Saturday, October 2, 2010

Forced Placed Insurance Drives Central Florida Homeowner Into F'closure; Loan Servicer Backpeddles On Initial Demands After Inquiries From Local Media

In Port Richey, Florida, WFTS-TV Channel 28 reports:

  • A Port Richey homeowner nearly lost his house not once but twice to foreclosure. Mark Poulsen said it had nothing to do with his payment history, but rather a new insurance policy.


  • About the same time when Mark lost his job, he says, CITI bank attached a $5,000 wind policy to his home. "My normal payment was $749 a month and the next statement shows $1,886 a month,” he said. Poulsen fell behind, and within months the bank served the family with foreclosure papers. “It was devastating I could not sleep at night.”

  • Mark's story then took a cruel twist. He says CITI worked out a deal with him. He paid them $3500 they were suppose to bring his account current and drop the foreclosure. Months later, this homeowner claims CITI called and backed out of that deal. "It was a nightmare, a total nightmare.”

  • After listening to Mark's story, [ABC Action News consumer advocate] Jackie Callaway emailed CITI bank's corporate office and asked them to review the account. A spokesperson responded in an email saying, "If the property owner does not maintain this and other required forms of insurance ... we will obtain lender-placed gap insurance on the homeowner's behalf. Failure to reimburse us for coverage can result in delinquencies on the account.”

  • Weeks later, CITI bank put another offer in writing. They excused Marks' delinquent fees and made his account current. He now has his own affordable wind policy on the house that meets CITI’s requirements.

For the story, see A man nearly loses his house in a mortgage insurance mess.

Deed Service Ripoff Operation Uses Mail Solicitations Simulating Government Collection Notices To Clip Homeowners Out Of Unecessary Fees

In Colorado Springs, Colorado, KKTV-TV Channel 11 reports:

  • A company is targeting homeowners, asking for $87 to send you a copy of your property deed. The company uses a mailing that looks a lot like a bill from a government agency, but don't be fooled.

For the story, see No Need to Pay More for Deed (go here for the video news report).

Four Pinched On Grand Theft, Forgery Charges; Used Stolen I.Ds To Obtain Homes, Mtgs: Cops; Victims Discover Scam When Stiffed Banks Sought Repayment

From the Office of the San Bernardino, California District Attorney:

  • On Monday, September 13, 2010, Ray Gross, 46, of Victorville, was arrested at his residence by San Bernardino County Sheriff’s deputies for real estate fraud charges. Gross was arrested for numerous felony counts including grand theft, forgery, and filing forged documents with the County Recorder’s Office. The San Bernardino County District Attorney’s Real Estate Fraud Unit conducted the investigation.

  • Within the last few weeks, other co-conspirators were arrested on similar charges. Those arrested were: Freddie Gross, 52, of Fontana, Lyall Alexander, 42, of Victorville, and Barbara Kimberling, 46, of Riverside.

  • In 2007, the suspects conspired to obtain real estate loans by fraudulently using the identity of three victims. The loans encumbered properties located in Victorville, Riverside, and Ridgecrest. The victims’ signatures were forged on Grant Deeds and Deeds of Trust. The fraudulent loans totaled over $600,000.

  • The victims had no knowledge of these loans until months later when they were contacted by lending institutions for lack of payment. The suspects have been booked into the San Bernardino County Sheriff’s jail facilities. Bail for Gross is set at $1,700,000.

Source: Victorville Man Arrested on Real Estate Fraud Charges.

Well-Known Monopoly Icon Gets Boot From Expensive Park Place/Boardwalk Hotel Digs; Forced To Shack Up In Modest Baltic Avenue Abode

In AnyCity, USA, reports:

  • Echoing the difficult economic times being faced by so many people, a well-known Monopoly player recently had two valuable properties foreclosed-- including five hotels on Park Place and Boardwalk. The bank gave him just two weeks to vacate the expensive properties -- forcing the owner to move into a much thriftier small green house on Baltic Avenue.

For more, see Park Place and Boardwalk Properties Facing Foreclosure.

Friday, October 1, 2010

Los Angeles Feds: Section 1031 Exchange Accomodator Illegally Dipped Into Investor Escrow Accounts, Pocketing $23M

In Los Angeles, California, the Los Angeles Times reports:

  • This week's indictment of Los Angeles real estate mogul Ezri Namvar on criminal fraud charges was welcome news to local investors who say the Iranian immigrant preyed on their shared ethnic ties and bilked them out of hundreds of millions of dollars.

  • Namvar has agreed to surrender to federal authorities Monday to face charges that he stole $23 million from clients of his company, Namco Financial Exchange Corp., which safeguarded proceeds from commercial real estate transactions, said Thom Mrozek, a spokesman for the U.S. attorney's office in Los Angeles. A federal grand jury indicted Namvar on Tuesday.

  • The indictment alleged that Namvar misappropriated the money in 2008, using it to pay investors and creditors from a real estate investment company he ran, instead of holding it in escrow as promised. The charges carry a combined maximum sentence of 100 years in prison. Also charged in the indictment was Hamid Tabatabai, who served as controller and vice president of Namco Financial.


  • Allegations in the indictment related only to Namco Financial, which helped investors avoid taxes by holding their commercial real estate profits in escrow until they could be reinvested.(1) Namvar promised to safeguard the money but instead dipped into it throughout 2008 to help run his struggling businesses, the indictment alleged.(2)

For more, see Investors cheer indictment of L.A. real estate mogul (A federal grand jury accuses Ezri Namvar of misappropriating $23 million held in escrow by one of his companies. 'I am happy because he deserves it,' said one man who lost $700,000).

For the U.S. Attorney press release, see Prominent L.A. Businessman Indicted On Fraud Charges That Allege He Bilked Five Victims Out $23 Million (Ezri Namvar Allegedly Stole Money Given to His Company for Safekeeping).

Go here for other posts on Section 1031 exchange escrow ripoffs.

(1) This outfit acted as a Qualified Intermediary (Exchange Accommodator) in Internal Revenue Code Section 1031 Exchanges, a legal maneuver that enables real estate investors reinvest proceeds from sales of profitable real estate investments into new real estate deals while indefinitely deferring the payment of income taxes on the profits.

(2) If it wasn't bad enough that the investors lost all this loot, the U.S. tax laws state that if the escrowed cash isn't reinvested in new real estate within certain time parameters, the investors will have to immediately pay their income tax liability. Thus, they now face a big tax bill on the un-reinvested profits from the sales, and no longer have those profits from which to pay the IRS bill (See Alleged 1031 Exchange Scam Leaves Real Estate Investors With Big Tax Bill & No Money To Pay It With).

However, the victims may be entitled to offset their taxable investment profits by taking an itemized deduction on their income tax returns for some, if not all, of their losses. See IRS Revenue Ruling 2009-9 for tax information that may provide some guidance:

  • (1) A loss from criminal fraud or embezzlement in a transaction entered into for profit is a theft loss, not a capital loss, under §165.
    (2) A theft loss in a transaction entered into for profit is deductible under §165(c)(2), not §165(c)(3), as an itemized deduction that is not subject to the personal loss limits in §165(h), or the limits on itemized deductions in §§67 and 68.
    (3) A theft loss in a transaction entered into for profit is deductible in the year the loss is discovered, provided that the loss is not covered by a claim for reimbursement or recovery with respect to which there is a reasonable prospect of recovery.
    (Editor's Note: If you are one of the investors in the reported story, how the hell do you determine if "there is a reasonable prospect of recovery" when the criminal prosecution has only just started and you don't know how much, if any, of the loot the Feds will recover - and how much will ultimately end up in your pocket???)

