Saturday, June 26, 2010

Dozens In Daytona Get Boot Without Prior Notice As Rent Skimming Landlord Pockets Renters' Payments & Stiffs Bank, Losing Properties To Foreclosure

In Daytona Beach, Florida, WESH-TV Channel 2 reports:

  • Dozens of Daytona Beach residents were evicted on Friday, and they said they had no idea it was coming. Residents who live in the homes along Magnolia Avenue in Daytona Beach said they paid their rent, but they claim it was the landlord who didn't pay his.

  • More than a dozen families were displaced, and their belongings were thrown to the curb. Many in the development said they have no money and nowhere to live. Their landlord said he feels guilty, but he said the tenants knew it was coming. "I have no words about what's going on right now," said former resident Joy Soriano. The tearful mother of two was at a loss for words over suddenly losing her home. "We knew nothing about this happening," she said. "They just threw everything out in the street."


  • The bank foreclosed on the two homes six months ago, [the ex-owner/landlord] said, and he continued to pay the electric and cable. He said he told renters earlier this month that they would have to get out.

For more, see Dozens In Daytona Beach Unknowingly Evicted, They Say (Landlord Says He Told Renters Weeks Ago They'd Have To Move).

Foreclosure Purchaser Intimidated Renter's Minor Children, Driving Tenants From Home, Says Suit Seeking $1M+ In Damages On Behalf Of F'closed Landlord

In Rockville, Maryland, Courthouse News Service reports:

  • A couple who lost their rental home to foreclosure claim the buyers sent men to the house the next day to force their way in, demand the keys from the tenants' children, who were home alone, and tell the kids to leave, or they would "break the door and change the locks. We will throw all your stuff out."

  • Alexander Portillo and his wife say David Loring and Jason Greenwald, of Residential Value, intimidated their tenants so badly that the family vacated the property that night, though the defendants "never acquired lawful deed holders status" for the house.(1)


  • When the parents returned home, they took the children and immediately vacated, costing the Portillos 6 months in rent, they say. The Portillos sued Loring, Greenwald and Residential Value for trespassing, interference with contract, conspiracy and loss of consortium. They seek $9,900 in compensatory damages for the first three counts, $50,000 in compensatory damages for loss of consortium, and $250,000 in punitive damages for each count. The Portillos are represented by Jonathan Ai.

For more, see Foreclosure Nightmare Alleged in Maryland.

For the lawsuit, see Portillo v. Loring, et al.

(1) As I read the lawsuit, while the foreclosure purchaser may have been the winning bidder, he never completed the transaction, which would have resulted in a forfeiture of any deposit paid with the winning bid, and would have left the landlord in foreclosure as the continuing title owner of the home until another foreclosure sale could be scheduled and conducted.

Harassment Of Tenants In Foreclosed Homes Continues As Investors Ignore Federal Law

In Bakersfield, California, KGET-TV Channel 17 reports:

  • Amber and Tony Moore say their rental was foreclosed on and sold at auction last year. "On the 15th of September we watched the house get sold," said Moore. The Moores obtained a lawyer who assured them they had the right to live out their lease, but eventually they say the harassment got so bad they just decided to give up.

  • "They were constantly dropping us a three day notice, constantly threatening us with harassing phone calls, emails, even text messages. Stuff like 'get out," said Moore. "If you're protected by the federal law you're allowed to live out the term of your lease,"(1) said attorney Mark Roy with Greater Bakersfield Legal Assistance.(2) Roy says the only exception to that law are people renting from family or paying way below market value rent, or if the new owner intends to live there.

  • But Frank St. Clair with St. Clair Investments, says he buys about a dozen foreclosed properties a month, and he doesn't agree. "It appears that pertains to the banks that are the foreclosing entity. I'm not the foreclosing entity, I'm a third party, so I don't have to honor the lease," said St. Clair. "Well they're 100% wrong," said Treves. "They say that but if they fight us in court they'll lose."

  • In fact a renter is taking St. Clair to court over this issue next month. St. Clair says it's the first time anyone has challenged him, but he is confident he'll win. "We have a fairly conservative legal system around here so I feel pretty comfortable with it going that way in court," said St. Clair.

For the story, see Contact 17 Investigation: Renters' rights.

(1) See the Protecting Tenants at Foreclosure Act of 2009, which provides important federal protections for tenants in foreclosed properties, including the right to receive 90 days' notice before being required to leave the property and, in many cases, the right to remain for the length of the tenant's existing lease term.

See also, National Law Center on Homelessness & Poverty, Staying Home: The Rights of Renters Living in Foreclosed Properties.

(2) Greater Bakersfield Legal Assistance (GBLA) is a 501 (c) (3) non-profit organization that offers free legal services in civil matters to low-income persons residing in its service area within Kern County, California.

Tenants In Homes Facing Foreclosure Continue Feeling Uncertainty, Despite Protections Under Federal Law

In Orange Park, Florida, First Coast News reports:

  • At the Orange Park Parkridge Apartment Complex, residents are just finding out the property is in foreclosure. Pamela Carden lives there and is worried. "I don't know if I have to move; I don't know what our rights are as tenants," said Carden.

  • Carden's lease expires in August, but she's decided to start packing in case she has to leave in a hurry. "We have not been notified by the bank, nor the attorneys." But there are protections for renters living in foreclosed properties, said attorney Erica Shaffor of Three Rivers Legal Services.(1) "There's a new federal law that provides protection," she said.(2)

  • A landlord has to allow a tenant to live on the property at least three months from the time the foreclosure proceedings begin, she said. An attorney for the lender said tenants should have been informed. Even those on a month-to-month lease are still allowed to live on the property 90 days, said Shaffor. "However, (you) still have to stay current with your rent. If you fall behind you will be subject to an eviction," said Shaffor.

  • Carden is pleased that she doesn't have to move out in a hurry, but she said when her lease expires in August, she will have to find a new place to call home. "If you have to move and you have kids or pets, you have to be able to plan and to save," said Carden. This 90-day allowance also applies to anyone living in Section 8 housing.

Source: Orange Park Renter Discovers Apartment in Foreclosure.

(1) Three Rivers Legal Services, Inc. is a local, non-profit corporation which provides free civil legal services to low-income, eligible clients in seventeen counties throughout North Florida.

(2) See the Protecting Tenants at Foreclosure Act of 2009, which provides important federal protections for tenants in foreclosed properties, including the right to receive 90 days' notice before being required to leave the property and, in many cases, the right to remain for the length of the tenant's existing lease term.

See also, National Law Center on Homelessness & Poverty, Staying Home: The Rights of Renters Living in Foreclosed Properties.

Family Who Unwittingly Rented Foreclosed Home Gets Two Weeks Before Getting Boot; Files Theft Complaint With Cops Against Phony Landlord

In Seattle, Washington, KING-TV Channel 5 reports:

  • Phyllis Richmond has to move out of the South Seattle house that she has rented for the past eight months. She's a single mother who shares the four-bedroom house with her three sons. Richmond leased the house from a property management company run by Peter Dodsondance. She signed a year-long lease, paying $1,400 a month to a man who doesn't own the house. "I honestly think he needs to be arrested and go to jail for a long time," said Richmond, who was notified on Friday she must move out.

  • KING 5 News reported on Dodsondance's property management company in April when he rented out another home. He filed a declaration of abandonment, claiming he has the legal right to collect rent on a foreclosed home owned by someone else. The home Richmond is renting was foreclosed on in October 2009 and Aurora Loan Services in Bellevue took ownership. Aurora Loan posted an eviction notice on the property on Friday.

