Saturday, June 12, 2010

New Florida Law Allows HOAs To Grab Tenants' Rent From Maintenance Fee-Delinquent, Landlord-Owned Units Without Need To Go To Court

In Tallahassee, Florida, the Sarasota Herald Tribune reports:

  • Gov. Charlie Crist signed into law a measure Tuesday that will allow Florida's beleaguered condominium associations to go after up to twice the amount of delinquent dues owed them. Condo associations had previously been limited to six months' worth in most cases. When the law takes effect on July 1, associations also will be able to deny owners who owe money access to pools or other common-ground amenities. [...] The new law is another government effort to help Florida's condo associations recover from a years-long slide in revenue from dues, plummeting unit values and declining occupancy rates as foreclosures ran rampant in the wake of the real estate downturn.


  • The deflation of the market also was felt most strongly in the condo market, which has been hit by waves of defaults. Investors walked away from units bought at inflated prices and stopped paying dues. Association advocates claim that many banks have been slow to complete foreclosures to avoid having to pay back dues and maintenance costs, leading to a downward spiral.

  • "For condominiums and homeowner associations struggling with very high delinquencies, this will allow them to collect rent from tenants in delinquent units and homes without having to go to court," said Donna D. Berger, executive director of the Community Advocacy Network. "For failed condominium conversion projects, this will hopefully encourage investment in these communities."

For the story, see Florida condo associations get power in dealing with foreclosures.

Residents In 76-Unit, Foreclosure-Plagued Condo Complex Temporarily Dodge The Boot Over Unpaid Water Bill; Get 30 Days To Cough Up $4,500

In Margate, Florida, the South Florida Sun Sentinel reports:

  • Dozens of residents at the Atlantic Palms condominium complex are getting a reprieve — even though it may be for just one month — from being evicted over an unpaid city utility bill. With a 3-2 vote, Margate city commissioners Wednesday night agreed not to turn off the complex's water service for 30 more days, expecting residents to eventually pay the water bill.

  • More than 60 of the 76 units at Atlantic Palms, at 400 NW 65th Ave., are in different stages of foreclosure, and the homeowners association can't afford to pay, city officials said. If commissioners hadn't stepped in, Atlantic Palms residents would have been forced to leave their homes next week because of health concerns from lack of water. Atlantic Palms has paid about $3,000 so far and is expected to pay about $4,500 by July 2, said City Manager Frank Porcella.

For the story, see Margate condo residents get reprieve from eviction over unpaid water bill.

Condo Resident Pays Price For Neighbor's F'closure Walkaway; Leak In Empty Unit Spurs Mold Problem; Told To Take A Hike After Calling Owner, Bank, HOA

In Fort Myers, Florida, WINK News reports:

  • A new foreclosure crisis: damage left behind putting other homes at risk of foreclosure, too. Jan Swanson thought she'd live in her home the rest of her life. But a few weeks ago, she discovered something unsettling: a bad smell. When her neighbor walked away from his condo unit, somehow, water leaked out saturating everything and leaving behind evasive mold. "So this is what's right next door to me," Jan told Call for Action as she pointed out the mold growing in the home next to her.

  • That same wall where the mold is growing is shared by her unit. Jan told WINK NEWS she worries, "It will eat up this townhouse since I have the greatest connection with the townhouse behind me that flooded, mine is going to be the first one to go." Once the mold enters her home, Jan says she'll have no choice, but to walk. "It's kind of an overwhelming loss," said Jan, "With the economy I'm really not working. I haven't had a full time job since July and now I'm looking at losing my property and it's depressing."(1)

For more, see Foreclosed homes putting others at risk.

See also, WZVN-TV Channel 7: Homeowners forced to pay for neighbors' violations.

  • Swansen said she knew it wouldn't be too long before the growing mold appeared in her home too. So she called the homeowner, his mortgage company and her homeowners association. "Everyone who got back to me said, ‘This is your problem,'" she said.

(1) First time homebuyers, retirees looking to downsize, rookie real estate investors and others may want to hang on to these stories and reread them periodically if considering the purchase of a condo.

"Chocolate Factory" Apartment A Mold-Plagued, Toxic Rat Hole, Says Couple In $1M Suit; Persistent Breathing Problems, Toddler's Rashes Among Claims

In Brooklyn, New York, the New York Post reports:

  • This was no sweet deal. A couple paying nearly $3,000 a month to live in the posh Chocolate Factory development overlooking the Brooklyn Navy Yard says their so-called luxury apartment is plagued with toxic mold and vermin -- and building management refuses to do anything about it. Jonathan Mairs, a media consultant for a finance firm, and his acupuncturist wife, Momoko Uno, claim they suffered persistent trouble breathing in their 1,500-square-foot loft with Manhattan skyline views. Their daughter, Jun, 3, has had rashes and stomach problems, they say.

  • When they hired their own air-quality expert in April, tests found three different kinds of mold in the walls in the apartment that also became overrun with mice and rats, they claim. "This is supposed to be a luxury building," Uno said. "This is not luxury." Mairs, 38, and Uno, 37, said they had no choice but to file a $1 million lawsuit in Brooklyn Supreme Court.

Source: Luxe apt. a 'toxic rat hole'

City Gives Dozens Of Families Immediate Boot From Deteriorating Rental Complex In Foreclosure, Then Condems Premises For Dilapidated Conditions

In Tucson, Arizona, KVOA-TV reports:

  • Dozens of Tucson families are forced to find a new place to live after an entire apartment complex is suddenly shut down. It's the Vista Sierra Apartments on Ft. Lowell, and it's not only shut down, but the city quickly condemned it. Jimmy Hernandez is one the few residents still living there. He said, "We didn't have any heat, the pool was always filthy and dirty. The water lines were either leaking or broken. The heaters and AC never worked." And those are just part of the problems the owners said eventually led to foreclosure.


  • Despite slapping the condemned tag on the complex, the city did step up and help distribute section 8 vouchers. Olga Osterhage, the Deputy Director of the Tucson Housing and Community Development Department said, "We did our part just trying to get info out to make sure people there qualified for section 8 vouchers and that there wouldn't be a hold up on our side."

For more, see Apartment complex gets shut down.

Friday, June 11, 2010

Failed Attempt At Evading Local Rent Control Law By Booting Tenants Paying Below-Market Rates Leaves Bay-Area Landlord's Empire On Thin Ice

In San Francisco, California, the San Francisco Bay Guardian reports:

  • Nearly four years after City Attorney Dennis Herrera filed suit against Frank and Walter Lembi and their dizzying array of companies affiliated with CitiApartments for "an outrageous pattern of corporate lawlessness," the powerful and notorious San Francisco landlords have watched their empire crumble.

  • The Lembi empire consisted of more 300 apartment buildings in San Francisco at its peak. Four Lembi subsidiaries that owned 16 buildings filed for Chapter 11 bankruptcy in February. Twenty Lembi properties were taken over by Lennar spin-off LNR in late May; another 24 buildings are slated to be foreclosed in early June; 51 were deeded back to UBS bank in lieu of foreclosure early last year; and still others are now held by court-appointed receivers and managed by Laramar, an unaffiliated property-management company.

For more, see Triumph of tenacity (The Lembi empire teeters after tenants resisted a business plan based on forcing them out).

Jury Hammers Real Estate Broker In Scam Using Unwitting Straw Buyers, Stolen Identities To Fleece Lenders Of $17.5M+

From the Office of the Orange County, California District Attorney:

  • [R]eal estate broker [Kathy Chen, 49, of Westminster,] was convicted [] of conspiring with her boyfriend and his brother to commit $17.5 million in real estate fraud by purchasing 35 properties using stolen identities and intentionally defaulting on loans in order to steal the loan money. [...] Chen’s boyfriend, Richard Salgado Gonzalez, 60, and his brother, Daniel Gonzalez, 57, face the same charges and sentence as Chen. Fugitives Richard and Daniel Gonzalez have outstanding arrest warrants. Both may currently be living in Puerto Vallarta, Mexico.