Metropolitan Money Store Foreclosure Rescue Civil Litgation Continues Kicking Around

The class action plaintiffs/homeowners who were victims of the Metropolitan Money Store sale leaseback, foreclosure rescue scam were hit with something of an unfavorable ruling in a U.S. Bankruptcy Court in Maryland recently in a matter involving the Chapter 7 bankruptcy proceeding of Sussex Title, LLC, a title and closing agent involved in many of the deals resulting in the draining of any equity the financially strapped plaintiffs had in their homes.

The court overruled an objection by the class action homeowners to an application by Special Counsel for the Chapter 7 Trustee seeking an allowance of $178,868.48 for the period January 4, 2008, through March 31, 2010. The homeowners unsuccessfully claimed that the amount of the attorney fees being charged by the attorney for the Chapter 7 trustee was excessive. As a result, less money is available for the homeowners to recover by way of damages resulting from the screwing over that they took.

For the ruling, see In Re Sussex Title, LLC, Case No. 07-22878PM (Bankr. D. Md., September 22, 2010).

CT Probate Judge Dodges Major Trouble, Gets Hand-Slap In Suspected Land Grab Case Involving Now-Deceased, Dementia-Stricken 92-Year Old's $1.5M+ Farm

In Southington, Connecticut, The New Britain Herald reports:

  • Local Probate Judge Bryan Meccariello has been publicly censured by the Council of Probate Judicial Conduct for his conduct in the Josephine Smoron estate issue. The council found that Meccariello “engaged in judicial misconduct” and “failed to perform the duties of his office and his conduct was prejudicial to the impartial and effective administration of justice.”


  • The council opened a hearing in June after receiving a complaint from Samuel Manzo. Josephine Smoron, his longtime employer and friend, had willed the 100-acre farm to him but, instead. the land went to three churches, two in New Britain and one in Southington. [...] The report said the council found “clear and convincing evidence” that Smoron had willed her estate to Manzo, whom she had known since 1985.


  • This is not the first time Meccariello has faced the Council on Probate Judicial Conduct. In 2007, the council found that Meccariello “probably violated judicial ethics rules” but that his actions did not rise to the level of judicial misconduct.

For more, see Conduct council censures probate judge.

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

Fannie Agrees To Rescind Foreclosure For Virginia Family After Recent "Post" Article; Says Chase Botched Loan Modification Application Process

In Prince William County, Virginia, The Washington Post reports:

  • Chase -- the bank that foreclosed on the home of a Prince William County couple caring for their gravely ill child -- has reversed the foreclosure and offered to modify the family's mortgage, the bank said Friday.


  • Chase, which was administering the loan for mortgage finance giant Fannie Mae, mishandled the application for assistance under the federal mortgage relief program, a spokeswoman for Fannie Mae said Friday.

  • Early this month, just days before the house was to be sold in foreclosure, Chase told the Waleses that they had been approved for a modification under the federal Making Home Affordable Program. But the promised documents never arrived, and on Sept. 8, the house was sold back to Fannie Mae.

  • In fact, the family might not have qualified under the program's income limits. But under Fannie Mae protocols, Chase should have offered modification options before weighing more drastic options, such as a short sale and foreclosure.

  • After the family's plight was described in an article Friday in The Washington Post, Chase and Fannie Mae began investigating and concluded that the case had been botched. "Fannie is frustrated when we learn of individual cases where servicers do not properly process modification applications, and families . . . pay the price," Fannie Mae spokeswoman Amy Bonitatibus said. "In this instance, the situation was not handled properly," Bonitatibus said.

For the story, see Bank reverses foreclosure for Va. family with very ill child.

Company Execs Quick To Shift Blame, Invoke "Flawed Business Model" Defense To Explain Collapse Of Alleged Loan Modification Ripoff Racket

In St. Louis, Missouri, a recent column in the St. Louis Post Dispatch describes the aftermath left by the now-defunct Home Safe Financial Assistance. The company's principals attempt to give reasons for their firm's problems in the following excerpt:

  • Derek Doherty, Home Safe's president and owner, and Elijah Norton, the company's former chief executive, said their company really did help customers save money and stay in their homes.

  • The men boasted that they successfully modified the mortgages of 50, maybe 70 customers. The problem, however, is the company had between 300 and 400 paying clients. At least 200 of them paid for Home Safe for work it didn't perform.

  • Norton, who now lives in Kansas City, blames the company's collapse on a flawed business model. He said too much of what consumers paid ended up with so-called affiliate marketers hired by Home Safe to drum up business.

  • One of the biggest, St. Peters-based Capital Debt Management, is owned by John Jacob Ehlinger. He previously owned CarSafe, a St. Charles company that sold extended auto-service contracts.

  • Doherty, the Home Safe owner, said Capital Debt Management lied to customers about how mortgage-modification process worked, improperly promised specific reductions and instructed consumers to stop making house payments. "When we heard this was going on, we issued them a formal warning," Doherty said in an e-mail. "They seemed to clean up but their production dropped drastically."

  • Ehlinger said that his company did nothing wrong, and that Doherty is passing the buck. "If he had such a problem in the ways the contracts were sold, he should have cancelled them," Ehlinger said. "He shouldn't have taken their money."

For the story, see Customers of mortgage-modification firm often got nothing for their money.

Thursday, September 30, 2010

Paying "All-Cash" In A Recent Home Purchase Not Enough To Avoid BofA Foreclosure; Ft. Lauderdale Man Left "Hanging In The Wind ... Scared To Death!"

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:

  • When Jason Grodensky bought his modest Fort Lauderdale home in December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.(1)

  • Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a government-backed lender. "I feel like I'm hanging in the wind and I'm scared to death," said Grodensky. "How did some attorney put through a foreclosure illegally?"

  • Bank of America has acknowledged the error and will correct it at its own expense, said [the presumably now-beleaguered] spokeswoman Jumana Bauwens. Grodensky's story and other tales of foreclosure mistakes started popping up recently across South Florida. [...] It wasn't until last week, when Grodensky brought his problem to the attention of the Sun Sentinel, that it began to be resolved.(2)(3)

For more, see Lauderdale man's home sold out from under him in foreclosure mistake.

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

(1) Reportedly, the foreclosure mill law firm Florida Default Law Group, currently the subject of a Florida Attorney general probe for alleged foreclosure sloppiness that might border on fraud, handled the foreclosure for Bank of America.

(2) For a recent similar incident in Arizona, see BofA Bagged Again On Wrongful Foreclosure Attempt; Says It's Sorry For Action Against Couple With Paid-Off Loan After Local Media Steps In (for a copy of the resulting federal lawsuit, see Newman v. Bank of America, N.A. and go here for the attached Exhibits).

(3) For earlier posts on a couple of high profile foreclosure screw-up cases involving other banks and resulting in significant sums in court-awarded financial damages, see:

Loan Modification Operator Denies Taking Upfront Fees; Says Money Taken Was For "Attorney Fees"

In Kansas City, Missouri, The Kansas City Star reports on Livonia, Michigan's Expert Financial Services, a loan modification outfit, led by its chief - Rick White, that has been accused of ripping off some local homeowners out of thousands in upfront fees. The following excerpt describes his responses to allegations when contacted by the media:

  • White didn’t return my call to his office or answer an e-mail I sent him. But a former employee who said she was owed back pay gave me his cell phone number, and we talked for a while the other day. He refused to discuss Diane’s situation or discuss his business practices in general, other than to say that upfront fees he charges are for “attorney’s fees” and not for the mortgage modification process.


