Saturday, May 1, 2010

Rent Skimming Scam Stings Would-Be Buyer Of Elder Care Home Under Lease-Purchase Deal With Owner; Leaves Unwitting Seniors Facing The Boot

In Northern California, The New York Times reports:

  • Sometimes even the licensed administrators managing an elder care home have been blindsided by an eviction notice resulting from a mortgage default. Inocencia Arindaeng, the administrator of a facility in Walnut Creek, Calif., has said in court documents that this happened to her.

  • She had signed a “lease to purchase” agreement with the owner of the property in 2007, according to court records, and diligently paid her monthly rent to the owner while caring for her elderly charges, who range in age from 86 to 97. The complaint said the owner did not use Ms. Arindaeng’s money to pay the mortgage. Ms. Arindaeng did not know the extent of the financial mess she was in until she and the elderly tenants she cared for received an eviction notice on March 18, 2009.

Source: Elder-Care Home Foreclosures, Without Warning.

Jury Convicts POA Abuser Of Ripping Off 89-Year Old Woman; Care Home Staff's Suspicions Raised After Scammer Put Victim's £300,000 Home Up For Sale

In Exeter, Devon (UK), the Herald Express reports:

  • A "greedy" 67-year-old man has been found guilty of defrauding his elderly neighbour out of £40,000. Robert Cole, of Ilsham Marine Drive, Torquay, abused his position as power of attorney over the affairs of Hilda Falk, a jury at Exeter Crown Court found. Cole denied one charge of fraud but the jury returned a unanimous verdict. [...] The verdict brought to an end a five-day trial during which the court was told that Cole had gained control over his neighbour's financial affairs and then exploited that to pay for his failing business.


  • Suspicions were only raised after Mrs Falk had moved into residential care at Sundial Care Home in Torquay. Staff were puzzled by her diminishing financial assets. Cole put her house on the market and changed the locks.(1) Speaking during a police interview in 2008, Mrs Falk, who has since died, said: "I thought I could trust him but I found I couldn't."

For the story, see Greed 'overcame' man who took £40,000 from elderly neighbour.

(1) See: Man 'put home of neighbour up for sale':

  • [Robert Cole] stole £42,000 from his elderly neighbour to pay for his mortgage and failing business[, ... ] then put the 89-year-old's £300,000 house on the market and attempted to auction her belongings when she went into a care home 'with eyes on the main prize', the jury has heard on the first day of his trial for fraud.

Cops Search For KC Woman Accused Of Forging Elderly Alzheimer's Victim's Signature To Pocket Reverse Mortgage Proceeds

In Kansas Ciy, Missouri, The Associated Press reports:

  • A Kansas City woman is accused of using an 89-year-old neighbor with Alzheimer's disease to obtain a reverse-mortgage loan of more than $64,000. Jackson County prosecutors on Thursday announced charges against 55-year-old Marilyn James, including financial exploitation of an elder/disabled person and two counts of forgery.

  • James is accused of forging David Cecil's signature to get a $9,000 loan from his life insurance policy. Officials say she also deeded a house that she had inherited over to Cecil, then forged his signature to take out a $64,445 reverse-mortgage loan on the property. Prosecutor Jim Kanatzar says James kept the money from the loan and now Cecil is liable for repayment. The house is in foreclosure and James is still at large.

Source: KC woman accused of using elderly neighbor to land fraudulent reverse-mortgage loan.

Homeowner/Couple Say They Owe $20K+ Over $50 Ticket For Texas HOA's Rules Infraction

In Austin, Texas, The Dallas Morning News reports:

  • Lawmakers say they have tried to write laws in recent years to prevent homeowners associations from gouging and abusing property owners, but more might need to be done. On Monday, outraged homeowners told a House panel they've been threatened with huge fines and possible foreclosure for what they described as minor infractions of association rules.

  • A Houston couple may wind up having to pay more than $20,000 after a feud over a $50 ticket for having gray – instead of black – tape on exterior water lines, leaders of a property owners' rights group told the House Business and Industry Committee. "That was clearly, if it's true, the most egregious thing we heard today," said Rep. Gary Elkins, R-Houston, the panel's vice chairman.

For more, see Outraged homeowners detail HOA fines, foreclosure threats to Austin lawmakers.

Friday, April 30, 2010

Virginia Woman Loses Chance To "Buy Down" Felony Conviction By Failing To Return Entire Ripoff Proceeds To Elderly Victim

In Spotsylvania County, Virginia, The Free Lance Star reports:

  • A woman who stole more than $188,000 from an elderly Spotsylvania County woman officially became a felon yesterday. Jerriett A. Bennett, 56, has repaid $143,000, Commonwealth's Attorney Bill Neely said, but so far has been unable to come up with the rest of the money.

  • Bennett entered a conditional guilty plea last year in which her embezzlement conviction was deferred in order to give her a chance to repay the money. According to the agreement, if she repaid the whole amount, she would have been convicted of a misdemeanor and gotten a suspended 12-month jail sentence. If not, she'd get the felony conviction and a suspended five-year prison term. Neely said Bennett still has to repay the rest of the money or face the possibility of serving prison time.

  • According to the evidence, Bennett stole the money from Maude Scott, a longtime county resident, between October 2007 and April 2008. [...] On Oct. 19, 2007, Scott signed a [] power of attorney giving Bennett control of her affairs. [...] Court records show that Bennett proceeded to cash large annuities belonging to Scott. The money was supposed to provide for Scott's care, and Scott told police she never gave permission for Bennett to spend it.(1)

For the story, see Spotsylvania woman declared a felon in embezzlement case (Woman formally convicted in $188,000 heist; gets suspended sentence).

(1) Reportedly, Bennett's attorney, Claire Caldwell, tried to have Scott declared unfit to testify because of her mental slippage. Neely acknowledged he would have had no case against Bennett had the effort succeeded. But Judge David Beck ruled that Scott could testify and said it would be up to the jury to determine her credibility.

Upstate New York Man Charged With Using Forged Documents To Steal Dead Mom's Home & Rip Off His Six Siblings

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

  • A former Whitehall police dispatcher has been indicted on five criminal charges that accuse him of cheating his siblings out of a Whitehall home after their mother died. John Dalton, 50, [...] is accused of filing a will and property deed with forged signatures of his mother that allowed him to take ownership of her West Street home, worth an estimated $70,000.

  • State Police said Dalton’s six grown siblings were denied their rightful inheritance by the forgeries. Dalton faces felony counts of grand larceny and criminal possession of a forged instrument and misdemeanor counts of offering a false instrument for filing in the indictment handed up recently in Washington County Court.

For more, see Police: Man tried to steal home.

LA Real Estate Broker Cops Plea To Use Of Forged Documents In Deed Theft Scam

In Los Angeles, California, the Los Angeles Times reports:

  • A former Los Angeles firefighter who also worked as a real estate broker pleaded no contest [] to more than a dozen felony counts in connection with a real-estate fraud scheme, authorities said. Brent Lamont Mathews, 43, pleaded no context to six counts of forgery, three counts of recording a false or fraudulent instrument and four counts of grand theft, the Los Angeles County district attorney's office said. He also admitted two special allegations of taking more than $500,000.(1)


  • Mathews allegedly put his name on the title of a Hacienda Heights property without the owner's knowledge or consent through a series of forgeries and false filings, prosecutors said. He also allegedly went on to defraud two investors after recruiting them as partners to "flip" the house, the district attorney's office said. The two victims lost $146,000 in the deal, prosecutors said Mathews resigned from the Los Angeles Fire Department in December 2009 in lieu of discharge, according to the district attorney.