  • She conspired with her then-boyfriend, Richard Gonzalez, and his brother, Daniel Gonzalez, to commit over $17.5 million in fraud by using the identities of unsuspecting or unqualified victims to obtain mortgage loans for the purchase of multiple properties. Chen and her co-defendants recruited these victims in order to hide their own identities. These victims often spoke little or no English, were unemployed or had limited incomes, and had no intention of ever residing in or repaying any loan on properties in their names.


  • [T]he defendants obtained 47 fraudulent loans from 13 lenders on 35 properties in excess of $17.5 million through the use of the fraudulently obtained identities. [...] The defendants used the fraudulently obtained personal and credit information of some of the fake buyers, including a 92-year-old woman, on several occasions without their knowledge or consent.


  • They fabricated loan applications to reflect higher incomes for the fake buyers, forged the fake buyers’ names and signatures on various deeds and loan documents, and forged seals and notary stamps on a variety of notarized documents and deeds.

For the Orange County DA press release, see Broker Convivted Of Conspiracy With Boyfriend And His Brother To Commit $17.5 Million In Real Estate Fraud By Purchasing Homes Using Stolen Identities And Intentionally Defaulting On Loans (Co-defendant boyfriend and brother have warrants for their arrest).

Resistance Against Sloppy Lenders, Foreclosure Mills Mounts As More Homeowners Retain Attorney Help To Challenge Legal Actions & Live "Rent Free"

Buried in a recent story in The New York Times is this excerpt on the effort of one Central Florida attorney in connection with providing foreclosure defense representation to homeowners facing the loss of their homes:

  • [Attorney Mark P. Stopa] sends out letters — 1,700 in a recent week — to Floridians who have had a foreclosure suit filed against them by a lender. Even if you haveno defenses,” the form letter says, “you may be able to keep living in your home for weeks, months or even years without paying your mortgage.”

  • About 10 new clients a week sign up, according to Mr. Stopa, who says he now has 350 clients in foreclosure, each of whom pays $1,500 a year for a maximum of six hours of attorney time. “I just do as much as needs to be done to force the bank to prove its case,” Mr. Stopa said.

  • Many mortgages were sold by the original lender, a circumstance that homeowners’ lawyers try to exploit by asking them to prove they own the loan. In Mrs. Pemberton’s case, Mr. Stopa filed a motion to dismiss on March 17, 2009, and the case has not moved since then. He filed a similar motion in her son’s case last December.

Source: Owners Stop Paying Mortgages, and Stop Fretting.

Treasure Coast Duo Face Add'l Charges In Alleged Home Hijacking Racket; Took Control Of Vacant Homes In Foreclosure, Rented Them To Unwitting Tenants

In Port St. Lucie, Florida, TC Palm reports:

  • Two men arrested earlier this year after investigators linked them to a scheme in which a home was rented to a family without the homeowners’ knowledge now each face more than a dozen additional charges, according to recently released records and a detective.

  • Robbie Jay Hughes, 36, and Issiac Rivers, 46, were arrested in early February after police accused them of renting a home in foreclosure to a family in September 2009. Following media coverage of the arrests, police received complaints of similar incidents involving the men, a warrant application states. “They would drive throughout the city, find foreclosures, or, since Robbie Hughes was a Realtor he had access to the computer and locating foreclosures due to his license,” Port St. Lucie Police Detective Kim Bailey said.

  • In general, Bailey said if the homes needed maintenance, such as pool cleaning or lawn care, arrangements were made for that to be done. The men would break into the homes and change the locks, affidavits stated, and they mainly accepted cash or money orders.

For the story, see Port St. Lucie police add additional charges to suspects in home foreclosure fraud case.

Thursday, June 10, 2010

Orange County DA Slams Suspect With Multiple Felony Charges In Alleged Vacant Home-Hijacking, Title-Swiping, Rent-Pocketing Racket

In Orange County, California, the San Clemente Times reports:

  • According to a June 4, 2010 Orange County District Attorney’s press release, Blair Christopher Hanloh, 46, of Long Beach was charged with grand theft for stealing more than $3.5 million in a fraudulent real estate scheme, renting out houses in Dana Point, San Clemente and Anaheim. The problem with him renting these homes?—he neither owns them nor acted as an agent on behalf of the owners.(1)

  • Hanloh would allegedly look for vacant properties that were in foreclosure, post a notice on the home labeling it an “abandoned property,” then return a few weeks later, drill the locks and “take possession” of the home. He would then change the locks and post “no trespassing” signs at the properties.

  • Hanloh would then file fake quitclaim deeds on the properties via his company, Blair Hanloh Trustee of Diversified Management Trust, to change “ownership” from himself to his company in order to perpetrate his scheme. [...] He would then advertise the homes for rent [online, on Craigslist] and lease them to unsuspecting tenants via fraudulent lease agreements and begin collecting rent.(2)

For more, see Man Charged With Renting Out San Clemente and Dana Point Homes He Did Not Own.

For the Orange County DA press release, see Man Charged With Grand Theft Over $3.5 Million In Fraudulent Scheme Of Real Property Theft And Renting Out Houses.

For an earlier post on this story, see S. Calif. Man Suspected Of Openly Hijacking Title To Vacant Homes & Renting Them Out, Leaving Owners Frustrated, Neighbors Rattled, Cops Flat-Footed.

(1) Hanloh is charged with eight felony counts of grand theft, five felony counts of recording false and forged instruments, one felony count of second degree commercial burglary, and sentencing enhancement allegations for property theft over $65,000, $200,000, $1.3 million, $3.2 million, and aggravated white collar crime over $100,000 and $500,000, according to the Orange County DA press release.

(2) Go here for a map of a slew of homes Hanloh is suspected of swiping, including five in Orange County.

Attorney Who Put Client Facing F'closure Into Bankruptcy w/out His Knowledge Temporarily Banned From Filing New Cases, Ordered To Pay New Counsel $10K

In White Plains, New York, The Journal News reports:

  • A White Plains lawyer who was accused of putting a client in bankruptcy court without authorization has agreed to a ban from filing new bankruptcy cases. Christopher Cabanillas also agreed to have attorneys at his firm receive training on bankruptcy court filing procedures.

  • Cabanillas and U.S. Trustee Greg Zipes signed the stipulation in the wake of a hearing where a federal bankruptcy judge ordered Cabanillas to return $1,250 to a former client and pay $10,000 to the man's new lawyer.

  • The client, Domingo Hernandez, charged in court papers that he went to Cabanillas to get help fending off foreclosure proceedings on a Yonkers building he owned. Instead, Hernandez charged, Cabanillas filed for bankruptcy on Hernandez's behalf without his knowledge. Cabanillas denied the charge but did admit his firm filed Hernandez's bankruptcy petition without a signature.

For the story, see White Plains lawyer banned from filing bankruptcies.

Ex-Lawyer Gets 18 Months For Ripping Off Client Facing Foreclosure Seeking Bankruptcy Help

In Billings, Montana, the Billings Gazette reports:

  • A former lawyer who admitted stealing money from his bankruptcy clients will be going to federal prison for a year and a half. Marvin Earl “Toby’’ Alback, 62, of Billings, offered little explanation during his sentencing hearing [] for why he stole about $17,000 from two clients for his personal use.(1)


  • In the bankruptcy fraud, Alback was hired by a family in March 2008 to represent them in a bankruptcy case. When the family had trouble making their mortgage payment, Alback told them to write their settlement and mortgage payments to him and he would deposit the money with the bank. Alback deposited the money into his trust account and never made the mortgage payments. Although he eventually paid back the money, he caused significant back payments and late fees to avoid foreclosure, said Assistant U.S. Attorney Ryan Archer.

For the story, see Ex-lawyer gets prison in fraud.

For the U.S. Attorney (Billings, MT) press release, see Marvin Earl Alback Sentenced In U.S. District Court.

(1) Reportedly, the federal case was the second time Alback has been convicted of misappropriating clients’ funds. In the late 1980s, Alback was convicted in state court of felony theft for taking more than $95,000 from two clients and was sentenced to 16 years in state prison, with 13 years suspended, the story states. He was disbarred, then was reinstated in 2000, and has permanently resigned his license in September, according to the story. The state conviction was reportedly too old to count against him for sentencing in the federal case.

NY Man Gets 7 Yrs For Swiping $6M In Escrow Cash Due To Existing Lien Holders In R/E Deals; Ran F'closure Bailout Racket Targeting Strapped Homeowners

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

  • PREET BHARARA, the United States Attorney for the Southern District of New York, announced [] that IRSHAD RAMZAN, a/k/a "Tony," a former mortgage broker who supervised the operations of Queens-based Platinum Funding, was sentenced to seven years in prison for his roles in a scheme to steal over $6 million in the proceeds of home mortgage loans issued by various banks for the purchase of residential properties, which funds were supposed to be used to pay off existing mortgages on the properties, and in another scheme to obtain home mortgage loans from banks under false pretenses by arranging straw purchases of those homes,(1) thereby generating tens of thousands of dollars in unwarranted fees for RAMZAN and Platinum Funding.

For the U.S. Attorney press release, see Mortgage Broker Sentenced In Manhattan Federal Court To Seven Years In Jail For Stealing Over $6M In Mortgage Loan Proceeds.

(1) In this scam, Ramzan tricked homeowners who were having problems making payments on existing home loans (in what presumably were sale leaseback, equity stripping deals), often to the point of facing foreclosure, to sell their houses to so-called "straw purchasers." In doing so, Ramzan misrepresented the nature of these "bailout" transactions to the lenders that financed these transactions and, thereby, defrauded these lenders, the press release states.

Use Of "Homemade Mortgage Modifications" Reduces Some Borrowers' House Payments To $0; "Free Rent" Approach To Loan Obligations May Be On Upswing

In St. Petersburg, Florida, The New York Times reports:

  • A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

  • This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.


  • While there are no firm figures on how many households are following the [] path of passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise. There is no question, though, that for some borrowers in default, foreclosure is only a theoretical threat for a long time.

  • More than 650,000 households had not paid in 18 months, LPS [Applied Analytics] calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.

  • In some states, including California and Texas, lenders can pursue foreclosures outside of the courts. With the lender in control, the pace can be brisk. But in Florida, New York and 19 other states, judicial foreclosure is the rule, which slows the process substantially.


  • [F]or borrowers like Jim Tsiogas, the benefits of not paying now outweigh any worries about the future. “I stopped paying in August 2008,” said Mr. Tsiogas, who is in foreclosure on his house and two rental properties. “I told the lady at the bank, ‘I can’t afford $2,500. I can only afford $1,300.’”

  • Mr. Tsiogas, who lives on the coast south of St. Petersburg, blames his lenders for being unwilling to help when the crash began and his properties needed shoring up. Their attitude seems to have changed since he went into foreclosure. Now their letters say things like “we’re willing to work with you.” But Mr. Tsiogas feels little urge to respond. “I need another year,” he said, “and I’m going to be pretty comfortable.”

For more, see Owners Stop Paying Mortgages, and Stop Fretting.

Wednesday, June 9, 2010

Arizona AG Files Suit Against Firm For Allegedly Deceptive Loan Modification Services; Says Victims May Number In The Thousands

From the Office of the Arizona Attorney General:

  • Attorney General Terry Goddard has filed a lawsuit against Discount Mortgage Relief and Mortgage Relief, LLC, (DMR/MR), based in Scottsdale, and its owners for engaging in allegedly deceptive loan modification services. The Attorney General’s Office also secured a Temporary Restraining Order that prevents DMR/MR from charging or receiving money for loan modification services and from advertising its services. [...] According to court documents, the number of victims may number in the thousands.


  • The lawsuit alleges that at least since July 2009, DMR/MR deceived consumers into paying thousands of dollars for mortgage loan modification services by misrepresenting the company’s ability to help them obtain mortgage relief and save their homes, thereby violating the Arizona Consumer Fraud Act.(1) Consumers allegedly paid DMR/MR between approximately $1,350 and $5,000 for loan modification services and were guaranteed results by the company.

For the Arizona AG press release, see Terry Goddard Files Lawsuit against Loan Modification Company,Obtains Temporary Restraining Order to Protect Homeowners.

(1) The allegations include:

  • Misleading consumers into believing they were pre-qualified and guaranteed to receive a loan modification through the company’s services.
  • Falsely promising favorable results and telling consumers that any foreclosure proceedings against their homes would stop once they hired the company.
  • Misrepresenting that the company used attorneys to negotiate consumers’ loan modifications.
  • Falsely stating that they were associated with or acting on behalf of the government and associated with or acting on behalf of the consumer’s lender.
  • Falsely stating that the company was “FBI certified”.
  • Misrepresenting the nature of the company’s loan modification services by referring to them as forensic loan documentation audits or analyses.
  • Falsely promising consumers that they would receive a refund of fees if the company failed to get them a loan modification and failing to return fees to some consumers who decided not to hire the company and never signed a contract.

Feds Tack On Five Individuals, Firms To List Of Targets In Ongoing Civil Suit Against Alleged Foreclosure Rescue Racket Peddling Forensic Audits

The Federal Trade Commission recently announced:

  • The Federal Trade Commission has named several new defendants and added new charges concerning so-called “forensic audits” to its lawsuit against an operation that allegedly bilked homeowners who were trying to lower their mortgage payments. The action is part of an ongoing crackdown on scams that target consumers who are behind in their mortgage payments or at risk of foreclosure.(1)


  • According to the FTC’s amended complaint, the new defendants, along with Smith and Gromann, offered “forensic audits” – checking a homeowner’s loan documents for law violations that would give them leverage in negotiating with lenders to obtain a loan modification or a “short sale” (sale of a house for an amount less than the mortgage balance). Their ads stated, “We have found that between 80-90% of all loans that we have audited have some form of rights violations.” They collected $995 in advance for each audit even though an audit was unlikely to assist in negotiations with lenders, the complaint alleges.

For the FTC press release, see FTC Broadens Case Against Mortgage Relief Scheme; Charges That 'Forensic Audits' Were Unlikely to Help Homeowners.

See Federal Trade Commission v. The Debt Advocacy Center, LLC, et al. for links to available court documents in this case.

(1) According to their press release, the FTC has added as defendants Bradford R. Geisen; Maurice Jackson; Patrick Butler; Credit Services Alliance Inc.; and CreditLawGroup, a law firm run by two of the original defendants, John W. Smith and Glenn E. Gromann. The original defendants also included The Debt Advocacy Center LLC; Smith, Gromann & Davidson P.A.; and Kevin McCormick.

State's Attorney Targets Foreclosure Rescue Rackets With Dedicated Unit In Prince George's County

In Upper Marlboro, Maryland, WUSA-TV Channel 9 reports:

  • Foreclosures are robbing people of their American dream. Mortgage fraud is such a big player in these losses that Maryland created a criminal unit, housed in Prince George's County, just to track down these housing predators.


  • The stories behind the losses lead the county to create the Mortgage Foreclosure Fraud Division. They go after the people who peddle too-good-to-be-true schemes. "There are promises about getting people out from mortgage debt entirely, instantly. You know, give us the deed, we'll give it back," says [Prince George's County State's Attorney Glenn] Ivey.


  • "Whenever you have a community that is laced with foreclosures, that means it's a breeding ground for foreclosure scammers," says Assistant State's Attorney April Richardson. Richardson is leading the charge against the companies that orchestra mortgage fraud schemes. She says scammers entice homeowners by telling them they can clean up their credit and keep them in their homes. "When you truly look at the documents, you'll see that the scammer would just take title and then turn around and refinance the house and take all of the equity out," says Richardson.


  • Prince George's County leaders and other officials will try to "Knock Out Mortgage Fraud" on June 12th. They plan to go door to door to educate people about the signs of fraud, in areas that are open targets.

For the story, see On The Trail Of Mortgage Fraud.

Operator Of Loan Modification Racket Cops Plea; Admits To Clipping 300+ Homeowners Seeking Foreclosure Help Out Of Over $900K, Say San Diego Feds

From the Office of the U.S. Attorney (San Diego, California):

  • Glenn Steven Rosofsky pleaded guilty [] to a superseding information charging him with one count of conspiracy to commit wire fraud and money laundering, one count of money laundering, and one count of filing a false tax return, announced Karen P. Hewitt, U.S. Attorney for the Southern District of California. [...] These criminal charges stemmed from Rosofsky's operation of a fraudulent telemarketing operation in San Marcos, Calif.

  • In his guilty plea Rosofsky admitted that in approximately April 2009, he and Michael Trap (who previously pleaded guilty) began operating a loan modification business using the names "Nations Housing Modification Center" and "Federal Housing Modification Department" (NHMC), in an effort to fraudulently sell loan modification services to homeowners who were delinquent on their monthly mortgage payments. Rosofsky admitted that he, Trap and others used false and fraudulent statements and representations to induce customers to purchase loan modification services from NHMC.(1)


  • The staff of telemarketers at NHMC's offices in San Marcos used a script provided by Rosofsky and others to make similar false and misleading statements to potential customers. Relying on such misrepresentations, over 300 homeowners paid between $2,500 and $3,000 to NHMC between April and July 2009, resulting in over $900,000 in customer funds to be transferred to NHMC's bank accounts in the Southern District of California.

For the U.S. Attorney press release, see Owner of Fraudulent Mortgage Loan Modification Scheme Pleads Guilty to Conspiracy, Money Laundering and Tax Charges.

(1) Among the misrepresentations made to customers, according to the press release, were claims that NHMC had "attorneys" and "forensic accountants" on staff to deal with the loss mitigation departments of banks on behalf of NHMC's customers, that NHMC had achieved an "extremely high success rate for homeowners that met the Nations Home Affordable Modification Program guidelines," and that NHMC was located on "Capitol Hill" in Washington, D.C. In fact, as Rosofsky admitted, NHMC did not have attorneys or forensic accountants on staff, it did not have a high success rate of modifying loans, it had no connection with the U.S. Treasury Department's "Making Home Affordable" program, and its only presence in Washington, D.C., was a rented post office box. These false claims were made in solicitation letters that were mailed throughout the country to individuals behind on their mortgage payments and encouraged struggling homeowners to call a toll-free number to purchase NHMC's loan modification services.

Michigan Man Faces Larceny Charges In Alleged Ripoff Disguised As Loan Modification Help

In Washtenaw County, Michigan, reports:

  • He offered to help struggling homeowners save their Saline homes from foreclosure, but authorities say all Bryan Crevier delivered were empty promises and widespread fraud. Crevier, 48, is charged with multiple counts of larceny for allegedly swindling nearly $10,000 from three Saline women within a few months in 2008.


  • Saline police began investigating Crevier in the spring of 2008 when three city residents reported he took money from each of them up front for loan refinancing services like closing costs, appraisals and fees. The women, ages 47, 58, and 60, were all friends dealing with financial hardship and were in danger of losing their homes.

  • Though he presented himself as a mortgage modification consultant and had each resident fill out official applications, Crevier never filed the women’s paperwork with lending institutions, police reports said. By the time they suspected him of fraud, Crevier had stopped returning their phone calls and e-mails. When officers visited his Troy home that fall, it was vacant and appeared abandoned, police said. [...] Crevier is also charged with one count of larceny by false pretenses of more than $20,000 in Macomb County.

For more, see Grosse Pointe man accused of swindling Saline residents out of money for foreclosure help.

Tuesday, June 8, 2010

Feds Slam Loan Servicers For $108M For Squeezing Delinquent Borrowers With Illegally Inflated Fees, Providing False Info In Consumer Bankruptcy Cases

The Federal Trade Commission announced:

  • Two Countrywide mortgage servicing companies will pay $108 million to settle Federal Trade Commission charges that they collected excessive fees from cash-strapped borrowers who were struggling to keep their homes. The $108 million represents one of the largest judgments imposed in an FTC case, and the largest mortgage servicing case. It will be used to reimburse overcharged homeowners whose loans were serviced by Countrywide before it was acquired by Bank of America in July 2008.


  • According to the complaint filed by the FTC, Countrywide’s loan-servicing operation deceived homeowners who were behind on their mortgage payments into paying inflated fees – fees that could add up to hundreds or even thousands of dollars.


  • When homeowners fell behind on their payments and were in default on their loans, Countrywide ordered property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property, according to the FTC complaint. But rather than simply hire third-party vendors to perform the services, Countrywide created subsidiaries to hire the vendors. The subsidiaries marked up the price of the services charged by the vendors – often by 100% or more – and Countrywide then charged the homeowners the marked-up fees. The complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times. As a result, even as the mortgage market collapsed and more homeowners fell into delinquency, Countrywide earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue.


  • In addition, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, the complaint charges that Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans. Countrywide also failed to tell borrowers in bankruptcy when new fees and escrow charges were being added to their loan accounts. The FTC alleges that after the bankruptcy case closed and borrowers no longer had bankruptcy court protection, Countrywide unfairly tried to collect those amounts, including in some cases via foreclosure.

For the FTC press release, see Countrywide Will Pay $108 Million for Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers in Bankruptcy.

Failure To Note Lien On Title Certificate On Mobile Home & Land Refinancing Transaction Sinks Lender In Homeowners' Bankruptcy Proceeding

The following facts have been taken from a recent ruling by a U.S Bankruptcy Court in London, Kentucky:

  • Debtors borrowed $67,500.00 from a mortgage lender, pledging their real estate and a 1998 Southern 28' x 52' double-wide mobile home. This transaction was to refinance the Debtors' mobile home and land.

  • The lender duly recorded its mortgage on the land, but failed to note its lien on the mobile home on a certificate of title.

  • Bankruptcy Trustee sought to avoid the lien on the 1998 Southern 28' × 52' double-wide mobile home under rules that allow the Trustee to avoid an unperfected lien.

The judge ruled that, because the sole means to perfect the lien on a mobile home in Kentucky is by a certificate of title as stated in the state statute (KRS 186A.190), the lien on the mobile home is unperfected and, accordingly, allowed the Trustee to avoid the lender's lien on the double-wide.(1)(2)

For the ruling, see In re Owens, Case No. 09-62087, Adv. No. 10-6014 (Bankr. E.D. Kentucky, London Div. June 2, 2010).

(1) The court dealt with the creditors' objections as follows (bold text is my emphasis, not in the original text):

  • Defendants American Home Mortgage Servicing, Inc. and Deutsche Bank National Trust Company object to the Trustee's Motion for Summary Judgment because there are factual issues as to where the mobile home is now and how the mobile home got there. However, that is immaterial to the motion because the Trustee is seeking solely to avoid the lien on the mobile home.

  • Also, these Defendants oppose the motion because they seek to establish an equitable lien on the mobile home. However, no equitable lien was established before the bankruptcy filing. Moreover, even assuming that an equitable lien arose in favor of the creditor on account of its improperly executed lien, any such lien is ineffective against the Trustee. See In re Anderson, 266 B.R. 128 (Bankr. N.D. Ohio 2001).

(2) Owners of mobile homes who are having trouble making their house payments may want to check their title documents and their local public records to see if their lender committed a similar screw-up in failing to record its lien on the title certificate. If so, that fact may provide some ammunition for squeezing a loan modification on favorable terms from the lender (under threat of the homeowner filing for bankruptcy, potentially leading to the lender being left holding the bag on an unsecured loan due to the unperfected lien).

Two Attorneys Placed On Inactive Status As Cal. State Bar Alleges Lawyer-Renting Racket, Upfront Fee Loan Modification Ripoffs In Seperate Actions

In San Francisco, California, Metropolitan News Enterprise reports:

  • The State Bar Court has ordered attorneys Eric D. Johnson of Los Angeles and Mark A. Shoemaker of Long Beach placed on involuntary inactive enrollment over accusations of loan modification misconduct, the State Bar said yesterday. State Bar Court Judge Richard Honn, in separate actions, concluded that the conduct of Johnson and Shoemaker posed a “substantial threat of harm” to their clients or the public, and ordered the enrollments under Business and Professions Code Sec. 6007.


  • According to the State Bar, Johnson associated with several non-attorney legal organizations, lending his name and status as an attorney to a firm offering bankruptcy filing and assistance, a business handling forensic audits and loan modifications, and two other loan modification companies.


  • Shoemaker, whose case was investigated and prosecuted with the help of the California Department of Real Estate, has owned and operated a loan modification business called Advocate for Fair Lending since 2008. Shoemaker “used Advocate and his status as an attorney to convince cash-strapped homeowners to pay him thousands of dollars in hopes of saving their homes from foreclosure,” Honn wrote. Shoemaker, however, “often did little to nothing to help these clients,” Honn said. “In fact, many of these homeowners were worse off after retaining [Shoemaker’s] services.”(2)


  • In addition to the involuntary inactive enrollments of Johnson and Shoemaker, the State Bar said its Office of Chief Trial Counsel has obtained the resignations of 13 attorneys involved in loan modification misconduct since creation of the Loan Modification Task Force in April 2009. Five loan modification trials are pending, the State Bar said, and another 2,000 active investigations related to loan modification are being conducted.

For the story, see State Bar Court Places Local Attorneys on Inactive Status.

For The State Bar of California press release, see Two more loan foreclosure lawyers placed on involuntary inactive enrollment.

(1) Reportedly, Honn cited cases in which homeowners were promised that their homes would not be foreclosed but the homeowners lost them anyway after having made significant payments to the non-attorney companies. According to the story, Johnson “lacked control and failed to supervise” any of the organizations with which he was associated, Honn wrote. “This lack of control and failure to supervise consequently led to, among other things, the unauthorized practice of law, misrepresentations and client harm.”

(2) Shoemaker contended that he was merely the president of Advocate and did not represent any Advocate clients in a legal capacity, but Honn rejected the argument, the story states. “Advocate’s clients were also [Shoemaker’s] clients,” he wrote. “An attorney cannot use a power of attorney form to absolve themselves of the ethical mandates they have sworn to uphold.”

TX Nat'l Guard To Help Officer, Wife In Effort To Reclaim Title To F'closed Free & Clear $300K Home Sold Over $800 HOA Debt While Away On Active Duty

In Frisco, Texas, WFAA-TV published a follow-up story on its report on servicemember Capt. Michael Clauer and his wife, May, who recently lost their free and clear home in a foreclosure sale over unpaid fees of $800 owed to their homeowners' association while he was away on active duty in Iraq.

  • When the warning letters sent via certified mail by the HOA came back unclaimed, it foreclosed on the Clauers' home and sold it at auction.(1) After that, May Clauer failed to sign for the certified letters saying she had six months to get the home back, under the law. The $300,000 property — which the Clauers owned free and clear — sold for $3,500 in back dues and real estate fees. "Selling a house for less than two percent — a little over one percent of what its value is — it seems harsh," Capt. Clauer said.

  • But the attention the Clauers are getting is not just from the public on the Internet. Lawmakers — both state and federal — have offered help, and so has the Texas National Guard. It is now providing legal advice in the Clauers' lawsuit to keep their home.(2)

For the story, see National Guard vows to 'not leave behind' officer who lost home to HOA.

See also, Soldier fighting to keep house (While the former Dubuquer was on active duty in Iraq, the homeowners' association foreclosed on his Texas home because of $800 in late dues).

In an earlier post on this story, see Active Duty Texan Returns Home To Find $300,000, Free & Clear Residence Sold Out From Under Him By HOA Over $800 Unpaid Fee.

(1) A case can be made here that, when the certified mailings were returned undelivered, an obligation was triggered upon the homeowners' association to take further action to try to provide effective notice to the homeowners before selling their home.

In Jones v. Flowers, 547 U.S. 220, 126 S. Ct. 1708 (2006), a case involving the loss of a home in a government tax sale, the U.S. Supreme Court held that when mailed notice of a tax sale is returned undelivered, constitutional due process required that the foreclosing party in that case take additional reasonable steps to attempt to provide notice to the owner before selling the property. Public Citizen Litigation Group successfully represented the homeowner in this case.

For the Public Citizen press release in this case, see U.S. Supreme Court Ruling Is Major Victory for Due Process Rights; State Did Nothing to Notify Owner of Tax Sale After Mail Was Returned Undelivered (Public Citizen Represented Man Whose House Was Seized).

Go here for the links to the transcript of the oral argument, and the various briefs filed in Jones v. Flowers.

(2) The Clauers have set up a fund to help them pay for defending their property. Contributions can be sent to:

Clauer Legal Defense Fund
c/o Plains Capital Bank
1629 Hebron Parkway
West Carrollton, TX 75010

Improper Mortgage Assignment By Now-Defunct Originating Lender Could Lead To Free Home For Delinquent Borrower, Says Foreclosure Defense Attorney

In Fayetteville, Arkansas, The City Wire reports:

  • The Legal Aid [of Arkansas] folks held [a] seminar in April in hopes of training attorneys interested in joining the effort to defend against foreclosures. First and foremost, seminar attendees learned that the worst mistake someone facing foreclosure can make is to take no action.


  • April Carrie Charney, senior staff attorney at Jacksonville, Fla., Area Legal Aid and a Legal Aid of Arkansas alum, said people going through the foreclosure process do have defenses. She signed on as a seminar presenter for the purpose of passing on some techniques that have been successful in Florida to Arkansas attorneys. “I'm going to fill up their quivers with more arrows than they'll ever need to stop or prevent foreclosures,” she promised prior to the seminar.


  • [C]harney said[] a good number of mortgages simply aren’t transferred correctly. Let’s say, for example, Joe Borrower takes out a mortgage through Fred’s Bank and Trust. Mortgages, quite often, are bundled up and put into trusts to provide a basis for investment in the mortgage-backed securities market. Fred’s Bank and Trust goes out of business and Joe Borrower’s loan goes into default -—if the mortgage was not transferred correctly into the aforementioned trust, who has standing to bring a foreclosure action?

  • With Fred’s Bank out of business, can anyone legitimately bring a foreclosure action? In some cases, might the borrower wind up with a house free and clear of any mortgage obligation?


  • Whether we’ll see lawyers in Arkansas jump up and start aggressively defending against foreclosures is anyone’s guess. It also remains to be seen how the courts will react to some of the tactics suggested by Charney. Still, we do know there are a lot of foreclosures out there and it appears Arkansas attorneys are starting to take a hard look at how to fight them in court — and make a few bucks in the process.

For the story, see Foreclosure rights.

Philly Court Provides Online Forms For Victimized Homeowners Seeking To Undo Effect Of Forged Documents In Home Title Ripoffs

In Philadelphia, Pennsylvania, the use of forged documents to rip off people's houses is apparently serious enough that the local court system has made available online a "fraudulent conveyance, quiet title" packet, a 22-page set of forms and instructions enabling area homeowners to initiate quiet title lawsuits without an attorney to properly restore the title to their homes in their names. If the homeowner is broke and can't afford the filing fees and other costs associated with filing a lawsuit, there's a form included in the packet that can be used to ask a judge to allow the matter to go forward without paying these fees and costs.

Go here for the fraudulent conveyance, quiet title packet.

Monday, June 7, 2010

DC High Court Affirms Punitive Damages Award Slamming Sale Leaseback Peddlers For $3.3M In Equity Stripping Foreclosure Rescue Ripoff

In Washington, D.C., notorious foreclosure rescue operators Vincent Abell ($2 million), the sole owner of Modern Management Company ($1.1 million), and Calvin Baltimore ($200K) are back in the news(1) as the District of Columbia Court of Appeals recently affirmed a jury verdict that slammed them with punitive damages of $3.3 million for scamming a local homeowner dealing with family health problems(2) and facing foreclosure out of her home that she owned for twenty-two years in an equity stripping, sale leaseback ripoff.(3)

The court also affirmed a jury award to the homeowner of $60,000 in compensatory damages as the group's liablity for common law fraud and for violating the D.C. Consumer Protection Procedures Act ("CPPA") for their various misrepresentations and omissions of material facts and for including "unconscionable terms" in the transaction, and which the trial judge tripled to $180,000 pursuant to the CPPA, D.C. Code § 28-3905 (k)(1).(4)

For the ruling, see Modern Mgmt Co. v. Wilson, Case Nos. 08-CV-18, 08-CV-85 & 08-CV-187 (D.C. June 3, 2010).

(1) For other stories on this foreclosure rescue racket, see:

(2) A severe head injury at work prevented her from being able to work consistently. After her injury, she suffered two additional head injuries causing her to develop epilepsy and suffer seizures. She also spent much of her time caring for her elderly mother after the death of her father.

(3) The victimized homeowner filed suit alleging common law fraud, and statutory fraud pursuant to:

  • the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C.A. §§1961-1964.;
  • the District of Columbia Consumer Protection Procedures Act ("CPPA"), D.C. Code §§ 28-3901 to 3-905 (2001 & 2009 Supp.);
  • the Truth In Lending Practices Act ("TILPA"), 15 U.S.C.A. §§ 1635-1640;
  • the District of Columbia Loan Sharking Act, D.C. Code § 26-901 (2009 Supp.);
  • the District of Columbia Consumer Credit Services Amendment Act, D.C. Code §§ 28-4601 to -4603 (2001);
  • the Home Ownership and Equity Protection Act ("HOEPA"), 15 U.S.C.A. §§ 1602, 1639; and
  • the District of Columbia Usury Statute, D.C. Code § 28-3301 (2009 Supp.).
(4) The legal issues contested on appeal involved assertions by the defendants that:

  • the award of punitive damages against them was constitutionally excessive;
  • the trial court erred in permitting the victimized homeowner to pursue her RICO claims and admitting evidence that appellants had completed one hundred similar transactions, which caused the jury to inflate the punitive damages awards;
  • the compensatory damage award must be reduced by the amount of the settlement agreement the victimized homeowner reached before trial with appellants' former co-defendant;
  • the trial court erred in submitting to the jury the issue of whether the victimized homeowner was a "consumer" as defined in the CPPA; and
  • the jury verdict finding appellants liable for common law fraud and for violations of the CPPA was against the weight of the evidence.

The court affirmed on all points, except it did kick the case back to the lower court with directions to modify the compensatory damage award. The Court of Appeals ruled that the three co-defendants are entitled to a pro rata setoff against the $180,000 trebled compensatory award in the amount of $40,000, the amount a former fourth co-defendant, the law firm Houlon Berman, coughed up to "buy" its way out of this litigation pursuant to a settlement agreement with the homeowner before trial, thereby reducing the total compensatory damages award to $140,000.

Judge Halts All BofA Mortgage Foreclosures In Utah; Says Bank Failed To Register To Do Business & Lacks Offices Within State As Required By Law

In St. George, Utah, KCSG-TV reports:

  • A court order issued by Fifth District Court Judge James L. Shumate May 22, 2010 in St. George, Utah has stopped all foreclosure proceedings in the State of Utah by Bank of America Corporation, ; Recontrust Company, N.A; Home Loans Serving, LP; Bank of America, FSB []. The Court Order if allowed to become permanent will force Bank of America and other mortgage companies with home loans in Utah to adhere to the Utah laws requiring lenders to register in the state and have offices where home owners can negotiate face-to-face with their lenders as the state lawmakers intended (Utah Code ' 57-1-21(1)(a)(i).).


  • The lawsuit filed by John Christian Barlow, [...] has drawn the ire of the high brow BofA attorney and those on the case in the law firm of Reed Smith, LLP, the 15th largest law firm in the world. Barlow said Bank of America claims because it’s a national chartered institution, state laws are trumped, or not applicable to the bank. That was before the case was brought before Judge Shumate who read the petition, supporting case history and the state statute asking for an injunctive relief hearing filed by Barlow. The Judge felt so strong about the case before him, he issued the preliminary injunction order without a hearing halting the foreclosure process.

  • The attorney’s for Bank of America promptly filed to move the case to federal court to avoid having to deal with the Judge who is not unaccustomed to high profile cases and has a history of watching out for the “little people” and citizen’s rights. The legal gamesmanship has begun with the case moved to federal court and Barlow’s motion filed to remand the case to Fifth District Court.(1) [...] Barlow said the Bank of America attorneys are working overtime filing motions to overwhelm him and the court. “They simply have no answer for violating the state statutes and they don't want to incur the wrath of Judge Shumate because of the serious ramifications his finding could have on lenders in Utah and across the nation where Bank of America and other financial institutions, under the guise of a mortgage lender have trampled the rights of citizens,” he said.


  • The second part of the motion, Barlow filed, claims that neither the lender, nor MERS*, nor Bank of America, nor any other Defendant, has any remaining interest in the mortgage Promissory Note. The note has been bundled with other notes and sold as mortgage-backed securities or otherwise assigned and split from the Trust Deed. When the note is split from the trust deed, “the note becomes, as a practical matter, unsecured.” Restatement (Third) of Property (Mortgages) § 5.4 cmt. a (1997). A person or entity only holding the trust deed suffers no default because only the Note holder is entitled to payment. Basically, “[t]he security is worthless in the hands of anyone except a person who has the right to enforce the obligation; it cannot be foreclosed or otherwise enforced.” Real Estate Finance Law (Fourth) § 5.27 (2002).

For the story, see Judge James L. Shumate Orders Halt to Bank of America Foreclosures in Utah.

(1) For a Willamette Law Review article that addresses the apparent abuse by some corporate defendants in civil cases of removing state court cases to Federal court (which imposes a cost in time and money on plaintiffs and the court system) in an attempt to shop for a friendlier litigation forum, see Erroneous Removal As A Tool For Silent Tort Reform: An Empirical Analysis Of Fee Awards And Fraudulent Joinder (article also available at

Ponzi-Scheming Boyfriend's $300K+ Cash Gift Leads To Florida Woman's Loss Of Home, Despite No Knowledge Of Fraud; Used Loot To Pay Off Mortgage

The following facts have been taken from a recent ruling from the U.S. Court Of Appeals - 5th Circuit:

  • One, Hudgins, engages in Ponzi scheme, screwing investors out of a ton of loot.

  • Hudgins gives Florida woman (presumably his girlfriend, mistress, etc.) cash gifts of $368,500, which came from the proceeds of his illicit business activities.

  • Florida woman was unaware of the fraud.

  • She used part of the money to pay off a $328,000 mortgage on her Florida condo, which was her homestead.

  • A federal regulatory agency brought a legal action against Hudgins to enjoin his scheme and seek civil penalties and other relief.

  • A U.S. District Court appoints a receiver to reclaim Hudgins's assets for the benefit of the defrauded investors.

  • The receiver demanded that Florida woman return the loot gifted to her by Hudgins.

  • Florida woman refused, responding that she used the money to pay off her mortgage.

  • The receiver petitioned the district court to require Florida woman to turn over the condominium because it was purchased with fraudulently obtained money.

  • Florida woman contended that the condominium was her homestead and protected by the Florida constitution's liberal homestead exemption.

  • The district court rejected Florida woman's argument, holding that while Florida's homestead exemption did apply, state law nonetheless allowed the imposition of an equitable lien because the homestead was purchased with fraudulently obtained money.

  • The court then directed that the woman turn over title to the condo to the receiver and gave her 30 days to vacate the premises.

  • Florida woman appeals the ruling.

The 5th Circuit Court of Appeals interpreted Florida case law to conclude that Florida woman, although innocent of any fraud, was not entitled to the protection of the Florida homestead exemption from forced sales set forth in Article X, Section 4 of the Florida Constitution.(1) Accordingly, the lower court order directing her to turn over title to her homestead to the receiver and move out was affirmed.(2)

For the ruling, see Crawford v. Silette, No. 09-40641 (5th Cir. June 3, 2010).

(1) Not to be confused with Article VII, Section 6 of the Florida Constitution which, among other things, deals with the entitlement to a $25,000 real estate tax exemption available to Florida homeowners, and has absolutely nothing to do with the application of the exemption from forced sales under Article X, Section 4 (Contrary to what some in Florida mistakenly believe, the local County Property Appraiser has nothing to do with granting homestead exemptions from forced sales under Article X, Section 4. He/She merely approves applications for the tax exmption under Article VII, Section 6.).

(2) In interpreting Florida case law, the Federal appeals court made these observations:

  • In Palm Beach Savings & Loan Ass'n v. Fishbein, the Florida Supreme Court held that, when imposing equitable liens, courts should focus on whether the party claiming the homestead exemption would be unjustly enriched. 619 So.2d 267, 270 (Fla. 1993).


  • [U]nder Florida law, to impose an equitable lien on a homestead, three conditions must exist: (1) the owner used fraudulently obtained funds to purchase or retire a mortgage interest in the homestead; (2) the owner was unjustly enriched; and (3) the owner would be no worse off if the court imposed an equitable lien in favor of the fraud victim. Each prong is met here. The funds were fraudulently obtained by Hudgins. Silette did not earn the money and was unjustly enriched. Silette will not be worse off; imposing an equitable lien for $328,000 puts Silette in the same position as if she had never met George Hudgins.


  • The Florida Supreme Court could not be clearer: a party's innocence in the fraud is not relevant to whether the court can impose an equitable lien. The only relevant factor is whether the party is unjustly enriched by fraudulently obtained funds. The Eleventh Circuit reached the same conclusion. In re Financial Federated, 347 F.3d at 890 ("Unjust enrichment can be the basis for the assertion of an equitable lien."). If the court does not impose an equitable lien, Silette will receive a $328,000 windfall. As Florida has not chosen to protect the innocent beneficiary of fraudulently obtained proceeds, the federal court may not do so.


  • The key factors, we believe, are that the fraudulently obtained funds can be traced directly into the homestead. Havoco carefully identified this situation — the Fishbein case — as the paradigmatic narrow exception to Florida's otherwise generous homestead laws. See Havoco, 790 So.2d at 1024-28 (discussing cases). This case is an application, not an expansion, of Havoco's principles.

Go here for links to all briefs filed in Palm Beach Savings & Loan Ass'n v. Fishbein, 619 So.2d 267 (Fla. 1993).

Go here for links to all briefs filed, and video of oral argument, in Havoco of Am., Ltd. v. Hill, 790 So.2d 1018 (Fla. 2001).

Florida Supremes Issue Rule Clarification Targeting Mess Created By Foreclosure Mills' Sloppy Paperwork

In Central Florida, the Sarasota Herald Tribune reports:

  • The Florida Supreme Court has reaffirmed its fight against the sloppy legal work being used to retake homes in thousands of foreclosure cases across the state.

  • A review of Manatee and Sarasota county cases showed attorneys for banks and lenders had widely ignored a new high court rule that requires them to verify -- under penalty of perjury -- the accuracy of allegations and paperwork in the foreclosure case. When local judges started throwing out the foreclosure cases for that reason, some attorneys for lenders contended that the rule, created in February, was not yet in effect.

  • But the top court this week clarified that attorneys must immediately follow its verification rule as part of its overall battle against the flood of foreclosure cases clogging the court system when the housing market crashed.

  • The uncertainty over the high court ruling illustrates the chaos in foreclosure courts across the state. The vast majority of the state's housing lawsuits come from Florida's five so-called foreclosure mills, where attorneys can each handle thousands of cases. Sloppy paperwork could mean banks and lenders foreclose on properties they are not legally entitled to retake, unfairly forcing homeowners out of their properties, attorneys say. The shoddy and incomplete filings also waste judicial resources.


  • Thursday's ruling clears the way for a local court-sponsored program -- unofficially dubbed "Stop the Slop" -- to once again review all foreclosure filings and dismiss those that are incomplete. Of the 52 cases in the first round of review in Sarasota, all lacked the new verification requirement or other proof the bank is entitled to take the property, an attorney who reviewed the cases says. The vast majority reviewed since then have also failed to meet the requirements.

For more, see Florida Supreme Court tightening foreclosure rules.

NC Appeals Court: Lender's Failure To Provide Sufficient Evidence That It Was "Holder" Of Promissory Note Precludes Foreclosure

Another trial court screw-up in a foreclosure action was recently reversed - this time by the North Carolina Court of Appeals, which ruled that a lender seeking to foreclose on a mortgage had failed to properly provide sufficient competent evidence that it was the holder of the promissory note secured by the mortgage. Accordingly, it ruled that the lender was not entitled to go forward with a foreclosure sale.(1)

For the ruling, see In re Foreclosure of Adams, No. COA09-1455 (N.C. App. June 1, 2010).

(1) An excerpt from the ruling (bold text is my emphasis, not in the original text):

  • [S]ince the photocopies of the Note and Deed of Trust presented to the trial court indicate that the original holder of both instruments was Novastar, not Deutsche Bank for Soundview, and since these photocopies do not indicate that Novastar negotiated, indorsed or transferred the Note to Deutsche Bank for Soundview, respondents contend the photocopied instruments alone were not sufficient to establish that Deutsche Bank for Soundview is the current holder of the Note.


  • We recognize that, in the present case, the testimony by affidavit from Ms. Smith, the assistant secretary of Deutsche Bank for Soundview——an out-of-state entity——as well as the in-person testimony offered by Ms. Cole indicated that Deutsche Bank for Soundview is the current holder of the Note and Deed of Trust. However, neither the in-person testimony from Ms. Cole nor the testimony by affidavit from Ms. Smith expressly showed that Novastar transferred or assigned its interest in the Note and Deed of Trust to Deutsche Bank for Soundview.

  • Moreover, as we discussed above, the photocopied Note and Deed of Trust, which were described in Ms. Smith's affidavit as "exact reproductions" of the original instruments, do not show that the Note was indorsed, transferred, or otherwise made payable by Novastar, the original holder of the instrument, to Deutsche Bank for Soundview.

  • Thus, whereas the record in In re Foreclosure of Brown, 156 N.C. App. 477, 577 S.E.2d 398 (2003), also included an Assignment of Deed of Trust as evidence showing that the original holder of the note and deed of trust had assigned its interest in said instruments to the party seeking to foreclose on the respondent—borrowers, the record before the trial court in the present case contained no such additional evidence.

  • Accordingly, because a foreclosure under a power of sale is not favored in the law and must be "watched with jealousy," see In re Foreclosure of Goforth Props., 334 N.C. at 375, 432 S.E.2d at 859 (internal quotation marks omitted), we must conclude that the evidence presented to the trial court was not sufficient to establish that the Note was payable to Deutsche Bank for Soundview, and so was not sufficient to support the trial court's finding of fact that "Novastar Mortgage, Inc., . . . transferred and assigned its interest in the Note and Deed of Trust to Deutsche Bank National Trust Company, as Trustee for Soundview Home Loan Trust 2005-4 (`Lender')."

Sunday, June 6, 2010

Loan Modification Scam Awareness Events Featured During Nat'l "NeighborWorks Week"

In Dover, New Jersey, the Daily Record reports:

  • The Housing Partnership will fight loan modification scams in Dover by distributing Loan Scam Alert literature to 2,000 households in Dover. The event is one of more than 150 loan modification scam awareness events held during national NeighborWorks Week, June 5 to 12. It alerts homeowners on how to avoid and report loan modification scams.

  • Eight volunteers will be canvassing Dover in bright yellow Loan Scam Alert T-shirts. Other events being held around the country include hundreds of volunteers canvassing neighborhoods also distributing tip sheets and fliers, dozens of one-on-one and group workshops about reputable loan modification programs, and more.

Source: Loan scam fliers will be distributed in Dover.

Foreclosure Scam Prevention Day Coming Up In Chattanooga

In Chattanooga, Tennessee, WDEF-TV Channel 12 reports:

  • Each day, an average of six Chattanooga homeowners face foreclosure. As the number of homeowners who need help keeping their homes increases, so does the number of foreclosure prevention scams. To arm area homeowners with information to prevent them from becoming victims of foreclosure scams, Chattanooga Neighborhood Enterprise (CNE) will kick off a community outreach initiative, Foreclosure Scam Prevention Day, on Tuesday, June 8.

For more, see CNE to Commerate Foreclosure Scam Prevention Day.

Mess Caused By Sloppy Lenders, Foreclosure Mills Deepens In Florida As Ambiguity In Recent State High Court Ruling Adds Confusion To Legal Process

In Central Florida, the Sarasota Herald Tribune reports:

  • An attempt to fix the sloppy legal work plaguing thousands of foreclosure cases in Florida has been ineffective, and has now caused a legal mess of its own. The Florida Supreme Court got tough on attorneys for banks and lenders in February, responding to stories of homeowners losing their property based on shoddy or incomplete paperwork. The incomplete filings also wasted judicial resources and clogged up the courts.

  • To combat that, a new rule enacted by the high court requires the attorney or bank filing a foreclosure to verify -- under penalty of perjury -- that the allegations and paperwork are accurate when a residential property is at stake. But attorneys have not followed the rule. Some contend they do not have to, arguing that the Supreme Court said the rule was not in effect yet.


  • A court-sanctioned review of hundreds of residential foreclosure filings in Sarasota and Manatee counties -- unofficially dubbed "Stop the Slop" -- found that nearly all the lawsuits lacked basic documentation. Of the 52 cases in the first round of review in Sarasota, all lacked the new verification requirement or other proof the bank is entitled to take the property, an attorney who reviewed the cases says. Backed by local Chief Judge Lee Haworth, who served on the state task force that recommended the new rule, judges in Manatee and Sarasota counties used the new rule to throw out dozens of foreclosure complaints in the past month.

  • But Miami attorney [Gerald] Richman, who represents banks and lenders, contacted Haworth last week and told him he and the other judges were jumping the gun. The confusion results from the wording of the Supreme Court's ruling. [...] The confusion sent Haworth backpedaling last week, after Richman said his client would appeal the tossing of the cases. Haworth temporarily suspended that part of the "Stop the Slop" program Friday, saying he was not alone in having questions.


  • Foreclosure defense attorneys had already pointed to Haworth's "Stop the Slop" program as an example that should be followed across the state. Haworth said he will continue policing foreclosure documents aside from the Supreme Court verification requirements.

For the story, see Legal mess over foreclosures deepening.

Hawaii Condo Associations Feel Pinch From Non-Maintenance-Fee-Paying Owners; Some Use Utility Shut-Offs To Persuade Delinquents Into Coughing Up Cash

In Maui, Hawaii, The Maui News reports:

  • Psst! Hey, buddy. Wanna buy a foreclosed condo in Wailea? One dollar! Believe it or not, it happens - but it can be a bad bargain. As more and more financially strapped apartment owners fall behind on their common area maintenance fees, condo associations find themselves feeling the pinch. The quitclaim foreclosure auction is just one of several unpleasant choices facing association boards when members quit paying their fees, which at upscale projects can easily run $1,000 a month.


  • Another tactic is to try to pressure the delinquent by shutting off the water, cable television or even electricity. Robert Miskae, past chairman of the Condominium Council of Maui, said that his group has been advised by one of Maui's leading condo law attorneys to avoid shutoffs, because of potential health and safety issues.

For more, see Isle condo boards get creative to obtain fees (As more financially strapped owners becoming delinquent, associations feel the pinch).

City Threatens "Drowning" Residents In 76-Unit South Florida Condo Complex With Water Shut-Off Followed By Eviction Over Unpaid Bill

In Margate, Florida, the South Florida Sun Sentinel reports:

  • Dozens of residents at the Atlantic Palms condominium complex could be evicted from their homes within two weeks if they're unable to pay a city utility bill of more than $7,000. Margate officials say more than 60 of the 76 units at Atlantic Palms, [...] are in different stages of foreclosure, and their homeowners association can't afford to pay the water bill.

  • Now, the city has posted notices on residents' doors saying they have until 6 p.m. June 3 to pay their water and sewer fees. If residents don't pay, their water service will be shut off June 7, and they will be forced to leave because of health concerns.

For more, see Margate condo residents face eviction over unpaid water bill.

Hundreds Of Mobile Home Residents May Face The Boot As County Pulls Plug On Waste Water Treatment Services; Park Owner Silent On Plans

In Scott County, Illinois, WHBF-TV Channel 4 reports:

  • Hundreds of Quad Citians may be forced to move as the future of one mobile home park is up in the air. For decades, Scott County has been treating the waste water at Lake Canyada Mobile Home Park. However in August that contract is up and the Scott County Conservation Department says it can't afford to cover the costs anymore.

  • Karen Constantino has lived at Lake Canyada for two and a half years. When she got the letter from Scott County last week telling her the waste water would no longer be treated, she panicked. "I think it's horrible," says Constantino, "especially if we can't get any straight answers on whether we need to find a place to live or if we're able to stay here."


  • The Scott County Conservation Department says it can't afford to treat the waste water. The only thing residents can do is build their own plant. "Our plant just can't handle the amount of waste going there and we can't handle the project cost to upgrade it," explains Scott County Conservation Director Roger Kean. Ohio based I & R properties, which owns Lake Canyada, hasn't told residents how it plans to fix the problem. Their silence doesn't surprise Constantino. "Anytime somebody tries to contact them, they never get back."

For the story, see Money Issues Could Force Community Out.

Managing Agent Faces Seven Felony Charges In Alleged $30K Rental Ripoff From Two Landlord/Clients

In Shasta County, California, The Redding Searchlight reports:

  • A former real estate agent accused of felony grand theft and conducting real estate business without a license pleaded not guilty last week during her arraignment in Shasta County Superior Court. Tina Marie Horan, 43, of Redding, who was arraigned on Friday, is scheduled to have her preliminary hearing on May 20.

  • Horan, who is free of custody without bail, is charged with seven felony counts of grand theft, grand theft of an elder and writing checks without sufficient funds. She’s also accused of conducting business as a property manager without a real estate license, a misdemeanor.

  • It’s alleged that Horan took more than $30,000 from two clients for whom she was managing residential properties, including an elderly Vallejo woman, said Bob Angulo, a real estate fraud investigator with the Shasta County district attorney’s office.

Source: Ex-real estate agent accused of grand theft.