Saturday, October 30, 2010

5 Bagged In St. Paul-Area Alleged Mtg Scam; Cal. Man's Stolen ID Used In Scoring $1.8M In Loans, Sham Entity Used To Pull Cash From Deals: Prosecutor

In Hennepin County, Minnesota, the Minneapolis Star Tribune reports:

  • Hennepin County prosecutors have charged five people with felony racketeering in an alleged mortgage fraud and money laundering scheme centered on a St. Paul-based mortgage brokerage firm.(1)


  • In several cases, part of the proceeds at closing were paid over to "Cire Building," supposedly for improvements negotiated as part of the sale. The complaint says that Cire was a "sham entity" created by [alleged ripoff artist Eric] Bernard.

  • The scheme also involved stealing the identity of a California man, creating a false paper trail to make him appear to be a legitimate buyer, and using that identity to obtain $1.8 million in loans on three properties, according to the complaint.

For the story, see Five charged in mortgage fraud, money laundering scam (Hennepin County prosecutors allege the group conspired to steal millions through phony loans).

(1) Charged were Eric Bernard (also known as Eric Shirpiro), 31, of Shakopee, Stacey Harrold, 42, of Burnsville, David Schoenhofen, 42, of Prior Lake, Michael Hudalla, 44, of Mendota Heights, and Nicole Marie Schmidt (also known as Nicole Origas), 33, formerly of Lake Crystal.

Idaho AG Settles Charges w/ R/E Agent Accused Of Filling In Blanks In Contracts After Obtaining Clients' Signatures, Then Using Phantom Notarizations

In Boise, Idaho, LegalNewsline reports:

  • Idaho Attorney General Lawrence Wasden announced on Wednesday that he has settled with a real estate agent who allegedly violated the Idaho Consumer Protection Act. Daniel Myers and his now dissolved company, Paradigm Solutions LLC, allegedly allowed a client to sign an option contract with missing information that was added in later.(1)


  • Myers allegedly filled in the missing information once the client signed the documents, which made it possible to figure important terms of the contract without the consumer's knowledge or consent. Although the contract was supposed to be signed by a notary, Myers allegedly had his client's signature notarized outside of his client's presence.

  • Similar practices were allegedly carried out by Myers with other property owners who also signed contracts that contained blank spaces that were later filled in.

For more, see Wasden settles with real estate agent.

See also: Idaho AG press release: Boise Real Estate Agent Penalized for Alleged Real Estate Contract Violations.

(1) The alleged information included the beginning and ending date of the option, the address and legal description of the property and the purchase price, the story states. Under terms of the settlement, Myers will modify his business practices to comply with state law, respond quickly to any new complaints that arise, pay $1,500 to cover costs associated with the litigation, and agrees to pay a $10,000 civil penalty in the event of further violations, the story states. Myers was also issued a formal reprimand by the Idaho Real Estate Commission and ordered to pay them $6,300 in fines and costs.

County Sells Unwitting Buyer A Home At Tax Auction, City Demolishes It A Week Later

In Farmington Hills, Michigan, NBC Channel 24 reports:

  • A Michigan woman is devastated after buying a home and seeing it demolished. Susan Tusk had purchased the home from Oakland County for $1,000 at a foreclosure auction last Wednesday. And she had the paperwork to prove it. When she showed up this weekend to do some work on it, Farmington Hills city workers were bulldozing the home.

  • In July, city officials ordered that the owners of four foreclosed houses demolish their properties or the city would move in and do it. Tusk says she had plans to restore the home and live in it.

Source: Mich. woman buys foreclosed home, city then demolishes it.

Minnesota Debt Collector Agrees To Cough Up $1.75M To Settle Federal Allegations Of Illegal Practices

In Minneapolis, Minnesota, the Minneapolis Star Tribune reports:

  • Allied Interstate Inc., a large Minnesota debt collection agency with a history of consumer complaints and state fines, has agreed to pay $1.75 million to settle federal allegations that it broke the law by trying to collect debts people didn't owe. The Federal Trade Commission (FTC) said it is the second-largest civil penalty it has obtained against a debt collection firm. It comes amid rising complaints of abusive collection tactics and calls by state and federal legislators for more regulation.(1)


  • Many debt collectors use software, known as "robo dialers," that automatically call the same people multiple times a day. With Allied, such calls continued even after people insisted the firm was calling the wrong person or that they did not owe the debt, the FTC alleged in a federal lawsuit.

