Saturday, February 27, 2010

Homeowner Facing Foreclosure Refuses To Let Bank Take $400K House; Plows Through It With Bulldozer Instead

In Moscow, Ohio, WLWT-TV Channel 5 reports:

  • Like many people, Terry Hoskins has had troubles with his bank. But his solution to foreclosure might be unique. Hoskins said he's been in a struggle with the bank over his Clermont County home for almost a decade, a struggle that was coming to an end as the bank began foreclosure proceedings on his $400,000 home.

  • Hoskins told News 5's Courtis Fuller that he told the bank that, "I'll tear it down before I let you take it." And that's exactly what Hoskins did. The sprawling country home is now rubble, buried under a coating of snow. Hoskins leveled the home with a bulldozer. Hoskins' business in Amelia is scheduled to go up for auction on March 2. Hoskins told Fuller he's considering leveling that building, too.(1)

Source: Frustrated Owner Bulldozes Home Ahead Of Foreclosure (Man Says Actions Intended To Send Message To Banks).

Go here for a "before & after" slideshow of the Bulldozed Home.

(1) See also, Terry Hoskins demolishes house to stop bank foreclosing and selling it :

  • "When I see I owe $160,000 on a home valued at $350,000, and someone decides they want to take it - no, I wasn't going to stand for that, so I took it down," Hoskins said. [...] Hoskins said he had a $170,000 offer from someone to pay off the house, but the bank refused, saying they could get more from selling it in foreclosure. Hoskins told News 5 that he issued the bank an ultimatum: "I'll tear it down before I let you take it." That's exactly what Hoskins did, using a bulldozer.

No word yet as to whether Hoskins faces criminal charges of defrauding a secured creditor.

Phoenix Man Facing Foreclosure Charged With Defrauding A Secured Creditor After Allegedly Being Nabbed Stripping His Home Prior To Sale

In Phoenix, Arizona, KPHO-TV Channel 5 reports:

  • Police arrested a man [] on theft charges after officers caught him stripping items from his foreclosed home, authorities said. A resident of the neighborhood near Willis and Dobson roads flagged down a police officer to say Chandler resident Daniel Clark, 35, was "deconstructing" his foreclosed home, according to a news release from Chandler Police Department spokesman Detective David Ramer.

  • Detectives from the financial crimes unit determined Clark was taking "various essential items" -- including two air conditioning units, a water heater, a water softener, interior doors, toilets, sinks, cabinetry, countertops and the garage door opener -- from his house before it was to be auctioned off in March, Ramer said.

  • Clark was arrested on charges of defrauding a secure creditor and criminal damage, Ramer said.

Source: Police: Man Stole Sinks, Toilets, Cabinetry.

See Police: Man Stripped Foreclosed Home for a slideshow of Clark's alleged handiwork.

Memphis Attorney Gets 10 Years For Abusing POAs In $60K+ Theft From Two Clients; Joins Ex-Law Partner Doing 22 Year Stint On Other Charges

In Memphis, Tennessee, MyFox Memphis Channel 13 reports:

  • Shelby County District Attorney Bill Gibbons announced [] that a Memphis attorney pleaded guilty to stealing money from two clients who had given him power of attorney over their financial affairs. 62-year old Joseph Richard Rossie pleaded guilty to the court on two counts of theft of property over $60,000. Rossie was sentenced to 10 years in prison on each count, to be served concurrently. He is scheduled to begin serving his sentence on March 15. Rossie has made restitution as part of the settlement of civil lawsuits filed by the victims.


  • "Mr. Rossie stole a significant amount of money from two clients. As an attorney, he violated their trust for his own personal gain," said District Attorney Gibbons. Rossie is the former law partner of attorney John Parker, who pleaded guilty in 2007 to five counts of theft of property over $60,000 and one count of theft over $10,000. Parker is serving a 22 year sentence in prison.(1)

For the story, see Attorney Pleads Guilty to Client Theft.

(1) If a Tennessee attorney, either in the course of representing you or acting as a fiduciary, screws you out of money or property through dishonest conduct, go to the Tennessee Lawyers' Fund for Client Protection for information on how to recover some or all of your losses from the fund. For other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

Illinois AG Out To Hammer, Nail Home Improvement Contractors For Deceptive Practices, Shoddy & Incomplete Work

The following press releases are from the Office of the Illinois Attorney General in connection with its effort to target wayward home improvement contractors. The civil lawsuits, according to the press releases, generally allege that the defendants have violated the Illinois Consumer Fraud and Deceptive Business Practices Act and the Illinois Home Repair and Remodeling Act by:

  • performing work in a shoddy, unprofessional manner;
  • failing to complete the repair work; and
  • refusing to provide refunds to consumers.

The complaints also allege that the defendants failed to provide homeowners with written contracts and the "Home Repair: Know Your Consumer Rights" pamphlet, as required under Illinois law. In the suits, Madigan generally also asks the court to prohibit the defendants from engaging in the home repair trade in Illinois, and seeks:

  • restitution for consumers,
  • a civil penalty of $50,000,
  • additional penalties of $50,000 for each violation found to have been committed with the intent to defraud,
  • $10,000 per violation found to have been committed against a consumer who is 65 years or older, where applicable.
  • a a court order requiring the defendants to foot the bill for the costs of the prosecution and investigation of the case.

For the press releases, see:

  • Madigan Sues Chicago Contractor For Failure To Fulfill Home Improvement Contracts: The AG's lawsuit, filed in County Circuit Court, alleges that Chicago home repair contractor Robert Leving, who operates a home repair business under the names Right Choice Construction and Elite Construction solicited contracts without a license and collected up to $26,000 in deposits from consumers. The Attorney General's Consumer Fraud Bureau has received six complaints about Leving's work from consumers in the Chicago area.

  • Madigan Sues Rockford Home Contractor For Shoddy Work, Failure To Complete Fence Installations: The AG's lawsuit, filed in Winnebago County Circuit Court, alleges that Rockford contractor Michael J. Thelen, who owns and operates Thelen Services, Inc., solicited contracts to remove or install fences but failed to complete contracted projects or completed them in a substandard manner. Despite consumer requests, Thelen allegedly refused to refund down payments. The Attorney General's Consumer Fraud Bureau has received three complaints since September 2008 about Thelen's work from consumers in DeKalb, Boone and Ogle Counties.

  • Madigan Sues Springfield Contractor For Failure To Fulfill Home Improvement, Roofing Contracts: The AG's lawsuit, filed in Sangamon County Circuit Court, alleges that Springfield-based contractor Jeremy L. Sorenson, who operates JSL Construction, solicited home improvement services from area homeowners without a license and collected more than $72,000 in fees for work that he failed to perform or completed in a substandard manner. The Attorney General's Consumer Fraud Bureau has received six complaints about Sorenson's work from consumers.

  • Madison Sues Washington County Contractor For Failure To Fulfill Home Improvement Contracts: The AG's lawsuit, filed in Washington County Circuit Court, alleges that local home repair contractors Everett and Myra Henson, who operate Henson Construction, Pole Barns & More and Do-It-Rite Home Improvement, solicited contracts and collected fees for work that the contractor failed to perform or completed in a substandard manner. The Attorney General’s Consumer Fraud Bureau has received five complaints about the defendants’ work from consumers in Franklin, Jackson and Washington counties.

  • Madigan Sues Williamsom County Contractor For Failure To Fulfill Home Improvement Contracts: The AG's lawsuit was filed against Williamson County contractor Garret Wilson, who operated Residential Construction Services LLC, for allegedly soliciting home improvement contracts from area homeowners without the proper licenses and collecting more than $47,000 in fees for work that he failed to perform or completed in a substandard manner. The Attorney General’s Consumer Fraud Bureau has received three complaints about Wilson’s work from consumers.

Friday, February 26, 2010

C. Fla. Man Claims "Adverse Possession" Defense After Arrest On Home Hijacking Charges; Swiped 72 Houses, Rented Out 31 To Unwitting Tenants, Say Cops

In Land O' Lakes, Florida, The Tampa Tribune reports:

  • Stephen Thomas Bybel had a business idea that would make him a landlord and line his pockets while sprucing up neighborhoods where homes in foreclosure were left to deteriorate and become targets of vandals. Pasco County sheriff's officials see it another way: He broke into vacant homes, changed the locks and rented out other people's houses. Bybel was arrested at his house Wednesday and was charged with one count of scheming to defraud.