  • Well, you might be interested to know that the Michigan attorney general’s office has received at least 10 complaints about the same company, which has been in business for less than a year.(1) Those complaints are “under review,” an official said. Meanwhile, the Better Business Bureau gives Expert Financial Services an “F” rating. On the Internet, you’ll find scads of bad reviews from former customers.

For the story, see Foreclosure rescue schemes a costly trap for homeowners.

(1) Inasmuch as the Michigan Attorney General's office has shown no reluctance in bringing criminal charges against alleged loan modification scams, it may simply be a matter of time before it gets around to slamming this outfit. See:

WV High Court Disbars Attorney For $90K Ripoff Of Client Cash; Follows Suit After Lawyer Received Similar Boot From Maryland, Virginia, D.C Bars

In Charleston, West Virginia, The West Virginia Record reports:

  • The state Supreme Court has followed suit with Maryland's high court to disbar an attorney for misappropriating over $90,000 in client funds. The Court on Sept. 16 voted to annul the license of Cumberland, Md. attorney Nathan H. Wasser. The decision came eight days after the Court heard arguments why they should impose a lesser punishment than the Maryland Court of Appeals for Wasser's misconduct.

  • The Court of Appeals on Feb. 3, 2009, ordered Wasser's license annulled. The annulment came three months after his office manager, Sherry Yates, resigned, and filed a complaint with Maryland's Attorney Grievance Commission that Wasser was using client funds for personal use.(1)


  • Despite reciprocal annulments in the District of Columbia and Virginia, where he was admitted to the Bar in 1969, and 1980, respectively, Wasser hoped the West Virginia Supreme Court would show him some mercy. [...] However, the Court found his argument unpersuasive. In an unsigned, unanimous opinion the Court said Wasser's repeated conversion of funds over a three-year period is grounds enough to disbar him.(2)

For the story, see WVSCA revokes Md. attorney's license.

For the court's ruling, see Lawyers Disciplinary Board v. Wasser.

(1) Reportedly, in the Maryland case, Wasser acknowledged his misconduct, expressed remorse for it, and forked over a check for $183,633.99 - the balance in his escrow account - to the Commission which was later forwarded to The Client Protection Fund of the Bar of Maryland.

(2) The West Virginia State Bar's Lawyers Fund for Client Protection was created to help reimburse clients for money they may have lost because of misappropriation or embezzle­ment by their attorneys.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

Now-Disbarred Title Lawyer Cops Plea To Ripping Off $2.7M In Real Estate Closing Proceeds Due To Existing Mortgage Holders, Clients From Trust Account

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

  • [A]ttorney James B. Hayes, 57, of Boca Raton, Florida, pled guilty [] to a criminal information charging him in two counts of making false statements on a HUD-1 Settlement Form, a matter within the jurisdiction of the U.S. Department of Housing and Urban Development (HUD) in violation of Title 18, United States Code, Section 1001.


  • According to the criminal information and statements made in court during [this week's] plea hearing, Hayes practiced law during 2007 through December 2009 at James B. Hayes P.A. in Boca Raton, Florida, handling real estate closings for clients and mortgage lenders.

  • According to statements made in court, during that time, Hayes misappropriated more than $2,706,346.91 that were to be used to payoff prior loans and clients funds from his law firms trust account. Instead of using the money as directed on several closings, Hayes prepared and sent false HUD-1 Real Estate Settlement Forms on closings, falsely reflecting the old loans had been paid off.

  • As part of the plea agreement announced in court today, Hayes agreed to make mandatory restitution of the $2,706,346.91 to the title insurance companies and to the client victims.(1)

  • Hayes was permanently disbarred by the Florida Supreme Court on August 24, 2010 and in his plea agreement agreed to never reapply or seek admission as an attorney in any state.

For the U.S. Attorney press release, see Title Lawyer Pleads Guilty To Stealing More Than $2,706,000 In Trust Funds.

(1) The Florida Bar's Clients' Security Fund, which was created to help reimburse clients for money they may have lost because of misappropriation or embezzle­ment by their attorneys, may also end up holding the bag in this ripoff as well.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

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

South Florida Feds: Recently Disbarred Lawyer Looted $2.4M In Client Cash From Trust Account

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:

  • A disbarred Fort Lauderdale attorney faces a mail fraud charge with federal authorities suspecting him of embezzling more than $2.4 million from clients.

  • Joseph Sindaco, 62, lost his law license last month after admitting during Florida Bar proceedings he misappropriated about $445,000 from two clients. He had practiced law in South Florida for three decades, specializing in estate and trust cases and real estate closings, court records show.

  • Federal court documents indicate that from April 2006 to December, he used clients' trust money for his own personal expenses. Prosecutors filed the mail fraud charge against him last week, accusing him of failing to distribute $318,000 to the family of a retired tool and die maker who died in 2008.(1)

For more, see Disbarred Fort Lauderdale attorney suspected of embezzling $2.4 million of clients' money (Joseph Sindaco has been charged with mail fraud).

(1) At the risk of solidifying my status as persona non grata among some of my "friends and colleagues" in the legal profession, I repeat the following (now-nauseating for some) reminder:

The victims in this story may be able to turn to the The Florida Bar's Clients' Security Fund (which was created to help reimburse clients for money they may have lost because of misappropriation or embezzle­ment by their attorneys) to recover some, if not all, of the swindled money.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

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

Federal Commission: Florida Played Starring Role In Mortgage Fraud Problem That Led To Untold Trillion$ In Crappy Loans

In Miami, Florida, The Miami Herald reports:

  • Mortgage fraud is responsible for untold trillions of dollars in bad loans currently defaulting across the country, and Florida has played a starring role in the tragedy, a federal commission said during a hearing in Miami on Tuesday.

  • A panel of national and local experts sat before the federal Financial Crisis Inquiry Commission during a hearing focused on liar's loans, predatory mortgage practices and shady home appraisals. They concluded that the financial impact of the fraud was more severe than most have estimated, and prosecuting those responsible will be nearly impossible.

For more, see Florida led nation in mortgage fraud, federal commission says (Experts discussed Florida's multibillion-dollar mortgage fraud problem during a hearing hosted by the federal Financial Crisis Inquiry Commission).

Technology Advances Continue In Effort To Help Lenders Identify Potential Short Sale Scams, Tracking Properties Even After Sale Is Completed

Housing Wire reports:

  • DataVerify announced today changes made to its fraud management platform, Data Risk Intelligent Verification Engine (DRIVE), that help mortgage lenders identify potential short sale and property fraud losses. The program has updated tools for predicting risks such as employment disclosure, local conditions for flipping and individual history in the housing industry.


  • [Property data provider] CoreLogic reported fraud occurs once in every 53 short sale transactions and has, since reporting this data, launched its own technology platform to monitor the estimated 400,000 short sales taking place in 2010. The program keeps track of properties even after the sale is completed.

For more, see DataVerify enhances short sale fraud detection based on customer track record.

In related stories, see:

Wednesday, September 29, 2010

"I Don't Know Why They Do Crappy Work!" Responds B'klyn Jurist When Asked About The 'Sludge' From Banks, Foreclosure Mills That Clogs Up His Courtroom

A recent story(1) in the New York Post reports on a recent interview it had with Kings County (Brooklyn) Supreme Court Justice Arthur M. Schack on the large number of foreclosure dismissals in his courtroom for a procedure that is often routinely granted:

  • "I read papers. I ask questions. I look at things and this is what I come up with. That's why some foreclosures are denied," according to Judge Schack. He raises questions about the assignment of ownership. He raises questions about attorneys' knowledge of the facts. He raises questions about potential attorney conflicts of interest.