  • But today, Aurora Loan gave Richmond a two-week reprieve. She can stay in the home until the end of the month. "I'm grateful. I'm very grateful," said Richmond. Richmond has filed a theft complaint against Dodsondance with the King County Sheriff's Office.

Source: Man scams renters by offering foreclosed homes.

Dozens Of Renters Get Immediate Boot Without Advanced Notice From F'closed Rooming House After Local Authorities Declare Premises Unfit For Habitation

In Edwardsville, Pennsylvania, The Times Leader reports:

  • Twenty to 30 residents of an Edwardsville rooming house have been evicted after authorities declared the property unfit for habitation Thursday. The property, a series of three buildings [...], was foreclosed upon by a bank in Florida, Edwardsville Code Enforcement Officer David Saraka said. Saraka and Edwardsville Fire Inspector Ray King said the property was rife with electrical, structural and health hazards, including improperly wired electrical junction boxes, a disconnected fire alarm, broken stairs and railings, and standing water in the basements of two of the three structures.

For more, see Edwardsville rooming house shuttered (The buildings along Main Street have numerous code violations, authorities say).

See also, Citizens Voice: Building violations force dozens out of apartments.

Friday, June 25, 2010

Failure To Update Owner's Title Insurance Policy On Refinance Leaves Couple Facing F'closure As Escrow Agent Allegedly Failed To Pay Off Existing Lien

In Pittsburgh, Pennsylvania, WTAE-TV Channel 4 reports:

  • Team 4's Paul Van Osdol spoke with one local family in danger of losing their home after being victimized by an accused fraudster. "We've been victimized many times over and this is getting ridiculous. I just want it resolved," said Heather Cerciello. Heather and R.J. Cerciello told Van Osdol that they refinanced their home in January through Wells Fargo.

  • The Cerciellos said that their closing agent was Jason Sheppard, the owner of TruClose Financial Services in Castle Shannon. They said that Sheppard was supposed to make sure that Wells Fargo [paid] $150,000 [to] Bank of America, their previous mortgage holder. "We found out the closing agent received the money from Wells Fargo and never paid off Bank of America," said Heather Cerciello.

  • Sheppard was indicted Tuesday on wire fraud charges, accused of taking more than $830,000 from multiple victims in a fraud scheme. "That was the issue with Mr. Sheppard, he failed to cause the payments to be made on the first mortgage and borrowers were now left with two," said Assistant U.S. Attorney Brendan Conway.

  • But the Cerciellos said they can't afford two mortgages and Wells Fargo is threatening them with foreclosure even though they haven't been accused of doing anything wrong. "It's just been very frustrating. We can't get anywhere and everyone you talk to they just give you the runaround," said R.J. Cerciello.

  • Conway was asked what the Cerciellos can do to keep from losing their house. "Well, I mean we're federal prosecutors. Our role here is limited here in terms of prosecuting criminals," said Conway.(1) TruClose Financial has since been evicted from its Castle Shannon office. Van Osdol went to Sheppard's home in Collier Township, where no one answered the door, but a BMW, Jaguar and Lotus were parked in the driveway.

For the story, see Mortgage Fraud Puts Family In Danger Of Losing Home (National Crackdown 'Operation Stolen Dreams' Targeting Mortgage Fraud).

(1) It may be that the homeowners failed to obtain an updated owner's title insurance policy when they refinanced their mortgage. If they had (although I doubt that many, if any, refinancing homeowners do), they could simply continue the house payments on the new mortgage, stiff the old lender, and upon the latter's start of foreclosure proceedings, the homeowners could file an insurance claim on their updated title policy and let the title underwriter straighten out the problem (that's why you pay for title insurance).

In this case, they presumably failed to update their policy, in which case they should probably continue payments on the new loan, stiff the old lender, and upon the latter's start of foreclosure proceedings, and hopefully/probably the new lender (whose interest would also be in jeopardy because of the allegedly corrupt escrow agent's actions) will file a title insurance claim on its mortgagee's title policy (which would bail it out and, in the process, hopefully bail out the otherwise uninsured homeowners).

Of course, all this presupposes that the allegedly corrupt closing agent ever had legal authority to issue title insurance and act as an authorized agent on behalf of a title insurance underwriter in the first place. If not, or if he once did but subsequently had his authorization revoked by his underwriter prior to presiding over the mortgage refinance closing at issue in this story, it may be that the homeowners and the new lender will both find themselves left holding the bag while the old lender proceeds on its foreclosure action.

Massachusetts Couple Facing F'closure To Keep Home After Settling Lawsuit; Sought Loan Modification & Claimed WAMU Failed To Bargain In Good Faith

In Boston, Massachusetts, the Lowell Sun reports:

  • A Westford couple's lawsuit against the nation's largest mortgage company -- one of many filed against Washington Mutual -- has been settled more than two years after the firm failed to respond to the couple's attempts to save their home from foreclosure. Lori and Mark Pestana originally filed a $5 million lawsuit in October 2008 alleging that Washington Mutual and its attorney, Boston-based Harmon Law Offices, which collected foreclosure fees and costs, violated state law that requires them to bargain in good faith. They settled the lawsuit last month, with the couple being able to stay in their home.

  • The Pestanas did not return a call seeking comment, but attorney Kevin Costello, who represents the couple, described his clients as the "poster children" for the gap between a lender's professed and public statements to stop foreclosures and the reality of the borrower's experience. "Although I cannot disclose the precise terms of the settlement, I can say that we expect the Pestanas to be able to remain in their home,'' Costello said. "This was an individual settlement that was deeply affected by WaMu's collapse and seizure by the FDIC. That action made the legal issues in the case vastly more complicated."


  • The Pestanas' lawsuit sought class-action status on behalf of thousands of Washington Mutual's former borrowers in Massachusetts. In the lawsuit, attorney Gary Klein, who also represents the Pestanas, wrote that the company's process for managing delinquent accounts creates "a nightmare for homeowners who deeply care about saving their homes."

For the story, see Couple settles foreclose lawsuit.

NYC Woman Victimized In Foreclosure Rescue Scam Temporarily Dodges The Boot As Neighbors Jam City Agency Phone Lines In Effort To Call Off Eviction

In St. Albans, Queens, the New York Daily News reports:

  • FRANCIS BLACKMAN knew the day was coming when city marshals would show up and evict her from the St. Albans home that had been in her family for more than 15 years. But when they knocked on her door last week, she had a backup plan.

  • Blackman enlisted the help of neighbors, who flooded the city's 311 line, the police and several city agencies with calls protesting the eviction. They argued that she was entitled to a temporary stay, since she'd filed for bankruptcy just days before. And it worked.

  • "They got me some time," said Blackman, 55, who is being ousted after her home went into foreclosure in what she believes is a case of deed theft - a scam that has become all too common in southeastern Queens.(1) Blackman is one 10 homeowners in the area who have banded together after becoming victims of the mortgage crisis. Some are in the midst of foreclosure proceedings and others are fighting evictions that have already happened.(2)

For more, see Foreclosure scam victim staying put for now.

(1) According to the story, Blackman said she was duped by a woman city property records identify as Orit Tuil, who came to her door in 2006 claiming to be a foreclosure specialist after she and her stepmother missed payments on the $180,000 mortgage. "She said that I would have to sign over the deed to her," Blackman reportedly said of the woman. "I was ignorant to what goes on after that." The $180,000 mortgage was paid back, then Tuil took out two mortgages totaling $405,000, according to property records. "This was a common scheme back then when money was being lent so easily," said Lynn Armentrout, a lawyer at the City Bar Justice Center, the pro bono affiliate of the New York City Bar. "What they usually do is refinance, strip all the equity out of the house, then disappear."