Source: Former L.A. firefighter pleads no contest in real-estate scheme.

(1) Acording to the story, Mathew’s girlfriend at the time, Joi Rochelle Smith, 34, was a notary public and part-time real estate broker who was also charged by authorities. In February, she pleaded no contest to one count of recording a false or fraudulent instrument, the district attorney said. Smith was sentenced to three years of formal probation and 52 days of community service, the story states.

Paralegal Admits Guilt In $2.6M Client Ripoff; Trust Account Looted, Chronic Care Patient Left Broke, On Public Dole; Pair Lost Entire Inheritance

In Hamilton, Ontario, The Hamilton Spectator reports:

  • A crooked paralegal with an admitted gambling problem admits to siphoning more $2.6 million from unsuspecting clients, while masquerading as a bona fide lawyer. Shellee Spinks, 47, pleaded guilty to 16 criminal charges yesterday, including one of theft by power of attorney, 12 counts of theft by conversion, and one each of perjury, obstruction of justice and uttering a forged document.
  • Superior Court Justice Barry Matheson heard that between September 2002 and February 2008, Spinks was employed as a paralegal by Hamilton lawyer Michael Puskas. Much of her work involved completing real estate transactions for her employer, along with various accounting responsibilities.
  • Puskas maintained a bank account at TD Canada Trust in which mortgage funds were held in trust for real estate clients in the process of buying and selling properties. At the same time, Spinks controlled another account with the bank that was for her personal use and into which she regularly transferred large sums of money from the law firm's legitimate trust account. Total losses to real estate clients from these type of thefts amounted to $926,000.
  • Between October 2002 and February 2008, Spinks held power of attorney for an 81-year-old woman in a nursing home. Spinks stole an estimated $200,000 and left the chronic-care patient destitute and on public assistance.
  • In March 2006, Spinks forged the last will and testament of an Ancaster man, which named herself as the executor and trustee of his estate. The bogus will directed that his estate should pass to Spinks, and absent that, to the man's two sisters. The man died on Sept. 26, 2006. At the time of his death, he owned a property on Glancaster Road and had about $400,000 in investment securities.
  • In December that year, Spinks and one of the sisters sold the Glancaster Road property. After adjustments and fees, the balance of nearly $950,000 was to have been deposited into an account in trust for the man's estate. Instead, Spinks deposited the cheque into her private account. When his family questioned why the estate was taking so long to disburse, Spinks told another lie. She said a former employee had come forward with a new will, naming himself executor and this was causing complications and delay. In the end, Spinks also cashed out the deceased man's securities and ended up cheating his sisters out of their entire $1.4 million inheritance.
  • Crown counsel Tracey Stapleton said documents obtained from the Ontario Lottery and Gaming Corporation and internet gambling records revealed that most of the $2.6 million was gambled away by Spinks, except for $700,000, which was transferred to a company called The Broker's Room.
Source: Legal assistant bilked millions (Woman pleads guilty to 16 charges).

Northern California Seniors Live In Unwitting Jeopardy Of Getting The Boot As Underwater Elder Care Homes Fall Into Foreclosure

In Northern California, The New York Times reports:

  • In September 2009, Sgt. Rick Turini of the Santa Clara County Sheriff’s Office drove to a house in San Jose to carry out a court-ordered eviction. With foreclosures in Bay Area counties near all-time highs, the office had been routinely evicting 35 to 40 households a week. But this property was different: It was a board-and-care home for the elderly.

  • Neither the residents nor their families had been warned about an eviction, said Sergeant Turini, who does not recall the home’s exact address. When he arrived with his partner, the house was still occupied, and the distraught daughter of an elderly bedridden woman was struggling to get her mother into a car. A couple of teenagers doing homework in the living room looked up at the officers in shock.

  • We got a call from Adult Protective Services letting us know that the house we were evicting had four or five bedridden residents, and the guy was ignoring the eviction notice,” Sergeant Turini said, referring to the owner. “I couldn’t believe it had gone this far.” He said the sheriff’s department worked with agencies to arrange for the fragile inhabitants to be transferred to other facilities or sent home with relatives.


  • An analysis of data by The New York Times shows that more than 100 elder-care homes in the Bay Area were under foreclosure in the last six months, and that as many as 700 residents — who often need help with bathing, eating and other daily activities — may have faced eviction.

For more, see When Foreclosure Threatens Elder-Care Homes.

See also, Elder-Care Home Foreclosures, Without Warning.

Thursday, April 29, 2010

Wells Fargo Sold Home Out From Under Me Despite Payments On Loan Modification Agreement, Says Homeowner In Lawsuit

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

  • When W.T. Joseph "Tyree" Brown, a 39-year-old sales manager, lost his job and tried to negotiate a home-loan modification, he became entangled in a situation as strange as science fiction, court documents suggest. Things were not as they seemed to be, according to a lawsuit filed in Clark County District Court. Brown said he now fears he will lose his home.

  • In his lawsuit, Brown said he tried to negotiate a permanent loan modification with Wells Fargo Bank. But after several months of payments under a trial loan-modification program, the bank surprised him by foreclosing and selling the house to an investment company.


  • District Judge Valerie Adair has scheduled a hearing for May 5 to consider a motion for a preliminary injunction to replace the temporary restraining order. Alternatively, she may dismiss the lawsuit.

For more, see Modification and misery: Lawsuit claims house sold from under homeowner after push to alter loan.

Houston Woman Says Lender Foreclosed On Her Twice By Mistake

In Houston, Texas, KVUE-TV reports:

  • A Houston woman says Wells Fargo sold her home through foreclosure by mistake last summer, quickly corrected the error, then did the same thing again. Debra Cannon's story began with a divorce in 2007 when she fell behind on her payments and threats of foreclosure followed.

  • "In August of 2009 they foreclosed on my home," she said. Cannon says she was in the process of working out a deal with her mortgage holder, Wells Fargo. But she says it was foreclosed on anyway. "They never really said, but it was an error due to Wells Fargo, and they did rescind -- they gave the money back to the man who bought the home," Cannon said.

  • Cannon's relief was short lived. The foreclosure process began again -- but this time, she thought she had reached an agreement for loan modification and that ended with a knock at the door. "A gentleman came by and told me my home was foreclosed on and gave me a letter demanding I get out," she said.

  • On April 6, Wells Fargo sold her home again through foreclosure. She said she was never notified and has a letter from the bank dated the same day of the foreclosure that states "a system error caused her to be deemed ineligible for the loan modification." "I didn't understand, after Wells Fargo told me everything was fine … I didn't understand it," she said.

For more, see Bank forecloses on woman's home twice.

Pressure From State AG Leads Oregon Man To Cough Up Cash To Settle Complaints From Homeowners In Lopsided Sale Leaseback Arrangements

In Portland, Oregon, KATU-TV Channel 2 reports:

  • Thousands of dollars have been returned to families that Oregon’s attorney general said were hurt in a scam that promised to save their houses from foreclosure, but the man who had to refund the money said he has done nothing wrong. Scott Barnes, a former lease/buyback plan agent, said the homeowners knew exactly what they were getting into – selling their homes and leasing them back with an option to buy them back someday, but Attorney General John Kroger said the case shows how difficult foreclosure rescue schemes are to understand for people in desperate situations.

  • One woman, who declined to be identified, said it was “a total shock, because I wasn’t expecting (the money to be returned).” She got a $4,000 check from Barnes as restitution. Kroger said he promised to help people save their homes through the lease buy-back plan, which he said was too lopsided against the families.

For the story, see Man pays back homeowners in loan modification case.

