Saturday, April 10, 2010

Ohio Man Charged In Alleged $500K+ Ripoff Of 70-Year Old Woman; Leaves Her Essentially Penniless, Facing Foreclosure

In Springdale, Ohio, the Cincinnati Inquirer reports:

  • A financial planner is accused of stealing a 70-year-old woman’s life savings -- more than half a million dollars – and leaving her essentially penniless. When Springdale police arrested Martin Morris, 50, at his Mason home Thursday, night, they said he was on the phone with his attorney.

  • A Hamilton County grand jury indicted Morris earlier this week on 14 counts, including aggravated theft, theft from an elderly person and forgery. Springdale Police Detective Keenan Riordan said Morris stole $509,637 by forging checks while handling all of the woman’s finances -- even doing her taxes -- and investing through Scottrade, an online brokerage. “It’s a shame, it really is,” Riordan said Friday.


  • She discovered she was broke earlier this year when foreclosure proceedings began on her Springdale home. “That’s when she became suspicious,” he said. With someone’s help she checked her account on Scottrade online and discovered she had just $7.01 left, Riordan said. The woman is now struggling to make ends meet on her only source of income, monthly Social Security checks. She also received assistance from relatives that has staved off foreclosure, at least for now, police said.


  • It doesn’t appear likely the woman will be able to get her money back. “He spent it,” the detective said. “It’s gone.”

For the story, see Cops: Woman bilked of $500K.

Bay Area Woman Gets 30 Days "Time Served," 3 Months House Arrest For Using Forged POA, Stolen IDs In Attempt To Steal Long-Time Friend's Home

In Alameda County, California, Laney Tower reports:

  • A former College of Alameda counselor was sentenced March 29 to five years probation and 120 days jail time(1) for multiple felony charges including forgery and identity theft. Shirley Robinson, 69, who has been in custody at Santa Rita Jail since a jury convicted her of 10 felonies on March 1, was sentenced at Alameda County Superior Court on March 29 and ordered to pay restitution and stay away from the victims.

  • The convictions stem from a real estate fraud and identity theft scheme perpetrated at the height of the real estate boom in 2005, according to prosecutors. Robinson and the victim, former COA counselor Alze Roberts, were friends for 50 years. Robinson created a forged power of attorney authorization to act on behalf of someone else - in an attempt to sell the property without Roberts' knowledge, prosecutors said. To make that transaction appear legitimate, Robinson also stole the identity of three other individuals.

For the story, see Ex-COA counselor convicted of forgery (Sentenced to five years probation, house arrest, fined).

(1) Robinson's four months in jail includes 30 days time served with the remaining to be under electronic home confinement (house arrest).

Hubby's Failure To Disclose Cheating Relationship Results In Favorable Ruling In Wife's Attempt To Undo Mortgage Refinancing Of Family Home

In Gorelston, Norfolk (UK), Norfolk News reports:

  • A Norfolk mother has won a landmark court ruling that may give her judicial protection against her home being repossessed - because she was unaware her husband was cheating on her.

  • Top judges ruled that Jayne Hewett was “unduly influenced” by her husband Darren Hewett, who had kept quiet about his affair when he persuaded her to charge his massive credit card debts against their family home, a breach of his “duty of fairness and candour”. Mrs Hewett had reluctantly agreed to take out the substantial loan against their home in [] Gorleston, in January 2004.

  • She had faced the choice of agreeing to the deal or saying no and holding on to her half of the already-mortgaged house, a move Mr Justice Briggs described as akin to having a “plank in a shipwreck.(1)


  • However Mrs Hewett may not necessarily be able to remain in her home, because a County Court judge will now have to decide whether First Plus is entitled to enforce the debt against Mr Hewett's former half share in the property. If that is the case, Colomb Road will have to be sold, although Mrs Hewett will not be as badly off.

For the story, see Norfolk mum wins landmark property ruling.

(1) The court's additional observations in support of their decision is reflected in this excerpt from the story:

  • I am persuaded that Mr Hewett's concealment of his affair from his wife did amount to the exercise of undue influence against her, sufficient to vitiate the re-mortgage transaction, as between them,” said the judge. Mr Justice Briggs added that the affair was “plainly a material fact calling for disclosure” as Mrs Hewett had agreed to enter into the mortgage transaction because she believed her husband was as “committed to the marriage as she was”. He said Mr Hewett was “guilty of a deliberate concealment of the affair” because he knew that if he had told his wife about it, she may not have consented to his proposal. “It is evident from his forgery of his mother-in-law's signature on the consent form that Mr Hewett was prepared to stop at nothing to achieve his objective,” added the judge, observing that Mr Hewett was later convicted over that matter.

Caretaker Dodges Charges After Pocketing 2nd Mortgage Cash On Alzheimer's Victim's Home, Then Failing To Make Payments; Cops Say No Crime Committed

In Anderson County, Tennessee, the Knoxville News Sentinel reports:

  • Living alone in his Claxton area house, elderly Auburn Casey apparently became smitten with his caretaker, a detective said. The 86-year-old signed blank checks for the 39-year-old woman to fill in the amount and cash.

  • He allowed the woman to take out a second mortgage on his house, valued at $177,900. The caretaker then didn't make mortgage payments, sending the home into foreclosure proceedings.


  • A family member and friend of Casey's became aware of the situation late last year and rushed to obtain power of attorney over his affairs. By that time, "everything was gone," Anderson County Sheriff's Department Investigator Danielle Alexander said. Casey was broke, his house had been sold at a foreclosure auction for $19,000, and he had moved into an assisted living facility.

  • For weeks, Alexander investigated the incidents. The Tennessee Bureau of Investigation looked at the case, records show. The Anderson County District Attorney's Office checked it out. Employees of the Department of Human Services' Adult Protective Services Division also became involved. But all law enforcement officials have concluded no crime was committed. The case is closed.(1)


  • Cora Logan-Lunny, director of the Anderson County Office on Aging, said last week she was aware of the situation, which she described as "the worst case we've ever seen." Logan-Lunny said Casey has Alzheimer's, and "he really didn't know what he was doing. That's the saddest part of it." "This is a shame," Alexander said of the case. "I'm seeing it happen more and more when these elderly people form relationships with young girls."

For the story, see Police say more taking advantage of the elderly.

(1) The story states that Casey repeatedly insisted he willingly gave the money to the caretaker, whom he described as "a great person" with a "good heart," according to a detective's report.

Live-In Caregiver Surrenders State Nursing License After Convincing Now-Deceased 91-Year Old Oregon Man To Sign Over $900K Estate

In Portland, Oregon, Willamette Week reports:

  • A licensed practical nurse accused of manipulating an elderly Portland man into giving up his estate has surrendered her Oregon nursing license. The state Board of Nursing uncovered disturbing new details of the case in the investigation that led to Patricia McIntosh surrendering her LPN license last month.
  • Last year WW reported the story of Warren Cummins, who died at age 91 in his Southwest Portland home shortly after giving his property and savings to McIntosh. She had been his live-in caregiver for four months when he died.
  • Cummins’ stepson and three adopted children challenged McIntosh in court. Multnomah County Circuit Court Judge Katherine Tennyson ruled in their favor last May, saying McIntosh used “undue influence” and “manipulation” to convince Cummins to sign over his estimated $900,000 estate.
  • The case also went before the Oregon State Board of Nursing. On Feb. 10, McIntosh voluntarily surrendered her license because of “conduct derogatory to the standards of nursing.” She also promised never to practice nursing in Oregon again. The nursing board’s six-page report (PDF) contains details not yet made public about the case, [...].
For more, see ‘Manipulative’ Caregiver Surrenders her Nursing License.
See also:

Oregon Woman Charged With Abusing POA In $224K Ripoff Of 85-Year Old, Now-Destitute Mother; Victim Puts Home Up For Sale To Pay Nursing Home Bills

In Milwaukie, Oregon, KPTV-TV Channel 12 reports:

  • A woman accused of stealing more than $224,000 from her 85-year-old mother's bank accounts was arrested Thursday on charges of aggravated theft and criminal mistreatment. Milwaukie police said Janet Durkee left her mother destitute after taking the money over a five month period. The financial exploitation began, police said, when Durkee's mother, Geneva Smith, suffered serious injuries in a fall. Friends said Smith was no longer able to care for herself and that Durkee made her mother sign over her power of attorney.


  • Smith is now living at an assisted living home. She has her home up for sale so she can pay the bills.

For more, see Police: Woman Stole $224K From Elderly Mom.

Friday, April 9, 2010

Philly Feds Charge Pair For Alleged Use Of Home Improvement Racket To Swindle Unwitting Owners Out Of Their Home Equity

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):

  • The owner of a home improvement company and a mortgage loan officer were charged today by information in a home improvement and mortgage fraud scheme, announced United States Attorney Michael L. Levy. Calvin Harris, owner of the Philadelphia Homes Improvement Outreach Program (“PHIOP”), is charged with two counts of wire fraud. Jonathan Ganz, a loan officer for a mortgage brokerage company, is charged with one count of wire fraud.

  • Harris focused his sales efforts on the African-American community in Philadelphia, promising home improvement work on the houses of those clients who signed with him. He also promised to help them secure financing for the work. For the mortgages, he partnered with Ganz who would complete the necessary paperwork to obtain the loans for the PHIOP customers.

