City Gives Residents In 36-Unit Condo The Boot As Rotting Wood Threatens Collapse Of 6-Year Old Structure; Suit Against Developer, Others Pending

In Bradenton, Florida, the Bradenton Herald reports:

• They received their packing papers Friday night. And all day Saturday, U-Haul trailers and cars packed with personal items began trailing out of Mainstreet at Bradenton Condominiums, 210 Third St. W., after the city of Bradenton sent a letter to all 36 units, stating the 6-year-old condo was considered unsafe.

• The primary issue: the two stairwells situated on opposite sides of the building. In many areas, stucco has been cut away to reveal rotting wood. One stairwell is completely closed off. “We’ve got to believe other parts of the structure are suffering the same damage,” said Darren Inverso, an attorney representing the condo association in a lawsuit that began two years ago against developers, subcontractors and engineers. “We’re not exactly sure what the cause of the water damage is, but we know we have dry rot, which is resulting in a partial collapse of the structure.”

For more, see Bradenton tells condo residents to move out.

End Draws Near In 17-Unit Building In F'closure; Water Shutoff Due To Unpaid Bill, Vacate Order For Health, Safety Issues Spell Eviction For Renters

In Daytona Beach, Florida, The Daytona Beach News Journal reports:

• The worry on Shawn Ackerman's face spoke volumes as he sat outside his second-floor, riverfront apartment. After eight years in Unit 17 of Riverside Apartments, 245 N. Halifax Ave., Ackerman, 38, and his roommate, Sherrie Copeland, 52, said they may soon find themselves homeless. As of 12:30 p.m. Wednesday, the city's Water Utilities Department shut off the tap over an overdue amount of $4,292 on the water bill.

• This is the latest in a string of problems at the 17-apartment complex including foreclosure and an order by the city's code enforcement board to vacate the building.

***

• "The landlord has not paid the water bill," [Daytona Beach spokeswoman Susan Cerbone] said. But that is the least of the owners' worries. Cerbone said the property is accumulating city code enforcement fines of $1,000 per day -- so far $27,000 --since July 8 for a variety of code violations including health and safety issues.

For more, see Tenants face eviction over code enforcement fight.

20 Families Get Boot From Building In F'closure After Getting 24 Hours Notice; Village Officials Say Premises Unsafe, Uninhabitable; Landlords Go AWOL

In Maywood, Illinois, WLS-TV Channel 7 reports:

• The village of Maywood has condemned a building as unfit for occupancy, forcing its residents to move out of their homes. About 20 families were given 24 hours notice that they must vacate their homes in the 1800-block of 5th Avenue. Flood damage is said to be only part of the reason the building is condemned. Residents say there have been problems for months and didn't realize the extent of the damage. They are devastated and angry and even the children are sad.

***

• The building has been determined to be unsafe and uninhabitable. There is no fire alarm system, no power and no hot water. Some of the conditions are the result of recent flooding. Village officials say they are mostly due to poor management and maintenance.

• "The fire alarm system isn't working. Some of the residents didn't have electricity, no hot water. The basement was flooded. Property maintenance issues," said David Flowers, Village of Maywood. "The building is not safe and we just wanted to avoid any disasters."

• The building is in foreclosure. Many residents are looking for the building's previous owners who appear to be nowhere in sight.

For the story, see Residents displaced from condemned building.

Transitional Rental Housing Facility In Foreclosure To Shut Down; 14 Families Get Two Weeks Notice Before Having To Face The Boot

In Valparaiso, Indiana, the Post Tribune reports:

• Fewer than half of Spring Valley Shelter's 14 families could attend [last week's] meeting about their future. One woman fought tears, and some bit their nails. Told that Spring Valley will shut down in two weeks and Friday was the employees' last day, they had one question.

• "As of right now, what are our options?" asked Krystal Smith, who is pregnant with her third child and whose roofer husband was laid off. There's no certain answer, but the families will be helped by Darrell Franklin, the only Christian Community Action employee left, and staff from Housing Opportunities.

• Franklin said alternatives that might break up families were never considered. However, moving all 14 families to the same place would overwhelm the resources of agencies helping, so the families will be moved in different directions.

• Some residents questioned the two weeks because in foreclosures on rental units, there's a 90-day period. "It is our understanding that tenant law does not apply to Spring Valley," Franklin said.

For the story, see Spring Valley residents in shock, tears.

Atlanta's Largest Homeless Shelter Faces Foreclosure; Advocates Claim Legal Action's A Conspiracy To Rid Hundreds Of Residents From Downtown Area

In Atlanta, Georgia, National Public Radio reports:

• The homeless problem in Atlanta may soon get worse. The city's largest homeless shelter has been foreclosed on because the group running it is deep in debt. Some say the foreclosure is a conspiracy to rid downtown Atlanta of homeless men, while others claim the shelter is a steady source of crime and civic frustration.

For more, see Atlanta Homeless Shelter Faces Eviction (Atlanta's largest homeless shelter is going into foreclosure, which may force hundreds of homeless men back on to the streets. Some say the foreclosure is a conspiracy).

60 Families Residing In Tacoma Mobile Home Park Face The Boot As Park Owner Facing Foreclosure Fails To Cure Safety, Health Violations

In Tacoma, Washington, The News Tribune reports:

• They say they pay their rent on time and take pride in their community, but about 60 low-income families in Lakewood may still be out on the streets later this year. The city has identified a litany of safety and health violations at the Fir Acres Mobile Home Park, which is currently in foreclosure, on the 12600 block of Bridgeport Way Southwest. The city plans to evict the tenants at the end of August unless someone emerges with a plan to address the concerns and the money to pay for the work.

***

• Fir Acres tenants and the city say the fault lies with the property owner, SLI Associates LLC, for allowing the property to fall into disrepair. Almost all the tenants own their homes and rent their spaces. “It’s like we’re being punished for their mess-up,” said River MystDragon, who has lived at the park for six years.

***

• If the tenants are evicted, she said, they may end up in publicly funded housing – or, more likely, homeless. “Most families have invested in their homes and are proud of the fact they’re homeowners,” said [the tenants’ lawyer, Ishbel] Dickens of Columbia Legal Services, which provides legal assistance to low-income people. “They’re trying to be responsible homeowners and responsible parents and yet they’re going to potentially lose their only asset through no fault of their own. The city needs to take that into consideration.”

For more, see Lakewood family: ‘We have nowhere to go' (They say they pay their rent on time and take pride in their community, but about 60 low-income families in Lakewood may still be out on the streets later this year).

Florida Supreme Court Disciplines "Dirty Dozen" For Playing Fast & Loose With Their Clients' Money

The Florida Bar recently issued its quarterly "gossip sheet," in which it announced that the Florida Supreme Court in recent court orders disciplined 27 attorneys, disbarring eight and suspending 17.

The following 12 attorneys (or now ex-attorneys, as the case may be) were either booted or suspended from the profession for allegedly playing fast and loose with their clients' money or just outright ripping them off:(1)

• Harvey Jay Goldstein, Milwaukee, Wis., suspended until further order, following a June 3 court order. (Admitted to practice: 1987) According to a petition for emergency suspension, Goldstein appeared to be causing great public harm by converting nearly $70,000 from three probate estates while acting as an administrator and using the funds to pay personal and business expenses and to finance real estate deals. Those incidents resulted in his suspension in Wisconsin.

• Christine Marie Horn, Boynton Beach, disbarred effective immediately, following a June 17 court order. (Admitted to practice: 1980) Horn was suspended on an emergency basis in November 2009. A Bar audit revealed trust account shortages ranging from more than $3,000 in September 2006 to nearly $314,000 in October 2008.

• Thomas Lemuel Hurst, Miami, disbarred effective immediately, following a June 3 court order. (Admitted to practice: 1972) Hurst, who previously had been suspended three times from practicing law, failed to respond to inquiries from The Florida Bar regarding a case alleging he misappropriated a client’s funds; and he failed to appear at a court-mandated final hearing.