(1)(They) were in danger of losing their homes to foreclosure and entered into an agreement that they believed would give them a little bit of time to get their financial house in order; instead, it resulted in them having a real risk of losing their home and not be able to get it back,” AG Kroger reportedly said. Barnes said he wrote another $4,000 check to a second family but said he only settled the case because it was cheaper than fighting the attorney general, according to the story.

Pair To Get Probation In Foreclosure Rescue Scam That Duped 22 Victims Into Signing Over Title To 34 Properties Into Fraudulent Trusts

In San Diego, California, San Diego News Network reports:

  • A husband and wife who assisted others in a Ponzi scheme aimed at San Diego Filipinos struggling to make their mortgage payments pleaded guilty [] to felony charges. Ben Hebron, 51, and Gloria Hebron, 53, will be placed on probation and be required to give up their real estate licenses when they are sentenced May 20, said Deputy District Attorney William La Fond. [...] The couple pleaded guilty to three counts each of deceitful practices by a foreclosure consultant and two counts each of rent skimming, La Fond said.(1)


  • During the scam, 22 people “quitclaimed” 34 properties into various fraudulent trusts owned by [Edmundo] Rubi and administered by the Hebrons, the prosecutor said.

For the story, see Couple pleads guilty in Filipino Ponzi scheme.

(1) According to the story, they were indicted in January along with co-defendants Edmundo Rubi and Joseph Encarnacion. Encarnacion, 60, pleaded guilty to helping the scheme’s alleged ringleader, Rubi, by recruiting victims and assisting in a presentation in which the victims were encouraged to transfer titles to their real estate to the defendants, La Fond said. Encarnacion was sentenced to four years in prison and Rubi is scheduled for a mental competency hearing next month. Filipinos in San Diego were urged to invest in companies called “Apocalypse Trust” and “Amerisian Trust,” the prosecutor said. At the time he was indicted, Rubi had just gotten out of prison after serving a 70 month federal sentence for swindling $24 million out of 425 mostly Filipino victims in 2005, La Fond said.

San Jose Man Gets Year in Jail In Loan Modification Ripoff; Cops Plea To Six Felony Counts Of Grand Theft

In Santa Clara County, California, the Contra Costa Times reports:

  • [A] 32-year-old San Jose man was sentenced March 30 to one year in jail for six felony counts of grand theft for defrauding homeowners in a loan modification scam, according to the District Attorney's Office.

  • Hector Ricardo Esquivel pleaded guilty to charges that he scammed thousands of dollars from homeowners in Santa Clara County and beyond from May 2008 to May 2009, according to the district attorney. Esquivel was arrested in May 2009 after an investigation by San Jose police, and he pleaded no contest on Feb. 11.

  • Esquivel was working as a real estate agent after his license had been revoked. He solicited primarily Spanish-speaking homeowners and offered loan modification services, charging thousands of dollars without providing any services. Several homeowners lost their homes to foreclosure, according to the District Attorney's Office. Esquivel also was ordered to pay $23,600 in restitution and is prohibited from working in the real estate or financial sector for the next three years.

Source: 3 charged with defrauding 45 homeowners in mortgage scam.

Manager Of Foreclosure Consulting Outfit Bagged & Held On $1M Bail; Accused Of Pocketing Upfront Cash From Homeowners In Or Nearing Mortgage Default

In Los Angeles, California, the Santa Maria Times reports:

  • The manager of a Los Angeles-based foreclosure consultant organization with an office in Santa Maria has been arrested on suspicion of violating rights of residents whose homes were in or nearing default. Irma Diaz, 41, of Hacienda Heights was arrested by Santa Barbara County District Attorney’s Office investigators Thursday in Los Angeles County. She was booked into Los Angeles County Jail with bail set at $1 million, according to the District Attorney’s Office.


  • Diaz currently is facing two felony counts of committing prohibited foreclosure practices involving one alleged victim, but investigators believe there are more victims. “We suspect that there are many other victims out there, and the investigation is continuing,” said Dave Tonello, supervising investigator with the District Attorney’s Office.

  • Investigators suspect Diaz took part in a scam where victims paid her money to refinance their homes, but she didn’t complete the process, according to Tonello. Her bail was set so high because authorities consider Diaz at risk of fleeing, he said.

For the story, see Foreclosure manager faces felony charges.

Go here for the Santa Barbara County DA press release.

Wednesday, April 28, 2010

Assembly Line Attorney Does "Ralph Kramden" Imitation When Judge Seeks Explanation For Bogus Affidavit Filed In Foreclosure Action

The New York Post reports:

  • GMAC Mortgage got slammed by a Florida judge this month -- and that may be good news for some of the 1,234 New York homeowners hit with a foreclosure action by GMAC since the beginning of 2008.

  • In that case, Judge Anthony Rondolino voided a GMAC foreclosure win after he found out legal papers filed by the company with the court to steamroll its way over homeowner Debbie Visicaro were faulty. They were filed by an employee of GMAC's law firm who had no personal knowledge of the faulty mortgage's position. In short, they were based entirely on hearsay.

  • Lawyers familiar with foreclosure actions filed by law firm mills, as was done in this case, say such instances aren't rare. Visicaro, like most of the New York homeowners, at first decided to fight the foreclosure action without a lawyer. She didn't know that the law firm employee was guessing in his court papers. But Visicaro finally hired a lawyer, Michael Alex Wasylik, who pointed out the flimsy evidence to the judge who then admitted he made a mistake when he first awarded GMAC a quickie legal win.

  • When the GMAC lawyer couldn't explain away the bad evidence -- and could only manage a Ralph Kramden-like hamina-hamina-hamina -- the judge barked: "You're going to have to speak up. I know that when you're getting pummeled, it's hard to talk loudly."

  • "You know what I'd really like to see?" Rondolino said. "I'd like to see in one of these cases where a defense lawyer cross-examines, takes a deposition of these people, and we can see whether they ought be charged with perjury for all these affidavits."

Source: Fla. judge reverses GMAC loan.

Oklahoma Couple Beats Off Foreclosure As Lender Fails To Produce The Note, Prove Right To Collect

In Forest Park, Oklahoma, The Oklahoman reports:

  • The Rev. Horace Scott for six years struggled to keep his house from being foreclosed on. Last week he learned he won’t lose his home. When it came down to it, no one could prove who actually owned what he thought was his.

  • "In the old days, you got a loan to buy your house from a nearby bank,” explained Scott’s attorney, Roland Combs. The mortgage note, or the instrument of the debt containing the payment terms and details of it, stayed with the bank along with the mortgage that is signed by the borrower and is filed with the county clerk. The mortgage secures the debt obligation with the property.

  • "Then, someone on Wall Street got the idea to use those notes as securities so they could be invested,” Combs said. "Notes were sold and combined and put into a pool to invest in by investors.” And sometimes, along the way, exactly what investor or bank has the original note becomes a mystery.


  • [L]ike so many mortgage notes pooled and used as investment vehicles, it wasn’t clear who held the original note or had a right to collect on the debt. Combs objected in court to Bank of New York’s claim that they had a connection to the Scotts’ debt because their name wasn’t on the mortgage or the note. On two occasions the bank didn’t respond to the objection. For this reason, a judge ruled the bank couldn’t collect. State law requires banks prove they have a mortgage and note together in order to foreclose on a home.

For the story, see Home loan confusion puts end to foreclosure of Oklahoma reverend (After housing bubble, toil and trouble, preacher wins).