For more, see Local debt collector to pay $1.75 million (Federal officials said they are trying to send a message to other debt collectors to stop harassing people over debts they don't owe).

(1) Go here for:

Banks Turn Up The Heat On Delinquent Borrowers; Begin Employing Methods Normally Reserved To Feds While Billing Victims For Dubious Fees

The Spoof (satirically?) reports:

  • Justice Department investigators confirmed today they are considering possible fines and other penalties against several of the United States' largest financial institutions for the murders of hundreds of homeowners delinquent in their mortgage payments.

  • The Justice Department responded to complaints from families of recent murder victims claiming to receive billing statements from the deceased's mortgage companies demanding payment for "ammunition services," "break-in and terrorizing administrative charges," and "blood removal and dry cleaning fees," among other charges related to "Mortgage Remediation Services."

  • According to a Justice Department spokesman, "The Department is taking these accusations very seriously. While the laws regulating just how aggressive lending companies can act in their efforts to collect a debt are very broad, the actual legality of physically killing individuals behind on their payments is rather vague. Congress and the Courts have consistently ruled that large financial institutions can do whatever they want whenever they want, but, the authority to just kill people for very little reason is a power normally reserved to the federal government."

For more, see Banks Face Hefty Fine for Murdering Delinquent Homeowners.

Friday, October 29, 2010

NY Law Sticking Banks w/ Homeowners Legal Fee Tab In Successful F'closure Defense To Level Playing Field, Prod More Pro Bono Lawyers To Jump Into Fray

The New York Law Journal reports:

  • Going against state bankers, New York Gov. David A. Paterson has signed into law a measure that will allow prevailing homeowners in many foreclosure actions to claim attorney fees from lenders.

  • The Access to Justice in Lending Act, A1239/S2614, will put defendants in foreclosure proceedings on the same footing as lenders, who often include in mortgage documents the right to recoup reasonable attorney fees if they bring a successful action.(1)

  • Supporters of the new requirement say that it will encourage attorneys to volunteer their services to homeowners facing foreclosure, many of them who cannot afford to hire their own lawyers.(2) At the same time, they say the measure will give the homeowners leverage to negotiate concessions from lenders seeking to avoid the potential costs of litigation.

  • "At a time when not-for-profits and counselors are flooded with these cases, this is an important step in bringing parity for homeowners," the governor's office said in an e-mailed statement.

  • The new law, Real Property Law §282, provides that all mortgage agreements giving prevailing lenders the right to attorney fees, must be read to grant that right to borrowers as well. Although it goes into effect 60 days after its signing, it applies to all mortgages in effect on or after Oct. 20 and all proceedings begun on or after that date.(3)

For more, see New York Grants Right to Claim Attorney Fees to Prevailing Homeowners in Foreclosures.

(1) According to the story, the new law is modeled after Real Property Law §234, a 1966 law that gave prevailing tenants the right to recoup attorney's fees whenever landlords include a fee provision in the lease. A 1995 Court of Appeals decision upheld the application of the law to leases signed before it became effective, Duell v. Condon, 84 NY 2d 773, which describes the purpose of the earlier fees provision as "to level the playing field between landlords and residential tenants, creating a mutual obligation that provides an incentive to resolve disputes quickly and without undue expense" the story states. Moreover, it said that the law tended to discourage landlords from engaging in frivolous litigation aimed at harassing tenants, the story states.

(2) For those attorneys, law students, paralegals and other fans of the law who find something counterintuitive about being able to score attorney fees in pro bono cases, there's really nothing new about it, believe me. See Another Law Firm Seeks Big Fees From Lawsuit Loser In Pro Bono Case. See also this legal fee 'rate sheet', appearing on the website of one non-profit law firm, which discloses the hourly fees charged in connection with some of their pro bono cases (unadjusted, of course, for any applicable "contingency fee risk multiplier" - see The Yale Law Jounal: The Contingency Factor In Attorney Fee Awards).

(3) Florida has a similar statute, except that the mandating of an award of prevailing party attorney's fees to the winning party under the reciprocity provisions of section 57.105(7), Florida Statutes applies to all contracts containing one-sided, legal fee provisions, not merely to mortgage loan agreements containing the one-sided, legal fee clauses. See also Landry v. Countrywide Home Loans, Inc., 731 So. 2d 137 (Fla. 1st DCA 1999).