(2) Among those helping in the effort was one woman who was evicted from her home in 2005 and is still trying to prove that her mother was a victim of an identity theft scam that resulted in a stranger taking over their home.

Calgary Cops Seek Suspect Wanted For Targeting Elderly Couple In Alleged Home Equity Ripoff; Accused Of Setting Criminal Interest Rate On Loan

In Calgary, Alberta, The Calgary Herald reports:

  • Police are looking for a man who allegedly scammed an elderly couple into unknowingly signing away their home to the suspect, officials said. Police say they are looking for Richard William Hoffman, 38, after Hoffman allegedly offered a loan to the victims. The suspect allegedly told the elderly couple in 2006 they could use their southeast Calgary home as collateral.

  • The couple then signed an agreement in June 2007, police say. The couple thought the agreement was a reverse mortgage. In reality, police say, the document pledged the home to the suspect and did not give any rights for the elderly couple to remain in their home. Hoffman has since started to foreclose on the house, police say.

  • Police say the couple was loaned $84,000 and owed $150,000, putting the interest rate at 65 per cent. Since it is illegal under Alberta law to have a loan interest rate exceed 60 per cent, police have charged Hoffman with unfair trading practices.

Source: Police looking for man who allegedly scammed elderly couple out of their home (Richard William Hoffman being sought after 65% loan).

For follow-up stories, see

  • CBC News: Accused in seniors' loan scam surrenders: Richard William Hoffman, 38, is charged with unfair practices under Alberta's Fair Trading Act, and with setting a criminal interest rate under the Criminal Code. Hoffman surrendered the day after police released a picture of him to the media. [...] The couple is still living in the home and involved in a legal battle to retain ownership.

Thursday, June 24, 2010

Cal. AG Warns Underwater Homeowners Against Emergence Of An Entire Industry Of So-Called Short Sale Negotiators; Calls It A Field Rife w/ Scam Artists

From the Office of the California Attorney General:

  • Attorney General Edmund G. Brown Jr. [] joined the California Department of Real Estate and the State Bar of California to warn homeowners about an alarming rise in short sale fraud across California in a field "rife with scam artists". A short sale is an arrangement in which a homeowner sells his or her home for less than the outstanding mortgage, with the consent of the lender.

  • "While short sales can provide homeowners with a last-ditch alternative to foreclosure, this market is rife with scam artists," Brown said. "Homeowners and buyers, agents, and lenders should beware of short sale negotiators who operate without licenses, use straw buyers or charge illegal fees."

  • With so many homeowners now considering short sales, an entire industry of so-called short sale negotiators has emerged. These individuals solicit homeowners by promising to expedite the process and help coax lenders into taking part in the transaction. The Department of Real Estate is investigating more than 40 complaints of short sale fraud, up from "virtually zero" cases only three months ago, a spokesman said.

For the California AG press release, see Brown Issues Warning about Rise of Short Sale Fraud.

NJ AG Announces Charges Against Woman In Alleged Short Sale "Flopping" Scam; Used Phony IDs & Documents, Straw Buyers Say Authorities

From the Office of the New Jersey Attorney General:

  • Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor [] announced charges against a Kearny woman who allegedly orchestrated a scheme to steal millions of dollars by obtaining mortgage loans using false identities and counterfeit documents. According to Director Taylor, Genilza R. Nunes, 36, of Kearny, was arrested on March 9 by detectives of the Division of Criminal Justice Major Crimes Bureau as a result of an ongoing investigation into the conspiracy. [...] Because the investigation by the Division of Criminal Justice is ongoing, the charges were not announced until [Wednesday]. Nunes was charged [] with other defendants in a federal investigation into related activities announced by the U.S. Attorney’s Office and FBI in Newark.


  • Nunes and her co-conspirators allegedly defrauded numerous lending institutions of millions of dollars through what is known as a “short sale mortgage loan property flip scheme.” [...] In this case, individuals involved in the scheme were purchasing the properties as straw buyers, using false identities supported by counterfeit driver’s licenses, false financial records, and fictitious credit histories.

  • Through a series of fraudulent transactions, the short sale properties were then sold or “flipped” at inflated values derived from fraudulent appraiser reports. A second straw buyer applied for a mortgage loan on the inflated property and obtained the loan under a false identity. The short sale property was then purchased with the loan proceeds, and, by design, the straw buyer made no payments on the loan, causing a loan default. [...] Typically Nunes and her co-conspirators obtained $100,000 to $300,000 per transaction.

For the entire press release, see Kearny Woman Charged in Multi-Million Dollar Scheme to Obtain Mortgage Loans Using False Identities & Counterfeit Documents.

Forced Sale Of Free & Clear Home Over Unpaid $800 HOA Fees While Texas Homeowner Away On Military Duty Gets National Media Coverage

ABC News reports:

  • It should have been a happy summer for Michael Clauer. The Texas Army National Guard captain was winding down his time in Iraq, preparing for a new unit to arrive and replace him and the 130 service members under his command. But a phone call in June 2009 left him so shaken that a colleague suggested he seek psychiatric help: his wife, her voice choked with tears, told him that their homeowners association had foreclosed on and sold their Frisco, Texas house -- which the Clauers say is valued at more than $300,000 -- for $3,200, according to county land records.


  • Now, Clauer and his wife May are suing the homeowners association, the investors who bought the home at foreclosure and sold it, and the home's current owner. The Clauers, who reached an agreement with the current owner to continue to live in the home with their two young daughters until their lawsuit is resolved, either want to get their house back or be paid damages by the people they're suing. They'd prefer, of course, the former.


  • As the case progresses -- a jury trial is set for January of 2011 -- Clauer said he hopes his story will help force a change in how homeowners associations in Texas are allowed to initiate foreclosures. Few other states, he said, allow associations as much power as Texas does.

For more, see Soldier, Back From Iraq, Finds Homeowners Association Sold His House (National Guard Capt. Michael Clauer Says Law Should Have Stopped Foreclosure; Association Says It Didn't Know Clauer Was on Duty).

Squatters Stake Claim To Vacant F'closed 8,000 Sq. Foot Mansion Currently On Market For $3.3M; Unexpected Move-In Leaves Listing Agent Scratching Head

In Kirkland, Washington, The Seattle Times reports:

  • The 8,000-square-foot mansion was dark and in foreclosure for years. So last weekend when the for-sale signs came down and the lights lit up, neighbors were relieved. "We were like — 'finally, somebody's going to make that place a home,' " says one. But then some new signs went up.

  • "No trespassing," the signs say. "Privately owned property. Not for sale." That's odd, neighbors thought. The West of Market neighborhood in Kirkland is friendly, easygoing. So one of them called the real-estate agent to ask what was up. What he said floored them. The house is still for sale for $3.3 million. Whoever is living there had broken in. They're squatters.(1)


  • The house's history is like a recap of the economic meltdown. A modest house was torn down to make way for this behemoth, but the builder defaulted on it in 2008 and the mansion went into foreclosure. It ended up in the hands of Venture Bank, in Lacey, Thurston County. Then that bank failed — too many defaulted loans — and was seized by the feds. So the house went to another bank, called First Citizens, which, according to legal documents on file at King County, now owns it. Or so they think they own it.

