Disabled Vet Gets Boot With No Notice After Landlord Loses Rental Home To Foreclosure

In Stuart, Florida, WPTV-TV Channel 5 reports:

• A local veteran is desperate for help after being put out of his home. He says the home he was renting went into foreclosure and he was told it was okay for him to stay there until everything was worked out. But on Thursday he was handed an eviction notice and watched as movers moved all his belongings into the street.

• It's tears of frustration and desperation from 62-year-old Vietnam Veteran Ramsey Harris. "I cry like a baby and I'm a about to burst into tears right now," said Harris. He hides his face as he is overwhelmed with emotion not knowing where he will go or do next. "It's kind of tough... it's just not right," Harris said.

• Harris says he moved to Stuart from Maryland after he was told he could receive better medical care at the VA hospitals in South Florida. "They're going to fuse my back and hope that solves some of the pain and problems that I have," said Harris.

***

• Neighbors are still in disbelief. "I was surprised at sort of the brutality of it the throwing a person's possessions on the street and leaving him to his own devices," said one neighbor. [...] And many of his belongings are still out on the street. He says some of the items have been taken by people thinking it's just junk.

For the story, see Vietnam Veteran homeless after home he's renting goes into foreclosure.

Struggle Continues For Homeowners With Chinese Drywall Problems As Few Companies Step Forward To Accept Responsibility

In Plant City, Florida, The New York Times reports:

• Linda and Randall Hunter own their dream house in Plant City, Fla., with an oversize master bedroom, granite countertops in the kitchen and a screened-in pool. The problem is they cannot bear to live there. For the last several months, the Hunters have been camped out in the side yard in a trailer — uncomfortable mattresses and all — because faulty drywall left the house smelling awful. “Living in the trailer is no easy thing,” Ms. Hunter said. “But I count my blessings that I have someplace to go.”

***

• Complaints about the drywall, or wallboard, which was mostly made in China, first surfaced a few years ago, and hundreds of lawsuits have been filed in state and federal court to recover money to replace it. The federal Consumer Product Safety Commission has received 3,500 complaints about the drywall and says it believes thousands more have not reported the problem.

• But so far the relief has been negligible. Most insurance companies have yet to pay a dime. Only a handful of home builders have stepped forward to replace the tainted drywall. Help offered by the government — like encouraging lenders to suspend mortgage payments and reducing property taxes on damaged homes — has not addressed the core problem of replacing the drywall. And Chinese manufacturers have argued that United States courts do not have jurisdiction over them.

• “They are hiding behind the ocean,” said Arnold Levin, lead lawyer in a lawsuit against the manufacturers of Chinese drywall in federal court in New Orleans.

***

• The Hunters decided to buy the trailer — it cost $18,000 — after their insurance company told them it would not cover their home for vandalism or theft if they moved. They are now gutting their house with their own money and hope to eventually recoup their expenses in court. “The trailer is a life raft,” said Ms. Hunter, 57.

For more, see Limited Relief for Owners of Homes With Drywall Flaws.

Hundreds Fear Eviction From Now-Foreclosed Amarillo Trailer Park

In Amarillo, Texas, KFDA-TV Channel 10 reports:

• Change of ownership could be coming again to an area trailer park already plagued with confusion. It was a month ago [] that NewsChannel 10 was the first to tell you about massive foreclosure notices going out at an area trailer park.

• Those came after the land was foreclosed on and people living there weren't sure who to pay their bills to anymore. Well now the web site for CIII Asset Management Sales says Amarillo Estates is "available for sale." People living in the park say they're scared of being kicked off if a developer buys the land.

Source: Hundreds Facing Eviction.

Niece Gets 14-84 Months In $92K Home Equity Ripoff Of Now-Deceased, Dementia-Stricken Aunt; Scammer's Son Triggers Probe Leading To Mom's Imprisonment

In West Chester, Pennsylvania, Local Daily News reports:

• Mary Ellen Ashton has had a problem with housing. Over the years, she has defaulted on two mortgages – one in Chester County and another in Montgomery County – and ultimately stole more thousands of dollars from an aging and senile aunt to pay rent at a Chester Springs home.

• Her housing concerns, however, are settled now -- at least for 14 to 84 months. [...] Common Pleas Court Judge William Mahon sentenced Ashton, 57, formerly of Phoenixville, to that amount of time behind state prison bars for the scheme that defrauded her aunt, the late Margaret Voytowicz, of $92,000 and nearly cost the woman the home she had lived in for more than 50 years.

***

• According to court records and testimony at her trial in July, the case against Ashton began in 2006, when Ashton’s son, Michael Ashton, who lives in California, learned that his great aunt, Voytowicz, was facing eviction for failure to make any payments on the $92,000 mortgage she had taken out with Chase Manhattan Bank. Voytowicz had told him that Ashton convinced her to take out the mortgage, even though she did not need it or want it. Ashton needed it, Voytowicz said, “because her son was being injected with the AIDS virus.”

***

• Michael Ashton and attorneys hired by Voytowicz’s family were able to save her from eviction after settling the mortgage account with Chase Manhattan for $50,000 in 2008.

• At the same time, officials at the Chester County Department of Aging hired Exton psychologist Bruce Mapes to assess Voytowicz’s mental state at the time that the mortgage had been taken out. Mapes found that although Voytowicz lived alone and appeared able to fend for herself in some ways, she was suffering from early stage dementia. [...] Voytowicz died in November 2008 at the age of 84.

For more, see Woman gets jail for stealing from elderly aunt.

Bill To Protect Innocent Tenants' Credit History In Evictions Resulting From Landlords' Foreclosure Needs Schwarzenegger Sign-Off

In San Francisco, California, Beyond Chron reports:

• Tenants evicted through no fault of their own frequently have their credit history damaged for years. In California, where hundreds of thousands of tenants are being evicted by banks because their landlords went into foreclosure, these credit impacts are particularly harsh. Fortunately, a bill by state senator Ellen Corbett (D – San Leandro) would limit this collateral damage to innocent renters.

***

• Tenants Together has set up an online petition to urge Governor Schwarzenegger to sign SB 1149. Please sign the petition today. Tenants should not be blacklisted because of evictions arising from their landlords' failure to pay the mortgage.

For more, see Legislature Passes Bill to Protect Innocent Tenants From Having their Credit Ruined by Banks (Will Governor Sign or Veto?).

Another Home Sold Out From Under Owner, Despite Continued Payments To Bank On Loan Modification Agreement

In Cape Coral, Florida, WINK News reports:

• A woman's beloved home, sold out from under her by the bank. It's the third such case uncovered by the WINK NEWS Call for Action team. And not only did the woman lose her home, but the bank still collected payments four months after selling it!