Those in states that don't have similar statutes and want to recover attorney fees for successful foreclosure defenses may need to continue to rely on bringing suits/counterclaims under the federal Truth in Lending Act, 15 USC §1640, and the federal Fair Debt Collection Practices Act, 15 USC §1692k, which already allow for the recovery of attorney's fees to a prevailing claimant, as was ably pointed out in this memorandum filed on behalf of the New York Bankers Association arguing against the passage of the recently-enacted New York law.

Given all the unfair and deceptive conduct engaged in by foreclosing lenders in the robosigning scandal, I suppose lawsuits and counterclaims could possibly also be brought/raised under state consumer protection laws that may be applicable, which typically also provide for the granting of court-ordered attorney fee awards to a prevailing party. For a survey of state consumer protection laws, see National Consumer Law Center: CONSUMER PROTECTION IN THE STATES: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

More NH Homeowners In Foreclosure Fight Back With Help Of Long-Time Nationally-Recognized Mortgage Servicing Fraud Watchdog

In Somersworth, New Hampshire, WMUR-TV Channel 9 reports:

  • While more [New Hampshire] residents are facing the possibility of foreclosure, a growing number of homeowners are fighting back. One of their allies is [New Hampshire's] Mike Dillon. Dillon is not an expert or a housing official but he has been successfully staving off foreclosure of his Manchester home for 10 years. Every day, often into the wee hours of the morning, he combs through public notices and other legal websites to find foreclosures in New Hampshire that look worthy of a fight. Dillon said that often, stopping a foreclosure is a matter of checking the paperwork.


  • Porter and Angie Moore, of Sandwich, N.H., took Dillon's advice and took their findings to a judge, who granted them a temporary restraining order that stopped the foreclosure until the lender produces more evidence. The Moores said they don't yet know who owns their promissory note, and multiple lenders have claimed ownership.

For more, see Homeowners Fight Back Against Foreclosures (Tracking Down Paperwork Can Prevent Home Auctions).

See 'Playing the Odds' for the transcript of an ABC News Nighline interview with Mike Dillon of on how some mortgage servicers go about giving homeowners a real screwing over in the handling of their house payments.

Disbarment Possible For NY Attorneys Representing Foreclosing Lenders For Violation Of State High Court's New 'Anti-Robosigner' Rule

The New York Post reports:

  • While the mortgage industry grapples with a legal morass over millions of flawed foreclosure actions, the chief of New York's courts made a bold move yesterday to ease the crisis -- at least in the Empire State. New York Chief Judge Jonathan Lippman issued a new rule [Wednesday] requiring every lawyer handling foreclosures to sign a document verifying that the paperwork in the case is accurate. Failure to meet the new standard could result in disbarment or other sanctions.


  • Realtors, banks, buyers and the courts are complaining loudly about foreclosure cases tainted by improper documentation and rubber-stamped without any review.

  • Lippman said his rule will for the first time force lawyers to put their careers on the line in foreclosure cases with a binding document that replaces prior "good practices" pledges that had little bite. "We want to make sure that everyone is focusing like a laser on these particular types of proceedings," Lipmann said.

  • Some 78,000 homeowners are already caught up in foreclosure cases around the state. To make a case go forward, the new rule requires lawyers to include the name of a bank employee who affirmed the case facts as correct and the date it was done.

For the story, see Hear ye, hear ye! Lawyers' feet held to fire in foreclosure cases.

See also, NY forces lawyers to verify foreclosures, nixes robosigning:

  • New York’s presiding justices handed down the new state rules after banks disclosed that an unknown number of homeowners faced foreclosure although their lawyers failed to get proper notarization, relied on “robosigning,” and failed to prove “proper standing.”


  • We cannot allow courts in New York to stand by idly and be party to what we now know is a deeply flawed process, especially when that process involves basic needs – such as a family home – during this period of economic crisis,” Chief Judge Jonathan Lippman said in a statement.

SF Man Gets 16 Months In $100K+ Ripoff Of Homebuyer In Bogus F'closure Rescue Deal; $3K Restitution Offer To Buy Out Jail Time "A Bribe": Prosecutor

In Napa, California, the Napa Valley Register reports:

  • A San Francisco man who scammed a Napa homebuyer out of more than $100,000 will serve 16 months in prison for the crime. Eric Kheng Yim, 35, pleaded no contest in August to grand theft and promised to repay the victim in the case.