  • A form posted on the door of the house by its new "tenants" says "all rights, interest and title in said property" has been transferred to something called the "Priority Rose Children's Outreach" in Bothell. That's a charity that was incorporated only two weeks ago, according to the state Secretary of State's Office. Its purpose is listed as "spiritual training for adults and children in a religious safe environment for the development of all mankind."

  • That sounds nice. But the phone number for the charity is also the number for a Bothell company called NW Note Elimination that specializes in "eliminating mortgages." It does this by finding flaws with loans or titles and exploiting them to stake outright claims to property.

  • One of its strategies, according to a primer it posted on Craigslist, is to create a land trust and claim title to a piece of property, then try to challenge the existing mortgages as flawed in hopes the banks eventually will just go away.

For the story, see Squatters cozy up in mansion.

For story update, see:

  • The Seattle Times: Police squelch squatters' brazen move into mansion: Tuesday the rent came due for the mansion squatters, a woman and man who last week just moved in and tried to stake claim to a 8,000-square-foot, foreclosed house in Kirkland that is for sale for $3.3 million,

(1) Reportedly, the real-estate agent had $80,000 worth of staging furniture inside, but last week he managed to get in and cart it away.

Short Sellers, Foreclosed Borrowers May Be In For Big Surprise As Collection Firms Scramble To Buy Up Unpaid Loan Deficiencies

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

  • Joshua Rand is the muscle. Not in a busting-skulls, Tony Soprano kind of way. But he does seek to collect, and sometimes even buys, the debt left by delinquent homeowners who walk away from their mortgages - the same borrowers who often assume that a foreclosure or short sale wipes out their loan balance, ending their liability.

  • A principal in the New York-based Deficiency Judgment Recovery Network, Rand said he has "hundreds, maybe thousands" of home loans gone sour in Florida that his company, formed in late 2009, is working to collect balances from. Rand either is hired by lenders to collect the deficiencies for them or his company buys the debt in pools for pennies on the dollar, profiting on the back end by making a borrower pay up.

  • "People are under the assumption that the banks are so busy modifying home loans that they don't have the bandwidth or stomach to go after those who are walking away. That's a bad assumption," said Rand, whose company motto is "We turn shortfalls into windfalls."

  • A deficiency judgment, or claim, is basically the remainder owed on a home loan when a borrower goes into foreclosure or completes a short sale. [...] "These lawyer firms are salivating. They can't wait because they see huge opportunities to collect money," said Mark Greene, owner and president of Short Sale Operations LLC in North Palm Beach. "It's going to be a blood bath."


  • In Florida, a claim must be filed within five years, but the lender has up to 20 years to collect. So even if a borrower has no money today, he or she may rebound within the collection time frame. "People are broke right now, but they won't be broke forever," Greene said.

For the story, see Borrowers beware: Firms profit off defaults.

Wednesday, June 23, 2010

Miami Jury Awards Couple $2.5M For Damages Due To Defective Chinese Drywall; Company To Mull Over Possible Appeal

In Miami, Florida, The Miami Herald reports:

  • About 2 ½ years after a Miami couple first wondered about the strange odor in their home, a Miami-Dade jury awarded them $2.5 million in damages and expenses Friday, blaming odors and corrosion problems on defective Chinese drywall.

  • Armin and Lisa Seifart sued Miami-based Banner Supply after the drywall that the company provided corroded copper pipes and fixtures, ruined their air conditioner and other appliances and made their home smell. The case -- the first jury trial in the country over Chinese drywall -- could set precedent for other lawsuits.(1) Banner has been sued in dozens of cases as have other drywall companies and businesses in the drywall supply chain.


  • Banner attorney Todd Ehrenreich said the company, [...] is still considering its next move. "We are a bit disappointed. We will weigh all of our rights, including our appellate rights,'' he said.

For more, see Chinese drywall verdict is in: $2.5 million (A jury found Miami-based Banner Supply at fault for the struggles of a Coconut Grove couple whose home was damaged by Chinese drywall. The plaintiffs had sought $4.4 million in the case).

(1) A federal judge in Louisiana awarded $2.6 million to seven Virginia homeowners, finding drywall manufacturer Taishan Gypsum Co. liable for damage, but that company has not participated in U.S. court proceedings, leaving the ruling's effect in limbo, the story states. Reportedly, Judge Eldon Fallon also ruled that manufacturer KPT pay $164,000 to a Louisiana couple for repairs to their house.

Jury Sends 62-Year Old Scammer Into Probable Retirement w/ Guilty Verdict In "Land Patent" F'closure Rescue Scam; Homeowners Losses Estimated At $260K

In San Diego, California, KGTV-TV Channel 10 reports:

  • A man who told homeowners that buying "land patents" from him would protect their properties from foreclosure was convicted Thursday of 21 felony counts, including grand theft and unlawful practices by a foreclosure consultant. Larry Smith -- who has prior convictions for second-degree murder, robbery and burglary -- faces a "very lengthy" prison term when he is sentenced Aug. 13, said Deputy District Attorney Marlene Coyne. [...] An expert estimated homeowners' losses at $260,000, Coyne said.

  • In her closing argument, Coyne told jurors that Smith[, 62] and others had homeowners hand over thousands of dollars under a false promise that their homes would be protected from foreclosure. "You buy a land patent from us, and your foreclosure is going to be stopped in its tracks" was Smith's sales pitch, the prosecutor told the jury. Smith and real estate agents who took part in the scam -- and previously pleaded guilty to various charges "were just bleeding money in this case," Coyne said.

  • Sixteen defendants -- including Smith -- have been found guilty or convicted and two remain set for trial, Coyne said.

For the story, see Jury Finds Man Who Sold 'Land Patents' Guilty Of 21 Felony Counts (Larry Smith Told Homeowners Buying 'Land Patents' From Him Would Prevent Foreclosure).

Cal. State Bar Shelves Another Attorney For Association With Alleged Lawyer-Renting Loan Mod Racket; Pocketed Upfront Fees & Did Nothing, Says Judge

In Southern California, The Orange County Register reports:

  • An Orange County lawyer who signed retainer agreements with homeowners facing foreclosure but then "did little or nothing to help them'' was placed on involuntary inactive enrollment, the State Bar of California announced. The Bar cited complaints from clients in 8 states against lawyer Brian Colombana, 29, of Lake Forest.(1)


  • The action against Columbana stems from efforts by the State Bar’s Task Force on Loan Modification to stop lawyers who "exploit the vulnerabilities of frightened homeowners who face foreclosure by promising services that are never delivered,'' the Bar says.

  • Since the task force was created last April, seven involuntary enrollments have been ordered and 13 resignations obtained from lawyers who engaged in misconduct related to loan modifications. The Bar says there are 5 loan modification trials pending and 2,000 active investigations.

For the story, see Bar goes after O.C. loan mod lawyer.

(1) According to the story, The State Bar of California released the following statement:

  • State Bar Court Judge Richard Honn said in his June 17 ruling that the conduct of Brian Colombana ... “poses a substantial threat of harm to his clients or the public.” Honn cited 13 declarations against Colombana by clients from California, South Carolina, Minnesota, Nevada, New Mexico, Maryland, Utah and New York who paid upfront fees to one of the loan modification companies with which Colombana was affiliated, including Loan Negotiators of America, Housing Law Center and Mortgage Law Center.

    In most cases, clients never even met the attorney but dealt with non-attorney representatives of the loan modification companies. Through the companies, Colombana 'convinced numerous cash-strapped homeowners to pay him thousands of dollars in hopes of saving their homes from foreclosure,' Honn wrote. '. . . Many of these homeowners were worse off after retaining respondent’s services.'