Renters Say "You Lend It, You Mend It!" As Lawyers Cite NY Legal Precedent In Attempt To Hold Banks Responsible For Repairing Property In Legal Limbo

In New York City, the Daily News reports:

  • Thousands of city tenants living in foreclosed apartment buildings - many with deteriorating conditions - saw a glimmer of hope Wednesday. Lawyers for Legal Service NYC filed a motion in Bronx Supreme Court that would force banks foreclosing on a property to maintain the building's upkeep while the case is pending.

  • A foreclosure, especially a contested one, could drag on for years, leaving the building without a tangible owner to make repairs for some things as simple as a runny faucet or as serious as toxic mold. "As complicated as this problem is, we're not going to take it lying down," said City Council Speaker Christine Quinn (D-Manhattan), who was involved in forming a city task force on financially distressed rental housing last year. "We will go building by building. This is a message to lenders that they will be held accountable," Quinn said.

  • The judge hearing the case, Justice Stanley Green, will not likely rule on the motion for several weeks. There is legal precedent for the motion, said Legal Services lawyers citing a 1997 New York State appellate court ruling that a bank is responsible for maintaining a property during a foreclosure proceeding.

  • About a year ago, banking behemoth Wells Fargo foreclosed on 10 properties in the Bronx owned by Los Angeles-based Milbank Real Estate. Since then, the buildings have been languishing in legal limbo, no longer owned by Milbank, but not yet definitively awarded by a judge to Wells Fargo.

For more, see Judge to rule on maintenance resposibility for foreclosing properties.

See also, The New York Times: Bid to Make Banks Fix Crumbling Bronx Properties (Housing advocates estimate that 4,700 apartments in dozens of buildings across New York City are in foreclosure, and that about 110,000 apartments are at risk).

California State Pension Plan To Cease Predatory Equity Real Estate Investments After Writing Off Million$ In Soured Deals

In Sacramento, California, Bloomberg News reports:

  • The California Public Employees’ Retirement System, the largest U.S. public pension, said it will stop investing in real-estate projects that would eliminate rent-regulated apartments, such as New York City’s Stuyvesant Town-Peter Cooper Village. [...] The new policy states that Calpers cannot invest in projects that would eliminate rent-controlled apartments or convert them to market rates.

  • Calpers wrote off a $500 million investment with Tishman Speyer Properties LP and BlackRock Inc. after the partnership’s plan to raise rents at Manhattan’s largest apartment complex failed to generate enough income to pay the $3 billion mortgage. The group paid $5.4 billion for Stuyvesant Town-Peter Cooper Village in 2006. The policy change is intended to head off a more restrictive proposal making its way through the California Legislature. That bill might prevent the fund from investing in affordable housing projects, said Brad Pacheco, a Calpers spokesman. Tenant-rights advocates sought the change after Calpers invested $100 million in a project in East Palo Alto, a low-income city in Silicon Valley. Tenants there complained to the Calpers board that if vacancy rates increase enough, the owners would be allowed to end rent-control rules.

Source: Calpers’ Board Approves Policy Shift to Protect Rent Control.

S. Calif. Man Suspected Of Openly Hijacking Title To Vacant Homes & Renting Them Out, Leaving Owners Frustrated, Neighbors Rattled, Cops Flat-Footed

In Southern California, The Orange County Register reports:

  • California's foreclosure crisis has spawned an unusual operation by a bankrupt Orange County businessman who takes control of vacant homes and rents them out, according to police, property records and neighbors.

  • From an office at an Anaheim massage clinic, Blair Hanloh has recorded deeds on at least 12 vacant houses in Southern California that he does not own. Property records show no evidence that the owners deeded interest to him—and five owners interviewed by The Orange County Register said that they had not.

  • Hanloh's scheme has rattled neighbors, befuddled police and frustrated the properties' real owners – who say they must spend thousands of dollars in legal fees to evict the tenants.(1)

For more, see Owners say they lost vacant homes to 'renters'.

See also, D.A. to examine vacant home scheme:

  • Orange County prosecutors have begun examining the law behind an unusual Southern California scheme in which an Anaheim businessman deeds vacant homes to himself and then installs renters. The District Attorney's fraud unit is working with Orange County Recorder Tom Daly to gather information about the operation by Anaheim businessman Blair Hanloh, officials said.

(1) According to the story, Hanloh twice declined comment, saying only that he is doing everything legally. "I will tell you that what I do is fight the banks," Hanloh reportedly said. Reportedly, the Orange County Sheriff's Department and Anaheim police say they are investigating. "We're getting an education, just like you are," said sheriff's Lt. Mark Levy, who oversees police services in Dana Point. "These quitclaim deeds, if misused, certainly muddy the water." Hanloh's official-looking paperwork has reportedly kept police officers from immediately taking action.

The story states that Hanloh's scheme appears similar to one in Pasco County, Fla., where a man took over 72 homes under a law called "adverse possession," renting out half of them, according to published reports. He was arrested in February on fraud charges. See C. Fla. Man Claims "Adverse Possession" Defense After Arrest On Home Hijacking Charges; Swiped 72 Houses, Rented Out 31 To Unwitting Tenants, Say Cops.

Tuesday, April 27, 2010

MERS "The Veiled Man Wielding The Home Foreclosure Ax" & "A Tax Evasion Broker"?

In Salt Lake County, Utah, The Salt Lake Tribune recently spotlighted Mortgage Electronic Registration Systems (MERS), a loan registry designed to save the home loan industry millions of dollars on paperwork and recording fees, and the role it plays in foreclosure actions:

  • Here and nationally, the company's legal status as a party in these actions is increasingly being challenged. "This is one of the buried, yet-to-emerge bombs in the whole mortgage crisis," said Christopher Peterson, a University of Utah law professor and author of the first scholarly analysis of MERS and its legal underpinnings, to be published this spring in the University of Cincinnati Law Review. "This has the potential to fundamentally affect the trajectory of our recovery."

  • MERS officials vigorously disagree, but Peterson contends the MERS system has violated a deep-seated principle of American law -- transparency in land-ownership transactions -- by effectively removing much of that information from the public record. In so doing, Peterson says, MERS also has served as "a tax evasion broker," denying counties millions of dollars in recording fees -- revenue that might otherwise have funded essential public services.

  • And now, by allowing actual lenders to pursue foreclosures under MERS' name instead of their own, Peterson says the company is acting as a "foreclosure doppelganger." "Throughout history, executioners have always worn masks," the U. professor writes in his article, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System. "In the American mortgage lending industry, MERS has become the veiled man wielding the home foreclosure ax."


  • Amid the current explosion in foreclosure actions across the country, courts in Nevada, Florida, Minnesota and elsewhere have upheld MERS standing as a foreclosing party. MERS also points to a 2009 federal case in Utah that affirmed its authority to exercise certain legal powers accorded to the lender, including the right to foreclose.

  • But several MERS foreclosures have bogged down when parties could not produce the original loan or "blue-ink'' documents on judicial demand. In September, the Kansas Supreme Court ruling took a dim view of the idea of a "nominee'' of the lender filing foreclosures(1) -- a position that some observers see as hostile to the MERS approach.

For more, see Loan registry raises legal questions (Foreclosures: Courts, legal scholars question company's role).

(1) Landmark Nat'l Bank v. Kesler, 289 Kan. 528; 216 P.3d 158, 2009 Kan. LEXIS 834 (2009), affirming Kansas Court of Appeals in Landmark Nat'l Bank v. Kesler, 40 Kan. App. 2d 325, 192 P.3d 177, 2008 Kan. App. LEXIS 138 (2008).