  • In early 2008, Yim and his business partner Eddie Ceballos, who operated SAP Investments, approached a couple who were struggling to keep their home [...] and offered to help them, Deputy District Attorney Jose Rossi said. He then contacted the couple’s neighbor, Antonio Parra, and offered to sell the home to him. Parra knew Ceballos and trusted him, and they negotiated a price of $375,000, Rossi said.

  • In April 2008, Parra gave Yim $30,000 that he had saved and took out an additional $70,000 loan, he said. “They never owned the property or had any legal right to the property,” Rossi said. Yim took the money and disappeared, Rossi said. The homeowner lost the home to foreclosure.


  • At Yim’s sentencing Wednesday, Rossi asked for two years in state prison. He noted that Yim brought a $3,000 check for the victim to the hearing, but called it abribe.” “This defendant is the worst type of financial predator,” he said. He took advantage of hard-working people in difficult situations, Rossi said.(1)

For more, see Man gets 16 months for selling home he didn’t own.

(1) Reportedly, Yim’s defense attorney asked Judge Mark Boessenecker to give Yim probation so he could work to pay Parra back. “If he goes to jail, that will be the end of his business and the end of his ability to pay restitution,” he said of Yim’s photography studio. Judge Boessenecker set restitution at $140,479, the story states.

Mom, Family Face Boot After Son Uses Forged Deed To Score Fraudulent Loan On Fully Paid-Off Home; Victim Fights Back, Seeks To Void Deed, Mortgage

In Miami, Florida, The Miami Herald reports:

  • Ten people spanning three generations share a single bathroom in what's left of Annie Edwards' crumbling home in Liberty City. There are holes in the wood floors and trash bags plastered to the leaking ceiling -- and Deutsche Bank is adamant that it wants this 82-year-old structure. It has been fighting to repossess the home since 2006 in an ongoing legal battle that involves allegations of forged signatures, a disbarred property appraiser and a family on the brink of homelessness.


  • Edwards' predicament represents a confluence of the fraud, document forgery, and suspicious foreclosure practices that have plagued South Florida's housing market from the housing boom after Hurricane Wilma in 2005, through the current "robo-signing'' scandal. In the midst of a new national foreclosure crisis, Edwards' story stands out as a case study of the housing and banking systems' laundry list of problems.

  • The 63-year-old retiree says her housing troubles began five years ago when her ex-husband, legally blind and illiterate, was duped into taking out a $102,000 mortgage on the house by his adult son and daughter-in-law. The couple forged Edwards' signature on a document that stripped her possession of the home, and then made off with the money in January 2006, she said.

  • "It's really a sad case,'' said Jonathan Heller, a lawyer who volunteered to defend Edwards from foreclosure.(1) "She worked for 30 years, had no mortgage on the property, is in a wheelchair and every night she goes to sleep thinking, `Am I going to have this house when I wake up?'

For more, see House, homeowner caught in a mortgage meltdown (A Liberty City woman is fighting foreclosure, claiming forgery, fraud and bank negligence in a drama that has her family home at stake).

(1) According to the story, using a dishonest property appraiser was only one of many suspicious actions by mortgage lender Argent Mortgage, Heller alleges. The loan approval process was also questionable, he said. The loan application claims Edwards' ex-husband, Kenneth Edwards, was an "owner-occupier,'' of the home, though he hadn't lived there for 10 years and public records shows he bought a separate homesteaded property in 1996. The bank never checked and, according to Kenneth Edwards, never asked. In a sworn affidavit, he states that he never spoke to any bank representatives before the loan was made.

According to Annie Edwards' counterclaim, the lender also relied on a forged quit-claim deed that stripped her of her ownership, the story states. A police report found her signature on that document was a forgery, the counterclaim states. If the forgery defense is accepted in court, that would make the loan, and the foreclosure, legally invalid.

Annie Edwards reportedly puts most of the blame on her stepson and his wife, since they obtained a loan without her knowledge, never paid the mortgage, and hasn't heard from either one of them since. Edwards' attorney Jonathan Heller hopes to take the matter to trial, and eventually have the foreclosure ruled unlawful. He also filed a counterclaim for wrongful foreclosure, the story states.