    The judge noted that many of the homeowners were current with their mortgages but then were advised by Colombana’s affiliates to stop paying. “Soon these clients were behind on their mortgage payments and facing foreclosure, and [Colombana] wasn’t there to help,” Honn wrote. In ordering involuntary inactive enrollment, Honn said Colombana continues to harm clients by failing to refund unearned fees or communicate with them and demonstrates a pattern of behavior likely to continue to cause substantial harm.

NC AG Wins Temporary Shut Down Of Alleged Ripoff Operation Peddling Loan Modification, “Regulation Z Audit” Services

From the Office of the North Carolina Attorney General:

  • A Charlotte foreclosure rescue operation, which previously operated in Colfax, NC, is barred from collecting any money from consumers for foreclosure assistance or loan modifications, Attorney General Roy Cooper announced Friday.


  • On Thursday, Wake County Superior Court Judge Cressie Thigpen agreed with Cooper’s request to temporarily bar Reginald Keith Turner, who did business as Hazelton Management and The Carley Group, from offering foreclosure and loan modification services. Cooper is seeking to shut down Turner’s foreclosure assistance business permanently and win consumer refunds and civil penalties.

  • As alleged in the complaint, Turner advertised that his company identified possible legal violations by the consumers’ mortgage lenders and used this to negotiate favorable loan modifications and “save homes from foreclosure.” However, Turner charged homeowners an up-front fee of as much as $2,500, told them not to contact their mortgage lenders, and then did little or nothing to help save their homes.

For the entire press release, see AG Cooper cracks down on foreclosure assistance outfit (Hazelton Management/The Carley Group took money but failed to provide promised help).

Illinois AG Files Civil Suit Against Firm For Allegedly Pocketing Upfront Fees, Failing To Deliver Services In Running Loan Modification Ripoff

In Chicago, Illinois, The Herald News reports:

  • A Crest Hill business is among those targeted in Operation Stolen Dreams, a joint initiative of the U.S. Department of Justice and state attorney generals targeting mortgage-related fraud. [... Illinois Attorney General Lisa] Madigan filed her complaint[] in Cook County Circuit Court against: Opportunity Consultants Inc. of Crest Hill. The lawsuit also names as individual defendants Juan C. Rodriguez of Crest Hill and Mirta Deus aka Mirta Tomlinson of Joliet, who are corporate officers and are alleged to have participated in the rescue scheme.


  • [The charges] allege defendants target at-risk homeowners and, for an upfront fee, promise to save their homes by negotiating lower mortgage payments with lenders. However, after the defendants collect the fees, they fail to negotiate or perform any services on behalf of the homeowners.(1)

Source: Crest Hill business accused of fraud.

For the lawsuit, see People v. Opportunity Consultants Inc., et al.

(1) The Illinois AG alleges violations of the state's Mortgage Rescue Fraud Act, the Consumer Fraud and Deceptive Business Practices Act, and the Credit Services Organization Act.

Tuesday, June 22, 2010

Ohio Appeals Court: Failure To Give Delinquent Borrower Notice Of Acceleration Of Amounts Due Sinks Lender's Foreclosure Attempt

An Ohio appeals court recently reversed a lower court ruling and held that a lender was not entitled to summary judgment in a foreclosure action where it failed to plead and establish that it provided a delinquent homeowner/borrower a notice of acceleration before commencing a foreclosure action, as required by the terms contained in paragraph 22 of the subject mortgage.(1)

The court rejected the lender's claim that the homeowner/borrower, by failing to raise this issue in its answer to the foreclosure complaint, constituted a waiver of an affirmative defense. It addressed the lender's claim as follows (bold text is my emphasis, not in the original text of the ruling):

  • The notice requirement set forth in paragraph 22 is not an affirmative defense. Rather, "[w]here prior notice of default and/or acceleration is required by a provision in a note or mortgage instrument, the provision of notice is a condition precedent," and it is subject to the requirements of Civ.R. 9(C). First Financial Bank v. Doellman, 12th Dist. No. CA2006-02-029, 2007-Ohio-222, ¶20.

  • Pursuant to Civ.R. 9(C), "[i]n pleading the performance or occurrence of conditions precedent, it is sufficient to aver generally that all conditions precedent have been performed or have occurred. A denial of performance or occurrence shall be made specifically and with particularity." In the instant case, LaSalle did not allege in its complaint, even generally, that it complied with the requisite condition precedent. Doellman, supra, at ¶21. "Under these circumstances, the [Kellys] were not required to plead with specificity that the bank failed to provide them with notice of default. Rather, it was sufficient that the [Kellys] alleged that the bank failed to state a claim upon which relief may be granted. Consequently, the [Kellys] appropriately raised the lack of notice in their opposition to the motion for summary judgment." Id.

For the ruling, see LaSalle Bank, N. A. v. Kelly, 9th Dist. No. 09CA0067-M, 2010-Ohio-2668 (June 14, 2010).

(1) According to the court ruling, paragraph 22 of the mortgage provided as follows:

  • "Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument ***. The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by Judicial proceeding and sale of the Property."

Sacramento Feds Say Foreclosure Rescue Operator Clipped Homeowners $1K/Month To Purportedly Fight Lenders; Used Ch. 13 Filings To Stall Legal Actions

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

  • United States Attorney Benjamin B. Wagner announced the unsealing of a seven-count indictment charging George M. Eggleston, 63, of Las Vegas, with wire fraud and mail fraud in a foreclosure rescue scheme.


  • According to the indictment, Eggleston targeted property owners who were facing foreclosure and offered to rescue them. Using the business names of Nexxus and Global Legal Associates, he advertised on his own Web site and would also get referrals from others individuals who marketed his services. Eggleston induced property owners to enter into a contract called the "Nexxus Engagement," the terms of which required property owners to sign an "Offer and Agreement" and pay Nexxus a monthly fee in the amount of $1,000 per month for 60 months. The terms of this agreement also required the clients to sign a Power of Attorney giving Nexxus authority to negotiate with lenders and file lawsuits on their behalf.

  • The indictment alleges that Eggleston told his clients that by using and managing attorneys, Nexxus and Global Legal Associates could negotiate with lenders and file lawsuits against lenders thereby stopping the foreclosure action. In fact, he did not provide the services, did not manage attorneys, and did not stop foreclosure actions. Instead he used the money from the clients for his personal expenses. According to the indictment, Eggleston filed Chapter 13 bankruptcy petitions in the United States Bankruptcy Court for the Eastern District of California in Fresno.

For the entire press release, see Las Vegas Man Indicted In Fresno In A Foreclosure Rescue Scheme.

For the indictment, see U.S. v. Eggleston.

Ohio AG Files Suits Against Two Firms For Allegedly Running Loan Modification Ripoffs; Secures Judgments Against Three Others

From the Office of the Ohio Attorney General:

  • As part of a national mortgage fraud sweep dubbed “Operation Stolen Dreams,” Ohio Attorney General Richard Cordray [] announced lawsuits against two Ohio foreclosure rescue businesses for failing to provide services for which consumers paid. JLS & Associates Financial Services LLC (JLS), based in Cleveland, and Freedom Equity Savings LLC (FES), located in the Columbus area, are accused of defrauding homeowners across the state out of thousands of dollars.


In addition to these two new cases, as part of “Operation Stolen Dreams” Cordray secured default judgments in the following three foreclosure rescue scam cases:

For the Ohio AG press release, see Cordray Focuses on Foreclosure Rescue Scams in Ohio.