  • Reached by telephone after his release from jail, the 48-year-old Bybel maintained he didn't defraud anyone. "I think I'm doing a service to the community." In all, Sheriff Bob White said, Bybel took possession of 72 homes – in the Land O' Lakes and Wesley Chapel areas -- beginning in December and rented out 31 of them.


  • The investigation into Bybel began when a real estate agent, also a part-time Pasco deputy, was recently trying to show a house that was for sale but discovered the locks had been changed. [...] One of the homes which Bybel has taken over, White said, is owned by another deputy who just started work this week. Apparently, it's a scheme that's being done in Miami and Las Vegas, the sheriff said. In fact, White said, they are investigating another unrelated similar scheme in Pasco.

For more, see Man says he did no wrong by renting out others' homes.

See also:

(1) Reportedly, Bybel started a company – Real T Solutions Investments, LLC -- and hit the streets of central Pasco searching for vacant homes. He would select some and then by filing a one-paragraph "memorandum of adverse possession" legal notice with the Pasco Clerk of Courts office, he would take possession of such properties, the story states. Bybel would then change the homes' locks, sometimes give them a fresh coat of interior paint and then rent them out.

Montana Man Faces Charges In Connection With Alleged Home Hijacking Scam; Targeted "Foreclosure" Homes, Changed Locks, Filed Phony Paperwork, Say Cops

In Polson, Montana, the Missoulian reports:

  • If Lake County authorities are correct, when Brent Arthur Wilson allegedly broke into homes in the Polson area, his intent was not to steal jewelry, artwork or other valuables. No, they say, Wilson intended to steal the house itself. Apparently targeting homes either in foreclosure or about to enter foreclosure, Wilson would allegedly gain entrance, change the locks and file a flurry of bizarre paperwork - including "third-planet-from-the-sun" language in legal descriptions of the properties' locations - with the county clerk and recorder's office.

  • The 53-year-old Wilson, who is being held in the Lake County Detention Center on $100,000 bond, was to be arraigned in District Court here Thursday morning. He is charged with three felonies (theft, deceptive practices and tampering with public records or information) and two misdemeanors (criminal mischief and false swearing) in regard to one of the houses in question.

  • Lake County Sheriff's Detective Rick Lenz says the investigation continues into other Polson homes on which Wilson allegedly filed similar paperwork, and more charges could be forthcoming. The houses appear to include a home at which Wilson was allegedly living, another on which he was allegedly collecting rent, and one he allegedly attempted to use as collateral for a loan from a Missoula finance company.

  • It took a Polson Realtor to unravel much of it. [...]

For more, including how local real estate agent Ed McCurdy unraveled this alleged scam after he had possession of a home he had listed for sale hijacked, see Man accused of stealing at least one Polson area home by breaking in, filing false paperwork.

For story update, see Polson judge orders mental evaluation for man charged with trying to steal house:

  • A court-ordered mental health examination is next for Brent Arthur Wilson, whose arraignment in District Court here Thursday morning on charges related to an alleged attempt to steal a $300,000 house didn't get much farther than that.

Ex-Central Fla. Closing Agent Feels Heat From All Sides As Feds, Title Underwriter, Bank All Press Legal Actions In Alleged Major Mortgage Fraud Case

In Sarasota, Florida, the Sarasota Herald Tribune reports:

  • AS SHE STRUGGLES to defend herself against criminal charges that she assisted with one of the largest mortgage fraud schemes in Florida history, Lisa Rotolo is also having to answer civil lawsuits alleging that her "negligent or fraudulent actions" cost banks and title agencies hundreds of thousands of dollars.

  • In August, First American Title Insurance filed a suit accusing Rotolo of breaching her agency agreement by failing to "conduct business in an ethical and honest manner." As a title agent, Rotolo was responsible for ordering title insurance, getting deeds and mortgages signed and distributing proceeds from real estate sales. Four months later, Chevy Chase Bank weighed in with a suit of its own, stating that Rotolo failed to follow closing instructions in loans made to Sarasota appraiser Heather Kabobel and mortgage broker Jonathan Glucker.


  • Last summer, the Herald-Tribune published a series of stories(1) showing how Rotolo, Kabobel, Glucker and dozens of their associates were involved in a scheme orchestrated by Sarasota real estate agent Craig Adams to maximize loan money by artificially inflating real estate values. Adams turned himself in to the FBI two years ago, and his statements to federal agents resulted in Rotolo's arrest on charges of conspiracy, bank fraud, wire fraud and making false statements in connection with loan applications, court documents filed with the U.S. District Court in Tampa show.

  • Approached at the Sarasota Target store where she now works, Rotolo declined to comment. But her husband, Jay Rotolo, said his wife has been cooperating with law enforcement officials for nearly a year.

For more, see Embattled on 2 sides in flipping case.

(1) See:

HUD: Watch Out For Upfront Fee "QWR" Scams

From the Department of Housing and Urban Development:

  • Beware of entities contacting you to prepare a qualified written request (QWR) for a fee. Section 6 of RESPA, per 12 U.S.C. § 2605, provides that a borrower may send a QWR directly to a loan servicer for information relating to the servicing of a federally related mortgage loan. When sending a QWR, you should be specific about the problems that you are encountering in terms of your loan servicing. You may send a QWR directly to your lender without outside assistance. For guidance on how to prepare a QWR, please use the following link: Sample Complaint to Lender. Note that HUD is the primary federal agency responsible for enforcement of RESPA.

Source: Loan Servicing Scams.

Go here for a sample qualified written request.

Thursday, February 25, 2010

Disbarred Attorney Cops Plea To Looting $3M+ From Escrow Account Used To Close Real Estate Transactions; 15 Deals Left Unfunded

From the Office of the U.S. Attorney (Minneapolis/St.Paul, Minnesota):

  • [Earlier this month] in federal court in Minneapolis, Minnesota, [] 38-year-old [now-disbarred in Minnesota(1)] lawyer [Jason Eric Fischer] from Hudson, Wisconsin, pleaded guilty to mortgage fraud by stealing more than $3 million from the escrow account at the real estate title and settlement company he jointly owned.


  • In his plea agreement, Fischer admitted that from 2006 through May 2009, he orchestrated a scheme to divert funds from the escrow account at Real Source Title, a company he jointly owned and managed. The company, which had offices in Mahtomedi and Burnsville in addition to Illinois and Hudson, Wisconsin, routinely accepted wire transfers and checks from buyers and lenders. Those funds were to be held in escrow for the sole purpose of closing residential real estate transactions.

  • To further his scheme, Fischer represented to buyers, lenders, underwriters, and others that the money deposited into the company’s escrow account was, in fact, used only to close real estate transactions. He made those representations by producing and mailing false HUD-1 settlement statements to people of interest. In truth, however, Fischer regularly withdrew escrow-account money to pay for personal and business expenses as well as fund prior company real estate transactions.

  • Between 2006 and May 2009, Fischer diverted approximately $3 million from the escrow account at Real Source Title; and by May 2009, the account was depleted and unable to fund 15 loans. As a result, buyers, sellers, lenders, underwriters, and others suffered significant financial loss.(2)

For the U.S. Attorney press release, see Lawyer pleads guilty to more than $3 million mortgage fraud scheme.

(1) For the disbarment order, see In re Petition for Disciplinary Action against Jason Eric Fischer.

(2) If a Minnesota attorney, either in the course of representing you or acting as a fiduciary, screws you out of money or property through dishonest conduct, go to the Minnesota Client Security Board for information on how to recover some or all of your losses from the fund.
For other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

Lender Found Liable For Role In Broker's Forgery Scam That Mortgaged 70-Year Old Woman's Home Out From Under Her

From a press release from the law office of Orange County, California attorney Douglas J. Pettibone:

  • 70-year-old Arizona resident Mona Dobben stands up and takes down a 20-billion-dollar Mortgage Company by winning a $100,000.00 judgment which includes punitive damages. American Home Mortgage (AHM) was found liable for aiding and abetting a fraud perpetrated on Dobben by an unlicensed real estate broker (In Re: American Home Mortgage Holdings, et al.; United States Bankruptcy Court District of Delaware; Case No: 07-11047 (CSS)).