Another Florida Judicial Rubber-Stamper Reversed On Appeal As Foreclosing Lender Fails To Conclusively Establish Standing To Sue

In West Palm Beach, Florida, a unanimous, 3-judge panel of Florida's 4th District Court of Appeal recently reversed a Broward County trial judge that rubber-stamped a summary judgment of foreclosure in favor of a lender that failed to conclusively establish that it had standing to sue (bold text is my emphasis, not in the original text):

  • Aurora Loan Services, LLC, filed a mortgage foreclosure action against Jerry Riggs, Sr., alleging that it was the "owner and holder" of the underlying promissory note. Aurora filed a copy of the mortgage and a copy of the promissory note, which named Riggs as the mortgagor and First Mangus Financial Corporation as the mortgagee. The promissory note reflected an "endorsement in blank," which is a stamp with a blank line where the name of the assignee could be filled in above a pre-printed line naming First Mangus. Aurora moved for summary judgment, and, at the hearing, produced the original mortgage and promissory note reflecting the original endorsement in blank. The trial court granted summary judgment in favor of Aurora over Riggs' objections that Aurora's status as lawful "owner and holder" of the note was not conclusively established by the record evidence. We agree with Riggs and reverse the summary judgment.

  • The Second District confronted a similar situation in BAC Funding Consortium, Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936 (Fla. 2d DCA 2010), when the trial court granted alleged assignee U.S. Bank's motion for summary judgment. In order to establish its standing to foreclose, U.S. Bank filed an assignment of mortgage, which, as described, is comparable to the endorsement in blank in the instant case. Id. at 937.

  • That court reversed because, inter alia, "[t]he incomplete, unsigned, and unauthenticated assignment attached as an exhibit to U.S. Bank's response to BAC's motion to dismiss did not constitute admissible evidence establishing U.S. Bank's standing to foreclose the note and mortgage." Id. at 939. The court in BAC Funding Consortium, properly noted that U.S. Bank was "required to prove that it validly held the note and mortgage it sought to foreclose." Id.

  • In the instant case, the endorsement in blank is unsigned and unauthenticated, creating a genuine issue of material fact as to whether Aurora is the lawful owner and holder of the note and/or mortgage. As in BAC Funding Consortium, there are no supporting affidavits or deposition testimony in the record to establish that Aurora validly owns and holds the note and mortgage, no evidence of an assignment to Aurora, no proof of purchase of the debt nor any other evidence of an effective transfer. Thus, we reverse the summary judgment and remand for further proceedings. We find no merit in any of the other arguments raised on appeal.

    Reversed and remanded.
    GROSS, C.J., and POLEN, J., concur.

For the ruling, see Riggs v. Aurora Loan Services, LLC, 4D08-4635, (Fla. 4th DCA, April 21, 2010).

Supremes Reverse Lower Courts; Say Attorney Screw-Up When Pursuing Foreclosure Action Is Indefensible As "Bona Fide Error" Under FDCPA

In Washington, D.C., Courthouse News Service reports:

  • Attorneys cannot hide behind an honest mistake should they violate federal debt-collection laws when chasing down debt, the Supreme Court ruled Tuesday. The ruling comes after the law firm of Carlisle, McNellie, Rini, Kramer & Ulrich filed suit in Ohio state court in 2006 on behalf of Countrywide Home Loans to foreclose on the mortgage for property owned by Karen Jerman. The lawsuit included a notice that the mortgage debt would be assumed valid unless Jerman disputed it in writing. Jerman's attorney sent a letter disputing the debt, and Countrywide confirmed that the debt had been paid in full.

  • The law firm withdrew its foreclosure lawsuit. Jerman fired back with a lawsuit, seeking class certification and damages for violating the Fair Debt Collection Practices Act. She contended that the firm broke the law by stating that her debt would be assumed valid unless she disputed it in writing.(1) The district court found that the woman's rights had been violated, but concluded that the law firm was shielded from liability because the violation was not intentional and "resulted from a bona fide error. The 6th Circuit found that the fair-debt law extends to "mistakes of the law."

  • In writing the decision, Justice Sonia Sotomayor said the court declines "to adopt the expansive reading" of the law. "We have long recognized the 'common maximum, familiar to all minds, that ignorance of the law will not excuse any persons, either civilly or criminally.'"

For the story, see Ignorance Still No Defense, Court Says.

See also, The Wall Street Journal: Debt Collectors Can Face Lawsuits for Mistakes, Court Says.

For the ruling, see Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, 08-1200 (April 21, 2010).

For earlier post, and links to all the briefs, see Supremes To Decide Whether Attorney Screw-Up When Pursuing Foreclosure Action Is Defensible As "Bona Fide Error" Under FDCPA.

(1) The consumer alleged the defendant violated the FDCPA because it compelled consumers to dispute the debt in writing when the FDCPA imposes no such requirement. See 15 USC 1692g(a)(3). The FDCPA states simply that if the consumer dipsutes the debt in writing, such written dispute operates to impose certain legal obligations on the creditor. See 15 USC 1692g(a)(4),(5); 15 USC 1692(g)(b). The consumer is always free to dispute the debt orally. Such oral dispute, however, will not impose those legal obligations on the creditor that a written dispute imposes.

Foreclosure Volume May "Encourage" Sloppiness, Boilerplate Paperwork Or A Lack Of Thoroughness;" Makes Process "Fraught With Potential For Fraud"

A recent story in The Wall Street Journal serves as another reminder of the problems inherent with mortgage lenders' use of assembly line law firms to prosecute foreclosure actions:

  • [A] Florida ruling against U.S. Bank was also a critique of law firms that handle foreclosure cases on behalf of banks, dubbed "foreclosure mills." Lawyers operating foreclosure mills often are paid based on the volume of cases they complete. Some receive $1,000 per case, court records show. Firms compete for business in part based on how quickly they can foreclose. The David Stern firm had about 900 employees as of last year, court records show.

  • "The pure volume of foreclosures has a tendency perhaps to encourage sloppiness, boilerplate paperwork or a lack of thoroughness" by attorneys for banks, said Judge [Lynn] Tepper of Florida, in an interview. The deluge of foreclosures makes the process "fraught with potential for fraud," she said.

Source: Judge Bashes Bank in Foreclosure Case.

LI Judge Strikes Again; Hammers Lender For $100K In Damages, Scraps $119K In Dubious Loan Charges For "Overreaching, Shocking, Unconscionable" Conduct

In Suffolk County, New York, Newsday reports:

  • A state judge accused Emigrant Mortgage Co. of premeditated attempts to destroy an East Northport couple's chances of keeping their home, ordering the lender to pay the borrowers $100,000 in damages and scrapping as much as $119,330 in questionable late charges.


  • [E]migrant waited 14 months before starting a foreclosure case, apparently to rack up penalty fees, [State Supreme Court Justice Jeffrey Arlen Spinner](1) concluded. Then, two months ago, on Feb. 23, the lender offered a loan modification plan and 10 days to accept or reject a proposal whose "deplorable particulars" insulated Emigrant from any liability by violating [homeowners'] state and federal rights, Spinner wrote.

  • "This court is driven to the inescapable conclusion that plaintiff has, by way of calculation and premeditation . . . created a scenario whereby it is a virtual certainty that defendants will ultimately be irreparably damaged," he wrote. "In short, the conduct of plaintiff in this matter has been overreaching, shocking, willful and unconscionable."


  • [W]hat the judge ripped into were the parts that called for the [homeowners] to "unconditionally" agree not to raise any challenges to Emigrant's foreclosure actions, including filing for bankruptcy, if the couple defaults again. The agreement also seems to release Emigrant from federal truth in lending laws, the judge said.