FTC Announces Enforcement Actions Against 16 Peddlers Of Foreclosure Rescue, Loan Modification Services

The Federal Trade Commission announced:

  • As part of the agency’s continuing crackdown on scams that prey on financially distressed homeowners, the Federal Trade Commission announced legal actions against more than a dozen marketers accused of pitching bogus mortgage modification or foreclosure relief services.

  • FTC settlement orders ban 16 marketers from the mortgage modification or foreclosure relief business. The promoter of a similar scam has been ordered to pay $11.4 million for flouting a previous court order. And, in a new action, the FTC has charged another online marketing operation with masquerading as a government mortgage assistance program.

For the entire press release, and links to the relevant court documents, see FTC Settlement Orders Ban More Than A Dozen Marketers from Selling Mortgage Relief Services; Repeat Offender Ordered to Pay $11.4 Million for Contempt.

Judge Allows F'closure Rescue Scammer To Buy Down 5-Year Prison Term To Three Years In Exchange For Immediately Coughing Up $25K In Victim Restitution

In Atlanta, Georgia, My Fox Atlanta Channel 5 reports:

  • A man running a scam foreclosure company exposed by the FOX 5 I-Team pleads guilty. It was more than three years ago that the I-Team captured the company on hidden camera and the victims are finally getting some relief. All but one family lost their home to foreclosure after dealing with Dwayne Green of Maximus Investments. They told the judge often times they scraped together their last $500 handing it over to him because Green said he could save their house. The judge handed the head of Maximus Investments a maximum sentence.

According to the My Fox Atlanta Channel 5 video report, the judge slammed Green with five years in jail and ordered to pay his victims $50,000 in restitution. The judge then offered him an option to buy down the five year sentence to three years if he coughs up half the restitution upfront before being hauled away to prison. Shortly thereafter, Green reportedly exercised the option and presented the court with $25,000 in money orders.

For more, see I-Team: Maximus Guilty Plea.

Las Vegas Scammer Gets 12-30 Months For Ripping Off Financially Strapped Homeowners Of Upfront Fees For Foreclosure Rescue Services Never Performed

In Clark County, Nevada, the Las Vegas Sun reports:

  • A 50-year-old Henderson man who preyed on Las Vegas area homeowners facing foreclosures in 2007 and 2008 is going to prison. Jeffery Tye Brown, who operated DB Financial Services, a Henderson foreclosure rescue business, has been sentenced to serve from 12 to 30 months for felony mortgage fraud by Clark Country District Court Judge Kenneth E. Cory.


  • The task force found that between December 2007 and February 2008, Brown contacted victims whose homes were going into foreclosure and obtained advance payments up to $999 for foreclosure rescue services that he never performed. [...] Shortly after the mortgage fraud task force executed a search warrant in 2008 on the DB Financial offices, Brown fled the country. In February he was extradited back to the U.S. from the Philippines, where he was in hiding to evade authorities.

For more, see Henderson man sentenced in mortgage fraud scam.

Monday, June 21, 2010

Central Fla. Multiple Corporate Hat-Wearing Vice President Back In News; Gets Hand Slap For Use Of Shortened Signature When Acting As "Robo-Notary"

In Central Florida, the St. Petersburg Times reports:

  • To thousands of homeowners whose loans have been shuttled from one company to another, the name "Bryan Bly'' is very familiar. Over the past few years, Bly has signed countless mortgage assignments as either a notary public or "vice president'' of various lenders.

  • In reality, Bly works for Nationwide Title Clearing, a Palm Harbor company. And he was recently reprimanded by state regulators after acknowledging in a sworn statement that Nationwide Title had him notarizing so many documents that he scribbled his initial instead of signing his full name as required by law.(1)

  • Such a pace, critics say, shows that Bly and other so-called "robo signers'' can't possibly be sure that what they're signing is accurate. "Our entire system of real estate is founded upon the ability of courts to believe in the documents before them,'' says Matthew Weidner, a St. Petersburg lawyer who has a blog on foreclosure issues. "What this (Bly's statement) describes is assembly-line document production with no concern for the facts in front of them.''

  • Bly's name has become well known in the foreclosure defense field since the St. Petersburg Times reported last year that he and Crystal Moore signed thousands of mortgage assignments as officers of Option One and other lenders even though both work for Nationwide Title.

For more, see Title company's notary saves time, breaks law.

(1) According to the story, Florida law says: "Once commissioned, the notary must sign precisely as commissioned by the state of Florida, in the exact name appearing on your notarial commission certificate.'' Reportedly, Bly was unaware that use of an abbreviated signature when acting as a notary was in violation of the law. This year, the governor's office notified Bly that it had put a "formal reprimand'' in his file that would be reviewed "if other complaints are filed against you for notary misconduct'', the story states.

Sale Leaseback Scam Warnings Continue As Desperate Borrowers Will Do Anything To Save Homes From Foreclosure

Buried in a recent story in the Sarasota Herald Tribune is this warning on sale leaseback foreclosure rescue scams:

  • "Rent-buyback" schemes are proliferating, the Federal Trade Commission recently warned, because so many homeowners are behind on their payments and are willing to do anything to save their homes from foreclosure. In a typical scam, the con artist offers to take title to the property and simultaneously provide an official-looking rental agreement or lease-option contract that purports to give the owner the right to repurchase the house after they regain their financial footing.

  • In reality, though, the con man then starts collecting the rent but never makes any payments to the lender -- or else couches the agreement in complicated legalese with terms so burdensome that repurchasing the house becomes impossible. Either way, the original owner winds up losing the home and any equity that was in it.

Source: Rent-buyback scams target desperate homeowners.

Illinois AG Files Civil Suit Against Pair For Allegedly Running Sale Leaseback Foreclosure Rescue Racket That Targeted Senior Citizens

In Chicago, Illinois, Courthouse News Service reports:

  • Two con artists promised to save distressed homeowners' houses from foreclosure, then tricked them into signing away their deeds, the Illinois attorney general says in Cook County Court. The state claims Warren Jackson and Yolanda King, and their companies W2X, PTU I, Y2X, and Goldburg Bail-Out, selected their victims "by reviewing Illinois foreclosure filings." Attorney General Lisa Madigan said the lawsuit came in response to eight complaints to her office.


  • Jackson and King promised to help homeowners refinance mortgage loans and stop foreclosure proceedings, then would "take the title from the homeowner's property and strip almost all of the homeowner's equity," Madigan claims in the lawsuit.(1) The "equity stripping scheme" targeted senior citizens with little understanding of the residential mortgage loan industry, according to the complaint.


  • Most victims were unable to buy back their homes, due largely to the lost equity and the exorbitant fees that King and Jackson took without their victims' knowledge, and for consulting work they never performed, according to the complaint. The complaint does not estimate the total damages done. Madigan demands restitution for the victims and civil penalties of $50,000 per violation of the [Illinois] Mortgage Rescue Fraud Act.

For more, see AG Alleges Heartless Mortgage Frauds.

For the Illinois AG press release, see Attorney General Madigan Joins U.S. Attorney General Holder To Announce National Sweep Against Mortgage-Related Fraud (Madigan Files Two Lawsuits as Part of Operation Stolen Dreams Initiative).

For the lawsuit, see People v. Jackson, et al.