  • Dobben is represented by Orange County attorney Douglas J. Pettibone who alleges Dobben is victim of loan fraud by an unlicensed real estate broker and convicted felon Patrick Downey. According to Pettibone, Downey stole Dobben's identity, forged Dobben's signature and submitted false loan documents to AHM without Dobben's knowledge. Trial Judge Christopher Sontchi said, "It shocks the conscious of the court what went on here".(1)

  • After Dobben received foreclosure notices from AHM she discovered the fraud and contacted AHM for help who turned a deaf ear and never responded. AHM then filed Bankruptcy. In the bankruptcy court Dobben claimed AHM aided and abetted the fraud perpetrated upon her by Downey and that her claim against AHM should not be discharged in the AHM bankruptcy.

For more, see Mortgage Company Liable for Aiding and Abetting Real Estate Broker Fraud (70-year-old Arizona resident, Mona Dobben stands up and takes down a 20-billion-dollar Mortgage Company by winning a $100,000.00 judgment which includes punitive damages).

(1) Reportedly, Judge Sontchi awarded actual damages of $32,000.00. However, given Dobben's deteriorating credit score and the clear emotional distress displayed in the courtroom, the court granted her treble damages. The total award was a judgment in the amount of $100,000. Following the trial AHM immediately appealed the judgment. The appeal is currently pending.

Attorneys Offering Dubious Loan Modification Services To Financially Strapped Homeowners Hits National Media

In Dallas, Texas, CBS News reports:

  • [Dallas-area homeowner Warren Jacobs] unwittingly became one of the many thousands of homeowners authorities allege have been taken in by unscrupulous or incompetent loan modification attorneys who rushed into a burgeoning legal niche: helping financially struggling homeowners re-negotiate their mortgages. Ripoffs of homeowners have become so commonplace that state bar associations from Florida to Arizona are warning their members of the many ethical pitfalls awaiting those who exploit the mortgage crisis.

  • The California State Bar launched a task force a year ago to examine thousands of homeowner complaints about foreclosure lawyers. Currently, the California Bar is investigating more than 400 attorneys who are suspected of ripping off thousands of homeowners across the country.The organization that licenses and disciplines California's more than 250,000 lawyers already has suspended or obtained the resignations of 15 lawyers while disciplinary charges are pending.


  • "The complaints are still going through the roof," said Suzan Anderson, the Bar's lead mortgage fraud prosecutor, who receives more than 30 complaints daily and expects many more lawyers to lose their licenses. Many of the complaints, like Texas homeowner Jacobs', are about do-nothing attorneys.

For more, see Lawyer Misconduct Rises With Foreclosure Record (Hundreds Of Foreclosure Attorneys Investigated In Calif. For Duping Desperate Homeowners).

Closing Agent Gets 20 Months For Stiffing Title Insurance Underwriter, Others Out Of $470K+ In Policy Premiums, Closing Costs From Real Estate Deals

From the Office of the U.S. Attorney (St. Paul, Minnesota):

  • A 45-year-old woman from Prior Lake was sentenced [] in federal court for stealing more than $470,000 designated for payment of title insurance premiums and recording fees. In St. Paul, United States District Court Judge Paul A. Magnuson sentenced Roseann Wagner to 20 months in prison on one count of wire fraud and one count of failure to file a tax return.


  • In her plea agreement, Wagner admitted operating a scheme to defraud mortgage lenders, borrowers, and a title insurance underwriter from January 2007 to December 2007. Wagner, a licensed insurance agent, owned and operated Tri-Star Title, a title insurance agency. [...] Wagner accepted more than $470,000 from lenders at hundreds of residential real estate closings, knowing the money was to be used to pay closing costs, including title insurance premiums and recording fees. Instead, however, she used the money for her own benefit. Initially, because of Wagner’s fraud, title insurance premiums, title search costs, and recording fees on hundreds of residential mortgage transactions went unpaid.

  • However, when Stewart Title Guaranty Company, the Texas title insurance underwriter for Tri-Star, discovered Wagner had misappropriated the funds, it absorbed the losses of all borrowers and paid the title insurance premiums and other expenses, though it was under no obligation to do so. Wagner also failed to file a tax return or pay taxes on more than $270,000 in 2007. The tax loss from her failure to report income was at least $70,000.(1)

For the U.S. Attorney press release, see Prior Lake woman sentenced for stealing more than $470,000 through mortgage fraud scam.

(1) In Minnesota, any person who has lost money due to the fraudulent, deceptive or dishonest practices, or conversion of trust funds by a licensed closing agent [or licensed real estate broker or salesperson] should contact the state's Department of Commerce's Real Estate Education, Research and Recovery Fund for possible reimbursement. According to their website:

  • The purpose of the Real Estate Education, Research and Recovery Fund is to compensate any person who has lost money due to a licensed real estate broker, salesperson, or closing agent’s fraudulent, deceptive or dishonest practices, or conversion of trust funds. The improper action that was committed must be an activity that required a license. [...] Applicants may be awarded any amount from $0 to $150,000, [...].

Indy Pair Get 5+ Years In Mortgage Scam Using Unwitting Victims' Stolen I.D.s To Score $23M+ In Home Loans

In Indianapolis, Indiana, The Indianapolis Star reports:

  • [Beverly A. Ross, 51,] was sentenced to more than five years in prison for her role in a multi-million dollar mortgage fraud scheme.(1) [...] Ross's partner in the scheme, Donella Locke, 60, Indianapolis, was sentenced to 71 months in prison last month and must pay $2.3 million to 13 different lenders who were defrauded. Locke went to trial and was convicted in September.

  • The two women were arrested in 2008 after authorities discovered they used other people's credit information to obtain more than $23.5 million in loans on more than 30 expensive properties in Indianapolis, Fishers, Carmel, Zionsville and other Indiana communities. Few payments were made on the properties, and Ross filed five bankruptcy petitions to help keep some of the properties from going into foreclosure, according to the press release. The investigation began in 2005 when one of Ross's relatives discovered she used his credit information to buy and lease properties and vehicles.

Source: 2nd woman sentenced in mortgage fraud scheme.

(1) Ross was reportedly ordered to serve 63 months in prison and repay $5.6 million to 21 lenders she defrauded as part of a plea agreement, according to a press release from U.S. Attorney Tim Morrison's office.

Wednesday, February 24, 2010

Brooklyn Jury Convicts Condo Developer Of Failing To Deliver Title To Buyers, Then Using Deeds As Collateral To Pocket Proceeds From Subsequent Loans

In Brooklyn, New York, the Daily News reports:

  • A ambitious [sic] Brooklyn developer was found guilty Tuesday of stealing more than $18 million from dozens of Hasidic families and several banks in a massive subprime mortgage scam. Eliyahu Ezagui, 39, preyed on his fellow congregants, sold them condominiums but never gave them the deeds when construction was finished. Instead, he gave the deeds to family members - including his wife, father and mother. He then used the deeds to take out mortgages on 53 apartments he didn't own and pocketed the money.


  • Because Ezagui didn't make payments on the illicit mortgages to lending banks, the condo owners are facing foreclosure proceedings and eviction in a separate civil court proceedings. "Now that the fraud has been established, I expect that the (civil) court will recognize the mortgages as fraudulent and cancel them," said [lawyer for many of the defrauded condo buyers Robert] Tolchin.(1)

For the story, see Brooklyn developer Eliyahu Ezagui found guilty of stealing $18M from Hasidic families.

(1) Despite the successful criminal prosecution in this case, the burden remains with the victimized condo buyers to initiate civil lawsuits to void/set aside/cancel any subsequent title transfers and lien encumbrances to recover title to their homes. In this case, if the victims can establish that the scams were pulled off by way of forged documents, the subsequent deed transfers and mortgages would likely be found void (as opposed to voidable) and subject to cancellation by a civil court.

In the event scams similar to this one are pulled off by duping the victims into unwittingly signing the deeds, mortgages, etc., those transfers and mortgages could be found to be voidable (as opposed to void), in which case, those interests could still be subject cancellation, provided the subsequent grantees and mortgagees are found to have had either actual or constructive notice of the victims' outstanding rights and equities. In that case, they [the subsequent grantees and mortgagees] would not be considered bona fide purchasers/encumbrancers entitled to the protection of the state recording statutes. Arguably, in this case, the victims' possession of the premises at the time the subsequent deeds and mortgages were made could constitute notice to the world of their interests in the condos. See Phelan v. Brady, 119 N.Y. 587; 23 N.E. 1109 (NY 1890):

  • Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in possession is able to establish. [citations omitted].