Thursday, October 28, 2010

Reports Of Judges Sticking Banks w/ Tab For Homeowners' Legal Fees In Robosigner Cases Increase With Growth Of 'Foreclosure Defense' Bar

The Wall Street Journal reports:

  • The paperwork mess muddying home foreclosures erupted last month. But the legal strategy behind it traces to a lawyer's gambit in 2006 that has helped keep one couple in their home six years beyond their last mortgage payment.

  • Lillian and Robert Jackson stopped paying on their home in Jacksonville, Fla., in 2004 when business dropped off at their cleaning company. Eviction might have seemed inevitable when they faced a foreclosure hearing two years later.

  • But their lawyer, James Kowalski, had the idea of taking a deposition from the signer of the mortgage papers. When a document processor for GMAC Mortgage admitted she routinely signed such papers without being familiar with details of the loans, she was tagged as one of a species now known as robo-signers.(1)

  • It was a first step in the growth of a legal sub-specialty called foreclosure defense that has sown confusion and turmoil in the housing market.(2) Lawyers in the field now commonly use a technique more identified with corporate litigation: probing depositions, designed to uncover any lapses in judgment, flaws in a process or wrongdoing.

  • In the 23 states where foreclosures entail a court hearing, the bank may be ordered to pay the homeowner's legal bill if a lawyer can convince a judge that the bank has submitted false documents, such as affidavits saying employees personally reviewed the details of loans when they didn't.(3)


  • The big risk to banks and the housing market, indeed, is that more homeowners and lawyers come to see such cases as attractive to fight. Mr. Kowalski in Jacksonville has already filed a suit seeking class-action status, in circuit court in St. Johns County, Fla., naming Deutsche Bank AG and Citigroup Inc. mortgage unit Citi Residential Lending, accusing them of violating Florida laws and seeking nonmonetary relief. On Tuesday, a New Jersey law firm filed a damage suit in federal court in New Jersey accusing Bank of America of breaching contracts with borrowers at settlement.

For more, see Niche Lawyers Spawned Housing Fracas.

(1) Reportedly, GMAC's case against the Jacksons was thrown out in 2006 by Florida state-court Judge Bernard Nachman, and has never been refiled. The Jacksons, still living there, are reportedly seeking a settlement with GMAC.

(2) It should be noted that a "produce the note" foreclosure case originally filed as far back as 1999 coming out of Palm Beach County, Florida (see State St. Bank & Trust Co. v. Lord, Case No.CL 99-006652 AW) resulted in a big defeat for a foreclosing lender who couldn't produce the note. The lower court ruling, which was subsequently affirmed on appeal, see State St. Bank & Trust Co. v. Lord, 851 So. 2d 790; (Fla. App. Ct. 4th Dist., 2003), led to a change in the applicable statute (section 673.3091, Florida Statutes - Enforcement of lost, destroyed, or stolen instrument) that no doubt was lobbied for by the financial industry to make it easier to foreclose without having the promissory note.

The 1999 version of Sec. 673.3091(1)(a), Florida Statutes (the statute at the time State St. Bank was originally filed in a Palm Beach County Circuit Court) read as follows:

  • (1) A person not in possession of an instrument is entitled to enforce the instrument if:

    (a) The person was in possession of the instrument and entitled to enforce it when loss of possession occurred;

The 2004 version of Sec. 673.3091(1)(a), Florida Statutes (after the change in the statute), read (and now reads - see current section 673.3091, Florida Statutes) as follows:

  • (1) A person not in possession of an instrument is entitled to enforce the instrument if:

    (a) The person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;

The following two points are worth noting here:

  • The Florida Bankers Association appears to tacitly acknowledge their guilt in lobbying for (keen awareness of) the statutory change arising out of the State St. Bank case at page 4 thru 6 of their comments to the Florida Supreme Court made in connection with Emergency Rule and Form Proposals of the Supreme Court Task Force on Residential Mortgage Foreclosure Cases,

  • The attorney representing the (thwarted) foreclosing lender who got clobbered by the court for failing to "produce the note" in the State St. Bank case was none other than notorious South Florida foreclosure mill, Law Offices of David J. Stern, P.A., Plantation, Florida, who presumably played some role in setting the wheels in motion for the change in the statute.