(1) According to the Illinois AG lawsuit (paragraphs 21-24):

  • In return for the loans, defendants require the homeowners to sign over their houses to defendants or someone affiliated with defendants. In some cases, however, the homeowners do not realize that they are giving up their homes. Instead, they believe that defendants Jackson and King, through defendants W2X, Y 2 X and PTU I, have merely refinanced their mortgage. They think they are making their 'mortgage' payments to defendants, but in reality, they are just paying rent to defendants. Under the guise of signing loan documents, defendants give these homeowners warranty deeds or similar instruments that transfer title to their homes. Some homeowners are told by Defendants that they are signing over title to their properties for a one to two year period. During this period, Defendants tell the homeowners that they can stay in their properties by paying rent.

According to the complaint, individual homeowners lost from $60,000 to $149,000 of equity in their homes as a result of W2X’s fraudulent schemes.

4 Lawyers Among Five To Go To Trial In Alleged Sale Leaseback F'closure Rescue Scam; 3 Others Cop Guilty Pleas; Civil Suits To Reclaim Losses Ongoing

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

  • Five suspects in an alleged mortgage scheme — including four lawyers — will go to trial in August,(1) fighting charges that they cost four Westchester County families their homes and swindled two mortgage lenders out of $1.4 million.

  • Meanwhile, three other defendants have pleaded guilty to roles in the scheme and will be sentenced this summer.(2) Prosecutors say the eight suspects swindled vulnerable people in Croton-on-Hudson, Yorktown, Cortlandt and Mount Vernon who were about to lose their homes. The suspects promised to help save their homes, but instead left the homeowners with nothing.(3) [...] The Westchester County District Attorney's Office and the state Banking Department investigated the case.

For the story, see Trial date set in Westchester mortgage-fraud case.

(1) Lawyers David Reback of Rye Brook, Eileen Potash of Queens, Mildred Didio of Manhattan and Frank Corigliano of Newtown, Conn., appeared in court with Amerigo DiPietro of Brewster, who owned Interstate Monetary Concepts in Briarcliff Manor. Jury selection for their trial will begin Aug. 9. They face up to 15 years in state prison on the top count of the indictment against them.

(2) Doreen Swenson and Hubert "Phil" Hall a married couple from Tarrytown, reportedly already pleaded guilty to second-degree grand larceny and first-degree scheme to defraud, both felonies, for helping to set up the phony mortgages. They agreed to serve 2 to 6 years in state prison and will be sentenced Aug. 5, the story states. Wilma Shkreli of Westwood, N.J., also known as Wilma Gecay, also reportedly pleaded guilty to second-degree grand larceny and is expected to be sentenced on July 20 to five years probation. Prosecutors reportedly said she posed an an investor.

(3) According to the story, prosecutors described the three-year scam like this:

  • The group found their victims through notices of public auction or foreclosure. They reached out to them and gained their trust, saying they could transfer their deed to an investor, who would hold the title for 12 to 24 months so they could save money and reclaim their home.
  • But once the "investor" took title, phony checks were presented to the lenders for much higher amounts than what the straw buyer paid for the home. Those checks allowed the group's members to get inflated mortgages, which they used to pay off the original mortgage and keep the remainder for themselves.
  • With the homes stripped of their equity, the former owners were left with nothing. They have filed civil lawsuits to try to reclaim what they lost, prosecutors said.

NY Appellate Court Stalls Foreclosure Action; Says Summary Judgment Premature Where Home's Purported Co-Owner Claimed To Be Victim Of Forged POA

A recent ruling by a New York intermediate appellate court reversed a lower court decision granting summary judgment in favor of a mortgage lender in a foreclosure action where a woman claiming to be a co-owner of the home alleged that her signature was forged on a power of attorney that purported to authorize her husband, the other co-owner, to engage in real estate and banking transactions on her behalf. She claimed that the allegedly forged power of attorney was then used to take her ownership interest in the home out of her name. The home was then allegedly pledged as collateral for a loan that ultimately ended up in default and subject to the foreclosure action at issue.

Because the appeals court found that several irregularities sufficient to "put a reasonable person on notice that something was amiss" were apparent on the face of the power of attorney, it found that the wife established, without contradiction in the record, that she may have an ownership interest in a property currently subject to foreclosure proceedings under a deed and mortgage that may be invalid. Accordingly, it ruled that summary judgment in favor of the foreclosing lender was premature, as the wife's allegations raised triable issues of fact.

In addition, the appellate court reversed the lower court's denial of the woman's motion to intervene in the action (since she wasn't an owner of record when the the mortgage loan was granted or when the foreclosure action was initiated, and since she didn't sign the mortgage or promissory note, she was not named as a defendant by the foreclosing lender). The appeals court found that the woman had "made a sufficient showing of a real and substantial interest in the outcome of the foreclosure action warranting her intervention" (Greenpoint Sav. Bank v McMann Enters., 214 AD2d 647, 648 [1995]), and that "As a person who "may be affected adversely by the judgment" in this action involving title to property, Sklar is entitled to intervene as of right (see CPLR 1012 [a] [3])."

The facts of the case are a little convoluted, but for those involved in unwinding or undoing a deed/title theft scam involving the use of a forged power of attorney, there may be something in this case that may be of interest.

For the ruling, see US Bank Natl. Assn. v Gestetner, 2010 NY Slip Op 04907 (App. Div. 3rd Dept. June 10, 2010).

Sunday, June 20, 2010

Feds Begin Announcing Mortgage Fraud Takedowns Around The Country

The Feds have begun announcing their major mortgage fraud takedowns around the country. The operation, dubbed "Operation Stolen Dreams", has involved 1,215 criminal defendants nationwide in the sweep that began in March responsible for more than $2.3 billion in losses to banks and mortgage companies, according to published reports. For a sampling, see:

USDOJ Announces Results Of Nationwide Mortgage Scam Takedown

From the U.S. Department of Justice:

  • Attorney General Eric Holder, FBI Director Robert Mueller, Housing and Urban Development Inspector General (HUD-OIG) Kenneth M. Donohue, and other members of the Financial Fraud Enforcement Task Force today announced the results of a nationwide takedown, Operation Stolen Dreams, which targeted mortgage fraudsters throughout the country and is the largest collective enforcement effort ever brought to bear in confronting mortgage fraud.


  • Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement, recovering money for victims and increasing cooperation with state and local partners. The operation was conducted in conjunction with the Department of Justice – including the FBI, U.S. Attorneys Offices, the U.S. Trustee Program and other components – as well as the Department of Housing and Urban Development, the Department of the Treasury, the Federal Trade Commission, the Internal Revenue Service, the U.S. Postal Inspection Service, the U.S. Secret Service, the National Association of Attorneys General and the National District Attorneys Association.

For the entire press release, see Financial Fraud Enforcement Task Force Announces Results of Broadest Mortgage Fraud Sweep in History.

Judge Kiboshes Foreclosure Action; Says He Was BS'd By Dubious Paperwork Filed By Loan Servicer, Foreclosure Mill Law Firm

In Northeast Florida, The Florida Times Union reports:

  • Changing stories about who owns a mortgage and seemingly fresh evidence from a long-closed bank led a judge to throw out a foreclosure lawsuit in St. Johns County. It’s the second time in as many months that Circuit Judge J. Michael Traynor has dismissed with prejudice a foreclosure case where homeowners disputed who owns the mortgage.

  • Lawyers representing New York-based M&T Bank gave three separate accounts of the ownership, with documentation that kept changing, before Traynor tossed the case Friday . “The court has been misled by the plaintiff from the beginning,” the judge wrote in his order. He added that documents filed by M&T’s lawyers seemed to contradict each other and “have changed as needed to benefit the plaintiff.”