For similar case law in other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Pair Sought On Charges Of Securing Execution Of Document By Deception In Connection With Possible Rent Skimming Scam Leaving Victims Facing F'closure

From a press release from the Midland, Texas Police Department:

  • The White Collar Division of the Midland Police Department is in the final stages of an investigation involving several citizens who were defrauded by people who purchased residences from them under false pretences. The citizens found out that the business was not making payments on mortgages as was their original agreement, placing them further into debt - a type of real estate fraud.

  • Jason Morrison and Marcus Rosenberg with Vanguard Properties purchased homes from unsuspecting victims, four persons, who are now close to foreclosure on their homes. On February 11, 2009, warrants were issued for Morrison (3-08-76) and Rosenberg (3-25-76) for Securing Execution of Document by Deception. Morrison was arrested on February 12, 2009, and Rosenberg, and Odessa resident, is still outstanding. The Midland Police Department White Collar Division is asking that any citizens who feels they might have been a victim, to contact police. Victims can contact the Midland Police Department White Collar Division at 685-7108.

Source: Midland Police Arrest One in a Real Estate Fraud Investigation.

Allegations Of "Lawyer Renting" By Loan Modification Outfit Among Charges Currently Under Probe By Florida AG In Five New Investigations

In South Florida, the Sun Sentinel reports:

  • The Florida Attorney General's Office has opened five new investigations this year, with four centered in South Florida, involving foreclosure rescue and mortgage modification companies, a key enforcement concern for regulators. Businesses being examined on allegations they took fees upfront for their services, in violation of state law, include: Foreclosure Relief Systems LLC, also doing business as Foreclosure Rescue Services, of Miami and Miami Beach; Pendulum Financial Group, also doing business as Blue Fox Financial, of Plantation; and Lender Forensics LLC, also doing business as National Modification LLC, of North Palm Beach.

  • The law offices of Thomas Dvorak, of Fort Lauderdale, are being investigated on allegations an attorney allowed a foreclosure rescue group to operate out of his office under the firm's name [ie. "lawyer renting"], state officials said. Save Our Dream LLC, of Orlando, is being examined for possible violations involving residential foreclosure proceedings.

Source: State investigating five mortgage modification firms (Four of the operations examined are in South Florida).

St. Louis Man Invests $137K+ To Buy, Rehab Home, Then Loses It For $6K In Municipal Foreclosure Sale; Says City Failed To Notify Him Of Pending Action

In St. Louis, Missouri, the St. Louis Post Dispatch reports on Mark Siebels, a local real estate investor who bought a burned-out two-family building in south St. Louis for $37,500 four years ago, invested an additional $100,000 to rehab it, and then lost it for $6,000 in a city foreclosure sale triggered by his failing to pay periodic vacant building registration fees. He says he had no clue about the sale, and did not receive any notice thereof.

  • Matt Moak, a city attorney in charge of the problem properties unit, said the city foreclosed on the property late last year because Siebels failed to pay a vacant-building registration fee. The city charges the owners of vacant buildings with code violations a $200 fee every six months. Moak was unsure Monday what the code violations were on the Siebels property. The fee is a way to deter investors from leaving land derelict, he said.

  • And if the notices are ignored, the property can be foreclosed on.In Siebels' case, the notices — numbering in "double digits," according to Moak — were sent to an address in Jefferson County. But he had moved by then. Siebels acknowledged he should have updated the city with his new address in Kirkwood. But he can't believe an innocent mistake could cost him the property, which he insists he has been maintaining.

  • City officials say they deal with hundreds of a properties each year and can't afford to track down homeowners. Many simply don't want to be found. Moak said it's Siebels' fault for not filing the address change, pointing out that notice of the foreclosure auction was published in the Post-Dispatch.


  • Alan Baker, a local real estate attorney, said Siebels could sue to try to turn back the sale of the property. The case would likely hinge on whether the city gave "reasonably calculated notice"(1) that it was foreclosing on his property, he said. "The ultimate answer lies with a judge," Baker said.

For more, see Rehabber puts 4 years into duplex, loses it to city.

(1) The words "reasonably calculated notice" come directly from the U.S. Supreme Court in at least two rulings that voided foreclosure sales in which the foreclosing entity did a miserable job at trying to track down property owners to provide them with notice of the pending actions. See Jones v. Flowers, 547 U.S. 220, 126 S. Ct. 1708 (2006):

  • [W]e have stated that due process requires the government to provide "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections."

citing Mullane v. Central Hanover Bank & Trust Co., 339 U. S. 306, 314 (1950):

  • An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. [citations omitted].

Go here for the links to the transcript of the oral argument, and the various briefs filed in Jones v. Flowers, referenced above, filed by the Public Citizen Litigation Group attorneys who successfully represented the improperly-foreclosed-upon homeowner in the U.S. Supreme Court.

$300K Proceeds From Reverse Mortgage Part Of $750K Ripoff From Victimized Senior; POA Called "License To Steal From The Elderly"

In Honolulu, Hawaii, the Honolulu Advertiser reports:

  • A trusting 82-year-old 'Aiea man is struggling to restore his financial footing after giving away his durable power of attorney to a female acquaintance who used it to raid his bank account and obtain credit cards and a reverse mortgage that plunged him into staggering debt.(1)

  • Friends who are helping the elderly man said cash losses and new debt from years of financial exploitation could top $750,000, with no guarantee of getting any of it back. The 'Aiea man's predicament, now under investigation by the state Department of Human Services Adult Protective Services, is an example of how powers of attorney — used since ancient times to allow individuals to act on behalf of others in business transactions and other affairs — have become a license to steal from the elderly.(2)

For more, see More Hawaii seniors financially exploited (Lawmakers considering ways to guard against exploitation; Couple helping exploited widower pick up the pieces ).

(1) According to another report (see Couple helping exploited widower pick up the pieces), the ripped off funds consisted, in part, of the proceeds from an alleged fraudulently obtained mortgage on the elderly man's home in the amount of approximately $300,000.

(2) Reportedly, most often the thieves are relatives or caregivers who take advantage of a senior's poor health or diminished mental capacity to gain control of bank accounts, homes and other assets for their own benefit, according to elder law experts and other advocates for the elderly. "It's a huge problem," said Bruce Bottorff, associate state director of AARP. "We continue to do education and outreach because it is so prevalent and, frankly, underreported. People need to be vigilant as the population grows older."

Tuesday, February 23, 2010

Bankruptcy Court OKs Home Mortgage Cramdown For NC Homeowner, Despite Congress' Failure To Change Law

Despite Congress' recent failed attempts to change the Federal bankruptcy law that restricts cramdowns of mortgages secured by a Debtor's residence in a Chapter 13 bankruptcy proceeding, such cramdowns are apparently already permissible in certain cases, and has been for quite some time, based on my reading of a recent ruling by a North Carolina bankruptcy court.

The ruling is somewhat technical in nature, but essentially revolves around the following:

  • The applicable provisions of the Bankruptcy Code (ie. sections 506(a) and 1322(b)(2)) provide a mechanism for modifying the rights of a holder of a secured claim by bifurcating the secured creditor's claim into secured and unsecured portions if the amount of the claim exceeds the value of the collateral securing the claim;

  • However, under section 1322(b)(2), some secured claims are protected against modification. Specifically, section 1322(b)(2) excludes from modification "a claim secured only by a security interest in real property that is the debtor's principal residence." [bold text emphasis mine, not in the statute];

  • Under the terms of the deed of trust in this case, the Debtor was to include in her monthly payment principal and interest plus an additional sum to cover the payment of "Escrow Items" consisting of taxes and special assessments, leasehold payments or ground rents, and insurance premiums; and

  • The lender's loan documents required the borrower to pledge the escrow funds as "additional security" for the principal and interest due under the promissory note and deed of trust.
In this case, the bankruptcy court, relying on the legal analysis by a Federal appeals court in In re Ennis, 558 F.3d 343 (4th Cir. 2009), found that the deed of trust was not "a claim secured only by a security interest in real property [...]" as set forth in section 1322(b)(2) - it was a claim secured by both:
  • a security interest in real property, and
  • a security interest in the funds sitting in the escrow account which, under North Carolina law, was found by the court not to constitute real property.

On the basis that the security for the deed of trust was not limited only to an interest in real property, but also included the escrow funds sitting in the escrow account, the court ruled that the anti-modification clause was inapplicable and, accordingly, the Debtor was permitted to modify (ie. cram down) her home loan.(1)

For the ruling, see In re: Bradsher, Case No. 09-80942, USBC M.D. N.C., Durham Division (February 16, 2010).