  • According to the indictment, Harris took the funds intended for his clients’ home improvements and misspent them, using some of the money for cars, clothes, and vacations for himself and his family.

For the rest of the press release, see Two Charged In Home Improvement Loan Scam.

For the criminal charges, see U.S. v. Harris, et ano.

California Regulator Issues Advisory On Illegal Activities Associated With Short Sales

The California Department of Real Estate recently issued an advisory to real estate agents licensed by the state on short sales and some of the legal and ethical minefields to avoid when dealing in these types of transactions. Among the points addressed are the activities of
unlicensed, self-described "short sale facilitators" and illegal short sale flipping.

For the advisory, see Short Sales -- An Overview and Warning to Real Estate Licensees Re: Fraud, and Legal and Ethical Minefields.

More Spotlight On Short Sale Fraud

The Orange County Register reports:

  • The [California] Department of Real Estate is issuing warnings about fraudulent short sales. [...] Short sales, in which properties are legally sold for less than what’s owed on the mortgage as long as the lender agrees, have been on the upswing this year. The DRE says it’s also been alerted to fraud surrounding short sale transactions.

For some examples, see Watch out for fraud in short sales.

Bldg Inspectors Shut Down Another NYC Deathtrap, Giving Occupants "Hours" Notice; Illegal Hostels Said To Cram Up To 16 Residents In Each Apartment

In Williamsburg, Brooklyn, the New York Post reports:

  • Talk about a hostel living environment! City officials raided and cleared a six-story Williamsburg building that contained two allegedly illegal hostels [] after an inspector found that the commercial building was not zoned for residential use.

  • Twenty tenants, mostly in their 20s and early 30s, were told to gather their things and leave the building [...]. The Red Cross arrived at the scene shortly after 2 pm to provide emergency services including temporary housing for those with nowhere else to go. “We were told we had a few hours to get out,” said Adriana Lee, an employee at Loftstel, one of the two hostels in the building. “Some people have been living here a couple of years.”

  • Two hostels, [...] managed 12 apartments total, which could house up to 16 people each with a capacity of 192 people. Tenants, many of them international students and interns at local hospitals and the United Nations, paid upwards of $1,100 per month to live in the communal setting.

  • According to city officials, in addition to not having the proper permits, the building did not have a fire escape, sprinkler system or a secondary exit in case an emergency arises.

For more, see Hostel takeover in Williamsburg! (The city kicks out two allegedly illegal hotels inside a normal residential building).

(1) According to the story, the building is just one of what city officials estimate are dozens of hostels operating out of illegally converted warehouses, commercial buildings, and residential lofts. In some cases, the owner has launched the hostel, and in others, a tenant has sought to earn extra cash by converting his apartment into a mini-dormitory. The proliferation of hostels and illegal hotels has so concerned residents and community leaders in Brooklyn that state legislators are proposing four bills that would make it illegal to rent residential buildings on a nightly basis, the story states.

Foreclosure Eviction Attempt Lands Lender In Federal Court; Tenant Accuses Bank Of Using Misleading Letter To Intimidate Her Out Of Rented Home

In Cincinnati, Ohio, the Cincinnati Enquirer reports:

  • A College Hill woman sued GMAC Inc. on Monday to stop the company from evicting her and other tenants after their rented homes were sold at sheriff's sales. Rosalyn Pratt said GMAC purchased her home in December after the property fell into foreclosure and then sent her a letter stating she would receive $500 if she left within two weeks. If Pratt didn't leave, the letter said, she would be evicted.


  • Her Legal Aid lawyer, Nicholas DiNardo, said the company's letter violates a 2009 federal law that requires landlords to give tenants at least 90 days notice before evicting them from properties that have gone into foreclosure or changed hands in a sheriff's sale."This is a direct violation," DiNardo said. "They misinformed her. They said if you don't take this deal, we'll file an eviction notice against you."(1)


  • The lawsuit, filed in U.S. District Court in Cincinnati, seeks a court order barring GMAC from evicting Pratt and from continuing to use the eviction letter the company sent her earlier this year.

For the story, see Suit seeks to block foreclosure evictions.

Representing the tenant is the Legal Aid Society of Southwest Ohio, LLC.

(1) For the lawsuit and the attached exhibits that allege violation of the Federal Protecting Tenants at Foreclosure Act (among other causes of action), see Pratt v. GMAC, et ano.

Thursday, April 8, 2010

NY's Warren County Seeks To Reform Its "Surplus Snatching" Ways In Delinquent R/E Tax F'closures & Allow Ex-Property Owners To Keep Equity After Sale

In Warren County, New York, The Post Star reports:

  • Once a county forecloses on your property, that property no longer belongs to you. It belongs to the taxpayers. So we have to wonder why Warren County supervisors are pushing so hard to give that money back. At issue is a law that allows counties to keep all the money from the sale of foreclosed properties, even if the sale price exceeds the amount of taxes owed on the property.(1) Some supervisors want the county to accept only the back taxes, and give any extra money back to the person who lost the property to foreclosure.(2)

For more, see County should keep money from foreclosures.

(1) The effect of this law, as it currently stands, is that the consequence of a failure to pay real estate taxes is a forfeiture of the real estate by a property owner. Forfeitures are generally unfavored in the law (a philosophy that forms the basis for the old maxim, "equity abhors a forfeiture"), and, clearly, the statute should be appropriately changed. There is no valid reason why the county should benefit from the delinquent property owner's built-up equity (over and above the amount due on the outstanding tax bill - plus interest, penalties, costs, etc.), and why these situations are not handled like any mortgage foreclosure, where the sale proceeds over and above what is owed to the foreclosing lien holder (ie. the "surplus" or "overage") belong to the foreclosed property owner (subject to any claims of subordinate lienholders).

(2) This story is actually an op-ed piece appearing on the "mullet wrapper" page of Warren County's local newspaper where the editorial board expresses its support for keeping the law unchanged, shamelessly advocating for the continued forfeiture, to the county, of the equity built up by tax-delinquent property owners over and above their unpaid tax debts.

Homeowner Accuses Loan Servicer Of Payment Posting Screw-Ups, Improper Charges For Force-Placed Insurance, Erroneous Reports To Credit Bureaus

In Galveston, Texas, The Southeast Texas Record reports:

  • After being threatened with foreclosure despite properly disputing a number of delinquencies on his mortgage, a Galveston County man has filed a $210,000 lawsuit against a Florida-based loan management company. Theordia L. McMahon accuses Bayview Loan Servicing LLC of failing to post payments and credits to his account in a timely and accurate manner after the defendant assumed the debt in early 2009, additionally claiming it refused audit for errors regarding premiums for force-placed windstorm insurance.

  • The suit was filed March 18 in Galveston County District Court. According to the complaint, McMahon, a disabled veteran, obtained the home equity mortgage in 2007. CitiMortgage allegedly purchased the debt and assigned it to Bayview two years later. The suit states that CitiMortgage had informed the defendant that the plaintiff did not owe the premiums, but Bayview continued to demand payment.

  • Bayview's subsequent actions resulted in the creation of erroneous reports of late payments to the credit bureaus, court papers assert. McMahon received a letter dated July 28, 2009, stating he failed to make multiple installment payments although there was no delinquency. The plaintiff responded to the notice with additional written disputes of delinquencies without success, the suit argues. Bayview ultimately filed an application for expedited foreclosure on Feb. 10.

  • The suit alleges that McMahon "suffered significant mental distress due to the attempted wrongful foreclosure, libelous errors, and the credit denial."

Source: Man claims loan company improperly foreclosing on home.

San Bernardino DA Bags Five In Alleged Conspiracy That Used Unwitting Victim's ID To Obtain $1M In Home Loans

From the Office of the San Bernardino County, California District Attorney:

  • [A]ndy Williams, 38, of San Bernardino, surrendered himself to San Bernardino County District Attorney's Investigators for real estate fraud related charges. Williams was arrested for numerous felony counts including grand theft, forgery, and filing forged documents with the County Recorder’s Office. Within the last two weeks, four other co-conspirators, Angela Cotton, 38, of Fontana, Frederick White, 31, of Beaumont, Terry Wallace, 41, of Mira Loma, and Donell Spencer, 43, of Lancaster, were arrested on similar charges on the same investigation.

  • In 2006, the suspects conspired to obtain real estate loans by fraudulently using the victim's identity. [...] The victim's signature was forged on loan documents and Deeds of Trust. Approximately $1,000,000 was stolen due to these fraudulent loans. The victim had no knowledge of these loans until months later when she was contacted by lending institutions for lack of payment.

For the DA press release, see San Bernardino Man Arrested for Real Estate Fraud.

Lender's Bookkeeping Screw-Up Lands Long Island Homeowner In Foreclosure; Bank Corrects Error, Issues Apology Only After Local Media Intervention

In East Hampton, New York, WABC-TV Channel 7 reports:

  • She's an architect who's helped build scores of homes. But now - the struggling businesswoman is trying to save her own house from foreclosure after she says her bank tried to literally run her out of town - that is until 7 on your side stepped in. "It's ridiculous. It's gotten me ill." Amagansett homeowner, Eva Growney's talking about foreclosure notices she's been receiveing since last year from her mortgage company, Chase. "It's exasperating. The phone rings all the time because I'm always getting threatening phone calls," the Hampton's homeowner.

  • At issue? Two mortgage payments, one from last April, the other from August totaling more than $4,890. Chase says they're both owed. But Eva and her business partner, Michael O'Sullivan, say both were paid months ago, when they were originally due.


  • So 7 On Your Side contacted Chase. And after a flurry of phone calls, Chase finally apologized for it's error and credited the two lost mortgage payments as sent on time. Finally, her mortgage was corrected. And Eva and Michael were breathing easier. "In that aspect we're appreciated of Channel 7 and you guys." Chase also said it had contacted the three credit reporting bureaus asking them to update Eva's account as being current and wipe the delinquencies off her record.

For the story, see Mortgage mess.

Unwitting Mortgage Cosigner Takes Hit On Credit Report After Daughter, Son-In-Law Subsequently Modify Loan Payments, Despite Never Being In Default

In Cherry Hill, New Jersey, The Philadelphia Inquirer reports on Roseann Ippoliti, a local woman who recently took a big hit on her credit in connection with a mortgage she had cosigned for her daughter and son-in-law to facilitate a home acquisition, despite the fact that the loan payments were always timely made.

The problem arose from the desire of the daughter and son-in-law to subsequently refinance the mortgage so that they could relieve Roseann from any personal liability on the acquisition loan.

  • Rather than leave her in a potentially vulnerable financial situation, Ippoliti said, her son-in-law decided to refinance the mortgage to put the house in his name. He contacted Wachovia and was told to apply for a mortgage modification instead. He did, it was approved, and his payments dropped to $1,100 a month from $2,159.


  • Because Ippoliti's name remained on the modified mortgage, she needed to sign the modification document. But, she said, her son-in-law was told her signature was unnecessary - that his signature, as occupant of the property, was enough.

  • In November, Ippoliti received a letter from Bank of America notifying her of a routine periodic review, "to ensure that they feature the most appropriate credit line" on her credit card. That review resulted in a drop in her credit line to $3,400 from $13,000 "because I had a major derogatory record on my credit file," which Bank of America identified as "a mortgage being delinquent." (Ippoliti has mortgages on houses in Cherry Hill and Cape May, and both are current.)

  • It was then her daughter and son-in-law told her about the mortgage modification, explaining they didn't do so before because they weren't delinquent and Wachovia said it didn't need her signature. They had no idea how the words mortgage modification are viewed by creditors.

For the story, see Cosigner bitten by refi mistake.

Wednesday, April 7, 2010

Fake Real Estate Agent Charged With Using $80K Pocketed From Would-Be Homebuyer To Purchase Target Home In Her Own Name

In Stanislaus County, California, The Modesto Bee reports:

  • A Ceres woman posed as a real estate agent and forged signatures to swipe $80,000 from an unsuspecting Spanish-speaking couple who thought they were buying a Modesto home, an arrest warrant says. Griselda Flores, 50, was arrested [] by the Stanislaus County district attorney's real estate fraud unit and charged with grand theft, forgery and impersonating a real estate agent. Bail was set at $25,000.

  • Flores, who is bilingual, gained the victims' trust over several years while preparing their taxes at her Ceres office, the warrant says. She showed them a few houses and arranged to sell one whose owner faced foreclosure [...] for $98,000, accepting an $80,000 cash down payment, the document says.

  • The couple believed that Flores would arrange an $18,000 loan for them, they told investigators. Instead, Flores forged receipts to fool them and arranged to buy the home for $80,000 in her name using a 3 percent down payment and a falsified loan application, the document states.

For the story, see Ceres woman arrested in real estate swindle.

Unwitting Family Gets The Boot Six Months After Paying $11K Deposit On Home "Purchase" From R/E Agent Now On Trial On Fraud, Forgery Charges

In Kitchener, Ontario, The Record reports:

  • [Natasha] Embro said she and her former husband, David, had been looking for a house, but didn’t have much money for a down payment, when they saw a newspaper advertisement for assumable mortgages requiring no approval.

  • [Real estate agent Steven] Stojadinovich(1) took them to three places and they agreed to buy the Wooley Street house for $189,900, with an $11,000 down payment, without negotiating the price or knowing the interest rate on the mortgage. “We were just excited to be able to get a house,” Embro said.

  • Na├»ve and inexperienced, she said, the couple didn’t use a lawyer and began paying Stojadinovich in cash after leaving their rented quarters and moving into the house with four children under 10 in the fall of 2005.


  • The eviction notice came without warning about six months later, leaving the couple scrambling to load all the belongings they could into a truck while officials secured the house behind them. [...] Embro said they lost their $11,000 “down payment” and all the money they gave Stojadinovich while thinking they were paying a mortgage.


  • The legal owner of the house was really Ryan Dewulf, a young friend of Stojadinovich. He testified he thought it had been sold until he began receiving notices about mortgage arrears. Dewulf was involved in all three of the house deals, but said he trusted Stojadinovich to handle the details. He was eventually sued in relation to the transactions and had to declare bankruptcy. Shown several documents in court, Dewulf said he had never seen them before and that the signatures on them weren’t his.

For the story, see Family evicted after thinking they had purchased house.

(1) Steven Stojadinovich, 49, is on trial after pleading not guilty to fraud and forgery charges related to three house deals in 2005 and 2006.

Trial Begins For Real Estate Broker Accused Of Using Stolen IDs To Obtain 47 Loans For $17.5M+ On 35 Properties; Two Other Suspects On The Lam

In Orange County, California, The Orange County Register reports:

  • A real estate broker is on trial for allegedly conspiring with her boyfriend and his brother to commit $17.5 million in real estate fraud by buying 35 properties using stolen identities and purposely defaulting on loans to get the money.

  • Kathy Chen, 49, Westminster, is charged with 157 felony counts, including conspiracy, grand theft, forgery, recording false documents, identity theft and other crimes. They carry a total maximum of 109 years in state prison.

  • Chen’s boyfriend, Richard Salgado Gonzalez, 60, and his brother, Daniel Gonzalez, 57, face the same charges and sentence as Chen. The brothers are fugitives and have outstanding arrest warrants. Both may currently be living in Puerto Vallarta, Mexico, according to the Orange County District Attorney’s office.

  • Chen worked as a real estate broker and owned several businesses including Chen Financial, Western Escrow, Nationwide Tax Services and SBC Financial.

  • The trio is accused of obtaining 47 fraudulent loans from 13 lenders on 35 properties for more than $17.5 million. Prosecutors say they used the identities of unsuspecting or unqualified victims to get the loans. The victims often spoke little or no English, had no jobs or little income and never intended to live in the homes or repay the loans in their names, according to the D.A. The properties included 13 in Orange County, 16 in San Bernardino County, and 6 in Kern County.

Source: $17.5M real estate fraud trial underway.

Cops Seek Real Estate Agent Accused Of Swiping Cash From Company Trust Account

In Rancho Cucamonga, California, the Inland Valley Daily Bulletin reports:

  • District attorney's fraud investigators are hoping that a woman wanted on suspicion of real estate fraud will turn herself in. Authorities served a search warrant at the Rancho Cucamonga home of Jodi Lee Nazir, 40, [...] said Vance Welch, prosecutor with the San Bernardino County District Attorney's Real Estate Fraud Unit. Three people, including Nazir's son, were in the house at the time, Welch said.


  • The case against Nazir has been building since 2007 when she was first arrested, Welch said. The District Attorney's Office has filed six counts of grand theft and embezzlement against Nazir.

  • One count of the criminal complaint alleges that Nazir fraudulently obtained cash from a trust account for her personal use. She was able to obtain the cash using her position as a real estate agent with the Inland Empire Real Estate Solutions Trust Co. The criminal complaint also alleges grand theft in which Nazir "took, damaged and destroyed property exceeding $200,000."

Source: Real estate fraud suspect eludes authorities.

Woman Accused By Siblings Of Using POA To Swipe Dying Father's Home; DC Court Of Appeals Orders Civil Trial On Allegations Of Forgery

A recent court ruling by the District of Columbia Court of Appeals may provide some insight for those who:

  • find themselves in a situation where an individual uses a power of attorney ("POA") to improperly convey title to real property belonging to another, and
  • seek to void/invalidate or otherwise undo the improper conveyance, and any transfers or mortgaging of the subject property occurring thereafter.
The abbreviated facts of the case, adapted from the ruling, follow:
  • On November 4, 2005, a frail, seriously ill (with pancreatic cancer) Willie Smith purportedly executed a document naming his daugter, Mary Smith, as power of attorney.
  • Eleven days later, asserting power of attorney for her father, Mary Smith purportedly executed a deed transferring title to the home of her dying father to herself for the consideration of ten dollars.
  • The next day, Willie Smith died intestate and was survived by eight children.
  • About one year later, in November, 2006, Mary Smith obtained a loan secured by a deed of trust (ie. mortgage) on her now-deceased father's home for $220,000.
  • Subsequently, after Mary Smith defaulted on the loan, Wells Fargo Bank, which had come to hold the note secured by the deed of trust, foreclosed on the property and eventually purchased it at a foreclosure sale.
  • At some point after the loan to Mary Smith and prior to the foreclosure sale of the home, Daral Smith, who is Mary Smith's brother and one of Willie Smith's surviving children, as well as several other siblings, sued both Mary Smith and Wells Fargo in a quiet title action, alleging that the conveyances to and from Mary Smith (and any conveyances following from them) were invalid because the power-of-attorney instrument did not authorize Mary Smith to convey the property to herself and because, in any event, the instrument was a forgery.
Ruling that there was no genuine issue of material fact to be determined that would require a trial, the lower court granted summary judgment in favor of Wells Fargo, (1) having stricken the affidavits that the brothers & sisters submitted to oppose summary judgment on the forgery issue, and (2) finding that Wells Fargo was a bona fide purchaser for value without notice of any defect in title (a "BFP").
On appeal, the District of Columbia Court of Appeals:
  • affirmed the lower ruling that, given the specific facts of this case, Wells Fargo (the foreclosing lender who wound up holding the loan on the home) was entitled to the protection of the recording statutes as a bona fide purchaser; and
  • reversed the lower court ruling on the forgery issue, saying that "the trial court erred in striking the affidavits that plaintiffs submitted in support of their forgery claim, and likewise erred in granting summary judgment, because the affidavits raised a material factual issue as to whether there was a forgery affecting the chain of title."
The court reviewed the POA, the terms contained therein, the surrounding facts of the case, and the case law precedent that it applied. It observed that the underlying deed to Mary Smith and the deed of trust in favor of her mortgage lender would be void ab initio if the POA was a forgery, or if the POA was valid but Mary Smith exceeded the authority it gave her as attorney-in-fact when she conveyed the property to herself. It concluded that:
  • the POA, assuming it wasn't a forgery, gave Mary Smith apparent authority (as opposed to actual authority) to convey the property as she did, and implied that in the event she did not have actual authority, the title conveyed would, at worst, be considered voidable (as opposed to void ab initio). In that case, Wells Fargo would be entitled to the protection of the recording statutes as a bona fide purchaser, which would preclude its deed of trust from being voided/invalidated by the court, and
  • the POA, assuming it was a forgery, would result in Mary Smith's title and Wells Fargo mortgage being void ab initio, in which case Wells Fargo would not get bona fide purchaser protection and, accordingly, would be left holding the bag with a deed of trust that would be subject to being voided/invalidated by the court.
Accordingly, the D.C. Court of Appeals booted the case back to the lower court to allow for a trial to determine whether or not the POA purportedly given to Mary Smith by her father was a forgery.

For the ruling, see Smith v. Wells Fargo Bank, 991 A.2d 20 (D.C. App., 2010).

Tuesday, April 6, 2010

State Regulator Clips Loan Modification Operator Out Of $2,500 For Unlicensed Activity; Seeks Refunds For Cash Collected From Homeowners

From the Nevada Division of Mortgage Lending:

  • After investigation, the Division [of Mortgage Lending] found that Las Vegas-based Felipe J. Urbina, dba Conceptos Home Retention Team, was providing loan modification and foreclosure consultant services without a license from the Division. As a result, the Division issued a $2,500 fine, plus $438 in administrative costs. The Division is also seeking to require Mr. Urbina to refund payments he collected from homeowners while he conducted the unlicensed activity.

For the press release, see Division of Mortgage Lending Issues Fines and Takes Enforcement Action in Four Matters.

Lenders File Challenges To Providence Foreclosure Mediation Ordinance

In Providence, Rhode Island, The Providence Journal reports:

  • Wells Fargo and Bank of New York Mellon have joined Deutsche Bank in filing a suit against the city over a recently enacted ordinance dealing with foreclosures,(1) according to Deputy City Solicitor Anthony F. Cottone. The two commercial and investment banks filed separate suits soon after Deutsche Bank filed its suit in January, he said.

  • Like Deutsche Bank, both banks argue that the city’s foreclosure-mediation ordinance, proposed by Mayor David N. Cicilline and City Councilmen Kevin Jackson and Luis Aponte, violates state law, according to Cottone.

For more, see Banks sue over foreclosure ordinance.

(1) According to the story, the ordinance, which has been in effect since September, requires lenders and homeowners to attempt to meet with an independent, third-party housing counselor before completing a foreclosure. Any lender who fails to make a good faith attempt at mediation will not be able to file a deed of ownership with the city Recorder of Deeds, a step necessary to complete the foreclosure process, and are also assessed a $2,000 fine, the story states. According to an earlier story (see Council OKs fine for disregarding foreclosure law), the city has found that failure to comply with the ordinance can lead to breaking the chain of title, which affects the value of the property and creates problems for the purchaser (ie. title to foreclosed property will be muddled up, which will affect its value, and the ability to obtain financing and title insurance for future buyers).

Reportedly, Deutsche Bank argues inits lawsuit that the city has no legal right to impose a different set of requirements for completing a foreclosure from other cities and towns in the state.

Missouri AG Obtains Money Judgments Against Two Loan Modification Outfits In Separate Cases; Firms Allegedly Failed To Provide Promised Services

From the Office of the Missouri Attorney General:

  • Attorney General Chris Koster said [] his office has obtained judgments against two foreclosure rescue companies who allegedly took money from distraught homeowners and failed to provide promised services.


  • Koster said his office reached a settlement with Gateway Mortgage Modification, owned by Richard R. Reichert, Jr. Gateway was alleged to have unlawfully charged up-front fees for foreclosure and mortgage modification services and to have falsely promised consumers that attorneys would negotiate loan modifications on their homes. Koster said the court ordered Gateway and Reichert to pay $65,000 restitution.(1)


  • Koster said First Universal Lending, LLC, based in Palm Beach Gardens, Florida, marketed its services to homeowners who were having difficulty paying their mortgages or facing foreclosure, promising them lower house payments or lower interest rates. Company representatives told some clients to stop making mortgage payments while the modification process was proceeding, which harms consumers by injuring their credit rating and increasing likelihood of foreclosure. The business also illegally required homeowners to pay up-front fees before they would provide any services. Koster said the court ordered First Universal to pay more than $51,000 restitution and $23,000 civil penalties.(2)

For the Missouri AG press release, see Attorney General Koster obtains judgments against two foreclosure rescue companies (Court orders $116,000 in restitution).

(1) In addition, the court permanently prohibited the company from charging up-front fees for services and from falsely representing to consumers that attorneys would negotiate modifications, the press release states. The court also permanently prohibited Gateway and Reichert from violating the state's merchandising practices and foreclosure consultant laws and ordered them to pay attorney fees and costs. Koster said that if the company fails to pay restitution as ordered, an additional $10,000 penalty will be imposed.

(2) The company also is prohibited from charging up-front fees; advising homeowners to stop making mortgage payments; and promising loan modifications they fail to follow through with, according to the press release.

NYC To Offer Free Legal Support In Mandatory Settlement Conferences For Homeowners In Foreclosure

In New York City, Crain's New York Business reports:

  • The city announced [] that it will be offering free legal support for New Yorkers at risk of losing their homes to foreclosure. The new program will be offered through NYC Service, which was launched last year by Mayor Michael Bloomberg to provide volunteer services to different sectors across the city suffering from the recession. The program will train and dispatch 300 volunteer attorneys to expand the legal services already provided by nonprofits to homeowners facing foreclosure.


  • The program, dubbed NYC Service Legal Outreach, will provide homeowners legal assistance during the mandatory settlement conference, which is when the homeowner and bank meet to negotiate alternatives to a foreclosure. Under a recently passed New York state law, these conferences are required before foreclosures can proceed.

  • The city hopes to recruit 300 volunteers over the next three months. One hundred of those volunteers will be stationed at courthouses to screen homeowners, while the other volunteers will be matched with individual homeowners and represent them through the foreclosure settlement process.

  • Volunteers do not need real estate law expertise because they will be trained and supervised by Empire Justice Center, Legal Services NYC, The Legal Aid Society and the City Bar Justice Center. The Center for NYC Neighborhoods, a non profit created three years ago to assist distressed homeowners, will direct homeowners to the program.(1)

For more, see City to offer legal aid to those facing foreclosure (Mayor launches program to train and dispatch 300 volunteer attorneys; vows “no family facing the loss of their home should be without representation").

(1) For a Center for NYC Neighborhoods report on how the court-based “mandatory settlement conference” process in New York foreclosure actions has yet to live up to expectations, see LOCKED OUT: Little Relief for NYC Homeowners in the Foreclosure Settlement Process ("Of the nearly 800 settlement conferences reviewed during this study, only 3% resulted in any kind of settlement").

Judge Addresses Attorney BS When Imposing Sanctions Against Lawyer For Role In Attempt To Revoke Valid Loan Modification Agreement

In Oakland, California, U.S. Bankruptcy Judge Randall J. Newsome recently found himself addressing the conduct of an attorney representing IndyMac Bank (OneWest Bank) for her role in attempting to improperly scrap a valid loan modification agreement between the bank and a homeowner facing foreclosure, and which resulted in an unappreciated waste of the judge's time.

  • [W]hen attorneys come before the court and play "fast and loose" with the truth, or rely on the bureaucratic obfuscations of their clients to dodge commitments they have made, this court is required to act to protect the integrity of its processes. If the court cannot rely on and trust the authority and words of the lawyers that appear before it, it cannot effectively handle the increasingly heavy volume of work confronting it, thus risking systemic collapse. That trust has been breached in this adversary proceeding, and the remedy of judicial estoppel perfectly suits the facts presented.

  • Accordingly, the defendants are hereby adjudged to have accepted the July 1, 2009 [loan modification] agreement signed by the [homeowner ...], and are fully bound by the terms thereof. The terms of that agreement supercede and replace any and all terms that are inconsistent therewith in any and all notes and deeds of trust previously executed by the parties, their successors and assigns.

  • As for the issue of sanctions, the defendants' failure to appear at status conferences and respond in timely fashion to court orders alone amply support a finding of bad faith in the conduct of this litigation. The total indifference shown towards the court's processes, the waste of judicial resources that resulted, and the misleading statements made to both the court and plaintiffs' counsel, constituted willful misconduct. In re DeVille, 361 F.3d 539 (9th 662 Cir.2004); see also U.S. v. McCall, 235 F.3d 1211, 1217 (10th Cir.2000).

For the ruling, see In re Clawson, 414 B.R. 655 (Bankr. N.D. CA, Oakland Div. 2009).

Thanks to Deontos .is for the heads-up on the court ruling.

Monday, April 5, 2010

The Big Short: Inside the Doomsday Machine

Sunday night on C-Span's Q&A program, author Michael Lewis talks about his new book, "The Big Short: Inside the Doomsday Machine," which tells the story of several key players in the subprime mortgage crisis. The book follows those who understood what was happening to the market and were able to greatly profit in the transactions.

Go here to read the program transcript, and here to watch program.

Arizona Bankruptcy Court Halts Foreclosure Action As Lender Lacked Standing To Prosecute, Not A Party In Interest

A recent ruling by a U.S. Bankruptcy Court in Tucson, Arizona refused to allow a foreclosing lender's request to continue with a foreclosure action on the grounds that it failed to establish that it was the real party in interest and lacked standing to prosecute the matter.(1)

For the court's ruling, see In re: Barry Weisband, Ch. 13, Case No. 4:09-bk-05175-EWH (Bankr. D. Ariz., Tucson Div., 3/29/2010).

(1) The basis for the court's denial of the foreclosing lender's ["GMAC"] request addressed the following three points:

  • GMAC's failure to demonstrated that it was a holder of the note under under §47-3301 of the Arizona statute ("while it was in possession of the Note at the evidentiary hearing, it failed to demonstrate that the Note is properly payable to GMAC. A special endorsement to GMAC was admitted into evidence with the Note. However, for the Endorsement to constitute part of the Note, it must be on "a paper affixed to the instrument." A.R.S. § 47-3204; see also In re Nash, 49 B.R. 254, 261 (Bankr. D. Ariz. 1985). Here, the evidence did not demonstrate that the Endorsement was affixed to the Note. The Endorsement is on a separate sheet of paper; there was no evidence that it was stapled or otherwise attached to the rest of the Note. Furthermore, when GMAC filed its proof of claim, the Endorsement was not included, which is a further indication that the allonge containing the Endorsement was not affixed to the Note.),

  • The MERS assignment of the deed of trust (ie. mortgage) did not provide GMAC with standing (MERS was named in the deed of trust as a beneficiary, solely as the "nominee" of GreenPoint Mortgage Funding, Inc. (the original lender), holding only "legal title" to the interests granted to the original lender funding the loan secured by the deed of trust. According to the ruling, "a number of cases have held that such language confers no economic benefit on MERS"),

  • GMAC was unable to establish that it was the servicer of the promissory note (the evidence in this case did not demonstrate that the promissory note and deed of trust were properly transferred to the "special purpose" securitization trust ("Trust") holding the pool of loans, and, "without that evidence, there is no demonstration that GMAC is the servicer of the Note." In light of this, the court stated that "it is immaterial that GMAC is the servicer for the Trust.").

Central Florida Bankruptcy Court Halts Foreclosure Action As Lender Lacked Standing To Prosecute, Not A Party In Interest

A recent ruling by a U.S. Bankruptcy Court in Orlando, Florida refused to allow a foreclosing lender's request to continue with a foreclosure action on the grounds that it failed to establish that it was the real party in interest and lacked standing to prosecute the matter.(1)

For the court's ruling, see In re: Jorge Canellas, Ch. 7, Case No. 6:09-bk-12240-ABB (Bankr. M.D. Fla., Orlando Div., 2/9/2010).

(1) The basis for the court's denial of the foreclosing lender's ("Movant") motion follows:

  • Movant’s Motion, however, is due to be denied because Movant has failed to establish it has standing to seek stay relief. A motion for relief from the automatic stay must be prosecuted in the name of the real party in interest. 11 U.S.C. § 362(d); FED. R. 8 CIV. P. 17(a)(1); FED. R. BANKR. P. 7017. “The real party in interest in relief from stay is whoever is entitled to enforce the obligation sought to be enforced.” In re Jacobson, 402 B.R. 359, 366 (Bankr. W.D. Wash. 2009). Only the holder of the Note and Mortgage, or its authorized agent, has standing to bring the Motion. Id. at 367.

  • Movant asserts in its Motion it is the “owner and holder” of the Note and Mortgage, but has presented no evidence substantiating that assertion. The copies of the Note presented do not contain an endorsement evidencing an assignment of the Note. The Affidavit executed by Movant’s loan servicer makes no mention of the location of the original Note or who has possession of it. Movant proffered no business records or testimony tracing ownership of the Note and establishing Movant is the present holder of the Note.

  • The veracity of the Allonge and Assignment is questionable. The dates contained in the Allonge are chronologically impossible. The Allonge is dated August 1, 2006, but references a trust that came into existence on October 31, 2006. The signature of Jennifer Henninger is undated and not notarized. The Allonge was not referenced in or filed with Movant’s Motion in October 2009, but was presented three months later as an attachment to its post-hearing brief.

  • The Assignment was executed and recorded post-petition approximately two weeks prior to Movant’s filing of the Motion for Relief. It was prepared by Jennifer Henninger, who executed the Allonge, and was recorded by the law firm that is representing Movant in this proceeding. Jack Jacob’s execution of the Assignment was notarized by Jennifer Henninger and witnessed by Louis Zaffino, the affiant of Movant’s Affidavit. It appears the Allonge and the Assignment were created post-petition for the purpose of the relief from stay proceeding. Movant did not establish Jennifer Henninger and Jack Jacob had authority to execute the Allonge and Assignment.

  • Movant’s submissions are insufficient to establish it is the owner and holder of the Note and Mortgage or is authorized to act for whoever holds these documents. In re Relka, No. 09-20806, 2009 WL 5149262, at *5 (Bankr. D. Wyo. Dec. 22, 2009) (granting stay relief where movant established possession of note through testimony of witness who personally retrieved note from movant’s vault); In re Jacobson, 402 B.R. at 370 (denying movant’s stay relief motion due to movant’s failure to establish it was holder of note); In re Hayes, 393 B.R. 259, 270 (Bankr. D. Mass. 2008) (denying movant’s stay relief motion and sustaining debtor’s claim objection due to movant’s failure to establish it was holder of note). Movant has not established it has standing to bring the Motion and the Motion is due to be denied.

WSJ On Feds' Probe Into LPS' "Docx" Sub; Allegations Of Creation Of Bogus Paperwork & Dubious Notarizations In Foreclosure Actions Under The Spotlight

The Wall Street Journal reports:

  • A subsidiary of a company that is a top provider of the documentation used by banks in the foreclosure process is under investigation by federal prosecutors. The prosecutors are "reviewing the business processes" of the subsidiary of Lender Processing Services Inc., based in Jacksonville, Fla., according to the company's annual securities filing released in February. People familiar with the matter say the probe is criminal in nature. Michelle Kersch, an LPS spokeswoman, said the subsidiary being investigated is Docx LLC. Docx processes and sometimes produces documents needed by banks to prove they own the mortgages.


  • The case follows on the dismissal of numerous foreclosure cases in which judges across the U.S. have found that the materials banks had submitted to support their claims were wrong. Faulty bank paperwork has been an issue in foreclosure proceedings since the housing crisis took hold a few years ago. It is often difficult to pin down who the real owner of a mortgage is, thanks to the complexity of the mortgage market.


  • Diana Adams, a U.S. government lawyer who monitors bankruptcy courts, argued in a brief filed earlier this year in [a] case that an LPS employee signed a document that wrongly said J.P. Morgan Chase & Co. had owned [the subject] loan. Documents related to the loan were "patently false or misleading," according to Ms. Adams's court papers. J.P. Morgan Chase, which has withdrawn its request to foreclose, declined to comment.


  • Some lawyers representing homeowners have claimed that banks routinely file erroneous paperwork showing they have a right to foreclose when they don't. Firms that process the paperwork are either "producing so many documents per day that nobody is reviewing anything, even to make sure they have the names right, or you've got some massive software problem," said O. Max Gardner, a consumer-bankruptcy attorney in Shelby N.C., who has defended clients against foreclosure actions.


  • LPS has acknowledged problems in its paperwork. In its annual securities filing, in which it disclosed the federal probe, the company said it had found "an error" in how Docx handled notarization of some documents. Docx also has processed documents used in courts that incorrectly claimed an entity called "Bogus Assignee" was the owner of the loan, according to documents reviewed by The Wall Street Journal.(1)(2)

For the story, see U.S. Probes Foreclosure-Data Provider (Lender Processing Services Unit Draws Inquiry Over the Steps That Led to Faulty Bank Paperwork).

(1) For examples of "Bogus Assignee" loan assignments, see

(2) For more in connection with the alleged manufacturing of phony documents in foreclosure actions, and dubious notarizations in connection therewith, see:

Fannie-Related Mortgage Foreclosures No Longer To Be Carried Out In The Name Of MERS reports:

  • In new policy guidelines released this week, Fannie Mae told servicers that they can no longer name MERS [Mortgage Electronic Registration Systems] as the plaintiff in any foreclosure action, whether judicial or non-judicial, on a mortgage loan owned or securitized by the GSE.


  • Fannie Mae stated in its new servicing guidelines that when MERS is listed as the mortgagee of record, the servicer must prepare a mortgage assignment transferring the position from MERS back to the servicer, and then bring the foreclosure in its own name.

For more, see Fannie Bars Foreclosure Actions in the Name of MERS.

Go here for Fannie Mae's new servicing guidelines.

NJ Feds Squeeze Guilty Plea From Brooklyn-Based Foreclosure Rescue Operator; Admits To Role In Peddling Sale Leaseback, Equity Stripping Scams

From the Office of the U.S. Attorney (Newark, New Jersey):

  • A Brooklyn man pleaded guilty [] to conspiracy to commit 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, U.S. Attorney Paul J. Fishman announced. Garth Celestine, 44, of Brooklyn, New York – formerly an owner of Home Savers Consulting Corp., which was located in Brooklyn and Freeport, New York – pleaded guilty [] to the conspiracy charge before U.S. District Judge Dennis M. Cavanaugh.


  • On August 5, 2009, Celestine was arrested pursuant to a Complaint along with former Home Savers co-owner Phil A. Simon. According to the Information to which Celestine pleaded guilty, other documents filed in this case, and statements made during Celestine’s guilty plea proceeding:

  • Celestine and Simon owned and operated Home Savers, which held itself out as a foreclosure rescue company, at 946 Fulton Street, Brooklyn, New York, and 350 North Main Street, Freeport, New York. Celestine and Simon allegedly conspired with each other and others to defraud both homeowners facing foreclosure and mortgage lenders by making materially false representations and promises.(1)


  • Celestine admitted that as a result of their actions, he and Simon fraudulently obtained more than $1 million and caused the mortgage lenders to fund dozens of fraudulent loans worth more than $10 million.

Reportedly, Simon has pleaded not guilty, and a criminal complaint against him is still pending, said Rebekah Carmichael, a spokeswoman for the U.S. Attorney’s Office. An investigation into the scheme continues, Carmichael reportedly said.

U.S. Attorney Fishman credited Federal investigators with the FBI, and Postal Inspectors of the U.S. Postal Inspection Service for their investigation leading to the guilty plea, and thanked Brooklyn District Attorney Charles J. Hynes for the assistance and cooperation that was provided by his Office.

For the U.S. Attorney press release, see Former Owner of Home Savers Consulting Corp. Pleads Guilty to Mortgage Foreclose Rescue Scheme.

See also, The Record: Brooklyn man pleads guilty to foreclosure scam in Bergenfield, Paterson.

Go here for earlier posts on the now-defunct New York City-area foreclosure rescue operator, Home Savers Consulting Corp.

(1) According to the press release, Celestine admitted that, doing business as Home Savers, he and his partner Simon advertised to homeowners and promised to help them avoid foreclosure, keep their homes, and repair their damaged credit. Celestine told the homeowners that they could avoid foreclosure by signing contracts of sale and transferring title to their homes to individuals who would act as “straw buyers” of the properties. Celestine promised the homeowners that after they transferred their title to these straw buyers, Home Savers would improve their credit ratings, help them obtain more favorable mortgages on their homes, and ultimately direct the straw buyers to transfer the title to their homes back to the homeowners within six months to one year. Celestine and Simon typically told the homeowners that the equity withdrawn from their properties would be kept in a separate account and used to pay the mortgages and expenses on their homes.

NY Appeals Court Dismisses Lender's Lawsuit; Says Bank Failed To Strictly Comply With State Anti-F'closure Rescue Ripoff Law When Filing Legal Action

In Brooklyn, New York, The New York Law Journal reports:

  • Failure to give proper notice to a homeowner under New York's foreclosure fraud law is a defense that can be raised at any time, a Brooklyn appeals court has ruled in a decision of first impression at the state appellate level.

  • In dismissing a foreclosure suit against homeowner Alan Silver, a panel of the Appellate Division, 2nd Department, held that the lender seeking to foreclose had the burden of showing strict compliance with the state's Home Equity Theft Prevention Act.

  • The act, codified in Real Property Law §265-a, requires that a homeowner be served with a foreclosure notice on a separate, colored page with a "bold, twenty-point type" title and "bold, fourteen-point type" in addition to a summons and complaint. Enacted in 2007, the law aims to curb foreclosure-related schemes that encourage homeowners in financial distress to sign over their houses to buyers who promise to pay off the debt but disappear once they have the title.

  • In reversing Supreme Court Justice Karen V. Murphy in Nassau County, N.Y., a four-judge appeals panel in First National Bank of Chicago v. Silver, 18539/07, disagreed with the bank's argument that complying with the statutory notice requirement was a "red herring." "We hold that this is a condition precedent which is the plaintiff's burden to meet, and which does not have to be raised as an affirmative defense in the answer," Justice Anita R. Florio wrote for the panel. Justices Mark C. Dillon, Ruth C. Balkin and John M. Leventhal joined the opinion.


  • In reversing the lower court, Florio observed that lower courts had consistently interpreted the notice provision "as a mandatory condition" that required the foreclosing party to show "compliance therewith and, if it fails to demonstrate such compliance, the foreclosure action will be dismissed."(1)

For more, see N.Y. Court Places Burden on Bank of Showing Notice of Foreclosure.

For the court ruling, see First Natl. Bank of Chicago v Silver, 2010 NY Slip Op 02511 (NY App. Div. 2nd Dept., March 23, 2010).

Go here for the standard, statutorily-required foreclosure notice required by New York's Home Equity Theft Prevention Act that the lender failed to serve on the homeowner when initiating this foreclosure action and which proved to be its undoing.

(1) Reportedly, Jeffrey D. Buss of Smith, Buss & Jacobs in Yonkers, N.Y., represented Silver and his wife pro bono. In an interview, Buss said that "it was a real pleasure" to inform his clients, a couple in their 80s, that the case had been dismissed, the story states. Buss said the bank could re-file the case but would have difficulty proving standing, according to the story.

Sunday, April 4, 2010

Arizona Bona Fide Purchaser, Possession, Duty To Inquire

The following compilation of cases is an extended version of the list of Arizona contained in the February 1, 2009 post, Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire, that address the issue of the effect of possession by an occupant of real property by one other than the seller/vendor on a prospective purchaser's status as a bona fide purchaser.

As stated in my February 1, 2009 post, these cases are presented here to remind the reader of the importance of giving this issue the serious consideration it deserves when attempting to undo/unwind/void an abusive real estate transaction (ie. foreclosure rescue sale leasebacks, fraudulent inducement in the execution of a deed, forgeries, other real estate swindles) where, after scamming or otherwise abusively relieving an unwitting homeowner of his/her title, the scammer either sells the property to an unwitting third party, or encumbers the property with a loan from an unwitting mortgage lender, neither of whom participated in the abusive transaction with the homeowner, nor having any actual knowledge thereof. Voiding the deeds and mortgages in these cases (in situations where the instruments are voidable, as opposed to being absolutely void - "void ab initio") will turn on whether the subsequent third party purchaser or encumbrancer, despite lacking in actual knowledge of the fraud or other abusive transaction, can otherwise be charged with notice of the fraud, thereby making bona fide purchaser/encumbrancer status unavailable to them and, consequently, subjecting the deeds or mortgages to being voided/rescinded/set aside.

(In a related post that addresses the distinction between deeds that are absolutely void (void ab initio), and deeds that are merely voidable, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable?)

While certainly not purporting to be an exhaustive list of cases dealing with the issue of possession and the duty to inquire when attempting to establish (or attack) one's status as a bona fide purchaser, the following compilation of case law citations specifically address this issue.

One caveat: Any serious consideration of the bona fide purchaser doctrine should, first and foremost, begin with a reading of the state recording statutes, as they are currently constituted. Since there are over 50 jurisdictions in the U.S., each with their own recording statute, I certainly can't address them here. For the Arizona statute, see Ariz. Rev. Stat. §§ 33-411 & 33-412.

But after reading your state's recording statutes, you may want to consider how these cases, if at all, fit into making the legal analysis necessary when attempting to undo/unwind/void an abusive real estate transaction by attacking the bona fide purchaser status of a subsequent purchaser or encumbrancer/mortgage lender. Keep in mind that, even in the event that the Arizona state legislature has passed laws subsequent to these court rulings that either modifies or renders them obsolete in Arizona, the persuasiveness of the logic that underlies them may still be of value to those involved in litigation outside of Arizona (don't lose sight of the fact that the doctrine of bona fide purchase is not a creature of state statute, but one of English common law, which is the starting point for this doctrine, not only as generally applied in Arizona, but as generally applied in Arizona sister states as well).


Arizona Supreme Court

Bianconi v. Smith, 3 Ariz. 320; 28 P. 880 (1892):

  • From the complaint it appears that the fraud, if any, which was practiced upon appellant, related solely to the title of the property sold and conveyed to him by appellee. It is not alleged that the false representation made by appellee was to any matter within his peculiar knowledge or possession. On the contrary, the allegation of the complaint is that such title as appellee had was derived from a tax-deed to the property, and that at the time of the conveyance to appellant one White was in possession of the property, claiming it as his own. It is to be presumed that this tax-deed was of record at the time of purchase, and that any fact or facts which void its effect as a conveyance could have been ascertained by appellant by an inspection of the record of the proceedings which preceded its execution by the proper officer.

  • From anything which appears to the contrary in the complaint, appellant might also have easily ascertained by simple inquiry that appellee was not in the possession of the property, and thus have been put upon his guard.

  • Common, ordinary business prudence would have suggested some investigation as to the source of appellee's title, and some inquiry as to who was in possession, before purchasing the property; and appellant's neglect of these indicated either gross carelessness or a degree of credulity not usually exhibited by men of ordinary experience.

  • Had some act of deceit or fraudulent concealment been alleged, other than the mere assertion of appellee that he had a good and perfect title to the property, which induced appellant to forego an investigation as to the title and the possession of the property, the case might have presented a different aspect, and its merits be more apparent. Not only was gross carelessness and lack of prudence shown by appellant in failing to make any investigation into appellee's title and his right of possession, but also in his failure to protect himself by a deed containing warranty of title. The facilities for obtaining information relative to this title and right of possession were open to appellant, from anything which appears to the contrary from the complaint; and, besides, he could have demanded and required such a conveyance as would have protected him from a failure of title. Will, then, relief, upon the ground of false and fraudulent representation, be granted a vendee, from the consequences of his folly in trusting implicitly in the naked assertions of his vendor that he has a good title, and in taking without investigation a conveyance without warranty? We think not. To use the language of Chancellor Kent in Clark v. Baird, 7 Barb. 66:

    "The common law affords to every one reasonable protection against fraud in dealing; but it does not go to the romantic length of giving indemnity against the consequences of indolence and folly, or careless indifference to the ordinary and accessible means of information."

  • From an examination of the authorities, we deduce the following as the true rule in such cases: A vendee may maintain an action for damages against his vendor, upon a sale of real property, upon the ground of false and fraudulent representations, when they relate to some matter collateral to the title and the right of possession, or relate to some matter connected with the title within the peculiar knowledge of the vendor, and not otherwise. Andrus v. Smelting Co., 130 U.S. 645, 9 Sup. Ct. Rep. 645; Peabody v. Phelps, 9 Cal. 213; 2 Kent's Commentaries, 285, 484. For the reasons stated, the judgment of the court below in sustaining the demurrer and dismissing the action is affirmed.

Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574; 296 P. 260 (1931):

  • If the circumstances were such that notice could be imputed, it is sufficient, and the particular fact relied on as having this effect is that appellee was at the time in actual, open, notorious and undisputed possession of the premises and had been since 1911.

  • Practically all the authorities give assent to the proposition that the purchaser or mortgagee of land in possession of an occupant other than the holder of the record title is compelled to inquire of the occupant by what title he holds possession, or he will be held to have taken subject to whatever rights a proper inquiry would disclose the occupant had therein.

  • "Actual possession of land," says 46 C.J. 547, "is such notice to all the world or to anyone having knowledge of such possession as will put upon inquiry those acquiring title or a lien on the land to ascertain the nature of the right that the occupant has in the premises." In Rowe v. Ream, 105 Pa. 543, the court quotes with approval this language:

    "The possession of land is notice to the world of every title under which the occupant claims it, unless he has put a title on record inconsistent with his possession. When, as in this case, an individual is in possession under no recorded title, his possession is notice of every title which he can set up to protect himself, sufficient at least to put a purchaser on inquiry."

  • In Oliver v. McWhirter, 112 S.C. 555, 100 S.E. 533, 536, is found this language:

    "One in possession under an equitable title has nothing that he can record; and possession, open and unconcealed, is the only mode by which he can give notice to the world of his rights; and when this notice is given, in the only way in which it could be given, he should be protected."

  • In Carolina Portland Cement Co. v. Roper, 68 Fla. 299, 67 South. 115, 116, the court says:

    "Actual possession of land is such notice to all the world or to anyone having knowledge of such possession as will put upon inquiry those acquiring title to or a lien on the land to ascertain the nature of the rights the occupant really has in the premises. One who acquires title to or a judgment lien on land with constructive notice of the actual possession and occupancy of the land by one other than the vendor or judgment debtor takes subject to such rights as proper inquiry will disclose the occupant of the land actually has therein. Possession, in order to be constructive notice of a claim of title to the land occupied, must be open, visible, and exclusive; and such occupancy may be shown by any use of the land that indicates an intention to appropriate it for the benefit of the possessor."

  • The following are to the same effect: Petrain v. Kiernan, 23 Or. 455, 32 Pac. 158; Follette v. Pacific Light & Power Corp., 189 Cal. 193, 23 A.L.R. 965, 208 Pac. 295; McVey v. McQuality, 97 Ill. 93; Moore v. Oates, 143 Ark. 328, 220 S.W. 657; Niles v. Cooper, 98 Minn. 39, 13 L.R.A. (N.S.) 49, 107 N.W. 744; Garbutt v. Mayo, 128 Ga. 269, 13 L.R.A. (N.S.) 58, 57 S.E. 495; Ross v. Hendrix, 110 N.C. 403, 15 S.E. 4; Wood v. Price, 79 N.J. Eq. 620, Ann. Cas. 1913A 1210, 38 L.R.A. (N.S.) 772, 81 Atl. 893.

  • Appellee contends that it conclusively appears from the statement of Lorenzo Villa to appellant, when the note and mortgage were executed, that it had both actual and constructive notice of appellee's possession and occupancy of the premises. Whether this be true or not is immaterial because it was the duty of appellant to ascertain who was in possession of the property before purchasing an interest therein. As said by the court in Sheerer v. Cuddy, 85 Cal. 270, 24 Pac. 713, 714:

    "Whether the respondent knew of the appellant's possession or not is immaterial. It was his duty to know who was in possession of the property before making the purchase, and his purchase without ascertaining the fact must be regarded as the strongest evidence of bad faith on his part. The burden of making the proper inquiry was cast upon him by the mere fact of actual possession on the part of the appellant. If it were allowed that, by failing to acquaint himself with the fact of possession on the part of another than the vendor, the vendee could avoid the effect of the rule above stated, he could purposely avoid any inquiry on the subject, and thereby evade the rule and its consequences entirely."

Phoenix Title & Trust Co. v. Smith, 101 Ariz. 101; 416 P.2d 425 (1966):

  • In Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574, 296 P. 260, the court said:

    "* * * Practically all the authorities give assent to the proposition that the purchaser or mortgagee of land in possession of an occupant other than the holder of the record title is compelled to inquire of the occupant by what title he holds possession, or he will be held to have taken subject to whatever rights a proper inquiry would disclose the occupant had therein. * * *" 37 Ariz. at 577, 296 P. at 261.

Miler v. Condon, No. 4866, 66 Ariz. 34; 182 P.2d 105 (1947):

  • Upon purchasing this property the defendants had notice, or by the occupancy of plaintiffs were put upon notice, of the claims of plaintiffs. Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574, 296 P. 260, and cases cited.

Davis v. Kleindienst, 64 Ariz. 251; 169 P.2d 78 (1946):

  • We call attention to the case of Adams Oil & Gas Co. v. Hudson, 55 Okl. 386, 155 P. 220, 222. In that case the defendant, a subsequent purchaser, claimed to be a bona fide purchaser. The deed recited a consideration of $ 10,000. It offered no other evidence except the recital in the deed as to the consideration paid. The court held this to be insufficient. We quote from the opinion:

    "This being true, what constitutes a bona fide purchase? Three things must exist: (a) A purchase in good faith; (b) for value; and (c) without notice. Where a subsequent purchaser establishes a purchase for value, good faith and lack of notice are presumed, and the burden shifts to the party attacking the transfer to show bad faith and notice, actual or constructive. The recital in a deed that the consideration has been paid is prima facie evidence as between the parties and those claiming under them, but as to strangers and persons claiming in opposition the recital is no evidence as to the consideration paid. To them it is mere hearsay, and is no evidence of a purchase for value. (Citing cases). There is no proof in the record, as against the plaintiffs, even tending to show that the defendant company purchased for value. In the absence of such proof, good faith cannot be presumed. Indeed, the defendant company might be termed a bad-faith purchaser. At least it cannot be said to be a bona fide purchaser, and is therefore not entitled to the benefits thereof. The defendant company and its grantor, Adams, knew what consideration, if any, actually passed for this property. Adams and the officers of the defendant company, and some of its directors, testified as witnesses for the defendant company, but it did not see proper to advise the court what consideration, if any was actually paid. If, as a matter of fact, any consideration was paid, the nature, amount of it, and the facts with reference thereto were within the breasts of Adams and the officers and directors of the defendant company. It was the company's duty to advise the court fully with reference to these matters. This it failed to do, and, in the absence of a showing that it is a purchaser for value, it has no right to invoke the aid of a court of equity. Its hands are not clean. A bona fide purchaser is favored by the courts, but until one brings himself within the rule of a bona fide purchaser a court of equity will not extend its aid. We therefore conclude that the defendant company was not a bona fide purchaser. * * *"


  • The law seems to be settled that a person who fails to exercise due diligence to avail himself of information which is within his reach is not a bona fide purchaser. University of Richmond v. Stone, 148 Va. 686, 139 S.E. 257. Thus a purchaser who has brought to his attention circumstances which should have put him on inquiry which if pursued with due diligence would have led to knowledge of an adverse interest in the property, is not a bona fide purchaser. Shephard v. Van Doren, 40 N.M. 380, 60 P.2d 635.

Condon v. Arizona Hous. Corp., Civil No. 4703, 63 Ariz. 125; 160 P.2d 342 (1945):

  • Since the individual defendants acquired their interest in the property after the plaintiffs took possession, whatever interest they may have is subordinate to plaintiffs' rights. Their actual possession was notice to the individual defendants. They have no greater nor better rights than the corporate defendant. This is settled by the decision of this court in Roy & Titcomb, Inc., v. Villa, 37 Ariz. 574, 296 Pac. 260, 261, wherein it was said:

    ". . . Practically all the authorities give assent to the proposition that the purchaser or mortgagee of land in possession of an occupant other than the holder of the record title is compelled to inquire of the occupant by what title he holds possession, or he will be held to have taken subject to whatever rights a proper inquiry would disclose the occupant had therein. . . ."

Maricopa Utilities Co. v. Cline, 60 Ariz. 209, 134 P.2d 156 (1943):

  • The rule is declared in the following:

    "Notice of facts and circumstances which would put a man of ordinary prudence and intelligence on inquiry is… equivalent to knowledge of all of the facts a reasonably diligent inquiry would disclose." Schneider v. Henley, 61 Cal. App. 758, 215 Pac. 1036, 1038.

Arizona Court of Appeals

Keck v. Brookfield, 409 P.2d 583 (1965):

  • A.R.S. § 33-412 provides:

    "A. All bargains, sales and other conveyances whatever of lands, tenements and hereditaments, whether made for passing an estate of freehold or inheritance or an estate for a term of years, and deeds of settlement upon marriage, whether of land, money or other personal property, and deeds of trust and mortgages of whatever kind, shall be void as to creditors and subsequent purchasers for valuable consideration without notice, unless they are acknowledged and recorded in the office of the county recorder as required by law, or where record is not required, deposited and filed with the recorder.

    "B. Such unrecorded instruments, as between the parties and their heirs, and as to all subsequent purchasers with notice thereof, or without valuable consideration, shall be valid and binding."


  • A.R.S. § 33-412, subsec. B as hereinabove set forth provides that unrecorded instruments conveying an estate for a term of years is binding upon subsequent purchasers with notice thereof. The trial court held, and we believe properly, that appellants were purchasers with notice and therefore bound by the equitable lease. It is undisputed that the appellees were in open, notorious and exclusive possession of the subject premises. The appellants, however, according to Mr. Keck's testimony at the trial never made inquiry of the appellees as to the extent of their possessory interest. Mr. Keck, when examined by appellees' counsel, testified:

    "Q. Did you ever go on the premises when you bought the property or before you bought the property?
    A. I did.
    Q. You inspected the premises?
    A. I have.
    Q. Did you ever notice the sign 'Brookfield's Tucson Mattress Factory' on the large barn?
    A. I did.
    Q. You weren't curious as to by what right they were in that barn, Mr. Brookfield and Mr. Jenkins?
    A. By what right?
    Q. Yes.
    A. No.
    Q. You knew that was part of the property that you were purchasing?
    A. Yes."

  • Mr. Keck further testified that his predecessor in interest told him that there was a lease which was to end January 1, 1959, and that he felt it unnecessary to inquire further as to the tenants' right of possession. We are of the opinion that the appellants were derelict in their duty.

  • A purchaser of land in possession of one other than the holder of the record title is compelled to inquire of the possessor by what title he holds possession, or he will be held to have taken subject to whatever rights a proper inquiry would disclose that the possessor had. Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574, 577, 296 P. 260 (1931).

  • In Frame v. Frame, 32 W.Va. 463, 9 S.E. 901, 907, 5 L.R.A. 323 (1889), the court said:

    "The earth has been described as that universal manuscript, open to the eyes of all. When, therefore, a man proposes to buy or deal with realty, his first duty is to read this public manuscript; that is, to look and see who is there upon it and what are his rights there." The law does not permit a person to close his eyes to facts that he cannot otherwise fail to see for the purpose of remaining in ignorance of them and thus acquire an unjust advantage. See Rogers v. Dumas, 166 Kan. 519, 203 P.2d 165, 169 (1949).

  • Appellants claim that they had no duty to inquire since there appeared of record an assignment of rents and profits executed by the Stegmeiers which referred to a lease between the Stegmeiers and the Brookfields and Jenkins dated December 1, 1951. This recorded assignment, however, does not relieve appellants of the duty to ascertain appellees' interest. Even if the terms of the 1951 lease were described in the recorded assignment, which they were not, the rule that, where one is in possession under a known right of possession, such possession is referable to such right and a purchaser is not required to inquire further, is inapplicable to lessees who rent for short periods of time and often renew their leases. See Golden v. Bilbo, 192 Iowa 319, 184 N.W. 643, 645 (1921).

  • Appellants knew that the appellees were in open and actual possession of the subject premises and knew of prior lease arrangements. Under these facts ordinary business prudence should have prompted them to pursue such reasonable inquiry as would have disclosed the terms and conditions of the tenancy. Therefore they must be charged with full knowledge of the terms of the lease and the appellees' rights thereunder.

Valley Nat'l Bank v. Avco Dev. Co., 14 Ariz. App. 56, 480 P.2d 671 (Ariz. Ct. App. 1971):

  • We believe the rule in Arizona to be that there is a duty to inquire when the land is in possession of an occupant other than the holder of record title, but when that occupant's possession is consistent with record title no duty of further inquiry arises. Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574, 296 P. 260 (1931); Keck v. Brookfield, supra.

Johnson v. Cavan, 152 Ariz. 452; 733 P.2d 649 (1986):

  • The evidence is also uncontradicted that appellees were on notice of appellant's claim of an exclusive right to use the parking spaces for his business. Appellees were obligated to inquire of appellant by what right or title he claimed possession. Keck v. Brookfield, 2 Ariz.App. 424, 409 P.2d 583 (1965). They could not rely solely upon the silent lease to resolve the uncertainty about parking spaces.

Federal Court Cases

Jubber v. Hatfield (In re Briggs), 1999 Bankr. LEXIS 790 (B.A.P. 10th Cir. 1999) (unpublished; applying Arizona law):

  • The debtor and appellant jointly owned two parcels of residential real property in Arizona. One property was located in Phoenix and the other in Glendale. In May of 1993 the debtor transferred her half interest in both properties to the appellant. The deeds were delivered approximately a year before the debtor filed her bankruptcy petition, but they were not recorded at that time. The appellant continued to live in the Glendale property and rented the Phoenix property. He paid the utility and insurance bills. The debtor filed her bankruptcy petition on January 14, 1998 and one week later the appellant recorded the deeds. Subsequently, the trustee-appellee filed his complaint, pursuant to 11 U.S.C. § 544, to avoid the transfers. The appellant defended under a theory of constructive notice and also argued he had the right to the Glendale property pursuant to the Arizona homestead statutes.


  • The appellant argues that his open, obvious, and notorious occupancy of the Glendale property and the rental tenant in the Phoenix property imparted notice to the trustee sufficient to require further inquiry as to the true owners.

  • In response, the trustee argues that where the occupancy is consistent with the recorded title, additional inquiry is not required. See Valley Nat'l Bank v. Avco Dev. Co., 14 Ariz. App. 56, 480 P.2d 671, 676 (Ariz. Ct. App. 1971). The trustee also cites to several Arizona cases and treatises which support the posture that occupation of the whole property by one co-tenant is never presumed to be adverse to the other co-tenant and, thus, is not inconsistent with the recorded titles. See, e.g., Morga v. Friedlander, 140 Ariz. 206, 680 P.2d 1267, 1269 (Ariz. Ct. App. 1984); Compton v. Compton, 128 Ariz. 148, 624 P.2d 345, 346 (Ariz. Ct. App. 1981). See also 6A R. Powell & P. Rohan, Powell on Real Property, § 905[1] (1994); 8 Thompson on Real Property, § 4330 (1963).


  • It is undisputed that he, as a co-tenant with the debtor, had the right to occupy the entire property. Nor is it disputed that as sole owner or co-tenant, he acted as the landlord over the Phoenix property. Thus, his occupancy, and the occupancy of the tenant, was not inconsistent with his alleged sole ownership and, thus, was not sufficient to place the trustee on notice to perform additional inquiries.

  • The appellant claims that the decisions of Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574, 296 P. 260 (Ariz. 1931), and Keck v. Brookfield, 2 Ariz. App. 424, 409 P.2d 583 (Ariz. Ct. App. 1966), were improperly ignored by the bankruptcy court and that these cases stand for the proposition that possession of property by third parties requires additional inquiry as to true ownership. Although these cases do support this general rule, they do not recognize the well-established exception to the rule that occupancy which is consistent with recorded title does not require additional inquiry. See supra.


  • It is apparent that, as a matter of law, the trustee did not have notice at the commencement of the bankruptcy case, actual or constructive, and the transfers of property from the debtor to the appellant were properly avoided.