  • The latest account was that another bank, Wells Fargo, owned the note, and M&T was a servicer, a company paid to handle payments and other responsibilities tied to a mortgage. To believe that, the judge wrote, the “plaintiff is asking the court to ignore the documents filed in the first two complaints.” He added that Wells Fargo can still sue on its own, if it has evidence that it owns the mortgage.

  • Traynor has scheduled a hearing in August for lawyers from the Law Offices of Marshall C. Watson, a Fort Lauderdale-based firm, to explain the evidence they presented before deciding whether he should impose sanctions on either them or the bank. Attorneys at the Watson firm referred questions [to] a supervising attorney who didn’t respond to messages left by phone and email. Traynor wrote he would have questions about a document that was presented unfinished in court last year, then shown again this year carrying the stamp of the First National Bank of Nevada, which the federal government closed two years ago.

  • More and more foreclosure cases are being argued on shaky evidence, said James Kowalski, a Jacksonville attorney who represented homeowners Lisa and Larry Smith in the fight over their oceanfront home on Anastasia Island. “I think it’s very representative of what the banks and their lawyers are currently doing in court,” Kowalski said. He said lawyers bringing the lawsuits are often pressed by their clients to close the cases quickly. But it’s up to lawyers to present solid evidence and arguments. “We are supposed to be better than that,” Kowalski said. “We are supposed to be officers of the court. ...We are supposed to be protectors of justice, not simply aiding and abetting a servicer who is trying to hurry something through.”

Source: Judge dismisses St. Johns foreclosure suit (Documents provided by M&T Bank contradicted each other, he said.).

In a related post, see Schmaper/Paper -- It's Just A Foreclosure, Your Honor.

Court-Appointed Trustees' Search For Faulty Mortgage Loan Documentation Threatens To Leave Lenders Holding The Bag In Consumer Bankruptcy Cases

Buried at the end of a recent story in The Arizona Republic is this excerpt on the aggressiveness of court-appointed trustees in their attempt to void the mortgages on homes owned by individuals filing for Federal bankruptcy protection:

  • Faulty deeds that open doors to trustees. As some debtors and creditors are learning, court-appointed trustees, especially in Chapter 7 cases, can be quite aggressive in trying to collect money. Some even look for defects in mortgage paperwork that could allow them to push their claim ahead of a lender's.

  • Suppose a person buys a home, stays current on the payments but files for bankruptcy protection. "The trustee can look at all the purchase documentation for problems," [Tucson attorney Daniel J.] Rylander said, citing issues like an insufficient number of witnesses or errors in notarized signatures.

  • "Keep in mind the mortgage industry had been insanely busy (during the boom)," he said, so plenty of title companies probably made paperwork errors. In fact, the lender, who would seek permission from a judge to complete a trustee sale, might not even be able to find the original paperwork, perhaps because the note has been sold several times, Nussbaum said.

  • "If the lender can't prove its claim, the trustee has an interest in a home that might not have a lien against it," he said. Homeowners usually aren't aware of this and might wind up living free in the property for a while. But they also could see the dwelling sold out from under them if they file for bankruptcy protection.

  • "If there's no valid loan, the trustee could just sell the home," [Scottsdale attorney Randy] Nussbaum said. Needless to say, all this can cause quite a surprise. "This is a very scary topic," Rylander said, adding that it also could apply to car loans with faulty paperwork.(1)

For the story, see Attorneys finding vexing issues in bankruptcy cases.

(1) I wonder how this plays out in states like Florida and Texas, where an invalidation of a mortgage that leaves the bank with an unsecured loan, coupled with homeowners' protections under each state's homestead exemption laws that are unlimited as to dollar value, could ostensibly leave a homeowner emerging from bankruptcy with a house unencumbered by a mortgage and an unsecured home loan that gets discharged through the bankruptcy court proceedings.

S. Fla. Feds Bag Attorney For Looting $1M+ Out Of R/E Escrow Acct.; Cash Intended To Pay Off Existing Lien Holders; Title Insurer Left Holding The Bag

From the Office of the U.S. Attorney (Ft. Lauderdale, Florida):

  • [A]ttorney Peter N. Price, 49, of Hollywood, pled guilty [] to a criminal information charging him making false statements to HUD, [...]. In addition, Price agreed to make restitution to Stewart Title Guaranty, the victim of his fraud, in the amount of $1,608,246.57.


  • According to the criminal information and statements made during [a] plea hearing, Price, a title attorney, operated Intracostal Title Services, Inc., a title company in Hollywood, Florida. According to statements made in court, Price embezzled more than $1,000,000 in loan proceeds that had been sent to Intracostal’s escrow bank account by clients to pay off prior mortgage loans. Instead of using the money as directed, Price prepared and sent a false HUD1 Real Estate Settlement Form, falsely reflecting the old loans had been paid.

For the U.S. Attorney press release, see Broward Title Lawyer Charged In Connection With Mortgage Scheme.

NY AG Slams Debt Collector, Affiliated Attorney In Seperate Suits; Alleges Repeated Threatening & Obscene Phone Calls, Lawyer-Renting Racket

From the Office of the New York Attorney General:

  • Attorney General Andrew M. Cuomo [] announced a lawsuit against several Western New York debt collection companies that violated the law by harassing consumers through repeated threatening and obscene phone calls as well as making illegal calls to the consumers’ employers and families. Attorney General Cuomo’s lawsuit claims Frank Santiago, of [...] Hamburg, who is the owner and operator of Northern Asset Management, LLC and Eastern Asset Management, LLC, had employees use abusive measures and lies in the debt collection operation.(1) The suit seeks to shut down the companies, bar Santiago from the collection business and require him to pay significant penalties, costs and fees to the state.


  • Earlier this month, in a related case, Cuomo sued Williamsville-based attorney John P. Nicolia after an investigation determined that he collected $141,000 in fees for allowing Santiago’s companies to threaten consumers across the country using Nicolia’s name. In reality, Nicolia never provided any actual legal services for the debt collection companies.

  • Santiago’s collectors, after invoking Nicolia’s name, often falsely stated that the consumers had lawsuits filed against them, would have their driver’s licenses suspended, would be charged with a crime and/or would be imprisoned or lose their property if they didn’t pay.(2)

For the New York AG press release, see Attorney General Cuomo Sues Wny Debt Collection Companies That Harassed And Threatened Consumers Nationwide.

(1) According to the press release, the Attorney General’s investigation determined that Santiago tried to avoid detection from authorities by changing the name of his companies after consumer complaints mounted. Santiago operated a company called Ethical Asset Management from late 2006 through mid 2007. After complaints, Santiago closed Ethical Asset and opened Eastern Asset. After being sued dozens of times, Santiago shut down Eastern Asset in December 2009 and immediately began operating Northern Asset, which is still active.

(2) The press release adds the following information:

  • The collectors also repeatedly harassed consumers and their relatives often at unconscionable times. One consumer claimed that he received calls as early as 6:50 in the morning from various phone numbers. Others claimed the company called 10-15 times a day to their home, cell phone, work and even to family members over an extended period of time. One consumer complained that the collectors called “constantly every 2 minutes, then when he couldn’t talk to me he called my 85-year-old neighbor and told her that this is a matter I can’t ignore and if I don’t contact them that they will be sending the police to my house.”

    Additionally, Santiago’s company regularly and illegally contacted consumers’ employers over the alleged debts. In one case, a collector continued to call and harass a consumer at work, leading to the consumer to lose a day’s pay because they were not allowed to take personal calls at work. Another collector called the employer of a consumer - on medical leave due to a high-risk pregnancy - and threatened to subpoena the employer at the workplace.