(1) For those (like me) who were unaware that a mortgage cramdown was possible in a case involving a deed of trust or mortgage secured by the Debtor's residence, this case illustrates the importance of reading every single word contained in both the:

  • the statute (the ruling in this case turns on the presence of the words "only" and "real property" in the anti-cramdown rule in section 1322(b)(2) of the Bankruptcy Code), and
  • the mortgage/deed of trust (the pledging of the escrow funds as "additional collateral" rendered the anti-cramdown rule inapplicable since, under North Carolina law, said funds are not considered "real property").

For those of you looking to cram down the mortgages/deeds of trust secured by your "underwater" homes, a review of your mortgage/deed of trust paperwork may be called for (and hope that any escrow funds paid with the principal and interest are pledged as additional collateral for the loan, as they were in this case).

Further, for those homeowners looking to modify their home loans, it may be a good idea to make sure the escrow account is pledged as additional collateral for the loan (if it isn't already). This way, if (or when) the modification doesn't work out, you may have the option to file a Chapter 13 bankruptcy, and then possibly cram down (ie. write down) the loan as part of your payment plan (and, if you have a 2nd mortgage on the home that is completely underwater, you can also avail yourself of the "lien stripping" statute found elsewhere in the Federal Bankruptcy Code).

Finally, keep in mind that the anti-modification (anti-cramdown) law only impacts homeowners with first mortgages secured by their residence. Investors with first mortgages on their investment property can, and have always been able to, cram down those mortgages.

Co-Ringleaders In S. California Sale Leaseback Racket Get 15, 10 Years For $12M+ Equity Stripping Ripoff Of Homeowners Seeking Foreclosure Rescue

In Los Angeles, California, Southern California Public Radio KPCC 89.3 FM reports:

  • Five participants in a massive fraud scheme were sentenced [] in Los Angeles to one to 15 years in federal prison. The defendants were found guilty of conning homeowners facing foreclosure out of millions of dollars in equity. U.S. District Judge George H. King saved the harshest sentence — and words — for co-defendant Edward Seung Ok, a 43-year-old former resident of Huntington Beach, who was sentenced to 15 years in prison. Ok "is more culpable than all the other defendants'' and "falls far short in the full acceptance of responsibility,'' King said.

  • According to prosecutors, Ok and ringleader Martha Rodriguez masterminded the con targeting more than 100 homeowners throughout the Southland who were seeking to avoid foreclosure. By telling the homeowners they could stave off foreclosure with short-term loans and refinancing, she and those working with her skimmed off more than $12 million in equity, Assistant U.S. Attorney Gregory A. Lesser said.

  • Although the homeowners were promised the process would allow them to keep their homes, they ended up losing title. In reality, new loans were obtained through the use of "straw buyers'' who lenders were led to believe were real buyers. The new loans were used to buy the homes from the owners by paying off the balance on their existing mortgages, and the ring would pocket the remaining money.

  • The banks that funded the new mortgages also lost money when the straw buyers didn't make the loan payments, and the new loans went into default. King sentenced the 38-year-old Rodriguez to 10 years in prison. [...] Under her plea deal, Rodriguez also agreed to forfeit her interest in five homes, a truck and about $900,000 in cash seized by the government, according to the U.S. Attorney's Office.(1)

Source: 5 sentenced to prison for fraud scheme that targeted homeowners.

For the U.S. Attorney (Los Angeles) press release, see Five Who Targeted Homeowners In Default Sentenced To Federal Prison In $13 Million Mortgage Fraud Case (O.C. Man Gets 15 Years for Fraud, Refusal to Account for Off-Shore Money).

(1) Also sentenced were:

  • Maria G. Juarez, 38, of Diamond Bar, who received three years in federal prison;
  • Vladimir Stefanovic, 38, of Lancaster, who was sentenced to a year and a half behind bars; and
  • Cynthia Valenzuela, a 27-year-old Downey resident who worked for Rodriguez as an escrow officer, who was sentenced to a year and day in prison.

St. Louis Real Estate Broker Admits Pocketing Cash By Collecting On Bogus Liens Placed On Property Facing Foreclosure In Equity Stripping Scam

In St. Louis, Missouri, the St. Louis Business Journal reports:

  • A St. Louis real estate broker has pleaded guilty to bank fraud in connection with brokering real estate transactions in 2006 and 2007. Randall Penberthy Jr., 40, of St. Charles, operated and controlled several business entities, including Covenant Financial, First Choice Investment and Loan and Midwest Management.


  • Penberthy recruited investors to buy residential real estate directly from distressed property sellers whose homes were in danger of foreclosure, according to the U.S. attorney’s office. With Penberthy’s assistance, investors would finance the purchases through bank loans, prosecutors said.

  • Penberthy would fraudulently place and record a second or third deed of trust on the property, typically in the name of First Choice or some other entity he controlled, in order to make it appear that a legitimate second or third mortgage had been placed against the property, when in fact he knew that no such legitimate second or third mortgage existed, prosecutors said. Bank loan funds were used to pay the sales price of the property as well as to pay off the fraudulent second or third mortgage, according to the U.S. attorney’s office.

Source: St. Louis real estate broker admits bank fraud.

Twin Cities Duo Get 3+ Years In Mortgage Fraud Scam; Targeted Homeowners Facing Foreclosure w/ Sale-Contract For Deed Buyback, Equity Stripping Ripoff

From the Office of the U.S. Attorney (Minneapolis, Minnesota):

  • The second of two men from the Twin Cities was sentenced today in federal court in connection with a real estate loan scam aimed at defrauding Associated Bank. In Minneapolis, United States District Court Judge Joan Ericksen sentenced Eric R. Krahnke, age 52, of Andover, to 37 months in prison. On February 3, 2010, Judge Ericksen sentenced Michael I. Striker, age 56, of Minnetonka, to 41 months in prison.


  • Although the loans(1) at the heart of this case were purportedly for construction rehab projects, Striker admitted he used some loan proceeds for unrelated expenses and debts. Furthermore, many of the properties subject to the loans were not rehab properties at all. Rather, they were homes in which financially distressed families still resided.(2)

For the U.S. Attorney press release, see 2 sentenced for orchestrating residential real estate loan scam.

(1) Accoding to the press release, Associated Bank disbursed more than $4 million in connection to the loans, with Striker receiving at real estate closings in excess of $724,000 in net loan proceeds. Krahnke, on the other hand, received commissions from Associated Bank for originating the loans. In addition, however, he received from Striker 3 percent of the net proceeds relative to each loan.

(2) According to the indictment (see Two Charged In Alleged Foreclosure Rescue Scam Involving $4M+ In Fraudulently Obtained Loans, Say Minnesota Feds):

  • The homeowners had conveyed their title to Striker, or businesses that Striker was working with, under a contractual agreement whereby they re-purchased the residence on a contract for deed. At the same time these homeowners thought that Striker was helping them to stay in their homes, Striker was falsely representing to the bank an intention to rehab and re-sell these properties.

Go here for a comparison/contrast between a mortgage and a contract for deed in Minnesota. foreclosure rescue sale leaseback

Fight To Successfully Recover Home Stolen, Mortgaged Out From Under Leaves Elderly Couple Exhausted, Out Thousand$ In Legal Fees

In Frostproof, Florida, The Ledger reports:

  • An elderly couple whose house in Frostproof was targeted for real estate fraud has reclaimed the home but might never recover money spent in a two-year legal battle. The outcome of a Feb. 5 court hearing means Albert and Nancy Pascell would have to pursue further legal action if they hoped for financial reparations. They are unlikely to do that, despite racking up thousands of dollars in legal bills, said their daughter, Nancy Houle of New York. "My parents are exhausted, both financially and emotionally," said Houle, whose parents are in their late 70s. "It's disrupting our entire lives every single day. We vowed we weren't going to talk about it any more. We're going to move on. We're done."(1)

For more, see Frostproof Deed Fraud Victims Regain Home (Frostproof couple reclaims house but might never recover legal expenses).

(1) According to the story, Polk County property records show two people with Tampa addresses, Maria Blanco and Armando Borges, recorded a quit-claim deed on Nov. 10, 2007, claiming the Pascells, who live part of the year in New York, had granted them ownership of the property. The Pascells said their signatures were forged. The same day the deed was filed, Blanco and Borges secured a $48,000 mortgage on the property, said the Pascells' lawyer, Keith Merritt of Lakeland.

Reportedly, the Pascells sued Blanco and Borges as well as the South Florida mortgage lender, 8 & 62 Corporation Profit Sharing Plan Trust. At a hearing last October in Polk County civil court, Circuit Judge Charles B. Curry voided the fraudulent deed and conveyed title to the Pascells. The Polk County Sheriff's Office has issued two warrants for Blanco's arrest, a spokeswoman said.

Monday, February 22, 2010

2nd Pa. Attorney To Go Down In Alleged Scam That Peddled Bogus Sale Leasebacks That Purported To Save Homeowners From Foreclosure

In Philadelphia, Pennsylvania, the Bucks County Courier Times reports:

  • Attorney and Doylestown Township Supervisor Jeffrey Bennett will plead guilty to criminal charges of conspiracy, mail fraud and wire fraud, and conspiracy to commit money laundering Wednesday in Philadelphia. [...] [Defense attorney Gavin] Lentz announced his client's intentions Monday afternoon, less than a week after Bennett's law partner - Stephen Doherty - pleaded guilty to similar charges in U.S. District Court. The pair ran Doylestown Township's Bennett & Doherty P.C.

  • Bennett, Doherty and three others were indicted two months ago on charges of skimming equity from homes of owners facing foreclosure in a mortgage fraud scheme.(1) [...] The five defendants are accused of conspiring to obtain fraudulent mortgages totaling $14.6 million for at least 35 struggling homeowners, [...]. The mortgages generated money for the defendants but often cost the victims their homes.

  • "(Bennett) got involved with an unscrupulous mortgage broker, that mortgage broker being Ed McCusker," Lentz said. "It's unfortunate that McCusker was as unscrupulous as he was and, unfortunately, (Bennett) was involved with him."


  • Residents involved in the program complained that, in some cases, they thought their troubled mortgages were being refinanced. But, at settlements organized by the defendants, they unknowingly signed away their properties to third parties and ended up paying rent in houses they no longer owned. The transactions did pay off the homeowners' original mortgages but, authorities claimed, the money left over - the home's equity - was divided up by the defendants.

For more, see Supervisor to plead guilty in fraud case (Doylestown Township Supervisor Jeffrey Bennett "wants to move on with his life," his attorney said).

For the indictment, see U.S. v. McCusker, et al.

(1) Also charged were Upper Makefield's Ed McCusker, head of the now-defunct Axxium Mortgage Inc., his wife, Jacqueline, and Mount Laurel mortgage broker John Bariana, the story states. foreclosure rescue equity stripping

Florida Appeals Court "Deep-Sixes" Rubber-Stamped Foreclosure Judgment; Kicks Case Back To Trial Court For Further Proceedings

Another rubber-stamping trial judge has ostensibly been caught with egg on his face by a state appeals court in a mortgage foreclosure action. This time, a three-judge panel of Florida's 2nd District Court of Appeal "threw the flag" on Sarasota County Circuit Court Robert B. Bennett, Jr. for what should be the equivalent of a 15-yard penalty (and subject to a league fine) in a National Football League game.

In a unanimous decision, the appellate court reversed a summary judgment of foreclosure in favor of a lender which was granted, according to the court, "[d]espite the lack of any admissible evidence that U.S. Bank validly held the note and mortgage[.]"

The facts in the case, as copied & pasted from the court's written opinion [except for the addition of the footnote and bold text, which is my own handiwork], follows:

  • On December 14, 2007, U.S. Bank filed an unverified mortgage foreclosure complaint naming the Jean-Jacqueses and BAC as defendants.(1) The complaint included one count for foreclosure of the mortgage and a second count for reestablishment of a lost note. U.S. Bank attached a copy of the mortgage it sought to foreclose to the complaint; however, this document identified Fremont Investment and Loan as the "lender" and Mortgage Electronic Registrations Systems, Inc., as the "mortgagee." U.S. Bank also attached an "Adjustable Rate Rider" to the complaint, which also identified Fremont as the "lender."

  • Rather than answering the complaint, BAC responded by filing a motion to dismiss based on U.S. Bank's lack of standing. BAC argued that none of the attachments to the complaint showed that U.S. Bank actually held the note or mortgage, thus giving rise to a question as to whether U.S. Bank actually had standing to foreclose on the mortgage. BAC argued that the complaint should be dismissed based on this lack of standing.

  • U.S. Bank filed a written response to BAC's motion to dismiss. Attached as Exhibit A to this response was an "Assignment of Mortgage." However, the space for the name of the assignee on this "assignment" was blank, and the "assignment" was neither signed nor notarized. Further, U.S. Bank did not attach or file any document that would authenticate this "assignment" or otherwise render it admissible into evidence.

  • For reasons not apparent from the record, BAC did not set its motion to dismiss for hearing. Subsequently, U.S. Bank filed a motion for summary judgment. At the same time, U.S. Bank voluntarily dismissed its count for reestablishment of a lost note, and it filed the "Original Mortgage and Note" with the court. However, neither of these documents identified U.S. Bank as the holder of the note or mortgage in any manner. U.S. Bank did not file the original of the purported "assignment" or any other document to establish that it had standing to foreclose on the note or mortgage.

  • Despite the lack of any admissible evidence that U.S. Bank validly held the note and mortgage, the trial court granted summary judgment of foreclosure in favor of U.S. Bank. BAC now appeals, contending that the summary judgment was improper because U.S. Bank never established its standing to foreclose.

For the rest of the appellate court's opinion, including its ruling reversing the trial judge and its analysis of the Florida law applied in this case, see BAC Funding Consortium Inc. v. Jean-Jacques, et ano., Case #2D08-3553 (February 12, 2010).(2)

(1) Listed as attorney for the foreclosing lender in this case is Florida Default Law Group, PL, of Tampa, Florida. This outfit has attained some level of notoriety as an alleged foreclosure mill law firm/"foreclosure factory."

(2) I remind my friends in Florida that, to the extent this ruling constitutes binding precedent in future cases, it is binding not only on the trial courts within the jurisdiction of the 2nd District Court of Appeal, but probably on all trial courts throughout Florida. See Pardo v. State, 596 So. 2d 665 (Fla. 1992), in which the Florida Supreme Court stated:

  • This Court has stated that "the decisions of the district courts of appeal represent the law of Florida unless and until they are overruled by this Court." Stanfill v. State, 384 So. 2d 141, 143 (Fla. 1980). Thus, in the absence of interdistrict conflict, district court decisions bind all Florida trial courts. Weiman v. McHaffie, 470 So. 2d 682, 684 (Fla. 1985). The purpose of this rule was explained by the Fourth District in State v. Hayes:

  • "The District Courts of Appeal are required to follow Supreme Court decisions. As an adjunct to this rule it is logical and necessary in order to preserve stability and predictability in the law that, likewise, trial courts be required to follow the holdings of higher courts--District Courts of Appeal. The proper hierarchy of decisional holdings would demand that in the event the only case on point on a district level is from a district other than the one in which the trial court is located, the trial court be required to follow that decision. Alternatively, if the district court of the district in which the trial court is located has decided the issue, the trial court is bound to follow it. Contrarily, as between District Courts of Appeal, a sister district's opinion is merely persuasive." 333 So. 2d 51, 53 (Fla. 4th DCA 1976) (footnote and citations omitted).

I trust my friends throughout Florida who are appealing rubber-stamped foreclosure judgments in scenarios similar to the one in BAC Funding will try to get some "mileage" out of this ruling.

More On Multiple Hat-Wearing Vice Presidents & Their Role In Residential Mortgage Foreclosure Actions

Recently stumbled upon while floating around in cyberspace is a Motion For Sanction Of Dismissal With Prejudice filed in July, 2009 by legal counsel for a defendant/homeowner in a 2008 mortgage foreclosure action (Indymac Federal Bank FSB v. Israel A. Machado - Case #50-2008 CA 037322) in Palm Beach County, Florida.

The 29-page document features the ostensibly, ever-growing-in-notoriety, multiple corporate hat-wearing vice president Erica A. Johnson-Seck, and her alleged antics in connection with signing documents in foreclosure actions while purporting to be acting as an authorized corporate officer for multiple foreclosing institutions simultaneously. It makes for some interesting reading if you're into this kind of stuff.(1)(2)

For more, see Motion For Sanction Of Dismissal With Prejudice.

Go here for the transcript of the corresponding deposition taken of Ms. Seck in the lawsuit, and go here for links to other posts on Erica Johnson-Seck, all available online courtesy of 4closureFraud - Fighting Foreclosure Fraud by Sharing the Knowledge.

(1) By the way, listed as attorney for the foreclosing lender in this case is Florida Default Law Group, PL, an outfit who has attained some level of notoriety in its own right as an alleged foreclosure mill law firm/"foreclosure factory."

(2) The motion makes reference to two earlier cases in which Ms. Johnson-Seck receives a less-than-honorable mention:

Ohio Appeals Court Gives Reminder On Importance Of "Real Party In Interest" Rule

In a recent ruling by an Ohio Court of Appeals in which it unanimously reversed a trial court's decision to grant what ostensibly was a rubber-stamped summary judgment in a foreclosure action, the three-judge panel gave this reminder of the importance that a foreclosing entity be a "real party in interest" in order to bring the lawsuit (reference to "Moore," below is a reference to the defendant/homeowner):

  • {¶ 21} Civ.R. 17(1) requires that a civil action be prosecuted by the real party in interest. A real party in interest is one who is directly benefitted or injured by the outcome of the case rather than one merely having an interest in the action. Mickey v. Denk, Cuyahoga App. No. 90484, 2008-Ohio-3983, citing State ex. rel. Village of Botkins v. Laws, 69 Ohio St.3d 383, 387, 1994-Ohio-518, 632 N.E.2d 897. The purpose behind the real party in interest rule is “to enable the defendant to avail himself of evidence and defenses that the defendant has against the real party in interest, and to assure him finality of the judgment, and that he will be protected against another suit brought by the real party at interest in the same matter.” Morelli v. Walker, Cuyahoga App. No. 88706, 2007-Ohio-4832, citing Shealy v. Campbell (1985), 20 Ohio St.3d 23, 24, 485 N.E.2d 701.(2)

  • {¶ 22} This action was filed by Sovereign Bank on December 27, 2006, one day after a letter was issued from Flagstar Bank to Moore stating that Flagstar Bank had assigned the loan to Countrywide Mortgage. Another document in the record indicates that on May 23, 2007, “MERS, Mortgage Electronic Registration Systems, Inc., as nominee for Lenders Choice Mortgage LLC (Assignor)” transferred and assigned the note and mortgage to Flagstar Bank, FSB. On this record, genuine issues of material fact exist as to who is the real party in interest and the trial court erred in granting judgment in favor of Flagstar Bank.

For the ruling, see Flagstar Bank, FSB v. Moore, 2010-Ohio-375 (February 5, 2010).

(1) Refers to Rule 17 of the Ohio Rules of Civil Procedure.

(2) For other Ohio appellate court rulings related to this point, see Lender Not Entitled To Foreclosure Judgment Due To Failure To Prove Promissory Note Ownership, Says Ohio Appeals Court.

Federal Judge Refuses To Intervene In Alleged Rubber-Stamping, Rocket Docket System Of Handling F'closures Against "No-Show" Homeowners In C. Florida

In Sarasota, Florida, the Sarasota Herald Tribune reports:

  • A federal judge has issued a warning to Florida's homeowners in foreclosure: You'd better fight if you want your rights. U.S. District Judge James Moody threw out a lawsuit that claimed the judicial system in Sarasota and Manatee counties violates the rights of homeowners who do not contest their foreclosure.

  • Two homeowners who filed the lawsuit, both of whom have since lost their houses, cited a study that found lenders used incorrect or fraudulent paperwork in three of every four foreclosure cases. The lawsuit called for a halt to all foreclosures until judges could verify all documents filed by lenders, to keep property from being taken by fraud or mistake.

  • But Moody, in his order throwing out the case, wrote that Florida's homeowners must defend their rights or raise any claims in the state foreclosure actions. "Though participating in the state court proceedings may be personally difficult for them, the opportunity is available," Moody wrote of the plaintiffs.

For more, see Judge: Homeowners must fight for rights.

(1) The Florida Supreme Court recently enacted new procedural rules designed to help Florida's judicial system better cope with the flood of foreclosures. See Fla. High Court Enacts Procedural Rules To Apply In Residential F'closre Mediations; Seeks To Tamp Down Use Of "Lost Note" Affidavits, "Sewer Service."

Sunday, February 21, 2010

Lender's Failure To Inquire Into Possession Disqualifies It For Bona Fide Purchaser Protection In Suit To Undo Foreclosure Rescue Sale Leaseback Scam

A 2009 case ruled upon by a Federal court in Chicago, Illinois dealt with the following facts:

  • Homeowner Davis was facing foreclosure and entered into a transaction with a foreclosure rescue operator in which the homeowner unwittingly conveyed full, unconditional title to the operator, and received $18,000 upon consummation of the transaction, a transaction that Davis believed to be a mortgage refinancing.

  • Davis retained possession of his home, and pursuant to a contemporaneously executed contract for deed, agreed to pay the operator $ 1,223.51 per month, with the option to repurchase his home in one year.

  • At the end of the year, Davis, unable to purchase the home back, received an extension of the contract for another year.

  • Before the end of the second year, Davis began having trouble making the monthly payments. At this point (and probably on the advice of legal counsel, who undoubtedly informed him that he unwittingly conveyed full title to the operator two years earlier, although the ruling is silent on this fact), Davis (or someone on his behalf) takes a stroll down down to the Cook County Recorder of Deeds and records a "Notice of Equitable Mortgage and Affidavit of Interest" setting forth his claim to the sole legal title to the property.

  • Approximately three months later, the operator sells the home to a third party for $345,000, who financed the purchase with a mortgage loan from an institutional lender.

  • Davis subsequently files a lawsuit to recharacterize his unwitting transfer to the operator as an equitable mortage, and to void both the operator's sale to the third party, and the mortgage obtained from the institutional lender to finance the third party's $345,000 purchase.

  • The lender claimed that its mortgage has priority over any interest or equity Davis could establish in the home because it (the lender) acquired its mortgage interest as a bona fide purchaser, without having any actual knowledge of either (a) Davis' earlier dealings with the foreclosure rescue operator, or (b) Davis' continued possession in the home.

In this ruling, the court was asked to decide on the narrow issue of whether the institutional lender acquired its mortgage interest in the home as a bona fide purchaser, or whether its interest is subject to (and inferior to) any right or equity that Davis can establish in the premises.

The court decided that the institutional lender was not a bona fide purchaser and, accordingly, is subject to any right or equity in the home that Davis can estabilsh.

While alluding to the fact that Davis had recorded a "Notice of Equitable Mortgage and Affidavit of Interest" with the county Recorder of Deeds, the court relied primarily on the fact that the lender had constructive notice of Davis' possible rights or equities in the home by reason of his continued possession in the home. (It found this to be the case despite the fact that the lender may have lacked actual knowledge of the facts that led up to the home's sale to the third party.)

More specifically, the court ruled that Davis' visible, open, exclusive and unambiguous possession of the property, under Illinois law, imposes on the lender a duty to inquire into the nature of any rights or equities Davis may claim in the premises, and charges the lender with that knowledge when it fails to make said inquiry.


In reaching its ruling, the court gave this recitation of the Illinois law that it applied to this case:

  • Bona fide purchase is a valid affirmative defense for which the defendant bears the burden of proof. Independent Coal & Coke Co. v. United States, 274 U.S. 640, 650, 47 S. Ct. 714, 71 L. Ed. 1270 (U.S. 1927) (citing Wright-Blodgett Co. v. United States, 236 U.S. 397, 403, 35 S. Ct. 339, 59 L. Ed. 637); Daniels v. Anderson, 252 Ill.App.3d 289, 296, 624 N.E.2d 1151, 191 Ill. Dec. 773 (Ill. App. 1st Dist. 1993).

  • "A bona fide purchase interest in property takes that interest free and clear from all claims except those of which [one] has notice." Daniels, 252 Ill. App.3d at 296. Notice may be actual or constructive and "contemplates the existence of circumstances or facts either known to a prospective purchaser or of which he is chargeable with knowledge which imposes upon such purchaser the duty of inquiry." Burnex Oil Co. v. Floyd, 106 Ill.App.2d 16, 21, 245 N.E.2d 539 (1st Dist. 1969).

  • Under the doctrine of constructive notice, the law imputes to a buyer or lien claimant knowledge of the facts that a diligent inquiry would have brought to light. Miller v. Bullington, 381 Ill. 238, 44 N.E.2d 850 (1942). The Illinois Supreme Court has long held that a purchaser must inquire into "persons in possession of real estate and by what tenure they hold and by what interest they claim, and is put on notice of all claims, legal and equitable, which the pursuit of such inquiry would disclose." Ambrosius v. Katz, 2 Ill.2d 173, 182, 117 N.E.2d 69 (1954); Miller, 381 Ill. at 243; Stein v. Green, 6 Ill.2d 234, 242, 128 N.E.2d 743 (1955) (holding that it is the purchaser's responsibility to investigate the property and inquire as to the rights of any individual in possession of the property).