  • "This court has never been presented with such a waiver, especially when accompanied by absurd representations [drafted by the lender] that amount to what could best be described as an express warranty that defendants presently are and will forever be insolvent," the ruling read.(2)

For the story, see Lender ordered to pay E. Northport couple $100G (A state judge accused a mortgage company of premeditated attempts to destroy an East Northport couple's chances of keeping their home).

For the ruling, see Emigrant Mtge. Co. Inc. v Corcione, 2010 NY Slip Op 20133 (Sup. Ct. Suffolk County, April 16, 2010).

(1) The story notes that Justice Spinner is the same judge who, back in November, 2009 voided Long Island residents Greg and Diana Yano-Horoski's $292,500 mortgage for similar conduct by the lender (see Indymac Bank F.S.B. v Yano-Horoski, 2009 NY Slip Op 52333(U), November 19, 2009). He had accused IndyMac Mortgage Services of failing to negotiate a loan modification in good faith. The lender's appeal is pending.

Spinner is also the same judge who recently belted Wells Fargo for giving a homeowner facing foreclosure a premature boot (see Long Island Judge Hammers Wells w/ $155K Tab For Oppressive, Heavy Handed, Egregious Conduct For Pre-Sale Lockout Of Homeowner In Foreclosure).

In his ruling, Justice Spinner makes this acknowledgement to a fellow New York trial judge:

  • Indeed, my learned and distinguished colleague, Justice Timothy J. Walker, in the matter of Wells Fargo Bank, N.A. v Hughes 2010 NY Slip Op (Supreme Court, Erie County; 1/13/2010) declined to approve a settlement proposal where the Plaintiff failed to act in good faith as required by CPLR § 3408. Regrettably, it is patently clear to this Court that Plaintiff has failed to act in good faith in this matter.

(2) In a recent New Jersey case (see Gonzalez v. Wilshire Credit Corp., DOCKET NO. A-2634-08T2, 988 A.2d 567; 2010 N.J. Super. LEXIS 16 (App. Div. 2010)), the state appeals court found that unfair, deceptive, or unconscionable practices engaged in by a mortgage lender in connection with "negotiating" a one-sided loan modification agreement with a financially strapped homeowner was subject to the provisions of the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -106. See Unfair, Deceptive Practices In Connection With Post-Foreclosure Judgment Loan Workout Negotiations Subject To NJ Consumer Fraud Act.

Monday, April 26, 2010

Revenue For S. Florida Assembly Line Foreclosure Mill Skyrockets To $260M As Media Shines Light On Alleged Sloppy, Fraudulent Document Manufacturing

The Tampa Tribune reports:

  • The housing crisis has been very good for Florida's biggest processor of foreclosure lawsuits: Its revenues have skyrocketed to $260 million since the housing bust began. In recent years, the Law Offices of David J. Stern, a Broward County-based foreclosure law firm, has become the largest filer of foreclosure suits in Florida. It also is the biggest filer in Hillsborough County, according to local court records.

  • Stern has taken an unusual step by separating his firm's lawyers from its back-office clerks, title insurance workers and other non-legal staff. Stern spun this back-office staff into a publicly traded company called DJSP Enterprises, which must file financial reports with the Securities and Exchange Commission.(1)


  • Dubbed "foreclosure mills," these firms are known for a factory-like process where most of the legwork of filing lawsuits, researching titles and other duties are handled by clerks and paralegals rather than lawyers. Some judges around Florida have criticized foreclosure mills for sloppy legal work and cutting corners.

  • Last week, the Wall Street Journal wrote [see Judge Bashes Bank in Foreclosure Case] about Lynn Tepper, a circuit court judge in Pasco County who accused the Law Offices of David J. Stern and a banking client of submitting a fraudulent document. According to the article, the judge found Stern's office presented a mortgage document with a falsified notary stamp. In an interview with the Tribune Monday, Tepper said it appeared the document had been backdated in order to give a bank legal standing to foreclose on a home.

For more, see Foreclosure firm's revenues jump to $260 million.

(1) In a related story, DJSP Enterprises has signed an agreement to acquire Timios, a national title insurance and settlement services company. Headquartered in Westlake Village, California, Timios is a licensed title insurance and escrow agent operating in 38 States. See Insurance Business Review: DJSP Enterprises Acquires Timios., and DJSP Enterprises, Inc. to Handle Processing for National Foreclosure Alternative Program for Leading Mortgage Lender.

WV High Court Points To Process Server Screw-Up To Void Judgment; Says Trial Judge Lacked Jurisdiction Where Service Made At Defendant's Mom's Home

In Charleston, West Virginia, The West Virginia Record reports:

  • In a case with no lawyers and no plaintiff, the defendant won. On April 1, the Supreme Court of Appeals relieved Barry Dailey of liability from a car crash at a Charleston intersection 10 years ago. The Justices reversed Kanawha County Circuit Judge Paul Zakaib, who ordered Dailey to pay Samantha Beane more than $2,000.

  • Dailey, pleading his own case, told the Justices in January that Beane served the suit on his mother in Dunbar[, West Virginia] when he lived in Missouri. Beane didn't appear for oral argument. Her former lawyer, Henry Wood, told the Justices in November that he couldn't find her and wouldn't represent her.

  • The Justices reached back to 1909 for authority to void any decree based on substitute service that doesn't strictly comply with requirements. "Moreover, our case law is clear that a court that enters a judgment where there has been insufficient service of process is without jurisdiction to enter said judgment," they wrote.(1)


  • "From the outset it is important to note that there is absolutely no evidence whatsoever in the record showing that Mr. Dailey resided at his mother's home," they wrote. The return of service could have indicated that her home was his "usual place of abode," they wrote, but it didn't. "Mr. Dailey's mother was not a party to this case and evidence that service was left at her home, in and of itself, is insufficient to effectuate proper service of process," they wrote.(2)(3)

Source: Defendant wins with no lawyers, no plaintiff.

(1) In the court's ruling, Beane v. Dailey, No. 34630, 2010 W. Va. LEXIS 25 (W.V. April 1, 2010), the court made this observation:

  • In Jones v. Crim & Peck, 66 W.Va. 301, 66 S.E. 367, 368 (1909), this Court held that:

    Before substituted service can take the place of, and be equivalent to, an actual personal service, all the requirements of the statute regarding the manner of such substituted service must be strictly complied with. . . . Such want of service renders the decrees based thereon absolutely void.”

  • (Citations omitted). Moreover, our case law is clear that a court that enters a judgment where there has been insufficient service of process is without jurisdiction to enter said judgment, “and a void judgment or decree is a mere nullity and may be attacked at any time.” Dierkes v. Dierkes, 165 W.Va. 425, 430, 268 S.E.2d 142, 145 (1980). See Syllabus Point 7, Aldrich v. Aldrich, 147 W.Va. 269, 127 S.E.2d 385 (1962) judgment rev'd on other grounds by 378 U.S. 540, 84 S.Ct. 1687, 12 L.Ed.2d 1020 (1964); Syllabus Point 1, Cable v. Cable 132 W.Va. 620, 53 S.E.2d 637 (1949). See also Desmond v. Brennan, 639 A.2d 1351 (R.I.1994); In re Schmidt, 436 N.W.2d 99 (Minn.1989); In re Hall, 173 Mont. 142, 566 P.2d 401 (1977); Smith v. Hatgimisios, 233 Ga. 354, 211 S.E.2d 306 (1974), aff'g 229 Ga. 475, 192 S.E.2d 270 (1972); Shaddrix v. Womack, 231 Ga. 628, 203 S.E.2d 225 (1974); Webster v. Clanton, 259 S.C. 387, 192 S.E.2d 214 (1972).