(3) Reportedly, Florida state-court Judge Bernard Nachman ordered GMAC Mortgage, a unit of Ally Financial Inc., to pay the $8,000 fee of the Jacksons' attorney after finding GMAC had filed false testimony, an affidavit in which a document signer, Margie Kwiatanowski, said she had personal knowledge of the details of loans such as the Jacksons'.

In another recent case, a Maine state court judge, in ruling that robosigned affidavits had been submitted "in bad faith," ordered GMAC to pay pro bono attorney Thomas Cox a $27,000 legal fee, a sum it said he might have earned for his legal work if he hadn't been working pro bono, the story states.

Washington securities lawyer Andrew L. Sandler, who represents banks and firms that service mortgages, noted for the story: "The class-action lawyers are swarming around this issue right now, because they perceive that it can result in significant fees for them. [...]"

Reportedly, Michael Gaier, an attorney in Philadelphia, who recently switched to foreclosure defense last year after years of representing patients in malpractice suits and consumers who said they had purchased faulty products, said his new legal practice "is academically challenging, and I'm hoping it'll be financially rewarding. I'm hoping the banks rewrite the mortgages, cover my fees. That's my end game," said Mr. Gaier.

See also Florida Judge Sticks Standing-Lacking Lender With $30K Tab For Homeowner's Legal Bill After Booting Case.

NY Attorneys To Score Court-Awarded Legal Fees From Banks For Sucessfully-Defended Foreclosures On Behalf Of Homeowners

Buried at the end of a recent New York Post article on the nationwide foreclosure robosigning scandal is this gem that I'm sure is welcomed by New York foreclosure defense attorneys statewide:

  • [G]ov. [David] Paterson [Wednesday] signed a bill that would enable homeowners who successfully defend themselves against foreclosure proceedings to be awarded lawyer's fees from the lender that sued them. Previously, mortgage holders had no recourse to get lawyers' fees from lenders if foreclosure proceedings were brought against them. Many simply repped themselves or defaulted, said Assemblyman Rory Lancman, a Queens Democrat, who co-sponsored the bill.(1)

Source: Hear ye, hear ye! Lawyers' feet held to fire in foreclosure cases.

See also The New York Times: New Law Allows Homeowners to Recoup Legal Fees in Foreclosure Cases:

  • In some other types of litigation, like employment or civil rights, lawyers’ fees have long been awarded to the winning party, [the new law's co-sponsor, state Assemblyman Rory I.] Lancman said. But foreclosure litigation has been an exception.

  • There’s been a major problem as this foreclosure crisis has exploded in getting representation for people who need counsel,” said Andrew Scherer, the former president of Legal Services NYC, an agency that provides counsel to people who cannot afford lawyers in civil cases.

  • This is going to provide a pretty reasonable incentive for private attorneys to take on these cases,” Mr. Scherer added.

(1) For those New York attorneys practicing in the non-profit, Legal Aid/Legal Services sector of the profession who want some idea as to how to approach the issue of how much in legal fees they can belt foreclosing lenders with when successfully representing their pro bono homeowner-clients in foreclosure actions (and possibly other consumer protection litigation as well), check out this legal fee 'rate sheet' appearing on the website of one of your out-of-state 'bretheren' (unadjusted for contingency fee risk multiplier).

"Dine & Dash" Banksters Now Caught In The Middle Of Two-Front War With Homeowners, Bond Investors Over Faulty Foreclosures, Crappy Mortgage Loans

Bloomberg News reports:

  • Shoddy mortgage lending has led bankers into a two-front war, pitting them against U.S. homeowners challenging the right to foreclose and mortgage-bond investors demanding refunds that could approach $200 billion.

  • While federal regulators and state attorneys general have focused on flawed foreclosures, a bigger threat may be the cost to buy back faulty loans that banks bundled into securities. JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. have set aside just $10 billion in reserves to cover future buybacks. Bank of America alone said this week that pending claims jumped 71 percent from a year ago to $12.9 billion of loans.


  • It’s going to be trench warfare with years of lawyering,” Christopher Whalen, managing director of Institutional Risk Analytics, said in a telephone interview from White Plains, New York. “The banks can’t afford to lose.”


  • It’s troubling that the people who caused the problem have walked away and left everybody else to fight over who gets stuck with the tab,” [Chapman University law professor Kurt] Eggert said in a telephone interview. “It’s like a massive game of dine and dash.”