  • Because possession has "substantial significance and consequences," it must be "visible, open, exclusive and unambiguous." Burnex, 106 Ill.App.2d at 21-22; Millikin Trust Co. v. Gregory, 292 Ill. App. 28, 29, 10 N.E.2d 853 (3d. Dist. 1937) ("Possession, before it can be held to operate as notice of an unrecorded deed, must be open, visible, exclusive, and unambiguous, such as it is not liable to be misunderstood or misconstrued."). The occupation of property by a party other than the record owner is "legally equivalent to the recording of such interest." Burnex, 106 Ill. App.2d at 21.

In addition to the foregoing, the court, in a footnote, made this observation relating to Davis' exclusive possession of the home:

  • NovaStar's argument that the fact that plaintiff's nephew lived with him during the relevant period somehow destroys plaintiff's "exclusive" possession is specious. If co-residence by family members negated exclusivity only single occupants would qualify for possession of real estate. No court has never reached such an absurd result.

For the ruling, see Davis v. Elite Mortg. Servs., 592 F. Supp. 2d 1052 (USDC N.D.Ill., East. Div. 2009).

Representing the homeowner is John S. Elson, Lead Attorney, Northwestern University School Of Law, Legal Clinic, Chicago , IL.

For some of the related court documents, see:



(Illinois Supreme Court)

While not addressed in this ruling, Illinois case law has specifically addressed the scenario where a grantor of a deed remains in possession of the premises:

  • Ambrosius v. Katz, 2 Ill. 2d 173; 117 N.E.2d 69; 1954 Ill. LEXIS 321 (Ill. 1954): This rule protects a grantor whose grant was induced by fraud, but who, remaining in possession, can show such possession as notice of his equity against a subsequent grantee. (White v. White, 89 Ill. 460; Ronan v. Bluhm, 173 Ill. 277.) The purchaser cannot excuse himself by merely obtaining information as to how possession was obtained or inquiring of the grantor or of other persons as to the rights of the person in possession, but he is bound to inquire of the person in possession by what tenure he holds and what interest he claims. Open possession is sufficient to charge such purchaser with notice of all legal and equitable claims of the occupant. German-American Nat. Bank v. Martin, 277 Ill. 629.

  • McDonnell v. Holden, 352 Ill. 362, 185 N.E. 572 (Ill. 1933): Where a grantor does not deliver possession to the grantee but remains in the open, exclusive possession of the premises, a party taking a deed from the grantee during such occupancy is charged with notice of all the rights and equities of the first grantor. (Ronan v. Bluhm, 173 Ill. 277; Bruner v. Manlove, 3 Scam. 339.).

  • Ford v. Marcall, 107 Ill. 136, 1883 Ill. LEXIS 237 (Ill. 1883): The law is, as this court has declared in White v. White, 89 Ill. 460, that when the grantor of real estate remains in possession, all persons acquiring title from the grantee are chargeable with notice of all the claims of the grantor.

  • White v. White, 89 Ill. 460, 1878 Ill. LEXIS 448 (Ill. 1878): Then, were appellants protected as innocent purchasers for value? Most clearly they were not. The grantors were in possession, and all persons purchasing the property must be held charged with all of their claims, legal and equitable. If appellants did not employ Williams to thus procure the title, or if they had no actual notice of his fraud in obtaining the conveyance, they took it charged with notice as though they had seen their father, and he had informed them of all the particulars of the fraud perpetrated by Williams; and it is for the reason that a party purchasing real estate in the possession of another should see him, and learn what claim he has.

  • Smith v. Heirs of Jackson, 76 Ill. 254; 1875 Ill. LEXIS 615 (1875): (Editor's Note: Reference below to "Jackson" is a reference to a prior owner of the premises) :It is true, this fact was not known to Smith, but he, according to his own testimony, purchased without even going or employing an agent to see the land, or make inquiry of the persons in occupation. Had inquiry been made, the fact would readily have been ascertained that they were paying rents to Jackson. The counsel who appear for him in this court were his legal advisers, he says, and to whom he presented the abstract for examination. It is not likely that counsel of such eminence would have failed to advise him of the necessity of inquiry whether there was any tenancy by others; for the law had been laid down by this court, as early as the case of Pittman v. Gaty, 5 Gilm. 186, that possession by the tenant was the possession of the landlord, and constructive notice of the landlord's title. That is the settled law in Pennsylvania, also in Iowa. See Dickey v. Lyon, 19 Iowa 544, where the principal cases upon both views of the question are collected and ably commented upon.

  • Metropolitan Bank v. Godfrey, 23 Ill. 531; 1860 Ill. LEXIS 276 (Ill. 1860): In Williams v. Brown, 14: Ill. 205, we say: A person who buys land in possession of another, is bound to inquire of the person in possession, by what tenure he holds possession, and what interest he claims in the premises. See also Prettyman et al. v. Wilkey et al., 19 Ill. 235, 238. So it is held that possession of lands by the grantor in a deed, absolute on its face, but intended as a mortgage, was notice, to a purchaser from the grantee, of the equities of the grantor. Wright v. Bates and Niles, 13 Vt. 341; Roberts v. Anderson, 3 Johns. Ch. 380-1; Grimstone v. Carter, 3 Paige's Ch. 437.



(Illinois Courts of Appeals)

  • Fidelity Trust & Savings Bank v. Williams (1936), 285 Ill. App. 131, 1 N.E.2d 739: The rule of law which seems to control in a like situation is that the retention of possession by the grantor of the property conveyed is notice of his or her interest in the property, and to those claiming under the grantee, and such rule is laid down in the case of Ford v. Marcall, 107 Ill. 136, wherein the court said: "The law is, as this court has declared in White v. White, 89 Ill. 460, that when the grantor of real estate remains in possession, all persons acquiring title from the grantee are chargeable with notice of all the claims of the grantor." This rule was followed and approved in the case of Ronan v. Bluhm, 173 Ill. 277, where the court said: "It is proper we should remark, in answer to the discussion upon the point, that as it is conceded by all parties that the said Thomas Ronan did not deliver possession of the premises in question to the grantee, Carbine, but remained in the open and exclusive occupancy thereof, appellee, Bluhm, is deemed, as matter of law, to have taken the conveyance from Carbine with full notice of all the rights and equities of said Ronan in the premises. Illinois Central Railroad Co. v. McCullough, 59 Ill. 166; White v. White, 89 id. 460; Ford v. Marcall, 107 id. 136."


  • It has been held also in this State, that if the grantor remains in possession after conveyance, purchasers from the grantee are affected with notice of the grantor's rights in the land. White v. White, 89 Ill. 460; Ford v. Marcall, 107 id. 136."

  • Rea v. Croessman, 95 Ill. App. 68; 1900 Ill. App. LEXIS 422 (Ill. Ct. App., 4th Dist. 1900): That possession of land by a grantor of it, is notice of his retained equitable rights in the land, see McConnell v. Reed, 4 Scam. 117; Metropolitan Bank v. Godfrey et al., 23 Ill. 579; I. C. R. R. Co. v. McCullough, 59 Ill. 166; White v. White, 89 Ill. 460; Ford v. Marcall, 107 Ill. 136; Pomeroy's Eq. Jur., 2d Ed. Sec. 115.

  • Porter v. Clark, 23 Ill. App. 567, 1887 Ill. App. LEXIS 53 (Ill. Ct. App., 1st Dist. 1887) (alterations added, not in the original): We have carefully considered all the evidence in this record, and we are unable to conclude from it that appellee Clark [ie. the grantor-in-possession] was estopped by anything that he did from asserting his vendor's lien against the land in the hands of Porter [ie. the purchaser from one, Parker, Clark's grantee]. [...] The evidence is not satisfactory with reference to the contract under which Clark paid rent after his deed to Parker [ie. Clark's grantee]. It would seem from Parker's letter to Clark, introduced in evidence, that the rent was applied on the notes for the purchase money from Parker to Clark. If that was the understanding, we could not say that Clark's possession as tenant was inconsistent with his claim of lien for the purchase money It would Seem to be the rule in this State that possession of land is notice of all rights of whatever nature, that the possessor has in the land.

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