• John Joseph Liu, Safety Harbor, suspended for 91 days, retroactive to July 17, 2009, following a June 17 court order. (Admitted to practice: 1993) Liu failed to respond in writing to inquiries from The Florida Bar regarding the status of his trust account, which had been overdrawn. Nor did he appear for a hearing, despite being served a notice at his official Bar address.

• Michael H. Lubin, North Miami Beach, disbarred effective 30 days from a June 24 court order. (Admitted to practice: 1981) Lubin misappropriated a portion of the funds he received from a client to hold in trust.

• Matthew Glenn Palentchar, Colonia, N.J., suspended until further order, effective 30 days from a June 1 court order. (Admitted to practice: 2004) Palentchar failed to comply with a subpoena requesting that he produce trust account records on or before Jan. 15.

• Jeffrey Stephen Rosenberg, Aventura, disbarred effective immediately, following a June 24 court order. (Admitted to practice: 1979) Rosenberg failed to explain the whereabouts of $27,750 placed in escrow with his title company for a client. During the course of a Bar investigation, Rosenberg agreed to disbarment.

• David Philip Ryan III, Coral Gables, permanently disbarred effective immediately, following a June 17 court order. (Admitted to practice: 1997) Ryan misappropriated client trust funds for his personal use and he continued to practice law despite his suspension in March 2009. Also, Ryan produced some, but not all subpoenaed records requested by The Florida Bar, including bank statements, canceled checks, cash disbursements and client ledgers.

• Mark David Swanson, Miami Beach, suspended for 50 days, effective thirty days from a May 20 court order. (Admitted to practice: 1984) Swanson shall pay restitution totaling $9,300 to two clients in separate cases. In both instances, after being retained, Swanson failed to adequately communicate with the clients. He also failed to respond to inquiries from The Florida Bar and the grievance committee.

• Harry Mark Vieth, Miami, suspended for one year, effective 30 days from a June 3 court order. (Admitted to practice: 1984) In one instance Vieth misled clients into believing that their case was progressing normally, when in fact, he had taken little action on their behalf. In another case, Vieth was retained to assist a military veteran in increasing his disability benefits and filing a retroactive claim. After obtaining a $1.5 million judgment, Vieth failed to file for payment and the client never received his money. As a result, the client was forced to retain new counsel. Despite numerous requests by the client to secure his medical records for a new lawsuit, Vieth failed to communicate with him.

• R. Scott Whitehead, Destin, suspended until further order, following a June 9 court order. (Admitted to practice: 1998) According to a petition for emergency suspension, Whitehead engaged in a systematic scheme to deprive his clients of their money in the form of fees and costs, while not performing the legal services for which he was retained. Additionally, he was arrested four times for alcohol-related problems since May 2009.

• Marvin Deon Wilson Sr., Homestead, suspended for three years, effective retroactive to Dec. 1, 2008 following a May 27 court order. (Admitted to practice: 1998) A Bar audit found that Wilson used client funds for his own purposes. Additionally, Wilson was charged with three felony counts: organized scheme to defraud, grand theft and money laundering. Subsequently, the state attorney’s office dropped the charges against Wilson upon his agreement to refund $15,000 and attend a trust accounting workshop. In another instance, Wilson failed to keep a client informed as to the status of her case. He also failed to timely respond to an inquiry about the case from The Florida Bar.

For the entire press release, see Supreme Court Disciplines 27 Attorneys.

For those attorneys who have one or more client trust accounts to hold clients' money but are completely clueless on how to maintain the proper record keeping for one, I strongly recommend Handbook on Client Trust Accounting as required reading.

(1) The Florida Bar's Clients' Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

For similar "attorney ripoff reimbursement funds" established to reimburse clients who have suffered similar losses due to the dishonest conduct of attorneys in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

Renters In 11,000-Unit NYC Complex In Foreclosure Score Big Win In Rent Overcharge Case; Tenants' Lawyer Pegs Haul At Approx. $200M

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

• Tenants of market-rate apartments at Stuyvesant Town/Peter Cooper Village won a significant victory on Thursday when a judge ruled that they are entitled to rebates for rent overcharges. The ruling stems from a court decision last October, which said that the owners of the sprawling Manhattan residential complex were not entitled to deregulate rents while they were receiving a particular type of tax abatement. The court didn't rule on the issue of retroactive payments at the time.

• After the October ruling, former owner MetLife said the ruling should not apply to it because the decision came several years after the company sold the property to a partnership led by Tishman Speyer. That partnership paid an eye-popping $5.4 billion in 2006 and has since defaulted on its loans. However, the special servicer representing the lenders has yet to foreclose on the property. Sources expect the foreclosure in the next few months. MetLife had been trying to get the case against it dismissed but New York Supreme Court Justice Richard Lowe declined to do that and said the tenants are entitled to be reimbursed for rent overcharges.

• Tenant lawyer Alex Schmidt estimated that tenants could be due a total of $200 million. However, he isn't sure whether MetLife will try to appeal the ruling. Mr. Schmidt says negotiations with Tishman Speyer over settling the rebate issue are ongoing.

For more, see Stuy-Town tenants take home big win (Judge rules that they are entitled to be reimbursed for years of rent overcharges on apartments whose rents were unlawfully de-regulated; decision's impact on other properties is unclear).

Go here for other posts on the Stuyvesant Town / Peter Cooper Village fiasco in NYC.

Atlanta Man Gets 39 Months In Attempt To Use Stolen IDs, Fictious Buyers, Phony Short Sales To Screw FDIC Out Of $2.2M

In Atlanta, Georgia, The Atlanta Journal Constitution reports:

• An Atlanta man who took out millions of dollars in illicit loans from the now-failed Omni National Bank was sentenced [] to more than three years in prison as part of a federal investigation. Brent Merriell, 38, was sentenced to 39 months for making false statements to the Federal Deposit Insurance Corp. and for aggravated identity theft. He also faces five years of supervised release as part of U. S. District Judge Jack T. Camp’s order.

• “Mr. Merriell used stolen identities, created fictitious buyers, and negotiated phony short sale deals for properties, all in an effort to defraud FDIC of millions of dollars he owed on mortgages,” said U.S. Attorney Sally Quillian Yates. Merriell pleaded guilty in March.

• According to a news release, Merriell faced foreclosure on 14 properties subject to Omni mortgages. After Omni failed and was taken over by regulators, Merriell asked the FDIC to forgive $2.2 million in loan payments, and instead allow him to “short sell” the houses at steep discounts. The seven new buyers, however, were phony, federal prosecutors say.

Source: Man sentenced in Omni National Bank scheme.

For the U.S. Attorney (Atlanta) press release, see Atlanta Man Sentenced to Prison for Fraud Related to Failed Omni National Bank (Defendant Used Stolen Identities for Short Sale “Buyers” When He Sought Forgiveness of $2.2 Million in Loans).

Another Lender Changes Its Tune When Local Media Intervenes On Behalf Of Screwed-Over Homeowner Seeking Loan Modification

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

• For Marci Williams, a single mother of two, it was a long day at the Neighborhood Assistance refinancing event at the World Congress Center but it was worth it. "I got there at 3 a.m. and after nine hours I was seen," Williams said. "I left with a 2 percent interest rate on my home." She had a signed contract with her lender, Bank of America.

• Then 35 days later, the bottom fell out. "My loan was approved in the beginning of June and about 35 days later I received this letter saying it would be rescinded. In addition, I had to pay some monies and if I didn't pay, my home would go into foreclosure in September," she said. Williams says she tried numerous times to reach Bank of America, but she says she got no response. "It could have been the end for me but for my kids. Probably would have done the worst, but my kids just kept me going. I had to fight for them," Williams said.

• Reaching a dead-end, she turned to the 11Alive Help Desk. 11Alive's Bill Liss contacted Bank of America in Charlotte, determined not to let the house go into foreclosure. The bank responded quickly and decisively. It honored the contract. "Because of you (11Alive), I am here in my house with the 2 percent that Bank of America gave me, and then rescinded. You made it right by being in my home and standing by me," Williams said. Standing by what was right.

Source: Bank Rescinds Refinance, Threatens Foreclosure.

Another Lender Jumps Gun Against Family In Foreclosure; Wife, Kids Discover Home Interior Destroyed While Hubby Is Deployed In Afghanistan

In Tuscola County, Michigan, WJRT-TV Channel 12 reports:

• He's in Afghanistan, serving his country. Back home, his family is in a fight to preserve their home. A Tuscola County family thought they had worked out everything with their lender through a program that helps military families facing foreclosure.

• The family still has the home, or what's left of it. Benjamin Kotzian's wife and kids spent a few months with him in Texas before he was deployed to Afghanistan in June. They arrived back home on Sunday, but it's a far cry from the home sweet home they remember. "It's sad enough to have your husband leave, but then when you just want to come home and you come home to this," said Michelle Kotzian. Kotzian and her children came back home to different locks and broken door frames. "I find my carpets ruined, I find broken pipes, I have no water, I can't turn the water on," she said.

• In December, she contacted the bank which holds the mortgage on the Millington-area home she has owned for five years. Kotzian told the bank her family was going to Texas to see her husband, Benjamin, before he was deployed to Afghanistan. "I'm leaving in January," she said. "I will be back five or six months later. My husband is deploying. We intend on coming back."

• She made the call because the family had just worked out a plan with the lender to avoid foreclosure with the help of the Servicemembers Civil Relief Act, which gives some protection to military families trying to keep their homes. Shortly after she arrived in Texas, she got a call from a neighbor saying people were at her house. "They come into the home, they are taking stuff out of the home," she said.

• Afraid that her home was being foreclosed on, she called the lender. She says the company admitted a mistake was made and the house was not in foreclosure. But when she returned months later, the family's belongings were gone and the house had looked as if it had been ransacked. Water pipes were ruptured, even though the home was winterized.

• "They've already admitted that they made the mistake. I just want them to come and fix it," Kotzian said. "I just want my running water. I want my clean carpet. I want my home. That's what I want. I want my home the way I left it."

• We have made several attempts to get in touch with the bank that holds the Kotzian's mortgage, but we have not heard back from them.

Source: Soldier fights in Afghanistan while family fights to save house.

(1) See Long Island Judge Hammers Wells w/ $155K Tab For Oppressive, Heavy Handed, Egregious Conduct For Pre-Sale Lockout Of Homeowner In Foreclosure for a recent court ruling which found a lender liable for $150,000 in exemplary (punitive) damages (in addition to $5,000+ in actual damages) in a trespassing case involving an improper padlocking by a foreclosing lender. In that case, the lender was found to be a bit premature in entering the premises since the delinquent borrower was still the legal owner of the property.

See Nevada High Court OKs Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure for a 2008 case in which the Nevada Supreme Court OK'd an award over over $1 million, including $968,000 in punitive damages, for a couple whose home was misidentified by a foreclosing lender and subsequently ransacked (for the actual court ruling, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008)).

Foreclosure Limbo Leads To "Free" Temporary Housing For Some Delinquent Borrowers

In Northern California, the San Jose Mercury News reports:

• Tens of thousands of Bay Area homeowners are trapped in a bizarre real estate limbo, living in houses but no longer paying for them, waiting and wondering if someone will help them — or throw them out. Some are victims of their own economic circumstances, unable to afford their mortgage and expecting to lose their homes if they can't get a break from their bank. Others are opportunists, choosing not to spend on a house worth less than they owe. Instead, they can live rent-free until their lender makes a move.

• The limbo phenomenon is a radical departure from previous real estate crashes, when there were far fewer troubled loans and banks moved speedily on those who fell behind on payments. Now many lenders simply can't keep up, and others appear reluctant to flood a weakened market with foreclosed homes.

For more, see Many Bay Area homeowners in real estate limbo.

Cleveland Housing Judge Invites Homeowners Living Near Blighted Houses To Submit Restitution Claims Against Absentee Property Owners

In Cleveland, Ohio, The Plain Dealer reports:

• Cleveland Housing Court Judge Raymond Pianka is ratcheting up the costs for absentee property owners who spread the damage from the foreclosure crisis. They will have to pay neighbors for economic losses caused by their neglect. Pianka plans to hold his first restitution hearings on the issue this month. The move comes as Cleveland's lone housing judge contends with the fallout from the foreclosure mess.

***

• A troubling number of homes have become vacant, neglected commodities bought and sold -- often by out-of-state companies -- for dirt-cheap prices and left to languish. That can undermine safety and nearby property values.

***

• In prior rulings involving companies that dealt in distressed properties and routinely defied local law, Pianka levied substantial fines. His aim: to deter illegal practices and make fines more than just a cost of doing business. Now he is broadening the lens on financial liability.

• To be sure, restitution is not new -- nor is holding property owners responsible for nuisance conditions. But Pianka's strategy is considered unique because he has determined that neighbors could be victims under state law and he's giving them the chance to make a financial claim as part of the prosecution of another property owner.

***

• Pianka declined to comment because the cases are pending. But the judge has sent letters to potential victims telling them they have a right to present their claims in court. Owners who live near the property and can show they suffered economic loss as a direct result of the defendant's criminal failure to maintain the property may be eligible for restitution under state law.

• For instance, a person may be able to recover costs associated with maintaining the cited property to lessen its impact on their property, such as for mowing the lawn or picking up garbage. And former owners who sold their nearby home during a certain time period and can show that the property lost value because of the condition of the house in question may seek restitution. The companies can challenge any claims, with the victim having the burden of proving the amount of the claim.

For more, see Cleveland Housing Judge Raymond Pianka requiring negligent property owners to pay victim restitution to neighbors.

Federal Appeals Court Affirms Lower Court Dismissal Of Cleveland Civil Suit Alleging Subprime Loan Peddlers Created A Public Nuisance

In Cleveland, Ohio, The Plain Dealer reports:

• A federal appeals court has ruled that Cleveland's attempt to punish banks for bankrolling subprime loans has no merit, leaving the city with little hope of ever collecting millions of dollars in damages related to the foreclosure crisis. The 6th Circuit U.S. Court of Appeals rejected arguments that the city's lawsuit should go to trial.

• A U.S. District Court judge dismissed the same lawsuit in May 2009, stating that the city could not prove that the banks were directly responsible for blight, crime and other problems foreclosures had caused in Cleveland. Law Director Robert Triozzi said Tuesday that the 3-0 ruling by the three-judge panel was disappointing. He said the city plans to ask the entire 6th Circuit to hear the appeal.

For more, see Cleveland loses appeal in nuisance lawsuit vs. financiers of subprime loans.

For the court ruling, see City of Cleveland v. Ameriquest Mortgage Securities, Inc., et al., No. 09-3608 (6th Cir. July 27, 2010).

NYC "Loan Scam Busters" Hit The Streets Of South Jamaica Targeting Side-Of-The-Road "Bandit" Signs Peddling Foreclosure Rescue Programs

In South Jamaica, Queens, the Queens Tribune reports:

• Volunteers took to the streets of Southeast Queens [last week] to help the City crack down on the vultures who prey on victims of the foreclosure crisis. The City Dept. of Consumer Affairs ["DCA"], partnering with NeighborWorks America, enlisted volunteers to bike through South Jamaica on July 31 to find and report deceptive foreclosure prevention ads posted in the neighborhood.

• For several months DCA has been canvassing neighborhoods in Queens and Brooklyn on foot documenting foreclosure scam ads and talking to residents about the fraudulent foreclosure aid practices they see happening in their area. These volunteers also give information to those who are in danger of losing their homes on getting free counseling from the city.

• This event marked the first time the volunteers, known as “loan scam busters,” used bicycles donated by Bike and Roll to canvass the entire neighborhood, enabling the DCA to cover a larger area faster. Volunteers armed with cameras and DCA forms for documenting advertising information – including where the advertisement was spotted, what type of ad it was and a brief description – headed out in teams of two at 11 a.m., after a brief training session on what to look for and where to look.

• “This is a dual purpose [campaign] – to educate and document,” said Amelia Erwitt, chief of staff for the DCA Office of Financial Empowerment. [...] The NYC Distressed Property Consultant Law was recently passed in an effort to stop predatory advertisements in neighborhoods hit hardest by foreclosure. The new law, aimed at printed materials, requires that ads state certain disclaimers, including no guarantee to stop foreclosure proceedings, that consultants cannot take money up front and consultants cannot retain original loan documents.(1)

• This law will make it easier for loan scammers to be prosecuted for predatory practices and enables DCA to gather more information about the foreclosure ads and ensure they are in compliance with the law.

For the story, see Fighting Predators Door-To-Door.

(1) The law also prohibits the consultant from snagging a power of attorney from a homeowner. New York City Administrative Code - Subchap. 5 - §20-723.3(b)(1)(iii).

State Lawmaker Among Many Bagged By Central Florida County Appraisers For Illegal Homestead Exemption Claim

In Hillsborough County, Florida, The Tampa Tribune reports:

• If you know somebody claiming an illegal homestead exemption, Hillsborough County wants to hear from you. The appraiser's office has rolled out an online reporting site to make tattling on double-dippers quick and easy.

***

• So far in 2010, the county has placed 240 liens on homes for homestead abuse, representing just more than a million dollars, according to [Hillsborough County Property Appraiser Rob] Turner. Turner said after an anonymous online report is filed, county investigators will handle the rest of the investigation. [...] Those caught are required to repay the taxes back as far as 10 years. The state also tacks on a 50 percent interest penalty, which retroactively accrues at 15 percent.

• State lawmaker Janet Cruz is one of the most high-profile and costly cases. The county hit her with $32,000 in back taxes and fines this year after appraisers discovered she wrongly claimed a homestead at 4114 Empedrado St. in Tampa. Cruz repaid the taxes in full. "Nobody should get special treatment, including me," she said.

• Turner said so far his office has received more than 300 anonymous online reports of exemption abuse since online reporting began in February. Sixty people lost exemptions as a result, and 235 more are under investigation.(1)

For the story, see Appraiser fights homestead fraud.

In a related story, see Orlando Sentinel: Who's that talking to neighbor? Investigators hunt homestead tax cheats.

(1) See Office of the Inspector General, Miami-Dade County press release for an example of a case that lead to criminal charges that resulted in connection with making bogus tax exemption claims under the state homestead law.

Those in Florida interested in legally renting out their homes without losing/relinquishing their homestead tax exemption garnted under Article VII Section 6 should be made aware of two exceptions in the statute, which I refer to as the "roommate" exception, and the "U.S. Armed Forces Servicemember" exception.

See Section 196.061, Florida Statutes treats the rental of an entire dwelling (as opposed to the rental of only a portion of the dwelling) previously claimed to be a homestead for tax purposes as an abandonment of said dwelling as a homestead. Accordingly, one taking in roommates need not be concerned with losing their tax exemption by reason of renting out a portion of the dwelling. This homestead abandonment statute also does not apply to U.S. Armed Forces Servicemembers.

• 196.061 Rental of homestead to constitute abandonment.--The rental of an entire dwelling previously claimed to be a homestead for tax purposes shall constitute the abandonment of said dwelling as a homestead, and said abandonment shall continue until such dwelling is physically occupied by the owner thereof. However, such abandonment of such homestead after January 1 of any year shall not affect the homestead exemption for tax purposes for that particular year so long as this provision is not used for 2 consecutive years. The provisions of this section shall not apply to a member of the Armed Forces of the United States whose service in such forces is the result of a mandatory obligation imposed by the federal Selective Service Act or who volunteers for service as a member of the Armed Forces of the United States.

But see, Karayiannakis v. Nikolits, 23 So. 3d 844; 2009 Fla. App. LEXIS 19251; 34 Fla. L. Weekly D 2534 (Fla. App. 4th DCA 2009) (homestead exemption for property tax valuation purposes held not applicable to entire 5-unit apartment building where property owner lived in one of the units and rented the other four units to tenants);

And, Haddock v. Carmody, 1 So. 3d 1133; 2009 Fla. App. LEXIS 354; 34 Fla. L. Weekly D 207 (Fla. App. 1st DCA 2009) (property owners not entitled to the tax exemption for homestead property where, in renting their condominium unit to others, they "carved-out" of the rental aggreement two closets for storing personal items that they maintained under lock & key and was not accessible to the tenants, in an attempt to fall within the "roommate" exception contained in Section 196.061, Florida Statutes).

Note that the foregoing only applies to homestead exemption determinations under Article VII, Section 6 of the Florida Constitution (relating to property tax exemptions for homestead property), and not to exemptions from forced sale for homestead property under Article X, Section 4, Florida Constitution.

Countrywide To Cough Up $600M To Settle Shareholder Lawsuits Alleging Failure To Disclose Loose Lending Standards

In Los Angeles, California, USA Today reports:

• Countrywide Financial will pay $600 million to end shareholder lawsuits alleging that it misled investors, in the largest settlement to emerge so far from the subprime mortgage meltdown. The agreement has received preliminary approval from a U.S. District judge in Los Angeles, and a final approval and hearing is scheduled Nov. 15. Countrywide's accounting firm, KPMG, also agreed to pay $24 million. The defendants admitted no wrongdoing in the agreement. The proposed settlement was first announced in May. "We haven't heard of any larger settlement being reported," says Joel Bernstein, lawyer for the lead plaintiffs, the New York state and city pension funds.

• The lawsuits claimed that Countrywide, once the USA's largest mortgage lender, loosened its lending standards during the housing boom and made loans that entailed greater risks than disclosed to shareholders. Countrywide was near collapse when Bank of America acquired it in July 2008.

For more, see Countrywide to pay $600 million to settle lawsuits.

Attorney Accused In Civil Suit Of Milking Deceased Client's Estate; Damages Estimated At $6M+

In Annapolis, Maryland, The Capital reports:

• When Robert Blackburn Hewitt died of a heart attack in 2007, the Arnold resident's longtime attorney estimated his estate at almost $4.7 million. He told Hewitt's widow that she and her two sons "would never have to want anything," according to a lawsuit filed in Circuit Court.

• But two years later, that same attorney, Steven B. Preller, turned around and told Tina Hewitt Sargent she was broke and facing foreclosure on an investment property she didn't know she owned.

• Attorneys for Sargent and her sons, Robert Brett Hewitt and Ryan Hewitt, now claim Preller entered into at least six "self-dealing" business transactions over the past three years to reduce the estate "to nothing more than a series of empty investments" while lining his own pockets and the pockets of his friends and family. They put the damages at more than $6 million. [...] No criminal charges have been filed against Preller, a partner with Preller, Fastow & Klein, LLC in Windsor Mill.

***

• The family learned last year that within weeks of Hewitt's death, Preller allegedly began orchestrating self-serving business transactions. They argued Preller did not have the legal right "to sell or otherwise transfer any money or other assets" from the estate.

• The lawsuit acknowledged that Sargent and her oldest son signed off on some of the deals, but argued those signatures were provided without "informed consent." "Ms. Sargent and Robert Brett Hewitt signed various documents in reliance of defendant Preller's false misrepresentation that these documents were ordinary documents that had to be signed to 'settle your late husband's estate,' " the lawsuit said.

For more, see Widow, sons sue attorney to reclaim millions (Claims he stole from her late husband's estate).

Upstate NY Couple Left In Limbo After Refinancing Home As Closing Attorney Is Charged w/ Pocketing Payoff Proceeds Due To Existing 1st Mtg Lender

In Lake George, New York, The Post Star reports:

• When Theresa Olson-Hoffman saw Patrick Reidy in the news last summer, in police custody and heading for a Saratoga County Court Room, she immediately recognized him. He was, she remembered, the same Saratoga Springs lawyer who had acted as a closing attorney when she and her fiancé completed paperwork to refinance a home loan almost a year earlier.

• Reidy, of Gansevoort, was charged with stealing more than $400,000 from area residents who came to him for similar services. Checks from those residents, which were intended for banks, were instead kept by Reidy, police said. Olson-Hoffman thought she was fortunate to have escaped her real estate transaction unscathed. “Thank God it wasn’t me,” she remembers saying at the time.

• Less than three months later, after a car crash prompted her to seek a new car loan, she discovered she wasn’t so lucky. Her credit, it turns out, was a wreck, and she soon learned the cause: Reidy had never paid off the first mortgage on a Lake George home she built in 2001, as he was supposed to do, Olson-Hoffman said. She has no idea what Reidy, who was working on behalf of the bank, did with the $135,000 check she had given to him.

***

• [O]lson-Hoffman and her finance haven’t been able to recover any of the money Reidy is accused of stealing from them. Lawyers have told them it’s unlikely they’ll see anything unless Reidy is convicted.(1)

For more, see Fraud case leaves Lake George pair in financial limbo.

(1) The victimized homeowners and mortgage lenders left unwittingly holding 2nd mortgages due to the attorney's failure to pay off the existing mortgages in the refinancing transactions might consider filing claims with The Lawyers’ Fund For Client Protection Of the State of New York, which was established to reimburse clients who have suffered a loss due to dishonest conduct of a member of the New York Bar. According to the Fund's website:

• The Trustees may reimburse losses caused by the dishonest conduct of lawyers admitted to the practice of law in New York State, up to a maximum of $300,000 for each client loss. Dishonest conduct means the wrongful taking of clients' money or other property, in the practice of law, after June 1, 1981. Clients must apply for reimbursement within two years after they discover their loss.

• Typical losses covered include the theft of money from estates of dead clients; escrow funds in real property closing; settlements in personal injury actions; and money embezzled from clients in investment transactions.

For similar "attorney ripoff reimbursement funds" established to reimburse clients who have suffered a loss due to the dishonest conduct of attorneys in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

C. Florida Closing Agents Cop Pleas To Looting Real Estate Escrow Accounts; Ordered To Pay $7.9M In Restitution To Title Insurer Left Holding The Bag

From the Office of the Florida Attorney General:

• Attorney General Bill McCollum [last week] announced that a Pinellas County woman pleaded guilty to stealing nearly $8 million in a real estate fraud scheme. Cheryl Wehlau, owner of Gulf Coast Title Offices, entered her plea [last week] in a case prosecuted by the Office of Statewide Prosecution.

• Cheryl Wehlau masterminded a scheme to funnel funds held in escrow for real estate closings into a business operating account, then spent the cash on a lavish lifestyle. Gulf Coast Title was placed into receivership by their underwriter Commonwealth in January 2006. Cheryl Wehlau pled guilty to 21 counts of misappropriation of $100,000 or more in funds. She will be sentenced at a future date to eight years in prison, to be followed by 15 years supervised probation. Should she violate any criminal laws or fail to show up to her sentencing at a later date, she will receive 30 years in state prison.

• John Wehlau, Cheryl Wehlau’s husband, also pleaded guilty to one count of misappropriation of escrow funds, $100,000 or more and 20 counts of petty theft of $100 or more. Restitution will be ordered against both defendants in the amount of $7.9 million, payable to Fidelity National Title Group, the victim of the scheme.

• As a condition of her plea agreement, Cheryl Wehlau may not be employed in real estate, title or mortgage services, or be directly or indirectly involved as fiduciary handling another person’s money. The Wehlaus will also have to pay $4,000 for the cost of prosecution and court costs.

Source: Pinellas County Woman Sentenced to 8 Years in Prison in Real Estate Fraud Scheme (Defendant and husband ordered to pay nearly $8 million in restitution).

Attorney Accused Of Running Upfront Fee Loan Modification Racket Gets Booted From Legal Profession

The Florida Bar recently issued its quarterly "gossip sheet," in which it announced that the Florida Supreme Court in recent court orders disciplined 27 attorneys, disbarring eight and suspending 17. Among those attorneys getting the boot was:

• Rudolph C. Campbell, Lutz, disbarred effective 30 days from a June 3 court order. (Admitted to practice: 1998) Further, Campbell shall pay restitution of $1,500 to one client. Campbell used his law firm as a loan modification and foreclosure assistance business. He charged up-front fees to homeowners, in violation of the Foreclosure Rescue Fraud Prevention Act, Florida Statute, 501.1377; he used deceptive advertising and he failed to respond in writing to an inquiry from The Florida Bar.

For the entire press release, see Supreme Court Disciplines 27 Attorneys.

Alleged Loan Modification Scammer Hit With 11 Felony Theft Charges; Accused Of Ripping Off 100+ Denver-Area Homeowners Out Of $300K+ In Upfront Fees

In Denver, Colorado, KMGH-TV Channel 7 reports:

• More than 100 homeowners in the metro area are out $2,500, and some have lost their homes. Investigators said it is all because of a company that promised to modify home loans, but instead stole homeowners' money.

***

• Santiago Pineda, has been arrested and charged with 11 counts of felony theft. Pineda, along with two other employees, worked with American Mortgage Consultants, also referred to as American Mortgage Counselors.

• According to the Ramirez family, he told them he would help them modify their loan in order to avoid foreclosure, in exchange for $2,500 up front. During the process, the Ramirez' said Pineda told them not to contact their bank or even let them know they were dealing with AMC.

***

• [Denver District Attorney Prosecutor Joe] Morales said AMC stole more than $300,000 from more than 100 families over the last two years. "We have not been able to determine that anything they were doing was legitimate," said Morales.

For the story, see DA: 100+ Scammed By Fake Mortgage Company (Mortgage Company Pretended To Modify Home Loans).

Woman Recovers Title To Home As Judge Invalidates Deed In Lieu Unwittingly Signed When Obtaining Loan

In Philadelphia, Pennsylvania, The Philadelphia Inquirer reports:

• When federal securities officials closed Robert Stinson Jr.'s real estate investment firm - Life's Good Inc. - for alleged investment fraud in June, they said it had no "significant" property holdings. There was no way they could have known how much the house at 1200 S. Ruby St. in Southwest Philadelphia meant to Joan Porterfield. She had inherited the house from her mother, but lost it to Life's Good after mortgaging it in September 2007 for $25,000.

• "On the papers they filed at City Hall, it shows like I gave them my property," even though she had no intention of doing so, Porterfield said. Porterfield, 47, has since won a judge's order to have the Ruby Street house put back in her name. But she remains shaken by the ordeal, choking back tears as she talks about the small rowhouse as the only thing she has left from her mother.

***

• In the packet of loan documents Porterfield signed for the mortgage on 1200 S. Ruby St. was a deed in lieu of foreclosure, which allowed Life's Good to take the house without going through foreclosure. Life's Good did so in November 2008. [...] Fortunately for Porterfield, her attorney argued successfully in court that the deed in lieu of foreclosure for 1200 S. Ruby St. should be invalidated because Life's Good did not register it within 90 days of its signing, as required by Pennsylvania law, according to court documents. Porterfield said she still owed her attorney $3,618. "That's why I don't have the deed right now. He needs his money," she said.

For the story, see Despite mortgage fraud, woman gets her house back.

Massachusetts AG Concludes Civil Action Against Equity Stripping Attorney, Five Confederates For Using Sale Leaseback Racket To Rip Off Homeowners

From the Office of the Massachusetts Attorney General:

• [Last week], Attorney General Martha Coakley’s Office concluded its case against former Brockton attorney Alec G. Sohmer and five other defendants over their roles in a 2006 foreclosure rescue scheme. The judgments entered [] by Judge Thomas Connolly against Sohmer in the amount of $620,000 and against the four remaining defendants collectively in the amount of $364,000, together with the judgment obtained last May in the amount of $41,204, resolve allegations that Sohmer, with the assistance of the other defendants, orchestrated an unlawful foreclosure rescue scheme against 26 homeowners.(1)

***

• According to the complaint, Sohmer preyed on homeowners facing foreclosure by promising them that they could avoid foreclosure with refinancing through Timeless Funding. Instead, Sohmer allegedly deceived the homeowners into conveying their properties to himself or to his wife. The complaint alleges that Sohmer concealed his fraud by deceiving homeowners into signing documents purporting to allow them to stay in their homes by making monthly payments to Sohmer, and then to "repurchase" their homes from Sohmer by obtaining new financing.

• The lawsuit alleges Sohmer knew the homeowners would not be able to afford the monthly payments, or obtain the required financing to repurchase their homes because of the homeowners' financial distress and the onerous "repurchase" terms, After homeowners were unable to make the monthly payments, Sohmer then sought to evict them from their homes, and to sell their homes to new buyers. Sohmer also stripped the homeowners’ equity by charging fees, commissions and other payments.(2)

• In a related action, on July 20, 2010, the Attorney General’s Office obtained a favorable decision against Sohmer, resulting in the denial of Sohmer’s bankruptcy discharge. In October 2007, the Attorney General objected to Sohmer receiving a discharge from the Bankruptcy Court of all of his debts alleging, among other acts, that Sohmer filed false Schedules and a false Statement of Financial Affairs with the Bankruptcy Court, thereby concealing assets, and also failed to maintain adequate financial records to evaluate his financial condition. In her decision, Judge Joan Feeney found Sohmer knowingly and fraudulently made false oaths on his bankruptcy Schedules and Statement of Financial Affairs, intending to mislead the Bankruptcy Court Trustee and creditors.

• None of the attorneys involved in this scheme are currently practicing law in Massachusetts. The Supreme Judicial Court accepted Sohmer’s affidavit of resignation from the practice of law as a disciplinary sanction on September 28, 2009, suspended [Andrew] Palmer from the practice of law for 21 months on June 29, 2009, and accepted [Shaun M.] Ellis’ affidavit of resignation from the practice of law as a disciplinary sanction on other grounds, on April 28, 2009.(3)

• Two years ago, the Bankruptcy Court approved a settlement between the Attorney General’s Office and 10 mortgage lenders and servicers who funded or serviced the loans thereby facilitating Sohmer’s fraudulent foreclosure rescue transactions. With respect to the 26 properties, the agreement was designed to provide approximately $1.8 million in reduced mortgage obligations, and to return each homeowner to his or her financial position before the foreclosure rescue transaction occurred. The agreement also provided an opportunity for Sohmer’s victims to reacquire legal title to their homes.(4)

For the Massachusetts AG press release, see Attorney General Martha Coakley Obtains Judgments Against Alec Sohmer and Other Defendants in Alleged Mortgage Foreclosure Rescue Scheme (Obtains Favorable Decision In Bankruptcy Court Case Denying Discharge To Sohmer).

(1) For some of the relevant court documents and other information, see:

• Commonwealth of Massachusetts v. Sohmer - Amended Complaint,
• Motion to Approve Settlement Agreement,
• Settlement Agreement,
• Massachusetts AG press release: Bankruptcy Court Approves Settlement Between Attorney General’s Office and Ten Mortgage Lenders and Servicers Involved in Foreclosure Rescue Transactions.

See also: Foreclosure Rescue Sale Leaseback Deals Are Usurious Equitable Mortgages, Says Massachusetts AG's Civil Lawsuit.

(2) With respect to the Sohmer's confederates in this racket, the AG states that the court also entered a consent judgment for $90,000 against Sohmer’s wife, Jennifer Sohmer, who served as the purchaser and mortgage loan borrower for six properties in the foreclosure rescue scheme. Also entered were a consent judgment for $200,000 against former Norwell attorney Andrew Palmer, who served as the closing attorney for the foreclosure rescue transactions and default judgments against Timeless Funding, the corporation through which Sohmer marketed his scheme, in the amount of $130,000 in civil penalties, and against former Sandwich attorney Shaun M. Ellis, who referred distressed homeowners to Sohmer in exchange for a fee, in the amount of $34,000, to be used toward restitution and civil penalties, according to the AG's press release. A consent judgment against Edward de la Flor, a mortgage broker involved in many of the transactions, for $41,204 was entered on May 5th of this year.

(3) The victims of this scam who are owed restitution from Sohmer and the other attorneys involved in this racket might consider filing a claim with the Massachusetts Clients' Security Board of the Supreme Judicial Court, which manages and distributes the monies in the court's Clients' Security Fund to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the Massachusetts bar acting as an attorney or a fiduciary.

For similar "attorney ripoff reimbursement funds" established to reimburse clients who have suffered a loss due to the dishonest conduct of attorneys in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

A similar fund in Minnesota that reimburses the public for ripoffs involving licensed real estate brokers, salespeople, and closing agents made a distribution to a victim of the same type of foreclosure rescue scam. See State Recovery Fund To Cough Up $116K+ To Compensate Elderly Victim Of Bogus Sale Leaseback Equity Stripping Scam Involving Licensed Real Estate Agent.

(4) See Court Approves Foreclosure Rescue Scam Settlement Between Massachusetts, Ten Lenders; Case Involved State AG Claims Of Equitable Mortgage, Usury, Etc..

NY Couple Gets 2 To 6 Years For Roles In Equity Stripping, Sale Leaseback Scam; Homeowners Who Sought Foreclosure Rescue Have Civil Suits Pending

In Westchester County, New York, The Journal News reports:

• A judge admonished a Tarrytown couple Thursday for their roles in "sham real estate transactions" that cost four Westchester County families their homes. The judge then sentenced Hubert "Phil" Hall and his wife, Doreen Swenson, to two to six years in state prison.

• "You perpetuated the complex schemes ... for your own financial benefit," acting state Supreme Court Justice Richard Molea said. Hall and Swenson had agreed to the prison term when they pleaded guilty in May to second-degree grand larceny and first-degree scheme to defraud, both felonies.

• They are among a group of eight — including four lawyers — who prosecutors say worked together to take advantage of vulnerable people in Croton-on-Hudson, Yorktown, Cortlandt and Mount Vernon who were about to lose their homes.

• The suspects are accused of promising to help save the homes, but instead draining them of their equity and leaving the owners with nothing.(1) The group also is accused of swindling two mortgage lenders out of $1.4 million. [...] At the court appearance, Swenson and Hall, both 61, each paid criminal restitution of $36,290. A civil suit against them and the other defendants is pending.

For the story, see Couple apologize for role in mortgage fraud, get 2-6 years.

(1) According to the story, prosecutors said that the group found victims through notices of public auction or foreclosure and reached out to them and gained their trust, saying they could transfer their deeds to an investor who would hold the title from 12 to 24 months so they could save money and reclaim their homes. But once the "investor" took title, phony checks were presented to the lenders for higher amounts than what the straw buyer paid for the home, the story states. Those checks allowed the group's members to get inflated mortgages, which they used to pay off the original mortgage and keep the rest for themselves.

More On Alleged South Florida Bogus Foreclosure Document Manufacturing Foreclosure Mill

Mother Jones recently ran a profile on South Florida foreclosure mill operated by attorney David J. Stern and the alleged manufacturing and backdating of bogus foreclosure documents that this firm his accused of engaging in.(1) An excerpt:

• LATE ONE NIGHT IN February 2009, Ariane Ice sat poring over records on the website of Florida's Palm Beach County. She'd been at it for weeks, forsaking sleep to sift through thousands of legal documents. She and her husband, Tom, an attorney, ran a boutique foreclosure defense firm called Ice Legal. (Slogan: "Your home is your castle. Defend it.") Now they were up against one of Florida's biggest foreclosure law firms: Founded by multimillionaire attorney David J. Stern, it controlled one-fifth of the state's booming market in foreclosure-related services. Ice had a strong hunch that Stern's operation was up to something, and that night she found her smoking gun.

***

• A Florida notary's stamp is valid for four years, and its expiration date is visible on the imprint. But here in front of Ice were dozens of assignments notarized with stamps that hadn't even existed until months—in some cases nearly a year—after the foreclosures were filed. Which meant Stern's people were foreclosing first and doing their legal paperwork later. In effect, it also meant they were lying to the court—an act that could get a lawyer disbarred or even prosecuted. "There's no question that it's pervasive," says Tom Ice of the backdated documents—nearly two dozen of which were verified by Mother Jones. "We've found tons of them."

***

• But the Ices had uncovered what looked like a pattern, so Tom booked a deposition with Stern's top deputy, Cheryl Samons, and confronted her with the backdated documents—including two from cases her firm had filed against Ice Legal's clients. Samons, whose counsel was present, insisted that the filings were just a mistake. She refused to elaborate, so the Ices moved to depose the notaries and other Stern employees whose names were on the evidence. On the eve of those depositions, however, the firm dropped foreclosure proceedings against the Ices' clients.

• It was a bittersweet victory: The Ices had won their cases, but Stern's practices remained under wraps. "This was done to cover up fraud," Tom fumes. "It was done precisely so they could try to hit a reset button and keep us from getting the real goods."

For the entire story, see EXCLUSIVE: Fannie and Freddie's Foreclosure Barons (How the federal housing agencies and bailed-out banks are helping shady lawyers make millions by pushing families out of their homes).

Thanks to Mike Dillon of GetDShirtz.com for the heads-up on the story.

(1) Mother Jones has made the following documents available online in connection with allegations made against this operation:

• Federal Securities Fraud Suit, Cooper and Methi v. DJSP Enterprises, David J. Stern, and Kumar Gursahaney, July 2010;
• Class Action Racketeering Suit, Figueroa v. MERSCORP, Law Offices of David J. Stern, and David J. Stern, July 2010;
• Fair Debt Collection Violation Suit, Hugo San Martin and Melissa San Martin v. Law Offices of David J. Stern, July 2010;
• Class Action Suit for Fair Debt Collecting Violations, Rory Hewitt v. Law Offices of David J. Stern and David J. Stern, October 2009;
• Florida Bar, Public Reprimand, Complaint Against David J. Stern, Sept. 2002;
• Florida Bar, Public Reprimand, Consent Judgment Against David J. Stern, Oct. 2002;
• Freddie Mac Designated Counsel, Retention Agreement with Law Offices of David J. Stern, April 2003;
• Freddie Mac Designated Counsel, Memo to Law Offices of David J. Stern, March 2006;
• Amended Complaint Alleging Sexual Harassment, Bridgette Balboni v. Law Offices of David J. Stern and David J. Stern, July 1999.

S. Florida Foreclosure Mill Faces Civil RICO Charges In Suit Seeking Class Action Status; Allegations Include Manufacturing Phony Mortgage Assignments

In Fort Lauderdale, Florida, The Palm Beach Post reports:

• Florida's purported largest foreclosure law firm filed thousands of documents to take people's homes that contained deceptive and intentionally ambiguous information, according to a proposed class action lawsuit.

• The suit, filed last month in U.S. District Court, Southern District of Florida, says David J. Stern and his Plantation-based legal team violated the Racketeer Influenced and Corrupt Organizations Act by generating fraudulent mortgage assignments when pursuing foreclosures. An assignment is held by the entity that has the right to receive mortgage payments.

• Stern's practice, which the lawsuit claims filed up to 7,000 new foreclosure cases in Florida every month last year, is also alleged to have pursued foreclosures for lenders that didn't own the debt on the homes. "There really is no proper plaintiff to sue and foreclose and that's what this charade is designed to cover," said Fort Lauderdale Attorney Kenneth Eric Trent, who is seeking class action status and filed the suit on behalf of Oakland Park resident Ignacio Damian Figueroa. "There is no real holder of the note and the mortgage anymore because they broke it up and sold it to 10, 12, 20 people."

***

• Tracking the true owner of the debt sometimes can be a challenge. When pressed for proof of debt ownership, Trent said Stern's office would create an assignment signed by a Stern employee instead of a representative of the lender attempting to foreclose. "The assignments were meaningless shells designed to pull the wool over the eyes of the judiciary and ease the burden upon the unknown real parties of interest," the lawsuit states.

***

• Trent also named the Mortgage Electronic Registration Service Corp. as a defendant. The private entity, known as MERS, was created by banks in 1995 to track mortgage ownership electronically and reduce paper documents. Trent says MERS helps hide the identity of loan ownership and that it conspired with Stern to "confuse everyone as to who owned what."

***

• West Palm Beach foreclosure defense Attorney Thomas Ice found 21 examples last year of assignments from Stern's office that had been executed with a date before the notary's commission was issued. In a deposition, a Stern employee agreed with Ice that "sloppiness" was to blame for the irregularity.

For the story, see Lawsuit claims that Florida's largest foreclosure firm faked documents.

For the lawsuit, see Figueroa v. Merscorp, et al.

In a related story, see Daily Business Review: Homeowner files fraud suit against firm, lawyer:

• An unrelated class action suit filed in 2007, which claims Stern’s firm overcharged borrowers, is pending in Palm Beach Circuit Court. Judge Thomas Barkdull recently certified the case as a class action. The suit claims the firm charged excessive fees to borrowers being foreclosed by Wells Fargo, a Stern client. The lead plaintiff is Loren Banner, who sought to pay the bank the money he owed and get his mortgage reinstated. Stern’s firm sent him a reinstatement letter that included charges for services his firm didn’t provide, according to the suit.

Pennsylvania Joins Baltimore, Memphis With Pending Lawsuit Accusing Alleged "Ghetto Loans" Peddler With Reverse Redlining In Philly Neighborhoods

In Philadelphia, Pennsylvania, Philadelphia Weekly reports:

• The Pennsylvania Human Relations Commission filed a complaint against Wells Fargo Bank early this month, claiming that the bank used reverse redlining in Philadelphia neighborhoods. In other words, Wells Fargo is accused of exploiting poor, African-American residents by allowing an abundant of sub-prime loans in densely black-populated neighborhoods that ultimately caused thousands of vacant properties.

***

• Philadelphia joins Baltimore and Memphis, cities that also have filed similar suits against the bank for racial discrimination.

For more, see PA Human Relations Commission Alleges ‘Reverse Redlining’ Against Wells Fargo.

For the lawsuit, see Commonwealth of Pennsylvania v. Wells Fargo Bank, N.A.

Go here for earlier posts on the "ghetto loans" allegations made against Wells Fargo.

Florida U.S. Senate Candidate Linked To Alleged Straw Buyer Mortgage Scam That Left Banks, Taxpayers Holding The Bag On Nearly $34M Of Worthless Paper

The St. Petersburg Times reports:

• Democratic U.S. Senate candidate Jeff Greene says he had nothing to do with creating the sub-prime mortgage mess that made him fabulously wealthy. He was simply a savvy investor who "could see that the housing market was imploding" and lucky enough to make more than $500 million by betting against it.

• But he wasn't just a spectator to the housing collapse. Four years ago, Greene was party to precisely the kind of deal that decimated the market. Greene insists he did nothing wrong. Yet the way he handled the deal left an opening for massive fraud and put him uncomfortably close to a man now under federal indictment.

For more, see Calif. deal put Jeff Greene on front line of mortgage mess.

Illinois Steps In To Stop Niece From Selling 100-Year Old Aunt's Farm Out From Under Her As State Probes Dubious Land Transactions

In Will County, Illinois, the SouthtownStar reports:

• State officials have told the niece of a 100-year-old Monee woman known as "Aunt Aggie" to stop trying to sell the woman's 70-acre farm. A cease and desist order was issued against Bridget Gruzdis and her firm, Phoenix Horizon LLC, to immediately stop marketing and attempting to sell the home of Agnes Albinger.

