Saturday, September 18, 2010

Historic Hip-Hop Birthplace May Get New Life As NYC Helps Finance Delinquent Bronx Building Loan Buy; “A Great Moment For 1520 Sedgwick": DJ Kool Herc

From The Bronx, New York, The New York Times reports:

  • Housing advocates, tenants and elected officials(1) have declared a victory in the Bronx with the announcement of the sale of the mortgage on an apartment building that has been called the birthplace of hip-hop. The sale, which was financed with significant help from city agencies, was the first step toward bringing in new owners after what tenants called an era of neglect.


  • The hulking brick tower at 1520 Sedgwick Avenue(2) has been a haven for generations of working-class families. In the early 1970s, a young resident named Clive Campbell, otherwise known as D.J. Kool Herc, held much-celebrated parties in the community room — parties that played a crucial role in the early evolution of hip-hop.


  • The building was sold in 2008 to a real estate group that included Mark Karasick, a prominent real estate investor, as part of a wave of deals in neighborhoods that had long been ignored. [...] When the real estate bubble burst, the building’s conditions deteriorated, leaving tenants to battle rats, roaches and the threats of foreclosure. [...] The city provided a $5.6 million loan to [finance the purchase of] the building’s mortgage from Sovereign Bank for $6.2 million.


  • Gloria Robinson, president of the Sedgwick tenants’ association, said the sale offered the prospect of much-needed relief. “It had gotten to a point where nothing was being done properly around the building,” Ms. Robinson said. “The garbage wasn’t being picked up, the floors weren’t being cleaned. It just got really, really bad. It’s like we’re starting fresh now.”

For more, see Hope for a Bronx Tower of Hip-Hop Lore.

See also: Press release from the Office of the Mayor of the City of New York: Mayor Bloomberg, Senator Schumer, Congressman Serrano, Speaker Quinn and City Housing Officials Cestero and Jahr Announce Plan to Rescue South Bronx Housing Complex.

Go here for more on the history of 1520 Sedgwick Avenue, and here for a 2007 New York Times story on 1520 Sedgwick that asks Will Gentrification Spoil the Birthplace of Hip-Hop?(4)

(1) The public announcement, which took place on September 7, drew the usual suspects: Mayor Mike Bloomberg, the never-media-shy U.S. Senator Charles E. Schumer, Congressman Jose E. Serrano, City Council Speaker Christine C. Quinn, New York City Department of Housing Preservation and Development Commissioner Rafael E. Cestero and New York City Housing Development Corporation President Marc Jahr.

(2) For those hop-hop fans planning a pilgrimage to 1520 Sedgwick in The Bronx (not to be confused with Florida's 1520 Sedgwick Avenue, located in the city of Titusville, in Brevard County), and wonder exactly where it is, it is located just north of the Cross Bronx Expressway and along the Major Deegan Expressway, little more than a stone's throw from the historic George Washington Bridge. Go here for a local street map and directions.

(3) Speaker Quinn noted DJ Kool Herc's role in the history of 1520 Sedgwick in her public statement. “Three decades ago, DJ Kool Herc mixed funk songs with African beats and rap, and hip-hop was born during a house concert in the basements of 1520 Sedgwick. Hip-hop has often been an expression of hardships and 1520 Sedgwick has seen its fair share of struggles. After the fiscal crisis, 1520 Sedgwick became a victim of predatory equity investors, and we were at risk of losing a historical and cultural landmark. But with this purchase and $3 million of Council funding for repairs, we will now see the rebirth of 1520 Sedgwick – and maybe see history created once again. I’m particularly excited that this will give tenants a chance to recreate their homes, not to mention the possibility of one day converting the building into a co-op. I want to thank the Mayor, Senator Schumer, Congressman Serrano, HPD Commissioner Cestero and HDC President Marc Jahr for continuing to think of creative solutions to save the City’s distressed buildings.”

(4) Three years later, one can say that while gentrification didn't spoil the birthplace of hip-hop, the failed attempt at gentrification almost did.

Friday, September 17, 2010

Judge Calls Off Tax Foreclosure Sale, Gives Homeowner Extension To Cough Up Cash After Finding Temporary Legal Incapacitation Prevented Payment

In Berrien County, Illinois, WSJM Radio 94.9 FM reports:

  • The owner of a lakefront home in Saint Joseph that was almost auctioned off by the Berrien County Treasurer's office won a break in court last week. According to the Herald Palladium, the Lakeshore Drive home of Tony Basso, of Chicago, will not be offered as part of a tax foreclosure auction on September 21st, after all. The treasurer's office had previously said that property taxes on the home were not paid for about three years and that Basso had all but abandoned the place.

  • However, Berrien County Trial Court Judge John Dewane decided last week that Basso was legally incapacitated and unable to attend to his affairs during that period. As such, he was entitled to some relief.

  • Basso, who is 82, told the court that he went to Italy about five years ago to help with family problems, leaving money with his son in Chicago to take care of the home in Saint Joseph, which is worth about 500-thousand dollars. The son failed to do so, but Basso couldn't manage the issue due to health problems. He now has until October first to pay the back taxes, and pay back the city of Saint Joseph for lawn mowing it's done for him at the property.

Source: Foreclosed Homeowner Gets A Break In Court.