For more, see Banks Face Two-Front War on Bad Mortgages, Flawed Foreclosures.

In a related column, see The New York Times: One Mess That Can’t Be Papered Over:

  • When investors — like the New York Fed — contend that strict rules governing [complex Real Estate Mortgage Investment Conduit, or REMIC] structures aren’t met, they can try to force a company like Bank of America to buy them back.

  • Which brings us back to the sloppy paperwork that lawyers for delinquent borrowers have uncovered: some of the dubious documentation may undermine the security into which the loans were bundled. For example, the common practice of transferring a promissory note underlying a property to a trust without identifying it, known as an assignment in blank, may run afoul of rules governing the structure of the security.

BofA Says "Take A Hike!" In Response To Those Demanding That It Buy Back Crappy Mortgage Loans That Were Allegedly Improperly Made

The Wall Street Journal reports:

  • Bank of America Corp. and some of its largest mortgage investors clashed on Tuesday as the bank vowed to fight government-backed demands that it repurchase loans that allegedly didn't meet underwriting guidelines and other promises. The bank acknowledged receiving a Monday letter from investors alleging that a Bank of America unit didn't properly service 115 bond deals.

  • The investors include Freddie Mac, the government-owned mortgage company. Freddie Mac and Fannie Mae, its larger sibling, have boosted demands on lenders over the past year to buy back defaulted loans that had been sold to and guaranteed by the mortgage titans.

  • But Tuesday's action marks the first step by either company to force banks to buy back mortgage-backed securities that were issued by Wall Street, not by government-backed mortgage giants.

For more, see BofA Resists Rebuying Bad Loans (Bank Posts $7.3 Billion Third-Quarter Loss as Fee Revenue Tumbles; Effects of Regulatory Overhaul) (requires subscription; if no subscription, GO HERE, then click the appropriate link for the story).

Ohio AG On BofA Fixing Bogus Foreclosure Document Problem In A Matter Of Weeks: "We Are Certainly Not Just Going To Take Their Word For It!"

Ohio Attorney General Richard Cordray recently offered the following statement in response to reports that Bank of America plans to restart foreclosures on borrowers in 23 states where issues of possibly fraudulent documentation have been raised:

  • “While I would not presume to speak for all 50 state attorneys general, from my own standpoint, we will want to be very careful in reviewing whatever their revised process purports to be. I would caution that they still have significant financial exposure in many, many cases if they are now acknowledging that the evidence that they previously submitted to the courts was fraudulent.

    “Those previous submissions remain subject to possible sanctions and penalties by the courts and so Bank of America would be well-advised to consider aggressively pursuing loan modifications as a means of resolving those cases by agreement rather than pushing toward a court order that may involve sanctions and penalties for their prior misconduct.

    “You have to remember, these are the same people who have essentially acknowledged that they committed fraud in perhaps tens of thousands of cases. Now they tell us that they have fixed the problem in a matter of weeks. We are certainly not just going to take their word for it.”

For the Ohio AG press release, see Cordray Is “Deeply Concerned” as Bank of America Announces Move to Resume Foreclosures.

(1) Ohio homeowners who have questions about the litigation against GMAC/Ally or investigations into foreclosure fraud by other banks or mortgage servicers can contact the Ohio Attorney General’s office at Cordray also urged Ohioans with knowledge of foreclosure fraud to contact his office via the new e-mail address and share what they know. “Investigations are put in place to gather evidence, and that is what we are aiming to do here with the help of the public.”

Wednesday, October 27, 2010

NJ Class Action: "Many Thousands Of Foreclosures Are Plainly Void!" Under State Law; Homeowners Seek Note, Mortgage Cancellations, Money Damages

In Newark, New Jersey, the New Jersey Law Journal reports:

  • Bank of America has been hit with a class action on behalf of homeowners seeking damages for alleged disregard of foreclosure process rules. The suit, filed Wednesday in federal court in Newark, N.J., accuses Bank of America and two subsidiaries, LaSalle Bank and BAC Home Loans Servicing, of "an undisciplined rush to seize homes" through "pervasive and willful disregard of knowledge, facts and statutes."(1)

  • Bank of America has filed foreclosure proceedings on many mortgages in New Jersey without holding the necessary rights as the mortgagee or assignee at the time of foreclosure, the suit says.