  • All these irregularities raise Judge Schack's ire when asked why so many foreclosure applications get tossed. "I'm not the creator of this mess," he complained. The mess, he said, is in the recording and assignment of mortgage sales. Often people with physical control of a mortgage agreement come to his courtroom, he noted, but don't have clear title to the property.

  • "It's not my fault. I'm not the bank. Ask Chase Manhattan. Ask Deutsche Bank. Ask Bank of New York. Ask Wells Fargo. I don't know why they do crappy work," said the judge.

  • Asked about Judge Schack, a JPMorgan Chase spokesman said "We're not going to comment on that."

For more, see Mortgage mayhem (B'klyn judge tosses bad foreclosure filings).

(1) A point made in the following excerpt in the story, as originally reported, merits a bit of clarification:

  • Indeed, the Web site [The] Home Equity Theft Reporter awarded the judge its Restore Integrity Award for "his appropriately strict scrutiny of foreclosure cases before him."

In fact, the Restore Integrity Award is an award given by the grassroots good government and legal reform advocate known as POPULAR (Power Over Poverty Under Laws of America Restored). See Judges Dominate Group’s Year-end “Restore Integrity Award”. This blog simply noted the well-deserved honor in an earlier post.

Rubber-Stamping Judges Allow 11th Hour Bank Substitutions, Make Court Docs Confidential In Continuing Effort To Bulldoze Cases Thru F'closure Pipeline

In West Palm Beach, Florida, the Daily Business Review reports:

  • Garret Bender and his wife Gina started a court battle more than a year ago against SunTrust Mortgage, which wanted to foreclose on their Delray Beach house to recoup a $4 million mortgage. The Benders asked the 4th District Court of Appeal to intervene last week after they came across what many foreclosure defense attorneys call growing and serious problems in South Florida courts — plaintiff substitutions and the increasing use of confidentiality in foreclosures against a backdrop of the muddled world of securitized mortgages.


  • The Benders filed a petition to quash an order by Palm Beach Circuit Judge Meenu Sasser granting a motion by SunTrust to keep confidential the documents related to the transfer and sale of the Benders’ mortgage. In the petition, the couple also criticized the order that allowed SunTrust to name a new plaintiff to replace itself in the foreclosure action.(1)

  • The order granting confidentiality was decided without a hearing and failed to identify the grounds for making the court records confidential, Fort Lauderdale appellate attorney Laura Watson claims in the petition she filed on behalf of the Benders. Watson did not return a call seeking comment by deadline.

  • Sasser ordered the documents related to the purchase and servicing of the mortgage be made available to attorneys representing the Benders but otherwise remain confidential. SunTrust claimed in its motion for confidentiality that the documents contained “proprietary commercial information.”

  • Florida International University law professor Howard Wasserman said the ruling seems unusual since no hearing was held on the confidentiality motion and the justification for granting confidentiality isn’t detailed in the order. “Ideally, there would be an opportunity for the defense to respond, and you have to have good reason why the records should be confidential,” he said.

For (much) more, see 4th DCA to review sealing of documents in foreclosure case (if link is unavailable, TRY HERE - available online courtesy of Ice Legal).

(1) According to the story, even though rules require substitutions can’t be granted without a hearing, several South Florida judges have been granting the ex parte motions without a hearing, foreclosure defense attorney Carol Asbury said. Attorney Darin Lentner of the Foreclosure Fighters Law Center in Fort Lauderdale said he has been involved in at least 10 cases this year in which lenders switched the plaintiff’s name in the lawsuit, and said he hopes they will eventually be held responsible for their alleged wrongdoing, the story states. “We joke amongst ourselves that there are currently two set of rules — the rules that apply to every other case and the foreclosure case rules, which are being bent, manipulated and violated by lenders, lawyers and the judiciary.

Concerns Over Lenders' Use Of "Affidavit Slaves" In Foreclosure Actions Now Threaten To Jam Up Resales Of Bank-Owned REOs

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

  • The revelation [...] that tens of thousands of Ally Financial Inc.'s GMAC foreclosures may have flawed court documents not only has implications for some of the nation's largest mortgage companies, it could strangle the resales of bank-owned homes. Attorneys are warning that title insurance companies may reject foreclosed properties for fear of future challenges to the procedures used in repossessing those homes.

  • Already, one Boca Raton real estate attorney said she has seen title insurance refused on a foreclosed property where the case was handled by one of Florida's massive foreclosure law firms. The firm is one of four under investigation by the state attorney general for allegedly mishandling documents in a rush to move thousands of cases through the courts. The reason for the title insurance denial: defects in the foreclosure.

  • "I think that the underwriting community - all of the title companies - are going to be looking at sales after foreclosure very carefully in light of the GMAC freeze," Boca Raton attorney Marlyn Wiener said. "If the underlying affidavits signed by the bank representatives were false, then the whole foreclosure is suspect."


  • How title insurers will take on that kind of legal risk is an industrywide question, said Norwood Gay, chief legal officer of Attorneys' Title Fund Services LLC in Orlando. "This has got more arms and legs to it than you can count," Gay said. "I don't know that there is any definitive industry policy because, frankly, it's all too new and too inconclusive."

For more, see GMAC troubles threaten to halt foreclosure sales.

Miami-Area Foreclosure Defense Attorneys Concerned Over Court's Expressed Goal Of Bulldozing 52,000 Foreclosure Cases Off The Docket By June

In Miami, Florida, the Daily Business Review reports a story on the Miami-Dade Circuit Court's recently announced goal of bulldozing 52,000 foreclosure cases out of the judicial pipeline by June. Naturally, the foreclosure defense bar expresses concern:

  • [T]he creation of a foreclosure master calendar heard by senior judges whose sole task is to consider summary judgments and clear dockets causes attorneys for homeowners to fear the system is biased toward lenders.


  • [T]alk of quotas and case closure goals is enough to worry foreclosure defense attorneys like Christopher Black. Although none of his cases has gone to summary judgment in the new court on the third floor, Black, a Miami solo practitioner, said he’s uncomfortable with how the system has been created.

  • It appears on its face that the task is simply to move these foreclosure cases along as fast as possible. And the fastest way to move it along is a summary judgment, which is inherently against the interests of the homeowners,” he said.

  • Similar worries plague Rafael Recalde, another Miami solo practitioner. By his own account, he has been on the master calendar more than a dozen times. He said he often sees judges often ask how old a case is, and the older it is the more aggressively they push it. “In many cases, there will still be discovery pending or affirmative defenses,” he said.

  • Recalde said the entire docket-clearing strategy is based on a single premise -- borrowers who lose their homes don’t have the money for an appeal. He also questions the motivation of judges. “It’s almost like regular laws and rules of procedures don’t apply to bank attorneys.”

  • Boca Raton foreclosure defense attorney W. Jeff Barnes, who runs the blog, questioned a summary judgment order issued by Senior Judge Jeffrey Rosinek on Sept. 7 -- the same day Barnes received notice of the hearing.

  • This procedure flies in the face of recent Florida case law, which provides that any final order entered without notice is void and subject to being vacated. As such, the Miami-Dade Circuit Court has probably served to further clog its dockets with a deluge of motions likely be filed by those who never received notice from the master calendar of a summary judgment motion,” Barnes wrote last week.

  • Judge Jennifer Bailey, who supervises the foreclosure program, said not all criticism is valid. She noted borrowers’ attorneys sometimes use discovery and other maneuvers for no other reason than to delay cases while mortgages go unpaid. “They can’t just file discovery as a stalling tactic and expect that to delay summary judgment. If they pursue the discovery in a diligent way, then that’ll affect the court’s consideration of summary judgment. Every individual case gets evaluated on its merit,” she said.(1)(2)

For the story, see Miami Court Aims to Clear Out 52,000 Foreclosure Cases by June (Case closure goals at Miami-Dade Circuit Court worry defense attorneys).