(Editor's Note: In the context of foreclosure actions, I still can't help wondering:

  • how many foreclosure judgments are floating around out there that are "mere nullities" that "may be attacked at any time," and
  • how title insurance agents can sleep at night having to insure these crappy land titles coming out of recent foreclosure actions where judges have lacked jurisdiction, whether by reason of a foreclosing lender's: (a) failure to properly serve a defendant with process, or (b) lack of standing to bring the foreclosure action.)

(2) The story goes on to set forth these details that led to the judgment against Dailey. Beane sued Dailey in 2002, over an auto collision that happened in December 2000. His mother, Cheryl Dailey, received a summons at her home in Dunbar, WV. Beane filed a default motion three months later, with an affidavit from Wood attesting to return of service. Judge Zakaib granted the motion but took two years to hold a hearing and three more to decide how much Dailey owed. In 2008, he awarded $1,600 in general damages and $449.86 in reimbursement of medical expenses, plus five years interest. Dailey appealed, writing that he was unaware of any hearing, trial or verdict. He wrote that as of May 2000, he lived at Whiteman Air Force Base in Missouri. He wrote that he was not a West Virginia resident at any point in the proceedings. As a matter of procedure he should have moved to set aside judgment before appealing, but the Justices let it slide because he lacked counsel, the story states.

(3) Since the Court reversed the default judgment entered below based upon insufficient service of process, it stated in its ruling that it was unnecessary to address any potential issues surrounding the Federal law known as the Servicemembers Civil Relief Act (SCRA) in regard to Mr. Dailey's contention that he was a member of the United States Armed Forces. The Court nevertheless issued a reminder to West Virginia trial courts that they are obligated to observe any applicable requirements of the SCRA, found at 50 App. U.S.C.A. §§ 501 et seq., which, according to the court, was enacted on December 19, 2003, as a recodification of the Soldiers' and Sailors' Civil Relief Act of 1940.

NY AG Shuts Down Process Server Outfit For Allegedly Engaging In "Sewer Service" Racket

From the Office of the New York Attorney General:

  • Attorney General Andrew M. Cuomo [] announced that his office has shut down a Brockport-based process server company that repeatedly claimed in legal affidavits that its employees had made proper service of legal documents to thousands of consumers when in fact it had not. We Serve It For You served summonses, complaints and other legal documents on individuals on behalf of law firms.


  • Generally, process servers deliver legal papers via one of three methods: to the defendant personally (actual service), to a person of suitable age and discretion at the location of the intended person to be served (substitute service), or to the door of the intended person’s actual location and by mail to their last known address (“nail-and-mailservice). After providing service to the intended recipient, process servers would print an affidavit of service to prove that they had indeed provided the legal documents to the defendant.

  • Attorney General Cuomo’s investigation determined that those documents were regularly signed and mailed to John Coy, who would notarize them without witnessing the signature. From 2007 to 2009, We Serve It For You served approximately 54,000 complaints and maintained a database detailing each service. The Attorney General’s Office and the Unified Court System determined that:

    On more than 1,100 occasions, We Serve It For You process servers claimed to have made service or service attempts at two or more places at the same time.

    On more than 700 occasions, We Serve It For You process servers claimed to have made service or service attempts before they even received the documents to serve.

    On tens of thousands of occasions, John Coy notarized the signatures of We Serve It For You process servers when he did not witness the signatures.

For the New York AG press release, see Cuomo Shuts Down WNY Process Server Company For Lying On Affidavits Of Service ("We Serve it For You” servers claimed to be in two or more places at same time, claimed to serve documents before receiving them; Company and operators must pay $10,000 to state, cooperate with ongoing investigations, and cease process serving).

Alabama Appeals Court: Process Server Screw-Up Leaves Trial Judge w/out Jurisdiction In F'closure Action; Default Judgment Against Pair To Be Vacated

The Alabama Civil Court of Appeals recently reversed a ruling of a lower court that refused to vacate a foreclosure judgment in favor of the Bank of New York ("BNY") on the grounds that the trial court lacked personal jurisdiction over the homeowner-couple, Linda and James Bogus. The issue - a process server screw-up in serving the court papers on the couple facing foreclosure.

  • Although BNY's complaint alleged that the Boguses were residents of Shelby County, the record indicates that BNY made no attempt to personally serve the Boguses with process. Rather, the record indicates that, on July 28, 2008, four days after it filed its complaint, BNY attempted to effect service of process on the Boguses by posting the process on the property.


  • On February 24, 2009, the trial court entered a default judgment against the Boguses. The default judgment awarded possession of the property to BNY and determined that the Boguses had forfeited their right to redeem the property; it did not award any damages.

  • On April 10, 2009, the Boguses moved the trial court for relief from the default judgment [...]. As one of their grounds, the Boguses asserted that the default judgment was void because, they said, they had not been personally served with process and, therefore, they said, the trial court lacked jurisdiction to enter the default judgment. Following a hearing, the trial court denied the Boguses' motion for relief from the default judgment. The Boguses timely appealed to the supreme court, which transferred the appeal to this court [...].


  • Th[e] statute requires that a defendant who is a resident of the State of Alabama be served personally unless he or she cannot be found. In the case now before us, the record indicates that BNY did not make any attempt to serve the Boguses personally. Consequently, BNY's attempt to serve the Boguses by posting the process on the property did not comply with the service-of-process provisions [...]. Therefore, BNY did not validly serve the Boguses [...].

  • Accordingly, we reverse the trial court's denial of the Boguses' [] motion [to vacate a default judgment] and remand the action to the trial court for further proceedings consistent with this opinion.

For the ruling, see Bogus v. Bank of New York, No. 2081195 (Ala. Civ. App. April 16, 2010).

Schack Hammers Attorney For Failure To Cancel Foreclosure Action After Delinquent Mortgage Was Paid Off & Subject Property Sold In Private Sale

In Brooklyn, New York, state court Justice Arthur M. Schack hammered another foreclosure attorney in a recent ruling for allowing a foreclosure action to continue despite the fact that the property owner had sold the subject property and paid off the delinquent mortgage over a year ago. Justice Schack stated the folowing (bold text and alterations [...] added, not in the original text):

  • On April 6, 2010, I searched ACRIS [the Automated City Register Information System] and discovered that WELLS FARGO executed a satisfaction of the instant mortgage more than ten months ago, on May 20, 2009. The satisfaction was recorded at the Office of the City Register of the City of New York, on June 1, 2009, [...]. Further, ACRIS revealed that defendant HUNTE sold the premises to Milton R. Linguard for $610,000.00, with the deed executed on March 13, 2009. The deed was recorded on June 16, 2009, at the Office of the City Register of the City of New York, [...]. ACRIS also revealed that Mr. Linguard, on March 13, 2009, borrowed $518,500.00 from GOLDEN FIRST MORTGAGE CORP. This was secured by a mortgage recorded at the Office of the City Register of the City of New York, on June 16, 2009, by MERS, as nominee for GOLDEN FIRST MORTGAGE CORP., [...].

  • Plaintiff's counsel never had the courtesy to notify the Court that the instant mortgage was satisfied and file a motion to discontinue the instant action. The Court is gravely concerned that: it expended scarce resources on an action that should have been discontinued; and, would have signed an order that could have possibly damaged the credit rating of defendant HUNTE and put an unfair cloud on the title to the subject premises now owned by Mr. Linguard, causing both defendant HUNTE and Mr. Linguard much time and effort to correct an error caused by the failure of plaintiff's counsel to exercise due diligence. The Court notes that [foreclosure attorney Peter G.] Zavatsky, in his affirmation for an award of attorneys' fees, requests that this Court award him $3,000.00 because, he states in ¶ 8 of his affirmation, that he has "been admitted to the Bar of the State of New York for more than thirty (30) years and have devoted my practice to real estate litigation and mortgage foreclosure practice for that entire time . . . and I have lectured on the subject of mortgage foreclosures."