Publicly-Traded S. Florida Foreclosure Mill's Reported Profits, Revenues Take Dip; Stock Sells At 25% Of April 26 Value

In Plantation, Florida, the South Florida Business Journal reports:

  • As an investigation by the Florida Attorney General’s Office looms over its chairman and CEO, Plantation-based DJSP Enterprises reported a decline in both profits and income during the second quarter. The foreclosure and title processing company (NASDAQ: DJSP) reported net income of $3.8 million, or 32 cents a share, on revenue of $56.1 million. That’s down from net income of $14.1 million, or 73 cents a share, on revenue of $61.7 million in the second quarter of 2009.

  • DJSP handles foreclosure legal work for major lenders, and its largest client is the Law Offices of David J. Stern, P.A. The lawyer is chairman and CEO of DJSP. [...] DJSP shares closed up 11 cents to $3.32 [as of Sept. 7]. The 52-week high was $13.65 on April 26. The 52-week low was $3 on Aug. 31.

For more, see DJSP reports smaller profit as AG probe looms.

Ex-Project Mgr.: Condo Conversion Amounted To "Putting Lipstick On An Elephant" As Developer Allegedly Unloaded Shoddy Units On Unwitting Homebuyers

In Redmond, Washington, The Seattle Times reports:

  • Vijay Dusi is paying $2,450 a month to live in a condominium so riddled with toxic mold that his family has shuffled from room to room for three years to escape the health hazards that go with it. His kids, ages 2 and 4, can't sleep or play in their room. His wife has tossed away toys, clothes, bedding, even beds while their homeowners association grapples with the question of who will pay for an estimated $4 million worth of repairs at the 82-unit complex.

  • The Riverwalk at Redmond condo association tried to get the developer, Roger Nix, to pay for repairs, but finally gave up when it couldn't find him. Nix dissolved his company last year, and an associate said he is living in Mexico. The homeowners association filed suit in July against Nix's company in an effort to force the firm to pay for what it says is shoddy construction that has contributed to water damage in 15 units at the complex on Northeast Leary Way in Redmond. Three of the five buildings are affected. Without a legal victory or settlement with the developer, the owners of each unit could be on the hook for as much as $50,000 to replace the buildings' exteriors.


  • Riverwalk's situation is dramatic. But it's far from unprecedented. Attorneys specializing in construction lawsuits say condo owners across the state have been left holding the bag for millions of dollars in repairs to shoddy construction that should have been remedied by developers. And those developers often operate under corporate entities that evaporate once the project is finished.


  • That's the situation that Dusi and the Riverwalk board confronted after developer Nix converted an apartment complex into condominiums with an elegant Mediterranean-style facade. Some units, such as Dusi's, began showing signs of water problems almost immediately.


  • [Ex-project manager Kim] Steward, who owns a condo at Riverwalk, said the developer wasn't responsible for the original construction of the buildings — only the mostly cosmetic changes made to Riverwalk after he bought it. The Riverwalk conversion, she said, amounted to "putting lipstick on an elephant." "You're making it look cute," she said of the conversion, which included replacing windows and applying a new coat of stucco over the existing stucco exterior.


  • Vijay Dusi, who works as a software developer at Microsoft, said he cannot afford to move his family to another place and must continue to pay the mortgage and the homeowners-association dues lest he jeopardize the permanent-residency permit he applied for in 2005.

For more, see Owners worry moldy condos are unsellable — and unlivable (It will take an estimated $4 million to repair a Redmond condo complex, where water damage has riddled some units with toxic mold. But when condo owners tried to get the developer to pay, they couldn't find him: he had moved to Mexico and the original development company had been dissolved).

Thursday, September 16, 2010

Montana Man Gets 10 Years For Attempted Vacant Home Hijacking; R/E Agent Blows Whistle After Noticing Missing "For Sale" Sign From One Of His Listings

In Polson, Montana, the Great Falls Tribune reports:

  • A drifter convicted of trying to assume ownership of a Polson-area house in foreclosure has been sentenced to 10 years in prison. KERR-AM reports that District Judge Kim Christopher sentenced 53-year-old Brent Arthur Wilson to 20 years in prison with 10 suspended on Thursday.

  • Wilson was convicted of theft, deceptive practices, tampering with public records and a misdemeanor count of criminal mischief. The investigation into Wilson began when a real estate agent noticed “for sale” signs had been removed from a $380,000 house he was selling on behalf of a lender in August 2009. The locks had also been changed.

  • Wilson also filed strange paperwork with the Lake County clerk and recorder’s office claiming he had purchased the house from Yahweh.

Source: Drifter gets 10 years for trying to steal houses.

WPB Man Convicted In Earlier Home-Hijacking Incident Bagged Again; Accused Of Filing Four Adverse Possession Claims On Homes Soon After Jail Release

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

  • A year in jail wasn't enough to deter a 52-year-old West Palm Beach man bent on renting out homes he doesn't own. Claiming he is backed by an obscure Florida law pertaining to abandoned and vacant property, Carl Heflin again has attempted to take homes via adverse possession and rent them to unwitting tenants, according to Palm Beach County sheriff's investigators.

  • He was arrested the first time in relation to the practice in 2009. Following a July release from the Palm Beach County Jail,(1) Heflin filed adverse possession papers on four homes, renting one on Tallahassee Drive and accepting $2,500 from a tenant to begin a three-year lease.