(1) In the context of properly serving defaulting homeowners with notice of a foreclosure action, Judge Bailey was quoted as saying:

Before concluding that discovery requests are nothing more than stalling tactics, Judge Bailey may want to carefully consider whether her earlier observation on the consequences arising when homeowners are improperly notified about foreclosure actions is equally applicable when foreclosure actions are improperly prosecuted.

(2) It seems clear that, unless a trial judge is prepared to clearly articulate a finding that the discovery request in a particular case is a stalling tactic, or that the discovery requested is otherwise irrelevant to the pleadings, granting summary judgment while discovery is pending is improper. See, for example:

Payne v. Cudjoe Gardens Prop. Owners Ass'n, 837 So. 2d 458 (Fla. App. 3d DCA 2002) (try here for 'Lexis' version):

  • It is axiomatic that Summary Judgment may not be granted unless the moving party is able to show that no genuine issues of material fact exist. See Holl v. Talcott, 191 So. 2d 40, 43-44 (Fla. 1966); Kemper v. First Nat'l Bank of Dayton, Ohio, 277 So. 2d 804 (Fla. 3d DCA 1973).

  • Where discovery is not complete, the facts are not sufficiently developed to enable the trial court to determine whether genuine issues of material facts exist. See Singer v. Star, 510 So. 2d 637, 639 (Fla. 4th DCA 1987).

  • Thus, where discovery is still pending, the entry of Summary Judgment is premature. See Smith v. Smith, 734 So. 2d 1142, 1144 (Fla. 5th DCA 1999)("Parties to a lawsuit are entitled to discovery as provided in the Florida Rules of Civil Procedure including the taking of depositions, and it is reversible error to enter summary judgment when discovery is in progress and the deposition of a party is pending."); Henderson v. Reyes, 702 So. 2d 616, 616 (Fla. 3d DCA 1997)(reversing the entry of Summary Judgment where depositions had not been completed and a request for the production of documents was outstanding.); Collazo v. Hupert, 693 So. 2d 631, 631 (Fla. 3d DCA 1997) (holding that a trial court should not entertain a motion for summary judgment while discovery is still pending); Spradley v. Stick, 622 So. 2d 610, 613 (Fla. 1st DCA 1993); Singer v. Star, 510 So. 2d 637 (Fla. 4th DCA 1987).

Fleet Fin. & Mortg. v. Carey, 707 So. 2d 949 (Fla. App. 4th DCA 1998):

  • This court has held on many occasions that "a court should not enter summary judgment when the opposing party has not completed discovery." Lubarsky v. Sweden House Properties of Boca Raton, Inc., 673 So. 2d 975, 977 (Fla. 4th DCA 1996) (quoting Brandauer v. Publix Super Markets, Inc., 657 So. 2d 932, 933 (1995)). See also Sica v. Sam Caliendo Design, Inc., 623 So. 2d 859 (Fla. 4th DCA 1993); Moore v. Freeman, 396 So. 2d 276 (Fla. 3d DCA 1981) (trial court's granting of summary judgment was premature where the opposing party, through no fault of his own, had not completed discovery). Further, it is reversible error to grant summary judgment where depositions are still pending. See Sica.

Florida Court System Begins Banning Public From Observing Foreclosure Proceedings? "You Don't Argue With Someone Carrying A Gun," Says One Attorney

Buried in a recent story in The Tampa Tribune on the three-ring circus that is the foreclosure process in Florida is this excerpt regarding public access to the legal proceedings taking place when booting delinquent homeowners from their homes:

  • Another concern of defense attorneys: a closed-door policy for something that should be open to the public.

  • "You get off the elevator now in Jacksonville and the doors leading to the foreclosure hearings are locked" [foreclosure defense attorney April] Charney said. "A bailiff won't let you in until your scheduled hearing is to begin."

  • Randall Reder, a Tampa foreclosure defense attorney, said he has repeatedly seen homeowners and attorneys turned away from hearings. He said he now waits in the hallway until his case hearing because bailiffs won't let him in the hearing room to observe. "The laws are very clear that all judicial proceedings are open to the public," Reder said. "But my automatic reaction is, 'you don't argue with someone carrying a gun.'"


  • The courts say it's not a matter of access but of space. "The rooms are small and we have emotional issues here," [Hillsborough County court administrator Mike] Bridenback said. "We only have one bailiff, and there is a need for security."

For the story, see Area judges handling hundreds of foreclosures a day.

Volunteer Lawyers' Efforts Help Shine Light On Shoddy Mortage Servicing Practices In Foreclosure Actions

In Portland, Maine, The Portland Press Herald reports:

  • Two Maine lawyers who help homeowners fight foreclosures may have contributed to a decision this week by one of the nation's largest mortgage-servicing companies to stop foreclosing on homes in 23 states, including Maine.

  • Thomas Cox(1) of South Portland and Geoffrey Lewis of Fryeburg said Wednesday that the shoddy legal practices that led to the temporary halt appear to be common in an industry that is swamped by troubled loans. [...] Cox and Lewis volunteer with a legal defense group called Maine Attorneys Saving Homes. About 6,000 foreclosures a year have been filed recently in Maine, and the advocacy group estimates that only one in 10 homeowners is represented by a lawyer.

For more, see Maine lawyers help uncover mishandled foreclosures (Now they're trying to get a summary judgment in a GMAC case nullified to keep a Denmark woman in her home).

(1) For more on Thomas Cox, see Retired Maine Attorney Joins Fight Against Foreclosures; Volunteers Services With Local Legal Aid Program.

Tuesday, September 28, 2010

Ally/GMAC Begins Withdrawing Affidavits From Another "Robo-Signer"

The Washington Post reports:

  • Was Kristine Wilson another "robo-signer"? Attorneys for homeowners in Florida say Ally Financial's GMAC mortgage unit has begun to withdraw affidavits submitted in support of foreclosures that were signed by a second employee. Like Jeffrey Stephan--the document processor who admitted in sworn testimony that he signed 10,000 documents a month without reviewing them--Kristine Wilson signed as a "limited signing officer" for GMAC.

For more, see Ally's GMAC unit withdraws foreclosure affidavits signed by second employee.

F'closure Rocket Docket Alive & Well In Palm Beach County; Local Chief Tells Financially Strapped Homeowner Hit w/ Rubber-Stamped Ruling To Appeal

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

  • Last month, Palm Beach County Senior Judge Roger Colton opened his afternoon foreclosure session by telling homeowners that he'd heard all their stories before, and he would give them a maximum of five months before letting lenders take their homes.


  • In the first case, Judge Colton signed a final summary judgment giving Everhome Mortgage Co. the right to foreclose on a Lake Worth couple's home despite their attorney's objections that Everhome had failed to prove that it owns the note. Foreclosure defense lawyers cite the case as an egregious example of Florida's so-called "rocket docket," the process of expediting foreclosure cases through the courts by siding with lenders.


  • In the case before Judge Colton, attorney Loretta Bangor questioned the validity of affidavits submitted by Everhome's attorney, a lawyer with Shapiro & Fishman, one of three firms under investigation by the Florida attorney general for "unfair and deceptive actions" in foreclosure cases. Judge Colton, one of two retired judges hired to handle foreclosures under the new state program, did not ask to see the documents. Nor did he question Shapiro & Fishman about the validity of the documents.(1)


When Judge Colton's conduct was brought to Palm Beach County Chief Judge Peter Blanc's attention, Blanc reportedly stated:

  • "If Judge Colton was wrong, the case can be appealed, and it will come back."(2)

For the story, see Legislature did not approve $9.6 million for judges to listen only to lenders.

(1) See Jacksonville Trial Judge Bags Foreclosure Mill, Chase, WAMU For Fraud On The Court In Foreclosure Action; Dismisses Suit With Prejudice for more on the Shapiro & Fishman foreclosure mill.

(2) Chief Judge Blanc's "brilliant" suggestion, of course, necessarily assumes that the financially strapped homeowner can cough up the cash to cover the cost of both:

  • a supersedeas bond (to stall the foreclosure sale), and
  • appellate counsel (even if the homeowner has the cash to pay legal fees for an appeal, there's a good chance that his/her attorney in the trial court doesn't do appellate work, thereby forcing him/her to scramble to find another lawyer to file the appeal).

A better approach to the administration of justice in these types of cases, where the average foreclosure defendant isn't flush with extra cash, may be to simply get it right the first time. We'll all be better off (just think of all the "clouded titles" to foreclosed homes that can be avoided if the trial judges try to get it right the first time).

Ally/GMAC Told Freddie Of Dubious Documents Weeks Before Slamming Brakes On Its Own Foreclosures

Bloomberg News reports:

  • Ally Financial Inc.’s GMAC Mortgage unit told Freddie Mac that foreclosures by the auto and home lender might have been faulty weeks before halting its own evictions, according to two people briefed on the matter.

  • Ally informed Freddie Mac on Aug. 25 that affidavits for court proceedings might not be valid, according to a person with direct knowledge of the matter. By Sept. 1, Freddie Mac had notified its network of lawyers and stopped related foreclosures and evictions, said the person, who declined to be identified because the matter hasn’t been formally disclosed. GMAC told agents to halt evictions in 23 states on Sept. 17.

For more, see Ally Said to Tell Freddie Mac of Faulty Foreclosures Weeks Ago.

Texas, Iowa AGs Open Probe Into Ally/GMAC Foreclosure Practices

Bloomberg News reports:

  • Attorneys general in Texas and Iowa, following Florida, have started their own investigations into foreclosure practices at Ally Financial Inc.’s GMAC mortgage unit.

  • The integrity of the foreclosure process is of utmost importance and we are very concerned by the issues that have been raised regarding Ally Financial’s treatment of affidavits,” Iowa Assistant Attorney General Patrick Madigan said yesterday. Iowa leads an 11-state working group of attorneys general and bank examiners exploring ways to prevent foreclosures.

For more, see Texas, Iowa Attorneys General Probe Foreclosure Actions by Ally's GMAC.

(1) Texas is a non-judicial foreclosure state, and is not one of the 23 states originally included by Ally/GMAC in their list of states affected by their foreclosure "suspension/moratorium."

"Robo-Signers" Masquerading As Multiple Corporate-Hat-Wearing Vice Presidents Just "Affidavit Slaves" With Modest Incomes, Mountainous Workloads

A recent story in The Washington Post describes the multiple corporate-hat wearing vice presidents employed by foreclosing lenders, servicers, foreclosure mills, etc. around the country in this excerpt:

  • Many large mortgage lenders have come to rely on a relative handful of so-called robo-signers [...] to attest to the accuracy of thousands of home foreclosure documents across the country. These workers are not the Wall Street masterminds who created ever more complex mortgage-backed securities and fueled the subprime mortgage boom, but rather "affidavit slaves" with modest incomes and mountainous workloads.

  • Their actions are leading lawyers representing foreclosed homeowners to claim that lenders have no legal standing if the filings weren't reviewed and verified, and to argue that the cases should be thrown out.

For the story, see 'Robo-signer' played quiet role in huge number of foreclosures.

Foreclosure Mills Begin Filing Motions To Withdraw Previously Filed Court Documents Signed By Loan Servicers' "Affidavit Slaves"

Mother Jones reports:

  • Christopher Immel, an attorney for Ice Legal, a Florida foreclosure defense firm, said each and every foreclosure that relied on an affidavit signed by GMAC's [Jeffrey] Stephan is shrouded in doubt.(1) "People who lost their homes to evidence like that did have their homes taken wrongly," he says. Indeed, Immel tells Mother Jones that one major Florida foreclosure law firm, Florida Default Law Group, has already begun withdrawing affidavits signed by Stephan knowing that they're faulty and ripe for challenging.

  • Immel adds that the effects of GMAC's decision to revisit foreclosures involving tainted legal documents could ripple throughout the housing industry. For instance, in May, another Ice Legal attorney took the deposition of Chase's [Beth] Cottrell, whose firm is a subsidiary of JPMorgan Chase. In that deposition, Cottrell similarly conceded that she didn't have the "personal knowledge" required to sign the foreclosure documents that crossed her desk.(2)


  • [O]ne judge in central Florida told Mother Jones that, in the past week, she's seen attorneys representing several other big banks file what she called "mysterious" motions to proactively withdraw foreclosure affidavits. The firms say the affidavits "may not have been properly verified"—the same problem with the documents at the heart of GMAC's headaches.

  • Having never seen a spate of withdrawals like this before, the judge, Pasco County's Lynn Tepper, questioned whether other banks might be hoping to avoid the kind of public scrutiny now on GMAC by quietly clearing up conflicts with robo-signed documents. Tepper called the motions "unbelievable," and said she might seek to vacate foreclosures—instead of merely delaying them—where banks try to swap out bogus documents for new ones.

For the story, see A Crack In Wall Street's Foreclosure Pipeline?

(1) Reportedly, in a June deposition, Stephan said his outfit handled 6,000 to 8,000 of these documents each month. Yet under questioning, Stephan all but admitted, under oath, that he didn't really read those crucial documents or know what they precisely said [...].

(2) For more on Cottrell, see Financial Times: Staff says bank foreclosures went unchecked:

  • In one case signed off on by Ms Cottrell, two separate promissory notes were presented as originals, even though they contained different clauses and monthly payments. “They are clearly two different notes,” said Chris Immel, one of the lawyers. “That is not what I’d considered a technicality.”

Monday, September 27, 2010

Illinois AG Demands Meeting With Ally/GMAC Bigshots Over Massive Foreclosure Screwup

From the Office of the Illinois Attorney General:

  • Attorney General Lisa Madigan [] issued a letter to the mortgage lender Ally (formerly GMAC) demanding a meeting to address concerns that the company has violated the state’s Consumer Fraud Act in its pursuit of Illinois homeowners in foreclosure. Madigan’s letter responds to reports raising serious questions about the accuracy of documents the lender files in foreclosure lawsuits.

For more, see Attorney General Madigan Demands Meeting With Mortgage Lender At Center Of Foreclosure Controversy (GMAC Suspected of Submitting False Documents in Foreclosure Cases).

Go here for the Illinois AG's letter to Ally/GMAC.

California AG To Ally/GMAC: Immediately Prove State Laws Are Being Observed Or Stop The Foreclosures Until You Can!

In Los Angeles, California, the Los Angeles Times reports:

  • California ordered Ally Financial Inc. to prove it was complying with foreclosure laws in the state or stop seizing properties, a reaction to the lender's suspension of evictions in 23 other states because of botched foreclosure paperwork it filed with courts. The Detroit company, formerly known as GMAC, didn't suspend evictions in California because almost all foreclosures here by it and other lenders don't require a court order. Still, Atty. Gen Jerry Brown on Friday told Ally to halt foreclosures in the state unless it can prove it is observing state laws.(1)

For more, see California puts Ally Financial on notice over botched foreclosures (Atty. Gen. Jerry Brown orders the lender to halt foreclosure proceedings in the state unless it can prove it has followed state laws).

For the California AG press release, see Brown Directs Nation's Fourth Largest Home Lender to Suspend Foreclosures Until It Proves It Is Complying with the Law.

(1) Go here for the California AG's letter to Ally/GMAC:

  • "The Office ofthe Attorney General writes to demand that Ally Financial, Inc. demonstrate immediately that it conducts foreclosures in compliance with California Civil Code, section 2923.5 or, if it cannot, halt all foreclosures in California until it can."

Trio Of Congressional Dems Demand Answers From Fannie As To Why They Used Foreclosure Mills Accused Of Fabricating Court Docs

The Washington Post reports:

  • A trio of congressional Democrats is demanding to know why government-backed mortgage giant Fannie Mae has entrusted many of its foreclosure cases to Florida law firms that stand accused of fabricating or backdating numerous court documents.

  • These so-called "foreclosure mills," essentially law firms that specialize in representing lenders while churning out foreclosure suits quickly and efficiently, are under investigation by the Florida attorney general and are running into legal challenges in other parts of the country.

  • According to the letter from three House Democrats - Financial Services Committee Chairman Barney Frank of Massachusetts and Corrine Brown and Alan Grayson of Florida - several firms facing scrutiny represent Fannie Mae both in foreclosure suits and in the company's pre-filing mediation program, which is designed to help borrowers and lenders talk through possible alternatives to foreclosure.(1)

For more, see Lawmakers question Fannie Mae on use of 'foreclosure mills.'

(1) "In other words, Fannie Mae seems to specifically delegate its foreclosure avoidance obligations out to lawyers who specialize in kicking people out of their homes," the group reportedly wrote Friday in a letter to the company's chief executive. "The legal pressure to foreclose at all costs is leading to a situation where servicers are foreclosing on properties on which they do not even own the note," they reportedly added. "This practice is blessed by a legal system overwhelmed with foreclosure cases and unable to sort out murky legal details, and a set of law firms who mass produce filings to move foreclosures as quickly as possible."

Dubious Docs Begin Surfacing In Ally/GMAC's 27 Non-Foreclosure Moratorium States, Leaving Homeowners Across Country Scrambling To Challenge F'closures

The Washington Post reports:

  • Flawed foreclosure documents like those that led mortgage lender Ally Financial [the outfit formerly known as GMAC] to halt evictions in 23 states this week are showing up in parts of the country previously thought to be unaffected, including the Washington area, according to attorneys and consumer advocates.

  • Ally Financial has not called off evictions in the other 27 states or the District of Columbia, none of which require a court order to initiate a foreclosure. And yet in those places, distressed borrowers, on the brink of losing their homes, are finding flawed and forged documents in their files and scrambling to challenge foreclosure proceedings.


  • In Maryland, Virginia, the District and 25 other states in which lenders do not need a court order, homeowners challenging foreclosure proceedings face an uphill battle. In those places, a bank needs only to file papers with a local court official after giving a borrower sufficient notice. It's up to the homeowner to sue the lender to stop the process.


  • Generally speaking, delinquent borrowers have a better chance of keeping their homes in judicial foreclosure states because of the involvement of judges who appear to have wide discretion over how to handle shoddy or forged foreclosure papers. The system in the other states creates "enormous barriers for homeowners who want to assert legal claims and raise a defense," a report from the National Consumer Law Center concluded.(1)

For more, see Ally's mortgage documentation problems could extend beyond 23 states.

(1) See Foreclosing A Dream: State Laws Deprive Homeowners of Basic Protections (page 4).

Other Multiple Corporate Hat Wearing Vice Presidents Begin To Share The Spotlight

The Washington Post reports:

  • The nation's overburdened foreclosure system is riddled with faked documents, forged signatures and lenders who take shortcuts reviewing borrower's files, according to court documents and interviews with attorneys, housing advocates and company officials. The problems, which are so widespread that some judges approving the foreclosures ignore them, are coming to light after Ally Financial, the country's fourth-biggest mortgage lender, halted home evictions in 23 states this week.


  • Beth Ann Cottrell said in a sworn deposition in May(1) that she signed off on thousands of foreclosures a month for JPMorgan Chase even though she did not verify the accuracy of the information. In one instance in Palm Beach, Fla., Cottrell signed off on two documents that stated conflicting amounts of mortgage, the court testimony states. Cottrell claimed that both were signed by the borrower at closing. But the homeowner recognized that her signature had been forged, her attorney Christopher Immel said. The attorney added that such forgeries are common among the cases he's seen. JPMorgan Chase declined to comment.

  • In Georgia, an employee of a document processing company, Linda Green, for years claimed to be executives of Bank of America, Wells Fargo, U.S. Bank and dozens of other lenders while signing off on tens of thousands of foreclosure affidavits.

  • In many cases, her signature appeared to be forged by different employees.(2) Green worked for a foreclosure document company owned by Lender Processing Services. The company is being investigated by a U.S. attorney in Florida for allegedly using improper documentation to speed foreclosures. Lenders have already started to withdraw foreclosures that had Green's name on them.

For the story, see Under piles of paperwork, a foreclosure system in chaos.

(1) See May 17, 2010 deposition of Beth Ann Cottrell (available online courtesy of Mother Jones).

(2) Go here for examples of Linda Green's changing signature.

(3) Green has also been known to have signed at least one assignment of mortgage with an effective date of 9/9/9999 (see - document titled - "DOCX Assignment of Mortgage 3 Effective 09-09-9999").

Use Of Robo-Signers In Foreclosure Actions Not New For GMAC/Ally; Earlier Case Required Servicer To Cough Up $8K In Fees To Homeowner's Attorney

Bloomberg News reports:

  • Ally Financial Inc.’s GMAC Mortgage unit, which suspended evictions in 23 states last week after finding employees didn’t verify foreclosure documents, was sanctioned in 2006 for similar practices, court records show.

  • GMAC gave “false testimony” when it justified foreclosures by submitting sworn affidavits signed by a mortgage executive who later said in a deposition she didn’t actually review the loan documents or sign in the presence of a notary, according to a 2006 court order filed in Duval County, Florida.


  • The 2006 case stems from a GMAC Mortgage foreclosure that began in August 2004 on a home owned by Robert and Lillian Jackson. The filing included an affidavit signed by a GMAC officer laying out the amount owed on the loan.

  • Florida Circuit Court Judge Bernard Nachman sanctioned GMAC in May 2006, saying that the company “submitted false testimony to the court in the form of affidavits of indebtedness.” The company was ordered to submit an explanation and confirmation that the policies were changed, and told to pay defendants’ legal costs of $8,135.55.(1)


  • They’re acting like this is a new problem,” said O. Max Gardner III, a bankruptcy attorney at Gardner & Gardner PLLC in Shelby, North Carolina, who isn’t directly involved in either GMAC case. “It’s the exact same thing,” Gardner said. “This is not just a GMAC problem. This is an industry-wide problem.”

For more, see GMAC Drew 'False Testimony' Sanction Years Before Eviction Halt.

(1) I suspect that Florida foreclosure defense attorneys are getting their motions ready for attorneys fees requests when courts begin dismissing foreclosures based on these bogus documents. In Florida, where an agreement allows for an attorney fee award to one of the contracting parties, state statute mandates an award of prevailing party attorney's fees to the other party under the reciprocity provisions of section 57.105(7), Florida Statutes; Landry v. Countrywide Home Loans, Inc., 731 So. 2d 137 (Fla. 1st DCA 1999).

Not only might the lender and servicer be court-ordered to cough up fees to the homeowners' attorneys, it's possible that the foreclosure mill law firms representing the lenders/servicers (at least in Florida) may also be ordered to foot part of the tab as well by reason of section 57.105(1), Florida Statutes:

  • Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee, including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and the losing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:

    (a) Was not supported by the material facts necessary to establish the claim or defense; or
    (b) Would not be supported by the application of then-existing law to those material facts.

(For an old (July/August,2000) article in The Florida Bar Journal that may be of some value in providing guidance to lawyers in requesting court-ordered, prevailing party attorneys fees from losing defendants (ie. lenders, servicers, etc.), see Pleading Requirements for a Claim for Attorneys' Fees.)

GMAC's Use Of "Affidavit Slave" May Affect Hundreds Of F'closing Lenders Using Firm To Service Mortgages, Opening Door For Challenges Across Country

The Washington Post reports:

  • Some of the nation's largest mortgage companies used a single document processor who said he signed off on foreclosures without having read the paperwork - an admission that may open the door for homeowners across the country to challenge foreclosure proceedings.

  • The legal predicament compelled Ally Financial, the nation's fourth-largest home lender, to halt evictions of homeowners in 23 states this week. Now Ally officials say hundreds of other companies, including mortgage giants Fannie Mae and Freddie Mac, may also be affected because they use Ally to service their loans.

  • As head of Ally's foreclosure document processing team, 41-year-old Jeffrey Stephan was legally required to review cases to make sure the proceedings were justified and the information was accurate. He was also required to sign in the presence of a notary. In a sworn deposition, he testified that he did neither.


  • Stephan's job at Ally was arguably one of the least enviable in the mortgage business: formally signing off on foreclosure papers that his company would submit to the courts to get approval to evict delinquent homeowners and resell their homes.

  • From his office in suburban Philadelphia, Stephan oversaw a team of 13 employees that brought documents to him for his signature at a rapid clip. Stephan did not respond to messages left at his work and home. His official title was team leader of the document execution unit of Ally's foreclosure department, but consumer advocates call him the company's "super robot signor" or "affidavit slave."

  • In sworn depositions taken in December and June for two separate court cases involving families trying to keep their homes, Stephan revealed his shortcuts when reviewing the files. He said he would glance at the borrower's names, the debt owed and a few other numbers but would not read through all the documents as legally required. He would then sign them. The files were packed up in bulk and sent off for notarization several days later. Stephan testified he did not know how the "summary judgment" affidavits he signed were used in judicial foreclosure cases.


  • Christopher Immel, an attorney in Florida who deposed Stephan for a case in Palm Beach County, said he thinks Stephan was not a rogue employee but one that was performing his job responsibilities as the company told him to do. "GMAC has a business model to do this, and Stephan was just one small part of it," Immel said. "He was under the impression it was okay to do this."

For more, see Ally Financial legal issue with foreclosures may affect other mortgage companies.

In a related story, see Mother Jones: A Crack In Wall Street's Foreclosure Pipeline?

Florida Congressman Asks State Chief Justice To Slam Brakes On Potentially Lawless Foreclosure Mill Seizures

The Florida Independent reports:

  • Citing the reporting of Mother Jones and the New York Times, Congressman Alan Grayson has sent a letter calling on the Chief Justice of the Florida Supreme Court to “abate” foreclosure cases involving three law firms currently under scrutiny from the Office of Attorney General Bill McCollum until the investigation is complete.

  • If the reports I am hearing are true, the illegal foreclosures taking place represent the largest seizure of private property ever attempted by banks and government entities,” Grayson wrote. “This is lawlessness.”

See Grayson calls on Florida Chief Justice to halt “foreclosure mill” cases for more, including the full text of Congressman Grayson's letter to Florida Chief Justice Charles T. Canady.

Sunday, September 26, 2010

GMAC Calls Off Foreclosure Actions, Suspends Pending REO Sales In 23 States, Letting Buyers Back Out Of Deals; Cites Need To Take "Corrective Action"

Bloomberg News reports:

  • Ally Financial Inc.’s GMAC Mortgage unit told brokers and agents to halt foreclosures on homeowners in 23 states including Florida, Connecticut and New York.(1)(2)

  • GMAC Mortgage may “need to take corrective action in connection with some foreclosures” in the affected states, according to a two-page memo dated Sept. 17 and obtained by Bloomberg News.

  • Ally Financial spokesman James Olecki confirmed the contents of the memo. Brokers were told to stop evictions, cash-for-key transactions and lockouts, regardless of occupant type, with immediate effect, according to the document, addressed to GMAC preferred agents.

  • The company will also suspend sales of properties on which it has already foreclosed. The letter tells brokers to notify buyers that the company will extend the closing date on all sales by 30 days. Buyers will be able to cancel their agreement to purchase and get their deposit back, according to the letter.


  • Lawyers defending mortgage borrowers have accused GMAC and other lenders of foreclosing on homeowners without verifying that they own the loans. In foreclosure cases, companies commonly file affidavits to start court proceedings. “All the banks are the same, GMAC is the only one who’s gotten caught,” said Patricia Parker, an attorney at Jacksonville, Florida-based law firm, Parker & DuFresne. “This could be huge.”

For the stories, see

For story update, see: GMAC Denies Halting Foreclosures in 23 States:

  • There has been a number of reports from other media outlets that the suspensions may relate to how GMAC documented ownership of the mortgage note in foreclosure claims in some states. The Associated Press reports that Jeffrey Stephan, a GMAC employee, testified in December that he routinely signed 10,000 such affidavits or claims a month without verifying who actually owned the mortgage.

  • An examination of the states listed in the Bloomberg report by the Naked Capitalism blog found that 22 of the 23 are judicial foreclosure states, which require such affidavits in order to bypass lengthy judicial hearings. In addition, the Bloomberg list covers all but one of the nation’s judicial foreclosure states. Regardless of whatever procedure GMAC is alluding to in its statement, the question of proving ownership of a mortgage in foreclosure cases has been a growing issue.


  • The Florida attorney general is presently investigating three law firms for providing fraudulent affidavits of mortgage ownership, two of which have represented GMAC in foreclosure proceedings. U.S. Rep. Alan Grayson (D-Fla. 8th), cited the cases in a letter [] asking the Florida Supreme Court Chief Justice Charles Canady to suspend all mortgages until the investigation is completed.

(1) The affected states are: Connecticut, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont, Wisconsin.

(2) According to a recent New York Times story (see GMAC Halts Foreclosures in 23 States for Review):

  • Since the real estate collapse began, lawyers for homeowners have sparred with lenders in those states. The lawyers say that in many cases, the lenders are not in possession of the original promissory note, which is necessary for a foreclosure. GMAC, which has been the recipient of billions of dollars of government aid, declined to provide any details or answer questions, but its actions suggest that it is concerned about potential liability in evicting families and selling houses to which it does not have clear title.

  • The lender said it was also reviewing completed foreclosures where the same unnamed procedure might have been used. Matthew Weidner, a real estate lawyer in St. Petersburg, Fla., said he interpreted the lender’s actions as saying, “We have real liability here.” Mr. Weidner said he recently received notices from the opposing counsel in two GMAC foreclosure cases that it was withdrawing an affidavit. In both cases, the document was signed by a GMAC executive who said in a deposition last year that he had routinely signed thousands of affidavits without verifying the mortgage holder. “The Florida rules of civil procedure are explicit,” Mr. Weidner said. “If you enter an affidavit, it must be based on personal knowledge.” The law firm seeking to withdraw the affidavits is Florida Default Law Group, which is based in Tampa.