For more, see Woman says Wells Fargo sold her dream home and didn't know it.

1st Time Home Buyer Faces Loss Of $8K Federal Tax Credit As Town Drags Its Feet On Sewer Line Hook-Up

In Middle Township, New Jersey, The Press of Atlantic City reports:

• Anthony Soto expected that owning his first home would be an exciting milestone. Instead, the last few months have been full of unexpected delays and he faces the potential loss of an $8,000 tax credit because his new home has yet to be hooked up to a sewer line that the township promised to complete in time for the credit.

***

• [I]n order to move in, Soto and his family must wait for their property to be hooked up to a not-yet-completed operating sewer line. Soto’s patience is wearing thin. The $8,000 first-time home buyer’s tax credit expires at the end of the month, and he doesn’t believe the township’s sewer project will be completed in time. “I’m going to end up losing (the tax credit) because this isn’t done yet,” Soto said. [...] The deadline to take advantage of the tax credit was moved to Sept. 30 but the project doesn’t look like it will be finished in time, according to [real estate agent Richard] Parker.

For more, see Family can't move into home, may lose tax credit due to Middle Township sewer delay.

Sale Leaseback Peddler Aquitted Of Charges Accusing Him Of Tricking Couple Facing Foreclosure Into Signing Over Deed To Home

In Farmington, Utah, the Standard Examiner reports:

• A judge rendered a not guilty verdict on two felony counts against a Morgan man accused of swindling a former West Point couple out of their home. Judge David M. Connors issued the not guilty verdicts Thursday in 2nd District Court following almost two days of testimony in a bench trial for Jeffery Q. Wangsgard, 57.

• The state Attorney General’s Office had charged Wangsgard in January of 2008 with two second-degree felonies: one count of communication fraud and one count of exploitation of a vulnerable adult.

• The charges accused Wangsgard of tricking Emery and June Mitton, when they were facing foreclosure in 2006, into signing documents that transferred their property deed over to the company where Wangsgard worked.

• Assistant Attorney General Charlene Barlow said she plans to go forward with remaining counts against Wangsgard. Those counts involve two other families who said they were tricked out of their homes by Wangsgard. Connors set Feb. 2 and Feb. 3 for one case and Feb. 9 and 10 for another case. Wangsgard is charged with second-degree felony communication fraud in both cases.

For more, see Not guilty verdict in swindling case.

National Effort Partnering State, Local Governments & Nonprofit Groups Target Upfront Fee Loan Modification Scams

Public News Service reports:

• The fight against loan modification scammers continues [...], and now homeowners have a new weapon. It's called the Loan Modification Scam Prevention Network, and it's part of a national effort partnering with state and local governments and nonprofit organizations. The goals are to identify who the scammers are and to warn and educate potential victims.

***

• If you feel that you have been scammed by a company that promises loan modifications and charges you a fee, you can visit www.preventloanscams.org to fill out a form to be logged into the national database. Information about what to watch out for and how to prevent being scammed is also available.

For more, see New Weapon in Fight Against Loan Modification Scammers.

Glendale Cops Begin Dipping Into $150K Grant Money As Battle Escalates Against Foreclosure Scams, Other Real Estate Rackets

In Glendale, California, the Glendale News Press reports:

• Glendale police detectives have begun using a $150,000 grant to investigate real estate fraud as more scam artists take advantage of homeowners looking to refinance their mortgages, officials said. The funding has been used to look into tips that may result in lengthy real estate fraud investigations, Lt. Susan Hayn said. Details about the cases were not disclosed because they are under investigation.

***

• Investigating real estate fraud can be time consuming.(1) Detectives must often work long hours to track suspects and information, Hayn said. The unit's large caseload was one critical component for the large grant amount, said county Deputy Dist. Atty. Dan Baker of the Real Estate Fraud Section. So far this year, Baker said his section is working on 50 cases with about seven prosecutors. The cases logged 134 defendants, which he said is common for real estate fraud.

• Because real estate fraud cases are complicated, he said prosecutors rely heavily on a police department's investigative skills and ability to organize evidence clearly. The number of real estate fraud cases throughout the county is overwhelming, Baker said.

For more, see Police fight real estate fraud (Grant money is helping to pay for hours of overtime investigating mortgage, foreclosure scams).

(1) Reportedly, one particular real estate fraud case was investigated for three years where a Glendale homeowner contacted police after his home was sold by scam artists without his knowledge. But an investigation into the home sale began to unravel a more complicated scheme. Detectives discovered that a pair of scam artists had represented themselves as real estate facilitators and recruited fraudulent mortgage brokers and notaries to submit fake loan applications and appraisals to lenders for six properties, police said. The pair was eventually convicted of the scheme and sentenced to more than 25 years in prison, the story states.

California Regulator To Step Up Education, Enforcement Efforts In Response To Alarming Escalation Of Short Sale Fraud

The Bakersfield Californian reports:

• The California Department of Real Estate says it has noticed an alarming escalation of short sale fraud and will step up education and enforcement efforts to combat it.

***

• "It's just starting to take shape," said Department of Real Estate spokesman Tom Pool. "I kind of equate it with the loan modification fraud, where we started out with just a few complaints and saw a swelling of it over time. "The fraud has shifted over to the short sales."

***

• A variety of deals have come up since then that cross legal or ethical lines, Pool said. That's why this week, California Real Estate Commissioner Jeff Davi sent letters to lenders warning them to be on guard.

• For one thing, a growing number of short sale negotiators are demanding upfront payments to work out an agreement with a lender on a borrower's behalf, then failing to do anything in return for that fee. Upfront payments are illegal without prior approval from the state, which mandates that money is held in escrow until after services are rendered and there's a full accounting of how the money was spent. Some short sale negotiators also are compelling buyers to pay their fee and failing to disclose that payment to lenders.

• A more costly form of fraud is short sale flipping. That's when a lender is told of a short sale purchase offer that is described as reflective of a property's fair market value, when in fact the offer is much too low. The lender accepts the offer, believing it's the most it can get, and after the deal closes the house is immediately resold for its true, higher value. The perpetrators of the fraud, who could be agents, brokers, appraisers or straw buyers, then pocket the difference between the two sale prices.

***

• The California Mortgage Bankers Association says it has definitely seen an increase in short sale fraud, and appreciates Davi's effort to call attention to the problem. "It affects everyone," said spokesman Dustin Hobbs. "It disrupts the market and takes business away from honest brokers and agents, because the majority of the perpetrators in these cases are unlicensed people who really shouldn't be operating in the first place."

For more, see Real Estate Department warns of rise in short sale fraud.

Renting From Financially Strapped Landlords A Concern In Commercial Leasing

Large companies renting commercial office space from financially strapped and underwater property owners are not immune to the problems that may arise when the landlord subsequently goes into foreclosure. Attorney Jeffrey Margolis writes in The Commercial Oberver on how commercial tenants attempt to protect their rights in foreclosure when entering into a lease with a landlord.

For the story, see Your Landlord Financially Challenged? How to Protect Tenants, Subtenants and Brokers.

Ohio AG Tags Three More Foreclosure Rescue Operators With Civil Suits Alleging Outfits Ran Illegal Upfront Fee Loan Modification & Related Rackets

From the Office of the Ohio Attorney General:

• Ohio Attorney General Richard Cordray has filed three new lawsuits against foreclosure rescue operations for bilking Ohioans out of tens of thousands of dollars. In the lawsuits, Cordray is seeking to shut down these outfits in Ohio with full restitution to homeowners.

***

• In Franklin County Common Pleas Court, Cordray filed suits against National Homeownership Assistance Foundation Ltd. (NHAF),(1) located in Worthington, and Stephens Investment & Financial Services dba Lifeline Financial Legal Home Solutions,(2) located in Fort Lauderdale, Fla. [...] Additionally, Cordray filed a suit in Stark County Common Pleas Court against 1st American Law Center Inc.(3) based in Oceanside, Cal.

For the Ohio AG press release, see Cordray Sues Three Foreclosure Rescue Businesses.

(1) Cordray accuses NHAF and its managing partner, Casimir S. Suwinski of Delaware, its general manager, Casimir S. Suwinski Jr. of New Albany, and its president, Arden Banks of Grove City, of charging homeowners on average $2,500 for foreclosure prevention services, such as securing loan modifications from mortgage servicers, and then not providing the service. view the lawsuit against NHAF and motion for attachment, see State of Ohio v. National Homeownership Assistance Foundation Ltd. et al.

(2) In the case against Lifeline, Cordray accuses the operation of claiming that it could “reduce your payments up to 10-50%,” or “lower your interest rate.” After charging thousands of dollars, the company failed to deliver the service. Lifeline also misled consumers by misrepresenting its legal expertise and the availability of legal services, including “retained legal experts.” To view the lawsuit against Lifeline, see State of Ohio v. Stephens Investment & Financial Services.

(3) In the filing, 1st American is accused of charging homeowners as much as $4,000 for foreclosure prevention assistance services such as negotiating loans and accepting payment for these services without delivering on its promises. To view the lawsuit against 1st American, see State of Ohio v. 1st American Law Center Inc.

Federal Judge Again Boots Baltimore "Reverse Redlining" Suit Against Alleged Ghetto Loans Peddler; Extends Invitation To City For A 3rd Try

In Baltimore, Maryland, The Baltimore Sun reports:

• A complaint filed by the city alleging that Wells Fargo Bank is liable for lost property tax revenue because some houses that went into default were in poor condition was denied by a U.S. District Court judge Tuesday.

• Judge J. Frederick Motz dismissed the city's complaint, the second against the bank, alleging that vacant houses fell into disrepair as a result of Wells Fargo's steering residents toward more expensive subprime loans, causing them to default. However, he permitted the city to file a third amended complaint by the end of next month.

• Motz's opinion said the city should pursue the third complaint "if it can prove property-specific injuries inflicted upon it at properties that would not have been vacant but for the allegedly improper loans made by Wells Fargo."(1)

For more, see Judge denies city complaint tying Wells Fargo to blight (City says dishonest loans caused unnecessary foreclosures, loss of tax revenue) (if link expires, TRY HERE).

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

(1) In the latest complaint, the city's attorneys reportedly focused on the alleged damages caused by more than 250 properties identified as blighted houses because of unnecessary foreclosures resulting from dishonest loans. Vermin, repeated visits by police and firefighters, and sometimes up to a half-dozen visits by housing code inspectors per year are recorded for most houses listed, the story states. The city's complaint reportedly also included declarations from 11 homeowners who live next to Wells Fargo foreclosure properties, contending that the vacant houses have led to additional problems, such as fires set by squatters, pit bulls running wild in yards and one case of a cockroach from a vacant house becoming lodged in a child's ear.

California Appeals Court Allows Homeowner's Class Action Suit Alleging Loan Modification Misconduct Against Attorney To Continue

In Southern California, Metropolitan News Enterprise reports:

• The Fourth District Court of Appeal has ruled that a former client can proceed with a suit alleging that Irvine attorney Sean Rutledge, who resigned from the State Bar in November amid accusations of loan modification misconduct, engaged in capping and charged illegal fees.

• Reasoning that Cu Phan established a probability of prevailing on his claims, Div. Three on Friday in an unpublished opinion affirmed an order denying Rutledge’s motion to strike Phan’s complaint as a strategic lawsuit against public participation.

• Phan filed a class action in September 2009 claiming that Rutledge and his firm, United Law Group Inc., violated state law by using telemarketers to make cold calls to individuals who were in default or faced foreclosure on home loans. Under state law, Phan contended, such conduct constitutes “capping,” a practice sometimes referred to in other contexts as “ambulance chasing.”

• He also alleged that Rutledge and the firm required clients to pay purportedly “non-refundable” advance fees. Rutledge, who was admitted to the State Bar in 2008, tendered his resignation with disciplinary charges pending,(1) and his firm filed for bankruptcy protection following Phan’s suit. He was ordered enrolled as an inactive member earlier that month under Business and Professions Code Sec. 6007 for an alleged pattern of client neglect involving failing to perform, failing to communicate, and/or failing to refund unearned fees in 14 matters.

For more, see C.A.: Suit Accusing Attorney of Capping Can Proceed.

For the court's ruling, see Phan v. Rutledge, No. G042983 (Cal. App. 4th District, Div. 3, September 10, 2010).

(1) Reportedly, State Bar Court Judge Richard Honn wrote that Rutledge “promised to help troubled homeowners—many of whom were in arrears or on the brink of foreclosure—modify their home loans and maintain financial stability,” but instead “took their money and time and offered little or nothing in return,” leaving them in a worse position than when they sought his help.

BofA Bagged Again On Wrongful Foreclosure Attempt; Says It's Sorry For Action Against Couple With Paid-Off Loan After Local Media Steps In

In Willcox, Arizona, KVOA-TV Channel 4 reports:

• A southern Arizona family is in fear of losing their house to what they call an unjust foreclosure, and they're now fighting back against one of the biggest banks in the country. The Willcox-area family says that house was paid for more than a year ago. The loan company went under, and Bank of America stepped in and said it wasn't paid.

***

• So the Newman's hired an attorney that has dealt with this kind of thing before, and then they contacted News 4. After working with the Newman's for two days, reporter Greg Dingrando got through to Bank of America who agreed to talk to them. A few hours later, they received the following statement:
  
  We sincerely apologize to the Newman's for this mistake. We have cancelled the foreclosure sale and hope to resolve this with the Newman's. Due to the pending litigation, we cannot comment further on this case.

• This came as a huge relief to the Newman's, but their attorney says it's not over. "You can't just walk away and let these large big box banks get away with that," said Carlin Phillips, the Newman's attorney. "We want to bring them to task before a jury in Arizona, and see what they have to say about this kind of conduct." The Newman's attorney says this type of thing happens all too often, and it's not just Bank of America. He says it happens everywhere.(1)

For the story, see Bank admits mistake on Willcox home foreclosure.

For the lawsuit, see Newman v. Bank of America, N.A. (go here for the attached Exhibits).

See also, Arizona Couple Sues Bank of America Alleging Unlawful Foreclosure.

Go here for links to other reported Bank of America foreclosure screw-ups.

(1) For earlier posts on a couple of high profile bank foreclosure screw-up cases, see

• Countrywide Financial: Nevada High Court OKs $1M+ Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure (for the court ruling, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008).),
• Wells Fargo: Long Island Judge Hammers Wells w/ $155K Tab For Oppressive, Heavy Handed, Egregious Conduct For Pre-Sale Lockout Of Homeowner In Foreclosure (for the court ruling, see Wells Fargo v. Tyson, 2010 NY Slip Op 20079 (Sup. Ct., Suffolk County, March 5, 2010)).

Arizona AG Scores $1.7M In USDOJ Cash To Escalate Efforts In Prosecuting Mortgage-Related Scams

From the Office of the Arizona Attorney General:

• Attorney General Terry Goddard [] announced he has been awarded a $1.7 million grant from the U.S. Office of Justice Programs to fight mortgage fraud in Arizona. The grant will be utilized to create a new six-person unit devoted exclusively to investigating and prosecuting mortgage-related crimes. This new unit will operate as part of the Criminal Division of the Attorney General’s Office and will be operational within the next 90 days.

• The Office of Justice Programs is a part of the U.S. Department of Justice. Goddard said the unit will enable his Office to go after more mortgage “rescue” businesses that exploit consumers struggling to keep their homes. Over the past three years, the AG’s Office has undertaken several dozen criminal and civil investigations of mortgage fraud, leading to 13 indictments and 19 lawsuits and settlements.(1)

For the Arizona AG press release, see Terry Goddard Wins $1.7 Million to Fight Mortgage Scams.

(1) Goddard also said that in the past two weeks he has stepped up efforts to prevent mortgage scams by sending more than 600 letters to loan modification companies and licensed mortgage brokers, advising them about the new state laws that went into effect this summer. The letters affirm his commitment to vigorously enforce the laws and take action over any violations of the Arizona Consumer Fraud Act.

Lender Sells Same Foreclosed House To Two Separate Buyers; Blames Escrow Agent For Closing One Deal In Error

In San Clemente, California, KABC-TV Channel 7 reports:

• The real estate market may be suffering, but that didn't stop one Orange County home from selling - twice. Doug Garhartt and his partner Brandon Lively bought the foreclosed townhouse in San Clemente last March. They moved in and started renovations but a week later, Garhartt said, the nightmare started.

• "I came home from work and found an eviction notice on my door that said you have three days to move out of your home," he said. Through a series of mistakes, the townhouse they had purchased at auction for $365,000 had also been sold to an investment group, which had paid more than $345,000 in cash.

• "We're kind of in no man's land," said Garhartt. "We bought a property but we don't have the property or the money, so we don't know what's going on at this point."

• Both of the buyers have the deed to the property. One West Bank handled both deals and Point Break Escrow closed them. [...] Garhartt alleged the bank was at fault. "They just simply forgot to cancel the foreclosure. It was a mistake. The right hand didn't know what the left hand was doing."

• According to court documents the bank said the escrow company closed the sale by mistake. The bank said it did not receive a required form before closing. The escrow company denied this and said it had property delivered all documents to the bank.

For the story, see House accidentally sold to two buyers in OC.

BofA Accused Of Wrongfully F'closing On Property It Sold Months Earlier In All-Cash Deal; Buyer Says Lender's Subsidiary Issued Title Insurance Policy

In Galveston, Texas, The Southeast Texas Record reports:

• Claiming its property in Galveston was wrongly foreclosed, American Furnishing Inc. has filed suit against Bank of America N.A. and BAC Home Loans Servicing LP. The plaintiff argues that Bank of America had no lien on the property in question and the defendants covertly planned the foreclosure, according to the original complaint filed Aug. 31 in Galveston County District Court.

• American Furnishing acquired the lot in the Pointe West Subdivision on Galveston's West End from Bank of America in April. During the transaction, Bank of America instructed Landsafe Title of Texas, Inc., its indirect subsidiary, to issue the plaintiff its owner's title policy.(1)

• The suit claims that BAC Home Loans Servicing prepared the property for foreclosure in favor of Bank of America during the conveying process. The defendants then had one of its employees, Steve Leva, conduct a foreclosure sale on or around June 1 without any notice to the plaintiff, court papers add. Leva is a co-defendant in the case.

• American Furnishing, which learned about the alleged events last month, insists it paid cash for the property and was free and clear of mortgage. "To make matters worse, defendant Bank of America in August 2010 trespassed upon the property, publicly advertising the property as its own property, and offering the property for a bargain sale," the suit says.

Source: Furniture company claims bank wrongly foreclosed.

Go here for links to other reported Bank of America foreclosure screw-ups.

(1) Owning or otherwise exercising dominion and control over the title insurance agent may be a slick way for lenders and loan servicers to unload recently foreclosed properties with potentially crappy titles resulting from irregularities in the foreclosure process (ie. lack of standing to foreclose, defective/fraudulent assignments, affidavits, etc.).

Florida Appeals Court Revisits Earlier Ruling Dealing With Two Lenders Simultaneously Foreclosing The Same Mortgage In Separate Legal Actions

A Florida appellate court recently re-addressed a one-paragraph ruling originally issued in June that dealt with two mortgage lenders who were foreclosing on the exact same mortgage in two seperate foreclosure actions. The re-issued ruling doesn't change the ultimate result in the case, but merely adds a brief statement of the procedural history in the case that led up to the defendant/homeowner filing an appeal. The re-issued ruling also drops language that was included in the earlier ruling about the trial judge abusing his discretion in allowing one the foreclosure actions to continue, despite the existence of the second action.

An excerpt from the reissued ruling:

• The unique circumstances surrounding this case involve a rather confusing situation caused by two banks—the appellee, HSBC, and American Home Mortgage Servicing, Inc. ("American Home Mortgage")—because they were simultaneously attempting to foreclose the same mortgage.

***

• Based on the unique circumstances set forth above, we conclude that the order under review must be reversed, and the cause remanded for further proceedings, with directions to allow the defendants to file an answer and affirmative defenses and to require HSBC to respond to the defendants' discovery requests. The record clearly demonstrates that the defendants' failure to file a timely answer and affirmative defenses in the action filed by HSBC was due to the confusion caused by American Home Mortgage and HSBC when they were simultaneously attempting to foreclose on the same exact mortgage in two different divisions of the circuit court.

For the re-issued ruling, see Ruscalleda v. HSBC Bank USA, Case No. 3D09-997 (Fla. 3rd DCA, September 15, 2010.).

DC AG's Lawsuit Against Foreclosure Rescue Operator Alleges More Of The Same Use Of Sale Leasebacks To Rip Off Property Owners' Home Equity

A recent lawsuit filed by the Office of the District of Columbia Attorney General against local foreclosure rescue operator Vincent Abell alleges more of the same conduct that has earned him notoriety for allegedly ripping off homeowners in foreclosure through use of sale leaseback arrangements purportedly designed to help them keep their homes.(1)(2)

In addition, in a separate charge, Abell is accused of taking a rental apartment building that he purchased, converting it into condominiums, and peddling the units to buyers that contained wiring, gas lines, and electrical outlets that were improperly installed, not to mention water damage to drywall and roof leaks.

For the DC AG's lawsuit, see District of Columbia v. Abell.

Thanks to DC attorney Mike McKeown of Neighborhood Legal Services Program for the assist in obtaining the lawsuit.

For earlier posts and links to other stories on Abell, see:

• F'closure Rescue Operator At It Again As DC AG Slams Sale Leaseback Peddler w/ Suit Seeking To Void Title Transfers Violating Consumer Protection Law,
• DC High Court Affirms Punitive Damages Award Slamming Sale Leaseback Peddlers For $3.3M In Equity Stripping Foreclosure Rescue Ripoff.

(1) For the DC AG's press release announcing the commencement of this action, see Attorney General’s Office Files Action Against Foreclosure Rescue Scam.

(2) DC authorities once brought a successful criminal prosecution years ago against a sale leaseback peddler who operated in much the same way as Abell does. See Browner v. Dist. of Columbia, 549 A.2d 1107 (D.C. 1988), in which the DC Court of Appeals affirmed a criminal conviction of a foreclosure rescue operator where the trial judge found "that the depiction of each of these transactions as a sale and lease back was a transparent sham which masked an unlawful loan."

Inasmuch as Abell has reportedly "done time in federal prison for property schemes" according to a 2004 CBS News' story (see Loan Scam Targets Seniors' Homes (Washington Con Artists Preyed On Elderly People In Financial Trouble) (go here to watch related CBS News' video)), continuing to bring civil suits against him (that lack a threat of jail time) will probably not do much to stop him.

If local law enforcement is unwilling to go after him criminally for making these usurious loans to homeowners that masquerade as sale leasebacks (the [relatively toothless] DC usury statute [§28-3301 et seq], provides for fines of not more than $1,000 or imprisonment for not more than 1 year, or both under §28-3313 for willful violations), it may take a sharp, aggressive FBI agent to "prove up" federal criminal charges against him (ie. mail and/or wire fraud, conspiracy, RICO) in an attempt to permanently put Abell and his associates out of business.

New Jersey Appeals Court Voids Mortgage Made In Violation Of Affordable Housing Deed Restriction, Leaving Lender With Unsecured Loan

The following facts have been adapted from a recent ruling of the Superior Court of New Jersey, Appellate Division (New Jersey's intermediate appeals court):

• On January 14, 2004, one, Hough, purchased a condominium unit for $68,142.86. To fund part of the purchase price, Hough borrowed $61,329 from Wells Fargo Home Mortgage, Inc., and secured the loan by executing a mortgage in favor of Wells Fargo.

• Because the condominium formed a part of the Township's affordable housing obligation under New Jersey state law, the deed contained a restriction limiting the use, sale and resale of this property, which, among other things, limited the amount of a loan that could be secured by the property.

• On March 25, 2005, Hough refinanced the condominium unit by borrowing $108,000 from Mortgage Lenders Network, USA, Inc.

• At the time of the mortgage transaction, the maximum allowable resale price of the condominium unit, pursuant to N.J.A.C. 5:80-26.6, was approximately $68,735.41. The loan, therefore, was limited to 95% of the units' maximum allowable resale price.

• Hough used the mortgage proceeds to satisfy the Wells Fargo purchase money mortgage then in the amount of $62,795.10, and for other personal unsecured debts, and real property tax liens. Hough netted $20,080.45 from the mortgage refinance.

• On February 1, 2007, Hough defaulted on the mortgage. The lender subsequently sued for foreclosure, afterwhich Hough challenged the legality of the mortgage, which the lower court overruled, and which gave rise to an appeal.

• In reversing the lower court, the New Jersey appeals court noted that the deed restriction limiting the use, sale and resale of the property placed lenders on constructive notice that the condominium unit was part of the Township's Mount Laurel affordable housing obligation subject to the applicable state regulations.

• Because the amount of the refinanced loan exceeded the maximum amount allowable under the Township's affordable housing obligation, the court found the mortgage to be void, but left the amount of debt itself, now unsecured, to remain in tact, and noted that lender may file a separate action seeking to collect upon the unsecured underlying debt.

For the ruling, see U.S. Bank, N.A. v. Hough, Docket No. A-5623-08T3 (N.J. Super. App Div. September 14, 2010) (when link expires, TRY HERE).

Bankruptcy Trustees' Foot-Dragging In Closing Out Cases Leads To Screwing Over For Debtor-Homeowners Involving Homestead Exemption Claims

A Federal Appeals Court in San Francisco, California recently issued a ruling in a bankruptcy case that resulted in a serious screwing over for a pair of homeowners occurring after the passage of a significant amont of time subsequent to receiving discharges in their cases. (Note that the issue in this case was of significant enough importance that it caught the attention of the National Association of Consumer Bankruptcy Attorneys, which, as a "friend of the court," filed an amicus brief with the court in support of the position of the homeowners involved).

The issue involved was summarized by the appeals court as follows:

• These consolidated appeals present the question of how to construe the homestead exemption in bankruptcy. In both cases, the debtors filed for Chapter 7 bankruptcy at a time when the value of the equity in their homes was less than the amount they were eligible to claim under the state or federal homestead exemption.

• There was no value in the homestead properties that could be claimed by the bankruptcy estate, and the debtors therefore anticipated that they would be able to retain ownership of their homes, subject to the terms of their mortgages, after the bankruptcy closed. The value of the homes subsequently increased so that the debtors had equity in excess of the homestead exemptions.

• Our question is whether the bankruptcy Trustees may force a sale of the homestead properties in order to recover the excess equity, or whether instead the debtors should be allowed to retain any postpetition increase in the fair market value of their homes.

The facts involving the first homeowner, an Arizona resident, follow:

• On August 8, 2003, one, Gebhart, filed for Chapter 7 bankruptcy protection. As part of his bankruptcy petition, he claimed an exemption in the amount of $89,703 for the house he owned in Phoenix.

• According to the petition, the market value of the property at the time of filing was $210,000, and it was encumbered by mortgages in the amount of $120,297. The $89,703 figure represents the difference between the value of the homestead and the mortgages with which it was encumbered.

• Gebhart claimed the exemption pursuant to Ariz. Rev. Stat. § 33-1101(A), which at the time of the bankruptcy filing provided that an Arizona resident may hold as a homestead exempt from attachment, execution and forced sale, not exceeding $100,000 in value.

• On December 12, 2003 (four months after filing the bankruptcy petition), Gebhart received his discharge under 11 U.S.C. § 727. However, the case itself was left open.

• Gephardt continued to reside in his house and even refinanced his mortgage with a lender who apparently believed Gebhart owned the property free and clear of any claims by the bankruptcy estate, when, in fact, the bankruptcy case was not closed.

• On November 10, 2006 (almost three years after receiving his discharge), the Trustee asked the bankruptcy court to approve the appointment of a real estate broker to sell the home for the benefit of the estate. (The Trustee believed that the value of the house had increased substantially since the time of the bankruptcy filing, and that if it were sold, the estate would recover a great deal of money, even after paying off the mortgage and the expenses of the sale and paying Gebhart the value he had claimed for his homestead exemption).

The facts involving the second homeowner, a Washington State couple, follow:

• On June 30, 2004, Steven and Julie Chappell filed for Chapter 7 bankruptcy.

• They owned a home in Camano Island, WA, in which their equity at the time of bankruptcy—$21,511—was less than the $36,900 they were allowed to claim under the federal homestead exemption in bankruptcy.

• On October 21, 2004 (about 4 months after the filing of their bankruptcy petition), the Chappells received their discharge. However, the case itself was left open.

• On July 7, 2006, (over 20 months after receiving their discharge), the holder of the Chappells' mortgage moved for relief from the stay in order to foreclose on the homestead because the Chappells had fallen into default.

• The Trustee responded that he believed the fair market value of the homestead had increased substantially since the bankruptcy filing, and asked permission to attempt to sell the property and keep the excess recovered for the benefit of the estate.

The Federal appeals court concluded that, because the cases remained open and were never closed by the bankruptcy Trustee, it was appropriate for the Trustee to seek a sale of each debtor's homestead (despite the significant passage of time from when they received their discharges) and pocket the post-filing appreciation for the benefit of the unsecured creditors.(1)

See In re Gebhart, Nos. 07-16769, 07-35704 (9th Cir. September 14, 2010) for the entire ruling, and the court's analysis of the applicable law.

(1) The following excerpt from the opinion sets forth the concerns that any homeowner filing bankruptcy and claiming the applicable homestead exemption shorld have when a bankrupcy Trustee drags his/her feet when closing out a case (bold text is my emphasis, not in the original text):

• The debtors argue that the result we reach today will lead to uncertainty about the status of exempt property and abuses by trustees. The facts of the Gebhart bankruptcy suggest that some of these concerns are legitimate.

• Gebhart remained in his home for five years after filing for bankruptcy, paying his mortgage and believing that his bankruptcy was finished when he received his discharge.

• Gebhart may have been mistaken in this belief, but his misapprehension was shared by his mortgage lender, which refinanced his home, apparently unaware of any claims on the property by the Trustee. A Chapter 7 debtor will not be certain about the status of a homestead property until the case is closed (something that may not happen for several years after bankruptcy filing) or the trustee abandons the property.

• Gebhart argues that, even if the homestead is the property of the bankruptcy estate, the Trustee in his case intentionally left the case open longer than necessary and should be estopped from proceeding with the sale of the property.

• We do not decide whether estoppel might be available as a remedy in a bankruptcy proceeding, see Cannon v. Hawaii Corp. (In re Hawaii Corp.), 796 F.2d 1139, 1144 n.3 (9th Cir. 1986), because, even if it were, Gebhart has not met the requirement for estoppel to apply. rogue

Federal Criminal Prosecution Of Major Maryland Sale Leaseback Foreclosure Rescue Scam Concludes With Sentencing Of Final Defendant To 38 Months

From the Office of the U.S. Attorney (Greenbelt, Maryland):

• U.S. District Judge Roger W. Titus sentenced Rolando Alonzo Cousins, a/k/a “Junior,” age 32, of Bowie, Maryland, [] to 38 months in prison, followed by five years of supervised release, for conspiracy to commit mail fraud and wire fraud in connection with a massive mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, but left them homeless and with no equity. Judge Titus also ordered that Cousins pay restitution of $471,702.25. With Cousins’ sentencing all 11 defendants in the Metropolitan Money Store case have now been convicted and sentenced.

For the U.S. Attorney press release, see Senior Loan Officer With Metropolitan Money Store Sentenced To Over 3 Years In Prison In Mortgage Fraud Scheme (Eleventh and Final Defendant Sentenced in the Metropolitan Money Store Case).

(1) According to Cousins’ plea agreement, he was the senior loan officer with the Metropolitan Money Store, in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. Cousins also owned and operated Prosper Investments LLC. In 2005, Joy Jackson and Jennifer McCall incorporated Metropolitan Money Store. Also at that time, Jackson, Jennifer McCall, Jackson’s husband, Kurt Fordham, and McCall’s husband, Clifford McCall and others incorporated Fordham & Fordham Investment Group, Ltd. (F&F) and Burroughs & Smythe Financial Services, Inc. (B&S), based in Lanham and Greenbelt, Maryland, to assist Metropolitan Money Store in its foreclosure consulting and credit servicing business.

Cousins admitted that from September 2004 through June 2007, he, Jackson, McCall and others, operating through several companies, including the Metropolitan Money Store, fraudulently promised to help homeowners avoid foreclosure, keep their homes and repair their damaged credit, by directing the homeowners to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a one year period, during which time the defendants would help the homeowners obtain more favorable mortgages, improve their credit rating and eventually return title to their homes to them. Cousins, Jackson, McCall and others told the homeowners that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit.

Lender Threatens To Grab Five Torahs In F'closure Action Against Synagogue; "Oh, Too Bad!" Says Bank Pres When Told It Was Holiest Time Of Jewish Year

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

• When Jews at Congregation Chabad-Lubavitch west of Boynton Beach gather Friday for the start of Yom Kippur, the holiest of Jewish holidays, they will be under a cloud of uncertainty.

• A bank is seeking to grab the Chabad's property and assets to pay off a delinquent loan. Among those assets are the congregation's five Torahs. Threatening to seize the Torahs is "a desecration," said Howard Dubosar, a Chabad attorney. "This is a bank playing hardball." David Seleski, president of Stonegate Bank, said the bank isn't trying to attack the Chabad through its religion. "We just want to get paid," Seleski said.

***

• Stonegate is seeking to proceed with a foreclosure of the Chabad property, despite the synagogue's Chapter 11 bankruptcy filing in June. Normally, Chapter 11 puts a halt to all litigation. But earlier this month Stonegate filed a motion with the U.S. Bankruptcy Court to allow its foreclosure lawsuit to go ahead anyway, arguing that the Chabad's bankruptcy filing was done in bad faith and was simply a bid "to stall for more time." The motion was filed on Sept. 10, which was Rosh Hashana, the Jewish New Year.

• Phil Landau, the Chabad's bankruptcy lawyer, said it was "disrespectful" for the filing to be made on this day. "It could have been filed a few days before or a few days after," Landau said. Dubosar went even further, saying that the filing was "calculated to harm the psyche of this religious institution. This is the holiest time of the year. It's like foreclosing on a church on Christmas Eve."

• Stonegate's Seleski said the Rosh Hashana filing date was not deliberate. But he was not bothered by charges that the filing was inappropriate. "Oh, too bad," Seleski said. "I don't think it's appropriate that they're not paying their loan back. I'm not aware of any holiday. My job is to collect as much money as I can for our shareholders."

For more, see Bank sues Boynton synagogue over delinquent loan; threat to seize Torahs spurs outrage.

Lender's Improper Calculation Of Interest Sinks Foreclosure Action, Leaves It Holding A Criminally Usurious Mortgage Loan Subject To Cancellation

A recent court ruling by a Florida appeals court shows how a private mortgage lender, by engaging in certain practices, can find itself unwittingly holding the bag on what a court finds to be a criminally usurious loan that is unenforceable and subject to cancellation. A summary of the facts, adapted from the court's opinion, follow:

• One, Velletri, obtained a loan with a face amount of $250,000 from Providence Mortgage Corporation, which was a mortgage servicing company acting on behalf of Dixon, a private lender. The loan proceeds were to be used to purchase and renovate a commercial property in St. Petersburg.

• The loan was an "interest only" loan, and the loan documents indicated that Velletri would make twenty-three "interest only" payments of $3150 followed by a final balloon payment of $253,150. The stated interest rate of the loan was 15 percent.

• According to the closing documents, Providence withheld $12,500 from the loan proceeds as an "origination fee." It also withheld $513.70 as "interest."

• Further, to ensure that the proposed renovations were actually performed, Providence also withheld an additional $65,000 at closing as "construction loan funds," and it placed those funds into an escrow account from which Velletri could apply for reimbursement as the renovations progressed.

• However, despite the withholding of sums totaling $78,013.70 from the loan proceeds at closing, the $3150 "interest only" payment was calculated based on a 15 percent interest rate on the full $250,000 face amount of the loan.

• Providence assigned the note and mortgage to Dixon at closing.

• Ultimately, Velletri defaulted on the loan and Dixon filed his foreclosure action against the property.

• Velletri defended against the foreclosure action by raising the defense of usury. Velletri contended that the loan was criminally usurious from its inception and that therefore the note and mortgage were unenforceable.

• Dixon argued that the loan was not usurious because he had not received the funds withheld at closing and because he had no usurious intent.

• The Florida appeals court ultimately determined that, as a result of the lender charging interest on the entire face amount of the loan, without any abatement to reflect the withheld loan proceeds, the recalculated interest pushed the actual rate charged to over 25%, which under Florida law, constitutes criminally usurious interest, the remedy for which is cancellation of the debt itself and a return of any loan repayments made by the borrower.(1)

Grissim H. Walker, Jr., of Consumer Law Center, P.A., Bradenton, represented the borrower.

See Velletri v. Dixon, Case No. 2D08-6251 (Fla. App. 2nd Dist. September 10, 2010) for the ruling, along with the actual number-crunching involved in the determination that the interest charged on this loan exceeded the maximum amount (25%) allowed on this type of loan under Florida law.(2)

(1) The court's identification of the applicable Florida law in this case follow (bold text is my emphasis, not in the original text; my [alteration] added; cited statutes are found in Chapter 687, Florida Statutes:

• Sections 687.03, 687.04, and 687.071 provide statutory causes of action which allow a borrower to seek affirmative relief against a lender who has made a usurious loan.

• Civil usury involves loans of $500,000 or less with an interest rate greater than 18 percent and less than 25 percent. See § 687.03(1).

• Criminal usury involves any loan amount with an interest rate greater than 25 percent. See § 687.071(2).

• The penalties for civil usury include forfeiture of double the interest actually charged and collected. See § 687.04. The civil penalty for criminal usury is significantly greater: forfeiture of the right to collect the debt at all. See § 687.071(7).

• Whether a transaction is either civilly or criminally usurious is determined at the inception of the loan. See Home Credit Co. v. Brown, 148 So. 2d 257, 259 (Fla. 1962); Oregrund Ltd. P'ship v. Sheive, 873 So. 2d 451, 458-59 (Fla. 5th DCA 2004).

• If a borrower is required to pay a bonus or other consideration at the inception of the loan as an inducement to the lender to make the loan, such an inducement may be considered interest and can render an otherwise proper loan usurious. See Cooper v. Rothman, 57 So. 985, 988 (Fla. 1912); Jersey Palm-Gross, Inc. v. Paper, 639 So. 2d 664, 667 (Fla. 4th DCA 1994), aff'd, 658 So. 2d 531 (Fla. 1995).

• Similarly, if a lender retains a substantial portion of the loan proceeds without allowing a corresponding abatement of interest on the amount retained, that retention effectively increases the interest charged on the amounts actually advanced to the borrower, which can render an otherwise proper loan usurious. See Mindlin v. Davis, 74 So. 2d 789, 793 (Fla. 1954).

• Section 687.03(3) sets forth the methodology to be used to determine whether a loan is usurious when some of the loan proceeds have been retained by the lender at closing. The Florida Supreme Court applied this statutory methodology in St. Petersburg Bank & Trust Co. v. Hamm, 414 So. 2d 1071 (Fla. 1982), and specifically rejected any alternative means of calculating the effective interest rate of a loan.

***

• [L]oan proceeds retained by the lender are considered additional interest, see Brown v. Home Credit Co., 137 So. 2d 887, 892 (Fla. 2d DCA 1962), and do not reduce the "stated amount of the loan" identified in section 687.03(3), see Hamm, 414 So. 2d at 1073.

***

• Having determined that the note was criminally usurious at its inception, we must next consider what remedy is proper. Generally, a debt that is criminally usurious at its inception is not enforceable. See § 687.071(7) ("No extension of credit made in violation of any of the provisions of this section shall be an enforceable debt in the courts of this state."); Brown, 137 So. 2d at 892 ("[I]f the interest charged exceeds twenty-five percent per annum the lender shall forfeit the entire indebtedness, both principal and interest.").

• However, Velletri claims she is entitled to more than that. She contends that she should be entitled to both cancellation of the note under section 687.071(7) and an award of double the interest paid under section 687.04—essentially a combination of the remedies for both civil and criminal usury. But such a remedy would be improper.

• When a debt is criminally usurious, the remedy is cancellation of the debt itself and a return of any amounts paid. There is no authority for cumulating the penalties for both civil and criminal usury, and, in fact, the authority is to the contrary. See Rosenbloom v. Hart, 95 So. 2d 18, 19-20 (Fla. 1957) (noting that sections 687.04 and 687.071 recognize and define different degrees of usury and provide distinct and separate penalties which are not cumulative); Brown, 137 So. 2d at 893 (same); Gordon v. W. Fla. Enters. of Pensacola, Inc., 177 So. 2d 859, 862 (Fla. 1st DCA 1965) (same); Coral Gables First Nat'l Bank v. Constructors of Fla., Inc., 119 So. 2d 741, 748-49 (Fla. 3d DCA 1960) (same).

• Contrary to Velletri's assertions, no court has held that the remedies provided in sections 687.04 and 687.071(7) are cumulative of each other. Therefore, we reject Velletri's suggestion that she is entitled to both cancellation of the debt and payment of double the interest she paid. Instead, on remand, the trial court should enter a judgment in favor of Velletri on the foreclosure action and award her a judgment in the amount the evidence establishes that she actually paid Dixon.

(2) The private lender in this case found itself holding an uncollectible, unenforceable loan, despite the fact that the stated rate of interest on the promissory note itself was otherwise within the maximun limits, as a result of a judicial recharacterization of the withheld loan proceeds as additional interest. Similarly, a foreclosure rescue operator (or anyone else, for that matter) can find itself in violation of the Florida usury statute as a result of a judicial recharacterization when peddling a sale leaseback arrangement that is combined with a repurchase right/option if such a transaction is ultimately recharacterized by a court as a secured loan/equitable mortgage, and where the "profit' on the deal (which would be recharacterized as "interest") violates the above-referenced Florida law. See, for example, Oregrund Ltd. P'ship v. Sheive, 873 So. 2d 451, 458-59 (Fla. 5th DCA 2004), which involved a usury claim in the context of a sale-buyback deal in a civil case. See also Equitable Mortgage & Usury In Sale Buyback Deals In Florida. (Note that, to the extent the sale leaseback transaction falls within the purview of Florida’s Foreclosure Rescue Fraud Prevention Act, F.S. 501.1377(6) thereof creates a rebuttable presumption that the deal is a loan transaction and the deed conveyance from the homeowner to the purchaser (ie. the foreclosure rescue operator, straw buyer, etc.) is an equitable mortgage under F.S. 697.01.)

Loan Modification Scammer Wastes No Time With Guilty Plea As Indictment Remains Pending Against Two Others

From the Office of the Nevada Attorney General:

• Doninador Palalay a.k.a. Dominador Palalay has pled guilty to Theft-Obtaining Money in Excess of $2500 by Material Misrepresentation, a category B felony, for his role in operating a foreclosure rescue scam in Las Vegas during 2008 and 2009 under the business name of PDM Financial Group, Inc.

***

• On August 30, 2010, Palalay, along with co-defendants Marie Tejada Medina and Benjamin Aquino Moraleda III, were indicted by a Grand Jury for their roles in operating a foreclosure rescue scheme.(1) The Indictment alleges that Palalay and his co-defendants operated a document preparation and loan modification business that charged one percent of the victims’ loan balance(s), or between $2,600.00 to $3,700.00, for loan modification and document preparation services. They also misled customers by falsely claiming their services would prevent foreclosures on their homes and/or they would obtain loan modifications. The State alleges that the services were not performed.

• The Indictment further alleges that Palalay, Medina and Moraleda defrauded consumers by having them sign false Deeds of Trust that gave the Defendants liens on the victims’ homes based on false promissory notes that deceptively claimed loans had been made on the properties. In fact, the loans had not been made. The Indictment alleges this was done to cloud the title to the home and prevent the legitimate lenders from foreclosing on the victims’ properties.

For the Nevada AG press release, see Guilty Plea Announced In Foreclosure Rescue Scam.

(1) Reportedly, the Indictment remains pending against Medina and Moraleda for their alleged roles in the foreclosure rescue scheme; Moraleda is currently a fugitive from justice. Inasmuch as it took Palalay less than two weeks from the time of his arrest to plea guilty, one can safely proclaim him the clear winner of the "race to the prosecutor's office." Expect that he will now “belly up” and tell what he knows about his "ex-colleagues" in order to snag the best deal when sentenced. See United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) for one Federal judge's observation, made in the context of drug conspiracy cases, involving the so-called "race to the courthouse/prosecutor's office" but, in my view, is equally suited to other types of major, multi-defendant felony cases:

• In practical terms, drug conspiracy cases have become a race to the courthouse. When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed.

(A similar approach may be worth some consideration in going after and bringing down the "phony-document-manufacturing" foreclosure mills.)

Couple Dodges The Boot After Buying Home On A Land Contract, Then Discovering Undisclosed Title Flaw After Making Significant Property Improvements

In Racine, Wisconsin, The Journal Times reports:

• A family that was threatened with eviction after investing thousands to improve a home will apparently be allowed to stay. Racine County Sheriff Robert Carlson said there are no plans to evict Noelia and Joaquin Raygoza from the home at 1404 Buchanan St. The eviction had been scheduled for Thursday.

***

• As reported in The Journal Times, the Raygozas signed papers in January to buy the house on a land contract and spent thousands to renovate a building that neighbors had watched deteriorate over the years. Although everyone agreed the family had fulfilled all of its obligations, a mix-up in a previous foreclosure threatened to void their ownership and force the Sheriff's Department to evict them.

• Last month Carlson postponed the eviction proceedings to allow the Raygozas, the various financial institutions and the sellers to work out another solution.

Source: Threat of eviction lifted after mix-up.

For earlier post on this story, see Another Novice Homebuyer Gets Screwed Over In Land Contract Deal; Sinks $15K Into Property Rehab, Now Faces The Boot Over Undisclosed Title Claim.