compensation paid by the borrower to do any of the following:
  a) Claim, demand, charge, collect, or receive any compensation until after the licensee has fully performed each and every service the licensee contracted to perform or represented that he/she would perform."

Freddie Video To Help Struggling Borrowers Gather Necessary Documents When Seeking Loan Modifications From Mortgage Servicers

The Washington Business Journal reports:

• With so many homes headed to foreclosure Freddie Mac has posted a new video on YouTube to show late-paying borrowers how to speed their efforts to get their mortgage loans modified. The video, which runs two minutes, shows borrowers which documents they need to make more effective calls to loan servicers.

• McLean-based Freddie Mac says having the right documents at hand can cut the time needed to determine their eligibility and process their application for a loan modification under President Barack Obama's Making Home Affordable program or Freddie Mac's other workout initiatives. Available in English and Spanish versions, the new Freddie Mac video — "Stop Foreclosure: Documents Your Lender Needs to Help You" — can be seen at Freddie Mac's channel on YouTube.

Source: Freddie Mac turns to YouTube to help delinquent borrowers.

Go here for the English and Spanish versions of the new Freddie Mac video, "Stop Foreclosure: Documents Your Lender Needs to Help You."

10-Week Program Seeks To Steer Pennsylvanians In Financial Difficulties In The Right Direction For Assistance

In Philadelphia, Pennsylvania, the Philadelphia Inquirer reports on the Get Help Now, Pennsylvania program, a program announced last month that offers consumers in foreclosure, bankruptcy and other difficulties face-to-face sessions with lawyers, bankers and other professionals at Drexel University and 19 other locations around Pennsylvania from 1 to 6 p.m. Tuesdays and Thursdays during the next two months. Volunteers will meet with those seeking help and provide information on the right place to turn. For information, call 1-888-799-4557. Go here for the locations througout the state.

For more, see Hit hard times? New state effort may help.

Brooklyn Feds Charge Title Agency Owner With Ripping Off $1.7M In Escrow Account Funds, Failing To Record Mortgages & Deeds In Real Estate Deals

From the Office of the U.S. Attorney (Brooklyn, New York):

• [Last week] in federal court in Brooklyn, Jonathan Boxman, an owner and operator of real estate title insurance companies, was charged with defrauding clients of title companies he controlled of more than $1.7 million. According to the criminal complaint, Boxman stole money that was entrusted to those companies and used it to pay operating expenses associated with his failing businesses.

***

• According to the complaint, Boxman controlled Titledge Insurance Company of New York, a real estate title insurance company licensed by the State of New York, and various other title abstract companies(1) and agents. [...] Through his companies and bank accounts, Boxman received fees for the recording of mortgages and deeds, which, in turn, he was supposed to remit to the county where the deed or mortgage was recorded.

***

• However, instead of paying the fees to the counties, Boxman allegedly transferred the money to accounts he controlled and used it to pay his companies’ operating expenses and to cover thefts from prior victims of his scheme. The complaint charges that between January 2006 and December 2008, Boxman stole over $1.7 million in recording taxes, other fees, and monies held in escrow, and that as a result of his scheme several mortgages and deeds were never recorded.

For more, see Title Insurance Company Owner/Operator Charged In $1.7M Fraud Scheme.

Go here, Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds.

(1) A title abstract company or agent performs title searches and other functions on behalf of a title insurance company, including issuing title insurance policies in the title insurance company's name, recording mortgages and deeds, and holding money in escrow. EscrowRipOffKappa

Staten Island DA Charges Title Agency Owners With Looting Real Estate Escrow Account, Illegally Pocketing $1M+ In Funds Belonging To Others

From the Office of the Richmond County, New York District Attorney:

• Richmond County District Attorney Daniel M. Donovan, Jr. today announced that Joseph DeVito and his wife, Mary Ann Palladino-DeVito [...] have been arraigned on an indictment alleging that from 2002-2004 they embezzled over $1 million from homeowners seeking to clear titles, as well as their franchise’s parent company.

***

• The defendants, [...] are accused of a top count of Grand Larceny in the 1st Degree, a Class B felony, punishable by a maximum penalty of up to 25 years in prison. District Attorney Donovan stated, "As part of this mortgage fraud scheme, these defendants are alleged to have victimized new homeowners and their franchiser by accepting payment for mortgage fees, mortgage taxes, customer fees, real property filing fees, and escrow account funds and then misappropriating the funds for their own purposes. They are also alleged to have failed to file any tax returns to the State of the New York, depriving our state of essential funds for services such as healthcare and education." The District Attorney further stated that the defendants were franchisees of Fidelity National Title, a Jacksonville, Florida based title insurance company.

For the Staten Island DA's press release, see D.A. Donovan: Two Former S.I. Residents Accused of $1 Million Real Estate Title Fraud, Tax Evasion (Joseph Devito, 39, & Mary Ann Palladino-DeVito, 41, Accused of Embezzling Over $1 Million from Customers & Title Insurance Company, Face up to 25Years in Prison).

For the indictment, see People v. Palladino, Devito.

Go here, Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffKappa