Saturday, April 17, 2010

Mortgage Holders' Lawyers Says Alleged N. Texas Rent Skimming Operator "Has Siphoned Rents From The Properties ... To Fund An Extravagant Lifestyle …"

In Dallas, Texas, continues its coverage on the probe into an alleged rent
skimming racket that left would-be home sellers facing foreclosure:

  • CBS 11 is learning more about the alleged business practices of [] North Texas man [Matthew Misczak,] accused of cheating dozens of clients across the country. He's accused of taking tens of thousands of dollars and people's homes. Angry customers say the business man is living the good life, and they're paying for it.


  • Misczak filed for bankruptcy. Court papers reveal lawyers for the mortgage holders found Misczak 'has siphoned rents from the properties... To fund an extravagant lifestyle…'(1)


  • Adria Allen worked for Misczak for four months before leaving. She remembers when Misczak suddenly moved out of his office in a Watauga strip mall. "I asked 'why did we move?' They said they were embarrassed with the way it looked." The next thing she knew, Misczak's new office was inside a Farmers Branch chiropractor's clinic.

For more, see: Customers: We Paid For Extravagant Lifestyle.

(1) See Experts: Taxpayers May Have Paid Forclosure Losses:

  • Records show when Misczak filed for bankruptcy in 2008 he had more than 100 houses. Former employees claim he still has about 60 houses in his name, though it's still unclear how many of them have been foreclosed on and how many of those had taxpayer-backed loans.

Insurer Stiffed HOA On $5M In Connection With Fire Insurance Claim Over Blaze That Left 30 People Homeless: Lawsuit

In Galveston, Texas, The Southeast Texas Record reports:

  • Alleging it was paid only half of its stated limits on its insurance policy in following a huge fire last year, a local condominium owners' association has filed suit against its insurer, recent court documents say. The Maravilla Homeowners Association accuses Westchester Surplus Lines Insurance Co. of "failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement" after the plaintiff filed a claim for the four-alarm fire within the Maravilla Resort Condominiums on Galveston's West End on June 3, 2009. [...] The homeowners association asserts the stated limits were $10 million, but Westchester tendered only $5 million. [...] The Southeast Texas Record reported in October that the homeowners association filed suit against two businesses over alleged misconduct and overall negligence in relation to the blaze, which left more than 30 homeless.

Source: Galveston condo owners sue insurer over $5M in fire proceeds.

Real Estate Investor Rents Out Foreclosed Home Before Obtaining Ownership; Last Minute Title Snag Forces New Tenant Out On The Street

In Springfield, Missouri, the Springfield News Leader reports:

  • Jacqueline Patrick moved the last of her boxes and furniture into her new rental home Monday. On Friday, everything came back out again. This wasn't a case of renter's remorse or an eviction. Rather, it was a series of mistakes and miscommunications that resulted in Patrick paying rent to a man who didn't legally own the home she had just moved into.


  • Chris Gatley, the owner of 417 Rentals, said the closing on the property had been pushed back and he had forgotten to tell his leasing agent. [Jacqueline Patrick] rented the property without knowing 417 Rentals didn't own it. Gatley said he bought between 20 and 30 foreclosed homes in the past year and hasn't had any other problems with closing the properties.

  • [Real estate broker John] Heitz said there was some problem with the foreclosure process, and the bank may have to go back through those legal proceedings. Gatley said he'll likely have to start the whole purchasing process over again.


  • Gatley said he had already put more than $10,000 in the property between his $5,000 down payment and the costs putting on a new roof and converting the garage into another bedroom. "I don't make a habit of fixing up homes I don't own, by any means," Gatley said. "I probably just had too many things going. It's my fault -- I'm taking full responsibility." He said if he doesn't get the home, he's probably just out the investment. Gatley is also out the more than $1,800 he paid back to Patrick for her deposit, rent and two sets of moving fees.

For the story, see Family kicked out of rental that landlord didn't legally own.

Texas Couple Claims Lender Screw-Up In Paying Homeowners' Insurance Premiums Out Of Mortgage Escrow Funds Left Them "Naked" During "Ike" Pounding

In Jefferson County, Texas, The Southeast Rexas Record reports:

  • A Hardin County couple claim their Dallas-based mortgage company failed to pay homeowners and windstorm insurance premiums out of the monthly mortgage payments the couple made, causing the insurance company to refuse to pay for damages the couple sustained to their property from Hurricane Ike.

  • Eanest Edward and Joseph Ann Jones filed a lawsuit March 30 in Jefferson County District Court against MGC Mortgage. The Joneses allege they financed property [...] in Beaumont through Citi Residential Mortgage. Out of the Jones' mortgage payments, Citi Residential should have paid homeowners and windstorm insurance premiums, according to the complaint.

  • Later, in August 2008, MGC Mortgage purchased the Jones' mortgage and continued to accept their premium insurance payments, but failed to forward those payments to an insurance company, the suit states. Hurricane Ike struck in September 2008, causing property damage to the Jones' property, the complaint says. In October, they claim they notified their insurance company of the damages and requested the company cover the necessary repair costs. However, the insurance company refused to reimburse the couple, saying no insurance policy existed because MGC failed to secure a policy for the Jones, according to the complaint.

Source: Couple blames mortgage co. for failing to pay insurance premiums.

C. Florida Man Charged With Recording Phony Land Documents In Alleged Vacant Home Hijacking Racket; Cops Suspect Him In At Least Four Other Scams

In Central Florida, the Orlando Sentinel reports:

  • When Andrew Brown moved into a home in Deltona, he furnished it, brought along his dog and even installed an alarm system. He changed the locks and took down the for sale signs, authorities said. There was just one problem, say Volusia County Sheriff's investigators: He didn't own the house. Brown, who faces charges of burglary, grand theft and criminal mischief, is free on $20,000 bail from the Volusia County Branch Jail, while investigators continue to look into his activities, Sheriff's Office spokesman Gary Davidson said.

  • An investigation into Brown began in March when a Realtor arrived at a home on Clay Court in Deltona to show it to potential buyers and found it filled with furniture. The Realtor called the Sheriff's Office. After deputies knocked on the door for quite some time, a woman with a 1-year-old child answered, Davidson said. The woman, who told deputies she and her boyfriend had rented the house from Brown, was ordered to vacate the house. Investigators then began looking into Brown and found his name in court records associated with a house on Shadow Ridge Drive, Davidson said.


  • Investigators said Brown filed a phony lien and a default notice at the courthouse and then insisted the paperwork proved he owned the house. Investigators disagreed and hauled him off the jail, Davidson said. Investigators believe Brown may have tried to pull off the same scam with at least four other houses, he said.

Source: Home sweet home was ticket to jail for Deltona man.

Friday, April 16, 2010

Minn. Regulator Files Suit Against Closing Agent Accused Of Pocketing Payoff Proceeds In Alleged $1.1M+ Escrow Swindle; Criminal Charges Under Review

In Forest Lake, Minnesota, the Star Tribune reports:

  • A Forest Lake real estate closer is accused of pocketing more than $1.1 million from dozens of real estate transactions in the Twin Cities area by failing to pay off original mortgages or pay forward numerous transaction-related fees. Two of the properties were being bought by the city of Forest Lake, which lost more than $205,000. Many of the cases involved hundreds or thousands of dollars but the largest, at $594,000, involved a bank that said funds given to the closer, a company owned by Cynthia T. Strand, were not used to pay off the first mortgage on the property.


  • According to the 14 counts of civil charges filed by the Commerce Department, Strand Closing Services in Forest Lake took in money that was meant to pay off mortgages and related fees but failed to pass it along in at least 42 instances. Her title insurance, real-estate closer and notary licenses have been revoked and she may face a civil penalty.(1)

  • Washington County Attorney Doug Johnson said the Commerce Department has referred the case to his office to review for possible criminal charges. "We're in the middle of looking at it," he said, declining to speculate on whether criminal charges would be filed.(2)

For the story, see Forest Lake closing firm accused of pocketing cash (State officials say the fraud scheme involved the company not paying off mortgages).

(1) Strand is also accused of failing to record title changes in several cases, failing to remit title insurance premiums, using fraudulent practices and demonstrating financial irresponsibility, the story states.

(2) Any person who has lost money due to the fraudulent, deceptive or dishonest practicesof, or conversion of trust funds by, a Minnesota-licensed closing agent, real estate broker, or real estate salesperson should contact the Minnesota Department of Commerce's Real Estate Education, Research and Recovery Fund for information on recovery of some or all of the monetary losses suffered.

Now-Disbarred Lawyer Cops Plea To $4.5M Swindle Of Elderly Clients' Trust Funds; 97-Year Old Victim Out $1M, Left Unable To Pay Ass't Living Expenses

From the Office of the U.S. Attorney (Atlanta, Georgia):

  • M. DEWEY BAIN, 59, of Cumming, Georgia, pleaded guilty [] in federal district court to defrauding his clients of over $4.5 million in trust funds that he had misrepresented were in investments earning good returns. United States Attorney Sally Quillian Yates said of the case, “This defendant, an attorney formerly licensed in Georgia and Texas, entered into trust agreements with elderly victims, told them that he was placing their money in safe investments, and then lost it all after diverting it to his own personal and business use. His egregious abuse of trust defrauded clients out of more than $4.5 million in retirement savings and inheritance money.”


  • Under one of the trust agreements, BAIN originally invested the money of a 97-year-old client in certificates of deposit and paid her personal expenses out of the trust. He later liquidated the certificates based on false pretenses and moved the money to a bank account in his name. He then used the money in his business, even though she had specifically refused to permit such an investment because it was too risky. He also wrote checks off of her credit card account without her authorization. As a result of BAIN’s fraud, this victim lost nearly $1 million and was no longer able to pay for her assisted living residence. BAIN was disbarred in Georgia in October 2009.(1)

For the U.S. Attorney press release, see Disbarred Attorney Pleads Guilty To Defrauding Elderly Clients (Defendant Diverted Over $4.5 Million of Clients’ Trust Money For His Own Use).

(1) If a Georgia 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 State Bar of Georgia Clients' Security Fund 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.

State Bureaucracy Slow To React To Deed Ripoff Of 89-Year Old Dementia Sufferer By POA-Abusing Son, Says Attorney

In Tulsa, Oklahoma, NewsOK reports:

  • Tulsa attorney Larre Sloan said he recently got a family guardian appointed for his wife’s 89-year-old grandmother, who has dementia and whose live-in son abused a power of attorney to tap his mother’s money for personal purposes and deed her property to him. The new guardianship, he said, will revoke the power of attorney and help void deeds and fix her bank accounts.

  • "We had a favorable result. However, we did it despite DHS [Department of Human Services],” Sloan said. "Our experience was Adult Protective Services did more to protect the alleged perpetrator than the victim.” Among other things, the case was delayed from 60 to 154 days, and investigators failed to read submitted bank accounts and detailed notes by the caretaker, he said.(1)

Source: Help available to foil financial exploitation.

(1) According to the story, the Senior Law Project of the non-profit law firm Legal Aid Services of Oklahoma — 557-0014 — offers free help with civil cases to seniors age 60 and older who live in Oklahoma and can’t afford to pay for private attorneys. Volunteer coordinator Sharon Ammon said the project can’t pay court costs, but those fees often are waived. The nonprofit Senior Law Resource Center in Oklahoma City — 528-0858 — offers Oklahoma seniors of any income level free advice and legal services on a sliding-scale fee.

Family Accuses Real Estate Broker Of Scamming Elderly Alzheimer's Victim Out Of Mortgage Payments, Allowing Home To Go Into Foreclosure

In Detroit, Michigan, WJBK-TV Channel 2 reports:

  • A Detroit man is being forced from his home after a foreclosure. His family says the man had been paying a real estate broker for every month for the past five years, but the bank holding the mortgage never got the money. "My dad, he got scammed. He was pretty much thinking he was paying the mortgage company, which he wasn't paying the mortgage company. He was paying the wrong mortgage company," said Clement Ramos, Jr. Clement Ramos, Sr. has lived in a home on Rosemary since 1983. However, the 79-year-old retired General Motors worker has been in declining health. "He has Alzheimer's. He flips in and out," Ramos, Jr. said. [...] "We went to court Monday, and the court gave my dad till May the fifth to be out of his home," Ramos, Jr. said.

For the story, see Family: Mortgage Company Never Got the Money.

Ex-Attorney Gets 21 Months In Federal Slammer After Copping Plea To Escrow Funds Swindle; Pocketed R/E Closing Cash, Left Existing Liens Unpaid

From the Office of the U.S. Attorney (Atlanta, Georgia):

  • TRENT EDWARD WRIGHT, 38, of Cumming, Georgia, was sentenced [...] to serve 1 year, 9 months in federal prison [and ordered to cough up $2,409,760 in victims' restitution] on a mail fraud charge involving a mortgage fraud scheme which victimized lenders and title insurance companies.


  • According to Acting United States Attorney Yates and the information presented in court: In September, October and November 2006, WRIGHT, then a real estate closing attorney operating from an office in Sugar Hill, Georgia, closed approximately 17 loans in which lenders were falsely assured that all prior loans encumbering the properties securing their loans had been paid off. Those lenders then believed that they would be in first position to recoup their loan amounts from the sale of the properties should they go into foreclosure. WRIGHT also wrote title insurance for these loans although he failed to pay off numerous prior recorded liens which encumbered the properties. Rather than ordering title searches and requesting pay off amounts from all prior lenders as required before the new loan closings, WRIGHT either failed to order title searches or disregarded recorded prior encumbrances, causing over $2.4 million in losses. WRIGHT closed his law practice in January 2007, and surrendered his license to practice law in December 2009.

For the U.S. Attorney press release, see Former Georgia Closing Attorney Sentenced to Prison In Multimillion Dollar Morgage Fraud.

(1) If a Georgia 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 State Bar of Georgia Clients' Security Fund 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.

State Regulators Probe Alleged North Texas Rent Skimming Racket That Left Dozens Of Unwitting Would-Be Home Sellers In Foreclosure

In Farmers Branch, Texas, reports:

  • State regulators are investigating a North Texas property management business after more of the owner's previous clients came forward with fraud complaints. Rob and Pennie Higdon said they hired Matt Misczak after they ran into trouble selling their home in 2005. Rob Higdon believed "everything looked good," so they signed the contract, which allowed Misczak to rent out their house and use the tenant's money to pay off the mortgage on it.

  • In exchange, they deeded their house to Misczak. But they said he didn't pay them for four months, which equated to about $9,000 in missed mortgage payments. "By the time we discovered what was happening, the house was about to go into foreclosure," Pennie Higdon said.


  • Adria Allen said she brought two of her friends to Misczak as clients because they needed to sell their homes before being foreclosed on. Allen said Misczak didn't pay her friend's mortgages either. [...] Rudy and Missy Schmerber said they were also victimized. The couple said they hired Misczak to sell their old home in Fort Worth.


  • Misczak did not return CBS 11's phone calls to discuss the loans in question. He is also accused of failing to pay back dozens of other clients.

For the story, see More Complaints Vocalized About Businessman.

In a related story, see CBS 11 Investigates Possible Real Estate Scam:

  • The Texas Real Estate Commission said it's investigating complaints that an unlicensed real estate brokerage company cheated dozens of customers out of thousands of dollars. The CBS 11 Investigators caught up with the owner of the company. Dozens of people in North Texas and across the country want to talk with Matthew Misczak[, ...] who blame him and his company, Texas Lease Houses, for losing their homes and thousands of dollars in cash.

Thursday, April 15, 2010

California AG: Jail Sentences "A Warning Shot To Loan-Modification Consultants: If You Swindle Homeowners, You Face Serious Time Behind Bars"

From the Office of the California Attorney General:

  • In a clear "warning shot" to unscrupulous loan-modification consultants, Attorney General Edmund G. Brown Jr. [] announced that two women have each been sentenced to one year in jail and ordered to repay dozens of homeowners who were charged thousands of dollars in up-front fees for non-existent foreclosure-relief services.

  • Marianne Curtis, 69, of Costa Mesa and Mary Alice Yraceburu, 46, of Riverdale, who operated Fresno and Orange County-based Foreclosure Freedom, pleaded guilty last month to 71 criminal counts, including grand theft, conspiracy and unlawful foreclosure consulting. Both will serve one year in Orange County jail and an additional four years of probation.(1)

For the California AG press release, see Brown Prosecution Sends Phony Foreclosure Consultants To Jail And Recovers Stolen Funds.

For the charging document, see People v. Curtis, Yraceburu.

(1) "Curtis and Yraceburu shamelessly exploited homeowners desperate to avoid foreclosure, charging up to $1,800 in up-front fees for loan modifications that were never delivered," Brown said. "Today's jail sentences send a warning shot to loan-modification consultants: If you swindle homeowners, you face serious time behind bars."

Idaho Regulator Issues C&D Order Against Alleged California Loan Modification Racket

From the Idaho Department of Finance:

  • The Idaho Department of Finance announced the issuance of a cease and desist order [] against California-based "Relief Law Center," stemming from alleged unlawful mortgage modification solicitations targeted to Idaho homeowners. "These solicitations are among the most deceptive we have seen," Finance Department Director Gavin Gee said.

  • Mailers from "Relief Law Center," also doing business as "USA Loan Auditors," were directed to Idaho homeowners and falsely represented that Idaho homeowners’ mortgage loans were part of a predatory lending investigation. Gee called the Relief Law Center’s tactics "reprehensible," and said the deceptive mailer was nothing but a ploy to lure financially strapped homeowners to make a telephone call leading to a pitch for payment of $1,200 in upfront fees.

For the Idaho Department of Finance press release, see California Company Ordered to Cease and Desist Mortgage Modification Solicitations in Idaho.

Texas Consumer Reaches Confidential Settlement With Zombie Debt Buyer After Scoring $8.1M Jury Verdict In Suit Alleging Hostile Phone Manners

In Dallas, Texas, Workbench reports:

  • At courthouses across the United States, it has become increasingly common during the economic downturn for lawsuits to be filed against consumers to collect old debts. Lawyers who specialize in the practice are filing thousands of suits on behalf of large firms that have acquired debts from other companies. Although most people don't fight the suits and lose them by default, a Dallas woman bucked the trend last October.

  • Chrystal A. Snow challenged the validity of a $9,000 debt in a Dallas County Court-at-Law and countersued the debt collector for making improper phone calls, her attorney Ross Teter said. In a case that has received no media attention, Snow won her suit against Midland Funding LLC(1) and the jury hearing the case awarded her $8.1 million -- $250 for actual damages, $100,000 for mental anguish and $8 million in punitive damages, he said.

  • "The jury made a finding she did not owe the debt," Teter said in a phone interview. "We argued that they violated the Texas Fair Debt Collection Act by making harassing phone calls and the jury agreed." [...] Snow, who did not return requests for comment, has [subsequently] reached a confidential settlement with Midland, her attorney Teter said.
For more, see Woman Sues Debt Collector, Wins $8.1 Million.

(1) According to the story, Midland Funding is a subsidiary of Encore Capital Group, a company whose primary business is the acquisition and collection of "charged-off consumer receivable portfolios," according to its 2009 annual report filed with the Securites and Exchange Commission. "We acquire receivable portfolios at deep discounts from their face values," the annual report states. "[W]e have invested approximately $1.4 billion to acquire 28.8 million consumer accounts with a face value of approximately $43.8 billion."

Arizona Feds, State Law Enforcement Raid Suspected Loan Modification Racket

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

  • State and federal agents raided the largest loan modification company in Arizona [last week]. Authorities arrived at Discount Mortgage Relief in Scottsdale around eight in the morning. Dozens of employees were told to leave as investigators sifted through documents and files.

  • "They're definitely looking for something," said employee Gary Porter. "I have no idea what it is, but it must be something important." CBS 5 News has learned the Discount Mortgage Relief is set up to take calls from across the country from struggling homeowners, looking to modify their mortgage. The company receives about 1,000 calls a day.

  • Arizona's Better Business Bureau has received at least 90 complaints about Discount Mortgage Relief since 2008 and has given the company an "F" rating.(1)

Source: FBI Storms Loan Modification Company (Employees Surprised By Sudden Raid).

(1) According to the story, one employee who has been with the company for a week, said that during his training, he got a sense that things were a little shady. "Not one of those people I heard on the phone with customers was honest," he said. "They were promising things they couldn't deliver, like interest rates." However, company spokeswoman Stacey Pearson said, the raid was not necessary, because they are not doing anything wrong, the story states.

Loan Modification Scammer To Serve Minimum Of 12-30 Months In State Prison After Copping Plea In Upfront Fee Ripoff Targeting Homeowners In F'closure

From the Office of the Nevada Attorney General:

  • Nevada Attorney General Catherine Cortez Masto announced today that Jeffery Tye Brown, 50, of Henderson, has pled guilty to felony mortgage fraud in violation of NRS 205.372,(1) in connection with the operation of DB Financial Services, a foreclosure rescue business located in Henderson.


  • The State’s case against Brown was based on an investigation by the Attorney General’s mortgage fraud task force which revealed that between December 2007 and February 2008, Brown contacted victims whose homes were going into foreclosure and obtained advance payments upwards of $999.00 for foreclosure rescue services that he never performed. He failed to give refunds despite promising refunds in his contracts and advertising. He also forged documents to the Mortgage Lending Division to cover up the criminal activity.(2)

For the Nevada AG press release, see Mortgage Foreclosure Rescue Scam Guilty Plea Announced.

(1) According to the press release, the crime is a Category C felony and carries a potential jail sentence of one (1) to ten (10) years and/or a fine of up to $10,000. In addition, the plea agreement requires Brown to execute Confessions of Judgment to the individual victims in an amount totaling $19,407.00. Under the terms of the plea agreement, he is not eligible for probation and will serve a minimum of 12 to 30 months in the Nevada State Prison.

(2) Shortly after execution of a search warrant on the DB Financial offices in 2008 by the mortgage fraud task force, Brown fled the country, the press release states. He was extradited back to the U.S. from the Philippines, where he was in hiding to evade authorities. The plea agreement requires Brown to forfeit monies seized from his company to pay for the costs of his extradition from the Philippines.

NAACP To Drop Suit Against Wells Fargo Alleging Institutionalized, Systemic Racism In Its Subprime Mortgage Lending Practices

The Wall Street Journal reports:

  • The National Association for the Advancement of Colored People agreed to drop a predatory-lending lawsuit against Wells Fargo & Co. in exchange for access to loan data. The pact, set to be announced on Thursday, marks a more conciliatory approach from the fourth-largest U.S. bank in assets as it works to eliminate legal headaches resulting from the housing bust.

  • Filed in March 2009, the federal-court lawsuit accused Wells Fargo of "institutionalized, systemic racism" in its subprime-mortgage lending, saying the San Francisco bank "steered" African-Americans toward "less favorable loans" in the run-up to the recent financial crisis.

For more, see NAACP Will Drop Lawsuit Against Wells Fargo (requires paid subscription; if no subscription, try here, then click link for the story).

Wednesday, April 14, 2010

Another Foreclosing Lender Screw-Up Leads To Winterizing The Wrong Home Mistakenly Believed To Be In Foreclosure

In Northlake, Illinois, the Franklin Park Herald Journal reports:

  • A homeowner stopped by her house on the 100 block of South Caryl the afternoon of April 1. She found pry marks on the door, some interior damage and a sign in the window that said the house had been winterized and not to turn on the electricity, heater or pump.

  • "She was a bit confused by this," said police Cmdr. Ken Beres. She contacted the company listed on the sign, which had been hired by a bank to winterize a foreclosed house. While the women's house is unoccupied, it is not in foreclosure. According to Northlake city records, a house with the same address on North Caryl is in foreclosure. The company said it would come back and fix the house.

Source: Northlake Police Department Police Blotter.

Another BofA Screw-Up Leads To Foreclosure Sale Of Wrong Home; Lender Apologizes "For This Unfortunate Mistake"

In Jackson County, Georgia, MyFox Atlanta reports:

  • A Jackson County family said Thursday that they nearly lost their home when somehow it landed on a foreclosure list and was auctioned off on the courthouse steps. On Tuesday, Rani Achaibar said she felt like the rug had been pulled out from under her when she found out her house had been sold and it wasn't even on the market.


  • Unbeknownst to the Achaibars, their home was auctioned off at the Jackson County courthouse. The Achaibars said their house, worth $500,000, somehow made it to a foreclosure list. "He had the paperwork in his hand and I said, 'Oh my gosh!' So sat down, got Bank of America on the phone right away, verified, not delinquent, but didn't say there was a mistake," recalled Achaibar.

  • The Achaibars' Bank of America mortgage statement showed their monthly payments had been paid on time. But the Achaibars said they have had a hard time getting answers. [...] A representative for Bank of America said, "It appears that a mistake has been made in this case. We are working diligently to research and rectify the situation as quickly as possible. We apologize to the Achaibar family for this unfortunate mistake." The Achaibars said they were relieved, but said they will feel better when the official paperwork is back in their hands. "Thank God it was a nice person who bought our house or he probably would have put us out," said Achaibar.

For the story, see Metro Family Nearly Loses Home in Error.

Homeowner Hit With Foreclosure Notice Despite Being Current On Loan Modification Workout; Was Encouraged By Lender's Employees To Keep Making Payments

In Portgage, Indiana, cbs2chicago reports:

  • [Angela] Dixon was shocked because she thought she was on track to get a loan modification from her mortgage company, Texas-based Nationstar. "It just completely blindsided us," she said. "I cried, I was angry, I didn't know what happened."

  • Dixon's husband, Brian, had lost his job and they had fallen two months behind on their mortgage. Nationstar called them to arrange a modification that would lower their payments from $1,431 to $929 a month, which the Dixons paid for nine months. Then the foreclosure notice turned up.

  • Angela called Nationstar and was told not to worry about going to court. They would make a notation in the computer that this foreclosure action would be suspended. But it wasn't. "Everybody told me my account was fine, everything is going good, just keep making your payments," she said. But in March, Dixon said she was notified that the family's request for loan modification was denied and they owed $14,000 in back payments and penalties. Her modification agreement clearly stated that her lender would "suspend any scheduled foreclosure." "In the best light, what was happening here is the right hand of the company didn't know what the left hand was doing?" [Channel 2 investigative reporter Pam] Zekman asked the homeowner. "Absolutely," Angela Dixon replied. "And I'm getting lost in the shuffle, when I've done everything right."

For the story, see Family Nearly Evicted When Mortgage Firm Goofs (The Dixon Family Got Foreclosure Notice, Even Though Company Agreed To Modify Their Debt).

Financially Strapped Idaho Couple Has Home Sold Out From Under Them, Despite Following Servicer's Loan Modification Instructions & Making Payments

In Boise, Idaho, the Idaho Statesman reports:

  • Last April, [Zijad and Hata Rudan, refugees from Bosnia-Herzegovina who moved to Idaho in 2000] applied to their loan servicer, MetLife, for a loan modification. The family said MetLife offered in May to let them pay $1,052.68 a month - a 38 percent reduction - through a three-month trial period while they were considered for a permanent modification under the federal Home Affordable Mortgage Program.


  • The Rudans made two more full payments for March and April, with late fees. In June, they said, the payments were sent back to them. Zijad Rudan said he called MetLife to ask why. He said he was told not to be concerned because the application for modification was still being processed. MetLife told him to start paying the reduced amount, he said. So he did.

  • The next month, the Rudans received a notice of trustee's sale. Alarmed, they called MetLife again. The Rudans said a representative again told them not to worry, saying the modification process was moving forward and they should throw the notice in the garbage. The family was told that their July payment had been received and that all was well.

  • They continued to make the required modified payments each month. As MetLife continued work on the loan-modification application, it sought more information. The Rudans faxed numerous documents, such as paycheck stubs, sometimes several times, the family said. On Feb. 8, they wrote another monthly check. MetLife still had not notified them of any decision on their permanent loan modification request, they said. But the check returned Feb. 17.

  • Once again, the couple called MetLife. They said they spent the morning calling the company and reached only recorded messages, so then went to a MetLife office in Eagle for help. The local MetLife representative called the parent company. MetLife again asked the family for more information and pay stubs. The Rudans said they faxed the documents that day.

  • The couple called March 4 to check on their status. They say they were told the modification was still being processes and they should call back March 10. Instead, they called on March 8 and were told that their files had been turned over to a different department, and that a foreclosure sale had been scheduled but postponed. The Rudans said they were told not to make payments for February and March.

  • On March 12, a representative of Gorilla Capital Inc. showed up at their door. The Oregon company buys homes at foreclosure sales and says it sells them for about $20,000 less than comparable houses in the market. The Gorilla representative said he'd bought the house at a foreclosure auction at 11 a.m. that day for $111,201, just $1 more than MetLife bid on it. The home is assessed at $195,000, said the Rudans' attorney, Richard Eppink of Idaho Legal Aid.(1) The Gorilla representative started eviction proceedings against the family that day, court documents say.(2)

For the story, see Owners say their Boise home was sold without their knowledge (A Boise family fights eviction after what its lawyer calls a botched loan modification).

(1) Idaho Legal Aid Services is a nonprofit law firm providing legal assistance for low income people statewide.

(2) Reportedly, a recent court hearing to evict the family was postponed for a week. Their attorney also filed a District Court lawsuit against MetLife Bank, Transnation Title and Gorilla Capital Inc. to undo the trustee's sale and declare the Rudans the rightful owners, the story states. "We're trying to stop the eviction process until we get this sorted out and get everyone into court," attorney Richard Eppink reportedly said.

Snags In Transferring Bankrupt Lender's Loans, Improper Posting Of Homeowners' House Payments Leave Thousands Under Threat Of Foreclosure

In Resaca, Georgia, WXIA-TV Channel 11 reports:

  • Just when we thought it was over we received a cry for help from another homeowner about to lose her home. Penney Bates of Resaca, Ga was another victim of the Taylor Bean & Whitaker ["TB&W"] collapse that affected hundreds of thousands of homeowners last year. Many of those people weathered the crisis and have had their mortgages successfully transferred.

  • However, Penney Bates has received a foreclosure notice even though she says she's made all her payments. "I've lived here all my life, I don't know what I'd do if I lose my home," she says. The single Mom is raising two boys and is panicked about what will happen next.

  • Her mortgage had been transferred from TB&W to Bank of America last year but somewhere along the line her payments aren't properly posted and Bank of America has initiated foreclosure on her house. We talked to Bank of America, the Attorney for TB&W in the bankruptcy proceedings and others in an effort to get this resolved. We got immediate action and an assurance that Penney will not be kicked out of her home on May 4th.

  • According to David Danzler of Troutman Sanders, an Atlanta attorney for TB&W, there are about 10 thousand homeowners who are still having trouble because of money tied up in the collapse of TB&W and the freezing of its accounts with the FDIC takeover of Colonial Bank.

Source: Taylor Bean and Whitaker Troubles Persist.

BofA Hit With Class Action Suit; California Homeowners Claim Lender Stiffed Them On Reasonable Requests For Loan Mods Or Other Alternative Solutions

Consumer-rights class-action law firm Hagens Berman Sobol Shapiro LLP announces:

  • California homeowners sued Bank of America on Tuesday claiming the lending giant is intentionally withholding government funds intended to save homeowners from foreclosure, announces Hagens Berman Sobol Shapiro.

  • The case, filed in U.S. District Court in Northern California, claims that Bank of America systematically slows or thwarts California homeowners' access to Troubled Asset Relief Program (TARP) funds by ignoring homeowners' requests to make reasonable mortgage adjustments or other alternative solutions that would prevent homes from being foreclosed. Hagens Berman filed a similar complaint in Washington state last month.


  • "Bank of America came up with every excuse to defer the Bayramian family from a home loan modification which forced them into foreclosure," said [the firm's managing partnet Steve] Berman. "And we know from our investigation this isn't an isolated incident."(1)

For more, see California Homeowners Sue Bank of America for Withholding Federal Bailout Funds.

For the lawsuit, see Bayramian v. Bank of America, N.A., and BAC Home Loans Servicing, L.P.

(1) The Hagens Berman law firm encourages homeowners in Washington and California with mortgages through Bank of America to contact them if they received an inadequate response from the bank for a home loan modification request after April 13, 2009. For more information or to join the lawsuit, please visit:

Tuesday, April 13, 2010

West Virginia Couple Files Suit Against Lender For Oppressive, Abusive Collection Practices

In Berkeley County, West Virginia, The West Virginia Record reports:

  • An Upshur County couple is suing American General Home Equity after they claim the company engaged in a pattern of abusive debt collection practices. Ricky Miller and Sue Ellen Siler obtained a credit line loan secured by a home Miller owned, according to a complaint filed March 5 in Berkeley Circuit Court.


  • Miller and Siler claim they fell behind on their loan payments to American General, despite using all of their savings money and borrowing from family members. They claim after they fell behind in payments, American General engaged in a pattern of oppressive and abusive collection practices. The plaintiffs claim Oravec repeatedly and on numerous occasions used profanity and obscene language.

  • Oravec informed Siler that "he believed when he made the loan that the Millers would be unable to make the loan payments," according to the suit. The plaintiffs claim that making a loan with the intent that the loan will not be repaid and that the lender will obtain titled [sic] to the property through foreclosure is in violation of West Virginia Code. Miller and Siler are seeking damages as allowed under the Truth in Lending Act, the West Virginia Consumer Credit & Protection Act and other West Virginia law.

Source: Upshur couple sues over collection efforts.

Mortgage Lender's Alleged Sleazy Collection Practices Leads To Civil Suit Charging Violations Of WV Consumer Credit & Protection Act

In Jackson County, West Virginia, The West Virginia Record reports:

  • A Jackson County couple allege their mortgage lender crossed the line in attempting to collect on their delinquent account. Charles E. and Tammy J. Hatcher of Ravenswood filed suit on March 31 against Vanderbilt Mortgage and Finance. In their complaint filed in Jackson Circuit Court, the Hatchers allege the Maryville, Tenn.-based company employed inappropriate techniques, including threats of arrest, and relaying message through third-parties, in an attempt to get the Hatchers current on their mortgage payments.(1)


  • In their suit, the Hatchers accuse Vanderbilt of unlawful debt collection, unreasonable publication and misrepresenting the status of their account. As a result of Vanderbilt's actions, the Hatchers allege they "suffered fear of loss of home, and annoyance and inconvenience associated with the abusive and unconscionable servicing of their contract." The Hatchers seek damages in the amount of $4,300 in civil penalties for each violation of the state Consumer Credit and Protection Act, attorney fees and court costs. They are represented by Sara Bird with Mountain State Justice of Charleston.(2)

For the story, see Jackson couple sues Tenn. mortgage company over collection tactics.

(1) According to the story:

  • the Hatchers allege representatives from Vanderbilt began calling "two to three times a day, Monday through Saturday."
  • they singled out one representative who "threatened that the police would kick them out and padlock the door so that [they] would not be able to remove their belongings."
  • other representatives threatened seizure of the Hatcher's personal belongings, and suggested they find "a better place to live so their kids would not be homeless."
  • on more that one occasion, Tammy alleges a Vanderbilt representative called her a "liar" when she said a payment would be forthcoming from the portion of student loans she intended to use as living expenses.
  • on at least two occasions, the Hatchers allege Vanderbilt informed their friends they were behind on their mortgage. The Hatchers say both the mother of one of their son's youth football teammates, and an in-law told them relayed to them a message from Vanderbilt about the need to make a payment.
  • on a date not specified, Vanderbilt sent the Hatchers a letter saying they were willing to work out a plan to get them current on the mortgage. The agreement called for the Hatchers to make lump sum payments once their student loans were disbursed. Despite making three lump-sum payments of $1,830 as called for, the Hatchers allege Vanderbilt continued to inform third-parties about the delinquency in their mortgage, including a neighbor, and Tammy's mother and step-father after the January payment was made.

(2) According to their website, Mountain State Justice is a non-profit public interest law office dedicated to pursuing impact and significant litigation on behalf of low-income West Virginians, whose work currently focuses primarily on combating predatory lending and abusive debt collection techniques through individual and class action lawsuits, and who provide free legal services in their areas of practice to qualifying individuals.

City Of Baltimore Revives "Ghetto Loans" Lawsuit Against Wells Fargo; Refines Reverse Redlining Allegations Against Lender

In Baltimore, Maryland, The Baltimore Sun reports:

  • Lawyers for the city of Baltimore have prepared a new complaint in their reverse-redlining lawsuit against Wells Fargo, which alleges that the bank steered black borrowers into subprime loans and then foreclosed on hundreds of city houses, leading to blight and high public safety costs in low-income neighborhoods.

For more, see Baltimore city revives suit against Wells Fargo (New complaint sites specific damage to the city resulting from foreclosures).

City Of Memphis, Shelby County Amend Lawsuit Against Alleged "Ghetto Loans" Peddler In Fair Housing Litigation

In Memphis, Tennessee, The Commercial Appeal reports:

  • Memphis and Shelby County have filed an amendment to a federal lawsuit(1) against mortgage lender Wells Fargo, detailing for the first time how the company allegedly used “predatory and deceptive” practices locally that targeted African-Americans for risky subprime loans. The amended complaint includes new testimony from four former Wells Fargo employees in Memphis. In sworn statements the former employees describe how the company targeted African-Americans for subprime loans.(2)

For more, see Memphis and Shelby County detail case against Wells Fargo.

For the amended complaint, see City of Memphis, et ano. v. Wells Fargo Bank, N.A., et al.

(1) According to the story, the initial complaint, filed in December, included testimony from two former high-ranking Wells Fargo employees involved in a Baltimore, Md., suit who say Wells Fargo intentionally made bad loans to African-Americans. The employees, who worked out of Virginia and Maryland but are knowledgeable about the company's national lending practices, said Wells Fargo marketed subprime loans to predominantly African-American ZIP codes and that company officials referred to the loans as "ghetto loans."

(2) The amended complaint, unveiled Wednesday during a news conference at City Hall, also asks Tennessee Attorney General Robert E. Cooper Jr., to take action against the company under the state Consumer Protection Act, according to the story.

LPS Responds To WSJ Article On Federal Probe Into Alleged Dubious Pratices In Foreclosure Actions

From a recent press release from Lender Processing Services:

  • Lender Processing Services, Inc. (NYSE: LPS), a leading provider of integrated technology and services to the mortgage industry, [Monday] provided clarification to a recent article published by the Wall Street Journal.(1)

  • As indicated in LPS' most recent Form 10-K, filed in February 2010, LPS reported that during an internal review of the business processes used by its document solutions subsidiary, the Company identified a business process that caused an error in the notarization of certain documents, some of which were used in foreclosure proceedings in various jurisdictions around the country.

For the press release, see LPS Offers Clarification to Recent Article.

For an earlier post on this story, see WSJ On Feds' Probe Into LPS' "Docx" Sub; Allegations Of Creation Of Bogus Paperwork & Dubious Notarizations In Foreclosure Actions Under The Spotlight.

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

Monday, April 12, 2010

Unfair, Deceptive Practices In Connection With Post-Foreclosure Judgment Loan Workout Negotiations Subject To NJ Consumer Fraud Act

A recent ruling by a New Jersey appellate court recently held that unfair or deceptive practices by a lender or loan servicer in connection with the negotiation of an agreement to cure a default in a mortgage following the entry of the judgment of foreclosure(1) is subject to the provisions of the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -106.(2) That court also held that this was the case even though the mortgagor/homeowner did not actually sign the promissory note (and, consequently, not liable for repayment thereof) that was the subject of the foreclosure action.(3) It stated that "[t]here [was] little doubt that, if [homeowner] had been the initial debtor and her attempts to cure default had taken place before entry of the order of foreclosure, the transactions would have been covered by the CFA ..." and "f[ound] no principled reason to distinguish the present structurally identical transactions, albeit by a non-debtor mortgagor, executed after a judgment of default had been entered."

Inasmuch as the New Jersey CFA allows for an award of triple damages and attorneys' fees to a winning homeowner, this ruling may operate to encourage more attorneys to take on cases on behalf of New Jersey homeowners who, when seeking loan modifications from their lender or loan servicer, get jerked around or are otherwise subjected to unfair or deceptive practices.(4)

For the ruling, see Gonzalez v. Wilshire Credit Corp., DOCKET NO. A-2634-08T2, 988 A.2d 567; 2010 N.J. Super. LEXIS 16 (App. Div. 2010).

(1) The court observed that the homeowner who filed suit "... essen[tially] claims that Wilshire committed consumer fraud in calculating the amounts due transforming, as the result of the terms of annually or biannually renegotiated agreements, a default curing obligation into a never-terminating cash cow."

(2) The court points out that the CFA, at N.J.S.A. 56:8-2, provides (bold text is my emphasis, not in the original text):

  • The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice . . . .

The court then went on to explain the meaning of the word "unconscionable" as used in the CFA when referring to commercial practices that are prohibited, and quoted its earlier ruling in Associates Home Eq. Serv's v. Troup, 343 N.J. Super. 254, 278 (App. Div. 2001) in that regard (bold text is my emphasis, not in the original text):

  • The word "unconscionable" must be interpreted liberally so as to effectuate the public purpose of the CFA. Kugler v. Romain, 58 N.J. 522, 543 (1971). It is not intended to "erase the doctrine of freedom of contract, but to make realistic the assumption of the law that the agreement has resulted from real bargaining between parties who had freedom of choice and understanding and ability to negotiate in a meaningful fashion." Id. at 544. The standard of conduct contemplated by the unconscionability clause is "good faith, honesty in fact and observance of fair dealing [,]" and the need for application of that standard "is most acute when the professional seller is seeking the trade of those most subject to exploitation — the uneducated, the inexperienced and the people of low incomes." Ibid. Whether a particular practice is unconscionable must be determined on a case-by-case basis. Id. at 543.

(Note: The legal analysis for determining whether a commercial practice is "unconscionable" under the New Jersey CFA appears to differ (and be much looser) from the analysis for determining the unconscionability of a contract under the common law. See, for example, Muhammad v. County Bank of Rehoboth Beach, Delaware, 189 N.J. 1; 912 A.2d 88 (2006), in which the New Jersey Supreme Court cited Sitogum Holdings, Inc. v. Ropes, 352 N.J. Super. 555, 564-66, 800 A.2d 915 (Ch.Div.2002) for the general proposition "that unconscionability traditionally entails discussion of two factors: procedural unconscionability, which "can include a variety of inadequacies, such as age, literacy, lack of sophistication, hidden or unduly complex contract terms, bargaining tactics, and the particular setting existing during the contract formation process," and substantive unconscionability, which generally involves harsh or unfair one-sided terms.")

(3) The court stated the following in giving its ruling (bold text is my emphasis, not in the original text; footnotes in original text omitted):

  • We acknowledge that the transactions at issue in this case did not directly involve the original mortgage loan but, instead, agreements to cure default between a mortgagor who was not a party to that loan and the assignee and servicer of that loan. However, as the Lemelledo Court observed: "the CFA could not possibly enumerate all, or even most, of the areas and practices that it covers without severely retarding its broad remedial power to root out fraud in its myriad, nefarious manifestations." Lemelledo, supra, 150 N.J. at 265 (citing Federal Trade Comm'n v. Sperry & Hutchinson Co., 405 U.S. 233, 240, 92 S. Ct. 898, 903, 31 L. Ed. 2d 170, 177 (1972)). Instead, the applicability of the CFA "hinges on the nature of a transaction, requiring a case by case analysis." Papergraphics, supra, 389 N.J. Super. at 13. While we would hesitate greatly to hold that most "settlements" are subject to the CFA's strictures, we regard these particular agreements to be so closely allied to the cures of default recognized in N.J.S.A. 2A:50-57 as to warrant coverage.

  • There is little doubt that, if Gonzalez had been the initial debtor and her attempts to cure default had taken place before entry of the order of foreclosure, the transactions would have been covered by the CFA under Lemelledo and Troup. We find no principled reason to distinguish the present structurally identical transactions, albeit by a non-debtor mortgagor, executed after a judgment of default had been entered.

  • The CFA offers a remedy to "[a]ny person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any method, act, or practice declared unlawful under this act" and affords legal and equitable relief, treble damages and reasonable attorneys' fees to successful litigants. N.J.S.A. 56:8-19.

  • We find that Gonzalez' status as a signatory to the agreements to cure default entered with Wilshire provides her with standing under the CFA. In the circumstances presented, Wilshire's arguments regarding the lack of privity between Gonzalez and Wilshire arising from the making of the initial loan and the issue of her status as a "consumer" of that loan are irrelevant. A separate contractual relationship between Gonzalez and Wilshire exists that involves the loan, but does not arise directly from it.

  • Further, we find that the monetary damages that Gonzalez claims to exist as the result of Wilshire's allegedly unconscionable practices, if proven, constitute the statutorily-required "ascertainable loss." Weinberg v. Sprint, Corp., 173 N.J. 233, 237 (2002) (holding that to have standing under the CFA, "a private party must plead a claim of ascertainable loss that is capable of surviving a motion for summary judgment.").

  • We disagree with the motion judge's conclusion that Gonzalez could obtain relief in this matter only by a motion to vacate, modify or enforce the "settlement" with Wilshire. Such a motion would not effectively address the unconscionable practices that Gonzalez claims to have occurred here. Moreover, contrary to the conclusion of the motion judge, we do not find the casting of this matter as a CFA claim to signify an improper motive on counsel's part. The remedies of treble damages and an award of attorneys' fees were created to address just such a circumstance as has allegedly arisen here.

  • As the Court stated in Wanetick v. Gateway Mitsubishi, 163 N.J. 484 (2000): "two of the three main purposes of the Act are `to punish the wrongdoer through the award of treble damages, and, by way of the counsel fee provision, to attract competent counsel . . . .'" Id. at 490 (quoting Lettenmaier v. Lube Connection, Inc., 162 N.J. 134, 139 (1999)). See also Cox v. Sears Roebuck & Co., 138 N.J. 2, 24-25 (1994); Sema v. Automall 46 Inc., 384 N.J. Super. 145, 151 (App. Div. 2006).

  • We thus conclude that Gonzalez has offered sufficient factual evidence of unconscionable conduct on the part of Wilshire to withstand a motion for summary judgment Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995), and that the motion judge was mistaken in his determination that the CFA is inapplicable to her claim. Manalapan Realty v. Manalapan Tp. Comm., 140 N.J. 366, 378 (1995).

(4) All states and the District of Columbia have some form of consumer protection law (regrettably, many are less effective and consumer-friendly than others) that may be applicable in situations similar to this one. For more on this point, see the National Consumer Law Center report: CONSUMER PROTECTION IN THE STATES: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

Florida Trial Judge Fumbles Chance To Vacate Foreclosure Judgment Granted While Valid Forbearance Agreement In Effect; Relief Obtained On Appeal

From a recent ruling from Florida's 4th District Court of Appeal:

  • On March 7, 2008, Aurora [Loan Services, LLC] filed a complaint against the Elliotts to foreclose on their mortgage. The Elliotts received the summons and complaint on March 11, 2008. According to their verified motion, on March 11, 2008, Lisa Elliott contacted Aurora's attorney, as directed in a letter attached to the complaint. The attorney instructed they call Aurora directly. The Elliotts did so and they then began a workout agreement. Lisa Elliott, in the verified motion, stated that they reached a proposed "Special Forbearance Agreement" with Aurora, dated June 27, 2008.

  • Due to the Elliotts' failure to file any [court] papers [in the foreclosure action], Aurora moved for an entry of default against the Elliotts, which was entered on May 21, 2008. Further, on May 21, 2008, Aurora filed a Motion for Summary Judgment and Motion for Attorneys Fee's and Memorandum (along with supporting affidavits).

  • Lisa Elliott stated in the verified motion that they discovered the entry of default for the first time on August 27, 2008. They filed their Verified Motion to Vacate Default with Proposed Answer and Affirmative Defenses on September 3, 2008. At the hearing on September 24, 2008, the trial court denied the Elliotts' verified motion to vacate default and granted Aurora's motion for summary judgment. The court then entered the final judgment of foreclosure.(1)

For the Florida appeals court's unanimous decision, and supporting legal rationale, vacating this foreclosure judgment (holding that the lower court abused its discretion in denying the homeowners' motion to vacate the default), see Elliott v. Aurora Loan Services, Case #4D08-4362 (4th Dist., April 7, 2010).

(1) To the foreclosing lender's credit, it agreed to stay the case and cancel the foreclosure sale (which was set for November 26, 2008) pending this appeal, thereby obviating the need for the homeowner to cough up the necessary cash to post a (probably unaffordable) appeal bond to halt the sale while the appeal proceeded.

Billion$ In Pooled Loans Were Defective, Ex-Citigroup’s Chief Underwriter Warned Bosses

eCreditDaily reports:

  • Beginning in 2006, Citigroup’s chief underwriter overseeing $90 billion in loans warned the institution’s top bosses that at least 60 percent of mortgages purchased and sold were “defective.” By 2007, as the subprime mortgage bubble would give way to a housing market collapse, Citigroup’s Consumer Lending Group was sitting on pools of subprime mortgages with a defective ratio of 80 percent.

  • Richard Bowen, the former Citi chief underwriter and senior vice president, testified before the Financial Crisis Inquiry Commission today, outlining unheeded warnings to [Robert] Rubin and other top Citi executives. Rubin, the former chairman of the executive committee of Citigroup’s board of directors, is to testify before the panel on Thursday.

  • Beginning in 2006, I issued many warnings to management concerning these practices, and specifically objected to the purchase of many identified pools. I believed that these practices exposed Citi to substantial risk of loss,” Bowen said in prepared testimony. Most notable was the lack of strict lending standards. Stricter credit oversight was abandoned in the rush to acquire mortgages originated by third-party underwriters for the purpose of selling in pools within mortgage-backed securities to the government sponsored enterprises, Fannie Mae and Freddie Mac, or Wall Street investors.

  • This channel – from near blind origination into the hands of eager investors – was the underlying pipeline the fueled the financial meltdown of 2008, and the subsequent credit crunch and foreclosure crisis.

For more, see Ex-Citi Exec Warned Bosses of ‘Defective’ Mortgage Pools.

Sloppy Service, Subsequent Title Transfer In Foreclosure Process Leaves Lender Holding The Bag On $111K+ Error

A recent ruling by the Indiana Court of Appeals may be of some interest to title agents and examiners (who are already in the unenviable position of being expected to insure title to homes that have a foreclosure judgment and foreclosure deed in its chain of title), and to some real estate operators (those who profitably dabble in the "trafficking" of seemingly worthless judgment liens on properties in foreclosure). The following facts have been taken from the ruling:

  1. Countrywide made a loan secured by a mortgage on a home on April 27, 2005.
  2. On June 9, 2006, CSB, an unsecured lender, obtained a default judgment against homeowners in the sum of $111,499.38 based upon a promissory note executed by the homeowners in favor of CSB. CSB recorded its judgment and obtained a lien on homeowner's property, inferior in priority to Countrywide's mortgage.
  3. Thereafter, Countrywide filed its complaint to foreclose mortgage against homeowners on August 28, 2006, and obtained a judgment of foreclosure on October 30, 2006.
  4. Countrywide did not name CSB as a defendant in its complaint to foreclose despite the fact that CSB had properly recorded its default judgment against homeowners.
  5. Therefore, CSB neither was made a party to nor had notice of the foreclosure action.
  6. Countrywide obtained title to the real estate following a sheriff's sale on February 22, 2007, and later recorded such title on March 15, 2007.
  7. Countrywide subsequently transferred title to the real estate to FNMA by deed recorded on May 3, 2007.
  8. After learning of CSB's judgment lien against the property, Countrywide filed its complaint for strict foreclosure against CSB on October 2, 2007. Countrywide sought an order foreclosing CSB's equity of redemption and interest in the real estate.
  9. CSB answered the complaint and also filed its own complaint to foreclose its judgment lien on the property naming FNMA and the Steuben County Treasurer as defendants.

Question: Which lender has priority and entitled to prevail in this matter?

Answer: If you said Countrywide, you're wrong.

The general rule applicable in Indiana, as well as in most (if not all) other states, can be generally, described as follows:

  • When junior lienholders are not made parties to the action, the foreclosure and sale cannot be enforced against them, and they are not precluded from exercising any right of redemption.
  • However, the rule then allows the foreclosing mortgagee to prevent junior lienholders from stepping up in priority as against the subject property, by allowing it (the foreclosing mortgagee) to re-foreclose on the property, and thereby giving it first crack at any money generated by foreclosure on the property, ahead of any junior lienholders, until it has been paid what it is owed in full.
  • In Indiana (and possibly other states???), the right to conduct this re-foreclosure action is limited solely to the foreclosing mortgagee who acquires the property at the initial foreclosure sale (in this case, Countrywide, the foreclosing lender).