***

• For the past few months, the SouthtownStar has chronicled Aunt Aggie's struggle to stay on her farm. Aunt Aggie's niece formed Phoenix Horizon and engaged in a series of transactions with her aunt that resulted in the farm being subdivided and annexed to the village for commercial development in 2003. The state, after learning of transactions between Aunt Aggie and her niece through news reports, launched an investigation into why the farm was at risk for foreclosure.

***

• Phoenix Horizon annexed the land to the village of Monee in 2003 with hopes of developing hotels and shopping centers. Gruzdis borrowed $700,000 against the property but paid back only $49 before the bank filed for foreclosure in 2006.(1)

• The Monee police launched an investigation into whether Aunt Aggie knew what she was doing when she was signing transactions with Phoenix over the past decade. They turned over their findings to the Will County state's attorney's office. The state's attorney's financial crimes prosecutor is still investigating, Will County state's attorney's office spokesman Chuck Pelkie said Thursday.

• Aunt Aggie, who turns 101 in August, has farmed the Monee property since 1949. Her husband died in 1956, and Aunt Aggie is well known in her community for raising as many as 40 foster children over the course of nearly five decades. On May 3, Gruzdis sent Aunt Aggie an eviction notice giving her 30 days to vacate the farm - a threat that was never carried out. Jim Armstrong is a longtime friend of Aunt Aggie's who acted as a whistleblower by alerting the media to Aggie's predicament.

For the story, see State to Aunt Aggie's niece: Stop right there (Woman blocked from trying to sell centenarian's property).

In a follow-up story, see In summer heat, Aunt Aggie finds strength.

For another story on an Illinois property owner falling victim in a real estate equity ripoff, see Blind Victim Of Sale Leaseback, Equity Stripping Scam Peddled As A Refinance Now Faces The Boot, Despite "Successful" Civil Prosecution By Illinois AG.

(1) With some exceptions, under Illinois law, a lender looking to take real estate as collateral for a loan generally has a duty to inquire into the rights and equities of anyone in open possession of the premises who is not the owner of record. Failure to do so could leave the lender's security interest subordinate to any legal rights and equities the party in possession who is not the owner of record can establish.

See Ambrosius v. Katz, 2 Ill. 2d 173; 117 N.E.2d 69; 1954 Ill. LEXIS 321 (Ill. 1954) (bold text is my emphasis, not in the original text):

• A purchaser is bound to inquire of the person in possession by what tenure he holds and what interest he claims in the premises. It is well settled that whatever is sufficient to put a party on inquiry is notice of all facts which pursuit of such inquiry would disclose, and without such inquiry no one can claim to be an innocent purchaser as against him whose possession raises the inquiry. (Bryant v. Lakeside Galleries, Inc. 402 Ill. 466; Miller v. Bullington, 381 Ill. 238.)

• This rule protects a grantor whose grant was induced by fraud, but who, remaining in possession, can show such possession as notice of his equity against a subsequent grantee. (White v. White, 89 Ill. 460; Ronan v. Bluhm, 173 Ill. 277.) The purchaser cannot excuse himself by merely obtaining information as to how possession was obtained or inquiring of the grantor or of other persons as to the rights of the person in possession, but he is bound to inquire of the person in possession by what tenure he holds and what interest he claims. Open possession is sufficient to charge such purchaser with notice of all legal and equitable claims of the occupant. German-American Nat. Bank v. Martin, 277 Ill. 629.

See also, Bullard v. Turner, 357 Ill. 279, 192 N.E. 223 (Ill. 1934) (bold text is my emphasis, not in the original text):

• Under the system of recording the evidences of title to real estate in force in this State, the actual occupancy of land is equivalent to the record of the instrument under which the occupant claims so far as notice to subsequent purchasers and incumbrancers is concerned. McDonnell v. Holden, 352 Ill. 362; Garlick v. Imgruet, 340 id. 136; Moore v. Machinery Sales Co. 297 id. 564; Merchants and Farmers State Bank v. Dawdy, 230 id. 199; Coari v. Olsen, 91 id. 273.

• A purchaser or incumbrancer is bound to inquire of a person in possession of real estate by what right he holds possession and what interest he claims; and in case the purchaser or incumbrancer fails to make such inquiry, the law charges him with constructive notice of all those facts which he would have ascertained respecting the claim or title of the person in possession had inquiry been made of him. (Nelson v. Joshel, 305 Ill. 420; Williams v. Brown, 14 id. 200; White v. White, 89 id. 460; Coari v. Olsen, 91 id. 273; Ford v. Marcall, 107 id. 136; Tillotson v. Mitchell, 111 id. 518; Rock Island and Peoria Railway Co. v. Dimick, 144 id. 628; German-American Nat. Bank v. Martin, 277 id. 629; Moore v. Machinery Sales Co. 297 id. 564).

The foregoing principles were applied by a Federal court in Chicago last year in Davis v. Elite Mortg. Servs., 592 F. Supp. 2d 1052 (USDC D. Ill., East. Div. 2009), in the context of a foreclosure rescue scam. The Court found that the mortgage lender that unwittingly financed the scam was not entitled to the protection accorded to a bona fide purchaser, saying that, despite the lack of evidence that the lender had any actual knowledge of the scam, it had constructive notice of any claim the screwed-over homeowner can establish in the property by reason of his open, exclusive possession thereof.

For more on the duty to inquire of persons in possession in real estate transactions in Illinois, see Illinois Bona Fide Purchaser, Possession, Duty Of Inquiry (Illinois Supreme Court cases), and Illinois Bona Fide Purchaser, Possession, Duty Of Inquiry - State Appellate Cases, Federal Cases.

For more on this duty to inquire in other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire. RecentIllinoisBFPStories

Media Report Probes Into Minister's Activities Involving Dubious Loan Modification Services

In Atlanta, Georgia, MyFox Atlanta reports:

• Some thought a minister who modifies mortgages would be a godsend. A FOX 5 I-Team investigation found that while one man had a Bible in one hand, the other one was in people's wallets. The I-Team's Dana Fowle went undercover to hear just what Mike Surgent and Trinity Corporation is preaching.

• One of the first things Surgent does when you go to his office looking for help to save your home from foreclosure is to ask you to call him Uncle Mike. He then tells you about his religious conversation. But Uncle Mike wraps it up by asking for a lot of money.

For more, see I-Team: Trinity Corporation.

For a follow-up story, see I-Team: Trinity Corporation Part 2.

Technicality Leads To Dismissal Of Criminal Case Against Ex-Homeowner Accused Of Stripping $1M In Fixtures From Foreclosed Home; DA To Refile Charges

In Southern California, North County Times reports:

• Suzy Brown, who was accused of stripping $1 million worth of property from the bank-foreclosed home her Encinitas neighbors dubbed the "monster house," won a legal victory Thursday when a judge dismissed criminal charges against her on a technicality. Brown, 45, was facing one charge of grand theft and one charge of felony vandalism for allegedly taking truckloads of lavish fixtures when she moved out of the bank-owned mansion in March 2009.

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• However, Superior Court Judge Aaron Katz ruled Thursday after a preliminary hearing at the Vista Courthouse that Eacret failed to prove that the bank ---- not Brown ---- owned the house last year when a real estate broker for Chevy Chase Bank discovered its doors, windows and 18 toilets, among other property, were missing.

For more, see Judge dismisses case against ex-owner of 'monster house'.

For story update, see Prosecutors to refile charges against ex-owner of 'monster house':

• Prosecutors will refile charges against Suzy Brown, the woman accused of stripping $1 million worth of lavish fixtures from the foreclosed home her Encinitas neighbors dubbed the "monster house," according to a deputy district attorney. Superior Court Judge Aaron Katz dismissed felony theft and vandalism charges against Brown on Thursday after a preliminary hearing at the Vista Courthouse.

• Katz said Deputy District Attorney Robert Eacret had shown evidence at the hearing that Brown, 45, had taken truckloads of toilets, windows and appliances from the Olivenhain mansion after she moved out in March 2009, but the judge said he had to dismiss the charges on a technicality.