  • Heflin was arrested again Tuesday afternoon on multiple charges of, among other things, burglary, organized scheme to defraud and contributing to the delinquency of a minor. On Wednesday, Palm Beach County Circuit Judge Krista Marx ordered Heflin held in lieu of $100,000 bail.

  • Heflin's 17-year-old daughter, Carli, also was charged with burglary because she allegedly broke windows to get into empty homes so her father could change the locks, the sheriff's report says.

For more, see West Palm Beach man arrested again for allegedly trying to rent out homes he doesn't own.

(1) Reportedly, Heflin's original charges related to adverse possession were pleaded down to misdemeanor trespassing because prosecutors said he had already spent 13 months in prison and the victims or owners of the properties were either unavailable or unwilling to appear for trial.

Allegedly "Fixing" F'closure Case Among Activities Set Forth In Charges Filed Against Cuyahoga County Auditor Suggesting Possible Judicial Corruption

In Cleveland, Ohio, The Plain Dealer reports:

  • The charges filed Thursday against Cuyahoga County Auditor Frank Russo offer the most detailed description yet of the suspected corrupt activities of two Common Pleas Judges -- one of whom is seeking re-election.

  • Excerpts of conversations between Russo and Judges Bridget McCafferty and Steven Terry suggest that the judges accepted political support and financial assistance on their campaigns in exchange for allowing Russo to call the shots on cases in which he or his associates had a stake.


  • In exchange for his help, Russo wanted control over the outcome of certain [of Terry's ] civil cases, according to the charges. The docket Terry inherited included numerous civil foreclosure cases involving Russo's close friend O'Malley, who was representing one of the litigants. American Home Bank was seeking $190,000 in damages from O'Malley's client.

  • O'Malley called upon Russo to wield his influence over Terry and convince the judge to deny motions for summary judgment in the case to force it to a settlement. According to the charges, Russo called Terry in July 2008 and asked, "Did (a county employee) give you the case numbers? ... I talked to you about this once before ... it's about denying the motions for summary judgment."

  • "Yep, I still have the note you gave me," Terry replied. "Okay, good, so deny the motions for summary judgment, okay, good. ... I just wanted to touch base with you on that," Russo said. The following day, Terry reported to Russo that he had followed through on his promise. "I called just to tell you that I took care of those two issues with those two cases that we talked about. ... Denied everything."

For the story, see Frank Russo charges suggest he corrupted county judges.

Wednesday, September 15, 2010

NC Real Estate Operator Cops Guilty Plea To Foreclosure Bid Rigging Claims; Conduct Suppressed Sale Proceeds, Screwing Lienholders, Homeowners: Feds

From the U.S. Department of Justice:

  • A Raleigh, N.C., real estate speculator pleaded guilty to conspiring to rig bids for public real estate foreclosure auctions held in multiple counties in eastern North Carolina, the Department of Justice announced [].

  • Christopher J. Deans pleaded guilty [] in U.S. District Court in Greenville, N.C., for participating in a conspiracy to rig bids during the real estate foreclosure auction process in eastern North Carolina from at least as early as April 2003 until at least April 2005.


  • According to the charge, which was filed on July 29, 2010, Deans, an owner of Raleigh-based real estate investment companies, and co-conspirators agreed not to bid against each other during public real estate foreclosure auctions in eastern North Carolina. As part of the conspiracy, Deans and co-conspirators paid one another not to bid on foreclosed properties and received economic benefits from the rental and sale of real estate purchased through the rigged foreclosure auction process.

  • The conspiracy resulted in the suppression of competitive bidding on foreclosed properties which caused foreclosing lienholders and certain homeowners to receive a lower price for properties sold through foreclosure actions, the department said.

For the DOJ press release, see North Carolina Real Estate Speculator Pleads Guilty to Bid Rigging in Real Estate Foreclosure Auctions.

Go here for other posts & links on bid rigging at foreclosure and tax sale auctions.

(1) According to DOJ, the charge against Deans is the first to arise in an ongoing federal antitrust investigation of fraud and bidding irregularities in certain real estate auctions in the Eastern District of North Carolina. DOJ states that the investigation is being conducted by the Antitrust Division’s Atlanta Field Office and the FBI, and urges anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division’s Atlanta Field Office at 404-331-7100 or visit

Court Hammers Alleged Loan Modification Racket With $100K Judgment; 2nd Score Against Foreclosure Rescue Operators In Recent Weeks For Wisconsin AG

In Dane County, Wisconsin, the Milwaukee Journal Sentinel reports:

  • A Dane County circuit judge has ordered the California-based Federal Loan Modification Center LLP to pay $105,754 and to stop doing business illegally in Wisconsin, Attorney General J.B. Van Hollen said [].

  • Van Hollen said in a statement that the company falsely presented itself as part of a federal program offering to help distressed homeowners modify their loans and stave off foreclosure. The firm collected as much as $3,500 in fees from Wisconsin homeowners, then failed to provide promised services or refunds, Van Hollen said.


  • The state Justice Department last week won a $111,861 judgment against another California company, Relief Law Center Inc. for violating consumer protection laws in soliciting homeowners for purported loan modification services.(1) In that case, the solicitations were designed to appear as though the firm was a loan auditor investigating the homeowner's lender, Van Hollen said.

Source: Loan firm told to pay $105,754.

(1) See Van Hollen Announces Judgment Against USA Loan Auditors.