In this case, the fact that there was a screw-up (presumably by Countrywide's foreclosure attorney) in failing to name and properly serve CSB in the foreclosure lawsuit, standing alone, was not fatal to Countrywide's mortgage lien priority as against CSB's later-acquired and recorded judgment lien. What sank Countrywide (and/or FNMA) in this case was the fact that this initial screw-up was then followed, arguably, by a second screw-up. That is, the transfer of the property by Countrywide (the winning bidder at the foreclosure sale) to FNMA without the benefit of a title search.(1) The court held that this subsequent transfer extinguished Countrywide's right to assert its mortgage against the now no-longer-inferior $111,499.38 judgment lien held by CSB.(2)

For the ruling, see Citizens State Bank of New Castle v. Countrywide Home Loans, Inc.

(1) From the court's ruling:

  • Contrary to Countrywide and FNMA's suggestion, we conclude that Brightwell correctly states Indiana law regarding priority rights when a foreclosing mortgagee sells the property to a third party. We hold that while Countrywide's mortgage lien was preserved after it acquired title to the property via sheriff's sale, Countrywide's right to assert the mortgage against CSB was extinguished upon subsequent transfer of the property to FNMA and, thus, the mortgage-assertion right did not pass to FNMA. When property is transferred for value or resold to a third party, that party cannot then assert what was formerly a superior mortgage lien position against the judgment lien. Rather, the third party takes the property subject to the valid judgment lien.

It is undeniable that there are plenty of judgment lienholders that have ostensibly been foreclosed by the owner/holder of a superior 1st mortgage. However, if the judgment lienholder wasn't served in the foreclosure action (much like CSB in this case), or if there was "sloppy" service attempted on the judgment lienholder that was so ineffectual so as to render it void, this ruling may support the proposition that the lien has not been extinguished, and is still "alive," thereby possibly giving:

  • title examiners, agents, insurers another issue to sweat about when underwriting a title insurance policy on a foreclosed property, and
  • clever real estate operators who seek out and buy these liens (usually at a steep discount) one more potentially profit-pocketing opportunity.

(2) For another case where a major lender's sloppiness in a foreclosure action, despite its priority position as against another party to the suit, left itself holding the bag, see Creditor's Failure To Record Request For Notice Allows Ex-Homeowner To Snatch Away Surplus Out From Under Subordinate Lienholder After F'closure Sale.

Sunday, April 11, 2010

South Florida "Surplus Snatcher" Hit With Grand Theft Charge In Alleged Ripoff Of Sale Proceeds Due To Foreclosed Homeowner After Public Auction

In West Palm Beach, Florida, The Palm Beach Post reports:

  • A Boynton Beach man who operates a business specializing in recovering unclaimed property and money found $60,000 for a client — then kept the windfall for himself, state investigators say. Richard Brandt, 41, of Woodgrove Harbor Lane in Boynton Beach, has been charged with grand theft by the state Department of Financial Services, two and a half years after his company allegedly convinced a Palm Beach County man that he could recoup tens of thousands of dollars for him.

  • Investigators say Brandt was president and director of Above Par Loss Prevention, a company that promised to recoup unclaimed property for its clients. Brandt's company contracted with a Palm Beach County man in 2007 to recover $60,000 in unclaimed foreclosure money he was due from the Palm Beach County Clerk of Court, investigators allege. Under the contract, Brandt would keep 12 percent of the recovered money as a fee and the client would get the rest.

  • Brandt recovered the money in April 2008 but didn't turn over any of it to his client, according to an arrest report. The client notified the state Department of Financial Services. When investigators began asking Brandt questions, investigators say he coughed up a fraction of the money. The rest he claimed he didn't have. In the end, investigators charged him with stealing $39,670 from the client.

Source: Boynton Beach man charged with stealing nearly $40,000 of client's recovered money.

Another Vulnerable Senior Falls Prey To Adult Child; Deed To Home Signed Over, POA Used To Siphon Savings From Bank Account

In Oklahoma City, Oklahoma, reports:

  • Her active life contrasts starkly with two years ago when [Rose] Howard (not her real name) sat alone and locked inside her daughter’s home for six months, while her daughter ran through her $39,000 savings account. She’d been hospitalized with a broken arm and upon discharge, her daughter convinced her to temporarily stay with her.

  • "I could have stayed in my own home because I had home health,” Howard said. "But I figured there was no reason not to go. She’s my daughter. I trusted her.”

  • A retiree of the Oklahoma Turnpike Authority who single-handedly raised three daughters, Howard said her only surviving daughter coerced her into signing over the deed to her home, convinced everyone she had Alzheimer’s disease and misused a financial power of attorney to tap Howard’s money to buy expensive furniture, clothes, a brand-new pickup and stop foreclosure on her own home.


  • On Howard’s behalf, [Senior Law Resource Center(1) attorney Catheryn] Koss won a civil case against her daughter, resulting in a voided deed transfer on her home,(2) stopped payment on several large checks, monthly restitution paid by a granddaughter who was given some of Howard’s money, and imprisonment of her daughter, who has been in the county jail for a year. A criminal case, brought by the Oklahoma County district attorney’s office, is scheduled to be heard in two weeks. "All too often it’s impossible to recover money,” Koss said, "because many abusers are unemployed or underemployed.”

For more, see Financial elder abuse is feared widespread (More than 6,000 cases of mistreatment of seniors investigated last year).

(1) Senior Law Resource Center is a nonprofit organization in Oklahoma City that provides education and support to elders and their caregivers in Oklahoma and reportedly offers legal services on a sliding-scale fee.

(2) A quiet title action is typically the type of civil lawsuit initiated by the victim:

  • to have the deed used in this type of unauthorized title transfer declared void, and
  • to property restore the title to the property in the name of the victimized homeowner.

More Financially Strapped Homeowners Claim Lender Duped Them Into Defaulting On House Payments

In Sacramento, California, Courthouse News Service reports:

  • JPMorgan Chase instructed homeowners to stop making mortgage payments, as that was the only way to be considered for a loan modification, then repossessed their house when they followed the bank's advice, a couple claims in Federal Court. "I've seen this happen to so many people," their attorney said. "When they come in here to tell me their story, I can actually tell it to them." Faiz and Khadua Jahani sued Morgan Chase and its predecessor, Washington Mutual Bank, on their own behalf and on behalf of the public.

For more, see Thanks a Lot, JP Morgan Chase.

For the lawsuits, in which the homeowners seek class action status, see Jahani v. Washington Mutual Bank, et al.

Massive Foreclosure Logjams Stall Court's Issuance Of Property Titles To Winning Bidders At Public Auctions

In West Palm Beach, Florida, The Palm Beach Post reports:

  • Don Cameron's March 8 win in a Palm Beach County home auction is stalled somewhere on the third floor of the courthouse in stacks of foreclosure filings piled several feet overhead. He'd like to start fixing up the three-bedroom house, renovate the kitchen, maybe get it ready for a first-time home buyer hoping to cash in on the waning days of the $8,000 tax credit.

  • But nearly a month after his $74,570 purchase, which he is required to pay for in full by noon the next day, the massive backlog of foreclosures in the Palm Beach County Clerk of Court's Office still has him waiting for the home's title. [...] By [Florida] statute, the clerk can't release a title for 10 days, but waiting up to 60 days to claim ownership is cutting into Cameron's profit margin and, some say, the economic recovery.(1)

For more, see As PBC foreclosure paperwork piles up, so does desperation.

(1) For an example of what can happen when a winning bidder at a foreclosure sale immediately takes possession of, fixes up, and rents out a property without waiting to have the title formally issued to him, see Family kicked out of rental that landlord didn't legally own.