  • The failure of Peter G. Zavatsky, Esq., and his firm, Zavatsky, Mendelsohn & Levy, LLP, to discontinue the instant action since the payoff of the HUNTE mortgage in 2009 appears to be "frivolous." 22 NYCRR §130-1.1 (a) states that "the Court, in its discretion may impose financial sanctions upon any party or attorney in a civil action or proceeding who engages in frivolous conduct as defined in this Part, which shall be payable as provided in section 130-1.3 of this Subpart." Further, it states in 22 NYCRR §130-1.1 (2), that "sanctions may be imposed upon any attorney appearing in the action or upon a partnership, firm or corporation with which the attorney is associated."

It appearing that foreclosure attorney Peter G. Zavatsky, and the Zavatsky, Mendelsohn & Levy, LLP law firm, engaged in "frivolous conduct," and that pursuant to the applicable court rules "[a]n award of costs or the imposition of sanctions may be made . . . upon the court's own initiative, after a reasonable opportunity to be heard," Justice Schack scheduled a hearing affording Mr. Zavatsky and his law firm "a reasonable opportunity to be heard," before deciding whether to hammer them with sanctions for their apparent screw-up in allowing the foreclosure action to proceed, despite the fact that the delinquent mortgage was paid off, a mortgage satisfaction was recorded in the public records, and the subject property was sold off to a third party in a private sale.

For the ruling, see Wells Fargo Bank, N.A. v Hunte, 2010 NY Slip Op 50637 (NY Sup. Ct. Kings County April 14, 2010).

Sunday, April 25, 2010

California Woman Cops Plea To Duping Mentally Impaired Homeowner Into Deeding Over Title To Property, Then Pocketing $336K On Subsequent Refinance

In Santa Clara County, California, the San Jose Mercury News reports:

  • A San Leandro woman who defrauded a vulnerable San Jose woman by illegally refinancing her house and taking an estimated $336,000 pleaded guilty Friday to real estate fraud and grand theft charges, according to the Santa Clara County District Attorney's Office.
  • Diana Marks, 45, is facing a four-year prison sentence, according to the district attorney's office. Marks was arrested in May 2009 after a concerned neighbor of the victim's tipped off the district attorney's real estate and elder-dependent adult fraud unit, which investigated the case.
  • Prosecutors say Marks persuaded the woman into gift-deeding to her the title of the victim's house. The victim had suffered brain injuries from an accident years earlier and did not understand the transaction, according to prosecutors.
  • Marks told the victim she was going to help her get rid of about $26,000 worth of liens levied against her home, which is valued at about $300,000. Except for the liens, the victim owned her house. After removing the liens, Marks refinanced the house and cashed out its remaining equity. Marks gained nearly $336,000, most of which was spent on her family, according to prosecutors.
  • When it was time to pay the mortgage, Marks defaulted on the loan and the house went into foreclosure. The victim lost her house and all of its equity and was at risk of eviction. Marks is scheduled to be sentenced Sept. 23, when she will be ordered to pay restitution as a condition to the plea, according to the district attorney's office.(1)
Source: San Leandro woman pleads guilty to defrauding San Jose homeowner.
(1) Unwinding or undoing a scam like this requires the filing of a civil suit in which, among other things, a determination is sought as to whether the deed signed by the unwitting victim is void, or is merely voidable. See Schiavon v. Arnaudo Bros., 84 Cal. App. 4th 374; Cal.Rptr.2d 801 (Cal. App 6th Dist. 2000), for California case law that references the propositions that:
  • A deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing. (Erickson v. Bohne, supra, "130 Cal.App.2d at pp. 555-556.)

    A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations. (Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106 [215 Cal.Rptr. 748].) The same rules apply to the reconveyance of the property interest under a deed of trust as to the conveyance of property by grant deed. (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 43 [198 Cal.Rptr. 418] (Wutzke).)
If the deed is found to be void, a subsequent bona fide purchaser for value is not protected by the state recording statutes, in which case his/her interest is a nullity. If the deed is found to be voidable, a subsequent conveyance to a bona fide purchaser will be recognized as valid. Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103 [215 Cal.Rptr. 748]:
  • A deed obtained as a result of fraud committed against the grantor or by use of undue influence by the grantee may be rescinded by the grantor. (Rogers v. Warden (1942) 20 Cal.2d 286 [125 P.2d 7].) If a grantor is aware that the instrument he is executing is a deed and that it will convey his title, but is induced to sign and deliver by fraudulent misrepresentations or undue influence, the deed is voidable and can be relied upon and enforced by a bona fide purchaser. (Peterson v. Peterson (1946) 74 Cal.App.2d 312 [168 P.2d 474]; Conklin v. Benson (1911) 159 Cal. 785 [116 P. 34].)

  • In Conn. Life Ins. Co. v. McCormick (1873) 45 Cal. 580, the Supreme Court held a deed voidable, not void, if obtained as a result of undue influence or compulsion. Such a deed "stands on the same footing as a deed procured by fraud." The court concluded that a deed or mortgage procured by duress cannot be set aside as against a party purchasing in ignorance of the facts constituting the duress, that is to say as against a purchaser for a valuable consideration and without notice of the duress. Until a voidable deed is declared void it is fully operative. (Frink v. Roe (1886) 70 Cal. 296 [11 P. 820].) Civil Code section 1107 provides: "Every grant of an estate in real property is conclusive against the grantor, also against everyone subsequently claiming under him, except a purchaser or incumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded."
For more, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.


Underwater Homeowner Uses Short Sale, Leaseback Deal To Shed Onerous Bank Debt While Retaining Possession Of Property & Future Right To Repurchase

In Akron, Ohio, WKYC-TV Channel 3 reports:

  • Dave Droge had few options when he lost his job in 2008. So he took a chance, a risk that not only kept his family from losing its home to foreclosure but also helped reduce a mammoth debt he likely never would pay off. "I had to either refinance or sell the home or I'd lose it," he said.

  • Droge applied for help with American Homeowner Preservation (AHP), a private group that came to Akron 18 months ago offering to help whose mortgages were under water -- owing more than their homes were worth -- a chance to reduce their debt. AHP's plan, which was called too risky by Summit County leaders and others,(1) allowed the group to negotiate a buyout of underwater mortgages with a written commitment to sell the home back to home owner at a reduced rate within five years.

  • Droge owed nearly $200,000 on his home, valued at just $160,000. After taking a risk with the AHP program, Droge's home recently closed on a short sale at $51,000. While it's now owned by a private investor, the home is under contract that allows Droge to buy it back within five years at a cost of $59-65,000, less than a third of what he once owed.

For more, see Akron man takes chance, saves home from foreclosure.

(1) Presumably, the plan was considered risky because lenders who OK short sales combined with a leaseback and buyback option are probably doing so unwittingly, being kept in the dark about the short sellers' continuing possession of the premises, and their retention of an option to buy back the home in the future at an amount significantly lower than what the lender is owed. Failure to fully disclose any contemporaneous side deals to the lender/loan servicer approving the short sale, or any lender financing the short sale, could land the participants in these deals in hot water. See:

See also, The Stockton Record: Home program savior or sketchy? (Buyback investor deals risky, some experts say).