State Regulator Orders Two Suspected Loan Modification Outfits To Cease & Desist As Sheriff's Deputies Execute Search Warrants On Companies' Records

In Northern Florida, The Florida Times Union reports:

  • The Florida Office of Financial Regulation ["OFR"] and Clay County Sheriff's Office [] ordered two Clay County mortgage loan modification companies to cease business and served search warrants on their records, the two agencies announced.

  • The two companies closed were Global Equity Solutions, [...] in Middleburg, and Hope Financial Services, [...] in Orange Park. The OFR served immediate cease and desist orders barring the companies from doing business as the sheriff's office executed the search warrants. Names were not released because charges are pending further investigation, the agencies said.


  • OFR investigators found the two companies marketed their services throughout the country via websites, mass mailings and a telephone call center. The companies have about 250 open contracts, where they received between about $1,200 and $1,800 up front first. Those who perform loan modifications in Florida without an active license are subject to being slapped with felony charges punishable by up to five years in prison and a fine as much as $5,000 per offense, [OFR communications director Flora] Beal said.

For the story, see State regulators shut down loan modification companies in Clay County.

Ex-TV News Anchor Says Loan Mod Racket Ruined His Reputation, Stiffed Him On Infomercial Fee After Promises To Homeowners In Foreclosure Were Broken

In Houston, Texas, KRIV-TV Channel 26 reports:

  • [H]omeowners Legal Assistance, also known as Delgado and Associates, was featured on infomercials on Spanish television. The advertisements featured Antonio Hernandez, a veteran Houston news anchor, as well as a money back guarantee. "It looked very credible on the surface and it wasn't," said attorney J.C.Castillo. [Homeowner Jose] Valladares paid the business $3,000.


  • When Valladares and other unhappy customers returned to the southwest side office building, the business was gone. "When all these complaints started coming in from everywhere, that's when they decided boom, it disappeared," said Castillo.

  • If losing their money and or their homes wasn't enough, some customers had bankruptcy filings they say they knew nothing about. Those filings were apparently done to stop their foreclosures. "That's obviously fraud on the bankruptcy court and fraud on the homeowners when that was being done," said Castillo. Court documents state one of the business' employees filed numerous bankruptcy cases for customers and in the process violated several provisions of the bankruptcy code. "Everything fell apart and everybody started pointing fingers at each other," said Castillo.

  • Business owner Arnold Gonzales and hundreds of thousands of dollars are nowhere to be found, according to court testimony. The bankruptcy court tried six times to serve Gonzales with a subpoena to testify. "We know that Arnold Gonzales disappeared and nobody seems to know where he's at," said Castillo.

  • Former television news anchor Antonio Hernandez told FOX 26 Investigates Gonzales owes him money for appearing in the commercials. He also accuses the business of ruining his reputation and plans to sue. Castillo estimates a thousand or more homeowners may have been ripped off by the business. [...] A criminal investigation is now underway.

For the story, see Unkept Promises For Homeowners Facing Foreclosure.

Tuesday, September 14, 2010

Suspicious Shorts Sales Continue To Attract Spotlight

The New York Times reports:

  • STRUGGLING homeowners have found some refuge in short sales, in which lenders allow borrowers to escape foreclosure by selling a home for less than what is owed on the mortgage. Government programs offering incentives to both parties will push the number of short sales to 400,000 this year from 100,000 in 2008, according to CoreLogic, a financial consulting firm.

  • But the jump in short sales has also given rise to a new form of fraud — which, as a recent study by CoreLogic suggests, could undermine the burgeoning practice.(1)

For more, see A Downside of Short Sales.

(1) The study can be downloaded by visiting

CT Probate Judge With Dubious History Faces Judicial Misconduct Charges In Suspected Land Grab Involving Now-Deceased 92 Year-Old's $1.5M+ Farm

In Southington, Connecticut, the Hartford Courant reports:

  • Rare is the chutzpa so shamefully displayed by Southington Probate Court Judge Bryan F. Meccariello. The judge who presided over a court process that expunged Sam Manzo, a humble farmhand, from Josephine Smoron's will, now wants to be the hero.

  • Meccariello told the Council on Probate Judicial Conduct this week that it was but a small mistake that he ignored Smoron's will in May 2009 when he gave the OK to the creation of two trusts that allowed the Smoron Farm to be acquired by a local developer.

  • The judge said he was merely trying to bring Smoron home before she died in June 2009 at age 92. At the time, Smoron lay dying in a nursing home. Her wish was to give the family farm, worth at least $1.5 million, to Manzo, her long-time caretaker. Meccariello hadn't seen her in more than a year. The man he appointed as her conservator — local lawyer John Nugent — never bothered to meet her. ("I don't speak dementia,'' Nugent artfully explained to the council this week.)


  • Manzo, who mortgaged (and lost to foreclosure) his home to help pay for some of Josephine Smoron's bills and who was removed by Meccariello as her conservator in 2008, could only shake his head. After Meccariello appointed Nugent, "there was no plan,'' Manzo told me.

  • Meccariello is the man who allowed the entire mess to unfold, who never would have been caught were it not for Manzo's complaint about a railroad job unfolding in the Southington Probate Court. This is the judge who, as Smoron's sad fate unfolded before his court over her last year, never bothered to find out how she was doing in the hospital or nursing home.(1)

For more, see Southington Probate Court Judge Bryan Meccariello Faces Judicial Misconduct Charges (if link expires, TRY HERE).

See also Judge Meccariello: "No Corruption In Southington Land Grab".

(1) Reportedly, the same probate council admonished Meccariello in 2007 for a habit of mixing his roles as judge, land investor and lawyer for local developers because it had an appearance of impropriety. This time, Meccariello promised the council that there was no "conspiracy to divert or funnel land to a local developer," the story states. He reportedly said: "There is nothing sinister. There is nothing underhanded that went on. This was a mistake. It is being corrected."

"Schack" Rulings Merit Note In Ohio Appeals Court Ruling Reinforcing Importance To Borrower That Promissory Note's Chain Of Title Be Established

In recent, apparently high stakes litigation(1) in which a lower court's ruling dismissing a lender's foreclosure action was affirmed, an Ohio Court of Appeals issued a reminder of how essential it is to the borrower (ie. the "maker" or "obligor" of the note) that the lender prove it is the proper holder of the promissory note being enforced.

In addition, it cited several rulings from Kings County (Brooklyn), New York Supreme Court Justice Arthur M. Schack to "indict" the lender in this case (HSBC Bank) and its "confederates" (Ocwen, Delta Funding Corporation, and Mortgage Electronic Registration Systems, Inc. - "MERS" ) for their history of apparent sloppiness when bringing foreclosure actions.(2)

Beginning at paragraph 71 of the Ohio appellate court ruling:

  • Thompson contends that because the last-named endorsement is made to Delta, Delta was the proper holder of the note when this action was filed, since the prior, first-named endorsement was from an entity other than the current holder of the note. In Adams v. Madison Realty & Development, Inc. (C.A.3, 1988), 853 F.2d 163, the Third Circuit Court of Appeals stressed that from the maker's (obligor's) standpoint:

    "it becomes essential to establish that the person who demands payment of a negotiable note, or to whom payment is made, is the duly qualified holder. Otherwise, the obligor is exposed to the risk of double payment, or at least to the expense of litigation incurred to prevent duplicative satisfaction of the instrument. These risks provide makers with a recognizable interest in demanding proof of the chain of title." Id. At 168.

  • The Third Circuit Court of Appeals further observed that:

    "Financial institutions, noted for insisting on their customers' compliance with numerous ritualistic formalities, are not sympathetic petitioners in urging relaxation of an elementary business practice. It is a tenet of commercial law that `[h]oldership and the potential for becoming holders in due course should only be accorded to transferees that observe the historic protocol.'" 853 F.2d at 169 (citation omitted).

  • Consistent with this observation, recent decisions in the State of New York have noted numerous irregularities in HSBC's mortgage documentation and corporate relationships with Ocwen, MERS, and Delta. See, e.g., HSBC Bank USA, N.A. v. Cherry (2007), 18 Misc.3d 1102(A), 856 N.Y.S.2d 24 (Table), 2007 WL 4374284, and HSBC Bank USA, N.A. v. Yeasmin (2010), 27 Misc.3d 1227(A), 2010 N.Y. Slip Op. 50927(U)(Table), 2010 WL 2080273 (dismissing HSBC's requests for orders of reference in mortgage foreclosure actions, due to HSBC's failure to provide proper affidavits). See, also, e.g., HSBC Bank USA, N.A. v. Charlevagne (2008), 20 Misc.3d 1128(A), 872 N.Y.S.2d 691 (Table), 2008 WL 2954767, and HSBC Bank USA, Nat. Assn. v. Antrobus (2008), 20 Misc.3d 1127(A), 872 N.Y.S.2d 691,(Table), 2008 WL 2928553 (describing "possible incestuous relationship" between HSBC Bank, Ocwen Loan Servicing, Delta Funding Corporation, and Mortgage Electronic Registration Systems, Inc., due to the fact that the entities all share the same office space at 1661 Worthington Road, Suite 100, West Palm Beach, Florida. HSBC also supplied affidavits in support of foreclosure from individuals who claimed simultaneously to be officers of more than one of these corporations.).


The Ohio appeals court adds this observation at paragraph 81 of its ruling (Note that Ocwen Loan Servicing's notorious, seemingly omnipresent, multiple corporate hat-wearing vice president Scott Anderson receives an "honorable" mention for his role in this case):

  • Even if HSBC had provided support for the proposition that ownership of the note is not required, the evidence about the assignment is not properly before us. The alleged mortgage assignment is attached to the rejected affidavits of Neil. Furthermore, even if we were to consider this "evidence," the mortgage assignment from MERS to HSBC indicates that the assignment was prepared by Ocwen for MERS, and that Ocwen is located at the same Palm Beach, Florida address mentioned in Charlevagne and Antrobus. See Exhibit 3 attached to the affidavit of Chomie Neil.

  • In addition, Scott Anderson, who signed the assignment, as Vice-President of MERS, appears to be the same individual who claimed to be both Vice-President of MERS and Vice-President of Ocwen. See Antrobus, 2008 WL 2928553, * 4, and Charlevagne, 2008 WL 2954767, * 1.(3)

For the entire ruling, see HSBC Bank USA v. Thompson, 2010 Ohio 4158 (2nd App. Dist., Montgomery County, September 3, 2010).

(1) The stakes in this case, which by all appearances involved nothing more than your standard, run-of-the-mill "lack of standing" and "real party in interest" claims, were apparently somehow ratcheted up significantly along the way as it attracted enough interest from the Ohio Attorney General's office to cause it to jump into the fray and file a "friend of the court" brief supporting the homeowner's position.

Further, a second amicus brief, also supporting the homeowner's position, was filed on behalf of six non-profit legal and consumer advocates, who also wanted to get in on the action.

Not to be outdone, in addition to being represented by local counsel, the foreclosing lender also called in the Washington, D.C. office of some big-shot, white shoe law firm for additional artillery (apparently to no avail).

(2) For links to some of Justice Schack's rulings booting sloppy foreclosing lenders from his courtroom, see:

Go here for other posts referencing Justice Schack.

(3) For some of the cases in which Scott Anderson receives mention for his multiple corporate hat-wearing role, see:

San Diego DA Bags Pair In Alleged Forged Deed, Bogus Bankruptcy Filing, Rent Skimming Ripoff Affecting 300+ Victims Throughout Five Counties

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

  • Two brothers were charged Tuesday in a $1.5 million foreclosure fraud scheme in which they allegedly stole the identity of several notaries and forged hundreds of deeds across five counties, including San Diego.

  • David Zepeda, 57, and John Zepeda, 59, are each charged with 104 felony counts, including identity theft, forgery, grand theft and rent-skimming. The "brazen" conspiracy involved more than 300 victims, said San Diego County District Attorney Bonnie Dumanis.


  • In San Diego, more than 40 alleged victims have been identified, with losses totaling approximately $100,000, Dumanis said. Victims were also located in Santa Barbara, Ventura and Los Angeles counties, as well as Clark County in Nevada, said Deputy District Attorney Valerie Tanney.


  • Authorities said the Zepeda brothers identified properties in foreclosure and acquired title either by forging a quitclaim deed, which transfers the property into a trust, or convincing homeowners to transfer the property to them by promising the homeowner they would help avoid foreclosure.

  • Once they had acquired the title, the Zepedas would rent out the property, according to authorities. In order to forestall the foreclosure process and to extend the period over which they collected rent, the brothers also filed bankruptcy petitions, prosecutors said.

For more, see Brothers Charged In $1.5M Foreclosure Fraud Scheme (David And John Zepeda Each Face 104 Felony Counts).

Monday, September 13, 2010

Federal Court To Consider Consolidation Of Homeowner HAMP Suits Against BofA Alleging Illegal Jerk-Arounds As Similar Claims Continue To Proliferate

USA Today recently ran a story on the proliferation of lawsuits being brought by financially-strapped homeowners against loan servicers for jerking them around when seeking affordable modifications of their house payments, and points to a recent class action suit brought by Lake Stevens, Washington couple Anthony and April Soper, among others, as an example of these types of suits.

  • Whether the Lake Stevens, Wash., couple keep their home may hinge on the outcome of a legal strategy that aims to join struggling homeowners with similar experiences in the HAMP program in a class-action lawsuit against the nation's largest bank. On Sept. 30 in Nashville, a federal court hearing is scheduled to consider consolidating the Sopers' case with more than a dozen others against Bank of America.

  • Similar lawsuits, also seeking class-action status, are pending against other major servicers such as JPMorgan Chase and Wells Fargo. Taken together, the cases threaten to amplify a growing public frustration with mortgage servicers' treatment of HAMP borrowers and HAMP's modest results.


  • Most of the lawsuits allege that the three- or four-month trial payment plans are contracts, and that Bank of America and other servicers broke them by not giving permanent modifications to homeowners who made their trial payments on time and provided the necessary documentation.

  • Servicers have asked courts to dismiss some of the cases, saying the trial plans are not contracts. Bank of America, which says it plans to seek dismissal of the Soper case, argues in a court filing in a similar case that it must consider borrowers for a HAMP modification, but that it has discretion in granting permanent modifications.


  • "Borrowers have said we should be able to enforce the contract between Treasury and mortgage servicers, and many courts have rejected that. Our cases are the first filed that touch on a contract between servicers and borrowers," says Kevin Costello, a lawyer with Roddy Klein & Ryan in Boston, which represents homeowners in cases against Bank of America, JPMorgan Chase and Wells Fargo.

  • "This litigation is spreading all across the country. People have been relying on a promise all along, and then they get a denial. Then they find themselves in that much worse of a hole," he says.


  • Meanwhile, the number of homeowners claiming improper denials of HAMP modifications is climbing. One is Peter Salinas, 52, who struggled to pay his mortgage after the economy collapsed and his wife developed cancer. He appealed to his lender for help.

  • Salinas says he felt elated last year when he received a HAMP trial modification slashing $500 off his monthly payments. But later, he was told he made too much money to qualify for permanently reduced payments, he says. Wells Fargo threatened foreclosure if he didn't pay $9,000, the difference between his original mortgage and what he paid during the trial.

  • His servicer, Wells Fargo, declined to comment on his situation. Salinas is working with Gulfcoast Legal Services, a not-for-profit [Central Florida] civil legal aid office, that says it is preparing a lawsuit against the lender. "I was convinced I was doing everything right," says Salinas, a reporter for an automotive trade publication who lives near Bradenton, Fla. "I wasn't trying to walk away from this mortgage. It's just infuriating."

For the story, see Home mortgage modification snags spark lawsuits.

Homeowners' Lack Of Knowledge, Confusion About Complex Homestead Protection Laws Against Certain Creditors Creates Opening For Sleazy Debt Collectors

The New York Times reports:

  • [E]ven though homestead exemptions have been on the books since the late 1800s, many people do not know about them. Tax officials, consumer credit counselors and bankruptcy lawyers said homeowners often fail to claim rightful deductions on their property taxes and are unaware that a homestead, or a significant portion of its value, is often legally protected from creditors unless the house itself is collateral on a debt like a mortgage.


  • The degree to which homesteads are shielded from creditors [] varies by location and sometimes by age, marital status and number of children. Homesteads in Florida, for example, are almost entirely protected from seizure by unsecured creditors (those without a lien), which is why O.J. Simpson’s home there remained in his possession even after he had several judgments against him. Had he declared his homestead in New Jersey, Maryland or Pennsylvania, his creditors could have taken his house because those states have no homestead exemption.

  • In between these extremes are states like New York, where the homestead protection from creditors is $50,000. In California, the limit is $75,000 for those younger than 65 and $175,000 for seniors and the disabled. Other states, like Kansas and Iowa, cap homestead protections at a certain amount of acreage rather than a dollar amount.(1)


  • Complicating things further is that in some states, such as Kentucky and New Hampshire, the homestead protection from creditors is usually a default right, while in others, such as Idaho and Washington, a legal filing is required in some instances.


  • Unscrupulous credit collection agencies may add to the confusion by threatening to evict debtors from their houses when that’s not legally possible. “It appalls me how many people are scared to death that they are going to be thrown out on the street because they have never heard of the homestead exemption,” said Nina Parker, a consumer bankruptcy lawyer in Winchester, Mass. Whether it’s for the tax break or protection from creditors, she said, “Best practice is to register your homestead when you buy your house.”


  • It’s hard to communicate what people’s homestead rights are because the laws are so complicated and there are debt collectors out there spreading misinformation,” said Katherine Porter, a professor at the University of Iowa College of Law. “Unfortunately, a complex right can be a worthless right to the consumer.”

For more, see Home is where the exemption is (if link expires, TRY HERE).

(1) Likewise in Texas and Florida.

Ohio Appeals Court Boots Promissory Note-Lacking Lender As State AG, Six Non-Profits Jump Into (Apparently) High-Stakes Fray In Support Of Homeowner

A recent decision ruling by an Ohio Court of Appeals affirmed a lower court's ruling:

  • striking the affidavit of an employee of a loan servicer (identified as a manager of trial preparation and discovery for Ocwen Loan Servicing) acting as servicing agent of the purported lender (HSBC Bank, as Trustee for ..., etc., etc.) that brought a foreclosure action because of defects in the affidavit;

  • refusing to consider the Ocwen employee's restated affidavit, in the course of deciding objections to the magistrate's decision, because HSBC failed to indicate why it could not have properly submitted the evidence, with reasonable diligence, before the magistrate had rendered a decision in the matter; and

  • rendering summary judgment against HSBC, and dismissing the foreclosure action for lack of standing because HSBC failed to establish that it was (a) the real party in interest to bring the suit, and (b) the holder of the promissory note secured by the mortgage being foreclosed.

The stakes in this case, which by all appearances involved nothing more than your standard, run-of-the-mill "lack of standing" and "real party in interest" claims, were apparently somehow ratcheted up significantly along the way as it attracted enough interest from the Ohio Attorney General's office to cause it to jump into the fray and file a "friend of the court" brief supporting the homeowner's position.

Further, a second amicus brief, also supporting the homeowner's position, was filed on behalf of six Ohio non-profit legal and consumer advocates, who apparently also wanted to get in on the action.(1)(2)

Among the points the appeals court had problems with, and that sunk the lender in this case were:

  • In the original affidavit filed on behalf of HSBC, the Ocwen employee averred "[t]hat he had executed it in Palm Beach, Florida. However, the notation at the top of the first page of the affidavit and the jurat both state that the affidavit was sworn to and subscribed to in New Jersey, before a notary public." (see paragraph 11 of the ruling);

  • With respect to the restated affidavit, "The affidavit was identical to what was previously submitted, except that the first page indicated that the affidavit was being signed in Palm Beach County, Florida. The jurat is signed by a notary who appears to be from Florida, although the notary seals on the original and copy that were submitted are not very clear. HSBC did not offer any explanation for the mistake in the original affidavit." (see paragraph 15 of the ruling);

  • Regarding copies of a pair of purported, undated "allonges" submitted as loose papers to the court by the servicer accompanying a purported copy of the promissory note, there was no evidence that the allonges were ever affixed to the note as required under Ohio law; and further, the order in which the purported allonges were submitted did not support HSBC's claim that it was the holder of the promissory note.(3)

For the entire ruling, see HSBC Bank USA v. Thompson, 2010 Ohio 4158 (2nd App. Dist., Montgomery County, September 3, 2010).

(1) The Ohio non-profit heavyweights who chimed in with their support of the homeowner's position were:

(2) Not to be outdone, in addition to being represented by local counsel, the foreclosing lender also called in the Washington, D.C. office of some national, big-shot, white shoe law firm for additional artillery (apparently to no avail).

(3) In this regard, the appellate court stated (at pargraphs 67-70):

  • {¶ 67} In contrast to Watson, no evidence was presented in the case before us to indicate that the allonges were ever attached or affixed to the promissory note. Instead, the allonges have been presented as separate, loose sheets of paper, with no explanation as to how they may have been attached. Compare In re Weisband, (Bkrtcy. D. Ariz., 2010), 427 B.R. 13, 19 (concluding that GMAC was not a "holder" and did not have ability to enforce a note, where GMAC failed to demonstrate that an allonge endorsement to GMAC was affixed to a note. The bankruptcy court noted that the endorsement in question "is on a separate sheet of paper; there was no evidence that it was stapled or otherwise attached to the rest of the Note.")

  • {¶ 68} It is possible that the allonges in the case before us were stapled to the note at one time and were separated for photocopying. But unlike the alleged creditor in Watson, HSBC offered no evidence to that effect. Furthermore, assuming for the sake of argument that the allonges were properly "affixed," the order of the allonges does not permit HSBC to claim that it is the possessor of a note made payable to bearer or endorsed in blank.

  • {¶ 69} The first allonge is endorsed from Delta to "blank," and the second allonge is endorsed from Fidelity to Delta. If the endorsement in blank were intended to be effective, the endorsement from Fidelity to Delta should have preceded the endorsement from Delta to "blank," because the original promissory note is made payable to Fidelity, not to Delta. Delta would have had no power to endorse the note before receiving the note and an endorsement from Fidelity.

  • {¶ 70} HSBC contends that the order of the allonges is immaterial, while Thompson claims that the order is critical.

Servicing Handbook Issued By Treasury Department Sets Forth New Rules For HAMP-Participating Loan Servicers When Evaluating Loan Modifications

Lexology reports:

  • There is a new manual governing HAMP loan modification practices, and the changes, often subtle but important, are worth noting. The United States Department of Treasury created the Home Affordable Modification Program (“HAMP”) to assist homeowners in default (or at risk of default) on their mortgages.


  • Although participation in the program is voluntary, HAMP imposes a number of requirements on participating servicers, including notice and reporting requirements. Until now, such requirements could be found only in what some perceived to be confusing and contradictory “Supplemental Directive” letters available on the HAMP website for servicers,

  • The Treasury Department has now released a Servicing Handbook that combines the former Supplemental Directives while also amending or revising prior guidelines. [...] The new Servicer Handbook does not merely collect prior guidelines — it establishes entirely new rules, in some cases clarifying or superseding prior Supplemental Directives.

For more, including an overview of the major new guidelines or clarifications, see The Home Affordable Modification Program: new handbook, revised guidelines (subscription required; if no subscription, TRY HERE; or GO HERE, then click link for the story).

For a copy of the new Servicer Handbook, see Making Home Affordable Program: Handbook for Servicers of Non-GSE Mortgages (Version 1.0 - 77 pages).

Sunday, September 12, 2010

FHA Continues Doing Business With Home Loan Execs With Tainted Backgrounds???

The Washington Post reports:

  • A crackdown on reckless mortgage lenders by the Federal Housing Administration has failed to root out several executives with criminal records whose firms continue to do business with the agency in violation of federal law, according to government documents, court records and interviews.

For more, see Executives with criminal records slip through FHA crackdown, documents show.

Escrow Agent Cops Guilty Plea For Role In Mortgage Fraud, Straw Buyer Flipping Scam Allegedly Involving Hundreds Of Condo Units Throughout California

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

  • Donna Demello pleaded guilty in federal court in Oakland [] to conspiracy to commit wire and mail fraud for her role in a mortgage fraud scheme, United States Attorney Melinda Haag announced. At the time of the offense, Demello worked as an escrow officer at Stewart Title in Milpitas, Calif.

  • Demello, 44 of San Jose, Calif., [...] and five others, including James Delbert McConville, were charged with conspiracy to commit mail and wire fraud in violation of Title 18, United States Code, Section 1349. The Indictment alleges that McConville purchased hundreds of condominiums throughout California in the names of straw buyers, individuals who were promised $5,000 to $10,000 for the use of their names and credit. The loan applications are alleged to have contained false information about the employment, income, and assets of the straw buyers.

  • Demello admitted to participating in the fraudulent approval of approximately 80 loans for condominiums in Escondido, Calif., and San Marcos, Calif. The government has alleged in its filings that loans totaling more than $20 million were approved for the purchase of these condominiums in Southern California, and that more than $11 million of that was paid directly out of escrow to individuals and companies controlled by McConville.

For more, see Escrow Officer Admits Role In Mortgage Fraud.

For the indictment, see U.S. v. McConville, et al.

Ex-Real Estate Agent Cops Plea For Role In Mortgage Fraud Scam Where Builder Kicked Backed Cash To Buyers, Salespeople To Help Unload Unsold Inventory

In Charlotte, North Carolina, The Charlotte Observer reports:

  • A Mint Hill man has pleaded guilty in connection with a mortgage fraud scheme that involved kickbacks [by] a homebuilder, according to documents filed Wednesday in federal court in Charlotte. Mike Foley, a former real estate agent, pleaded guilty to one count of mortgage fraud conspiracy and one count of making false statements. He will be sentenced later.

  • The mortgage fraud scheme, according to court records, involved an unnamed builder who agreed to pay hidden kickbacks to buyers - and to promoters who would find buyers - in order to sell houses. [...] Foley was accused of serving as a real estate agent in the deals and facilitating the kickbacks. [...] Overall, the conspiracy involved about $5 million in kickbacks and about $42 million in fraudulent loans, court records say.

For the story, see Guilty plea entered in mortgage fraud case.