  • "Many thousands of foreclosures are plainly void under statute and settled New Jersey case law. Many borrowers never obtain statutorily required notices, and many foreclosure suits are filed entirely based in inaccurate recitations concerning ownership of the mortgage, the note, or the assignment," the suit says.

  • The putative class in the suit, Beals v. Bank of America, N.A., 10-cv-05427, consists of all named defendants in pending New Jersey foreclosure actions initiated by Bank of America or its affiliates. The complaint includes counts of common-law fraud, breach of the covenant of good faith and fair dealing and violations of the New Jersey Fair Foreclosure Act and Consumer Fraud Act.


  • The plaintiffs claim they are entitled to compensation for emotional distress, damage to their credit scores and time lost from work for attorney meetings and foreclosure proceedings.

  • They also seek punitive damages and attorney fees as well as declaratory and injunctive relief dismissing the foreclosures of class members, with prejudice, declaring the mortgages and promissory notes of class members void and unenforceable` and rescinding or reforming the mortgages and promissory notes to conform to plaintiffs' reasonable expectations.

  • The suit was brought by Lawrence Friscia, head of a Newark firm that counsels distressed homeowners, and his associate, Jonathan Minkove, who say they’ve found that Bank of America regularly negotiates binding agreements to modify mortgage terms and then fails to honor the terms.

  • "There's a difference in the fact pattern [among individual cases] but there's pattern and a practice of blatant disregard for process," says Minkove. "Any lawyer who's worth his salt will tell you process matters."

  • And when judges call them to case management conferences in their foreclosure cases, outside counsel for Bank of America regularly fail to show up, says Friscia. Worse still, New Jersey's judges don't seem to be bothered by such behavior, he says. "There's a shocking deference given to Bank of America on the part of the judicial system," Friscia says.

For more, see Bank of America Sued in Class Action Over Flouting of Foreclosure Rules.

For the lawsuit, see Beals v. Bank of America, N.A., et al.

(1) According to the story, the plaintiffs cite a recent, well-publicized admission by a Bank of America official in a Massachusetts foreclosure case that she signed thousands of foreclosure complaints without reviewing them. That Bank of America official, Renee Hertzler, said in a deposition that she robosigned as many as 8,000 foreclosure documents a month without reviewing them, according to the lawsuit (at paragraph 29).

Indiana Class Action Quotes Brooklyn Jurist's Description Of Robosigner As "A Milliner's Delight By Virtue Of The Number Of Hats She Wears"

A class action lawsuit filed last week in Indianapolis, Indiana alleges that Countrywide Home Loans/Bank of America's use of robosigners resulted in violations of the Federal RICO statute as well as the Federal Fair Debt Collection Practices Act.

One of the robosigners described in the lawsuit is the notorious Keri Selman, described as "a nationally known robosigner" and a "robosigner extraordinaire" - (at paragraph 55), and who is further described in the following excerpt (at paragraph 58):

  • Selman's prolific career signing affidavits as a supposed vice president for so many entities led Judge Arthur M. Schack of the Supreme Court of the State of New York to remark in a court order that "Ms. Selman is a milliner's delight by the virtue of the number of hats she wears." Judge Selman [sic] noted that "Plaintiff's application is the third application for an order of reference received by me in the past several days that contain an affidavit from Keri Selman ... ." Judge Schack said he was concerned that Ms. Selman might be engaged in a subterfuge, wearing various corporate hats, and ordered that, before he would grant an application for an order of reference, Selman would be required to submit another affidavit describing her employment for the last three years. Selman never submitted such an affidavit.(1)

For the lawsuit, see Davis v. Countrywide Home Loans, Inc., et al.

(1) For Justice Schack's referenced court order, see Bank of NY v Myers, 22 Misc 3d 1117, 2009 NY Slip Op 50159 (2009).

In another of his court rulings (HSBC Bank USA, N.A. v Charlevagne, 20 Misc 3d 1128, 2008 NY Slip Op 51652 (2008)), Justice Schack makes an equally interesting observation in describing Ocwen Loan Servicing multiple corporate hat-wearing robosigner Margery Rotundo, whose affidavits also littered his courtroom and which, in my view, is equally applicable to describe Keri Selman, and which I will 'borrow' below:

  • The late gossip columnist Hedda Hopper and the late United States Representative Bella Abzug were famous for wearing many colorful hats. With all the corporate hats Ms. [Selmon] has recently worn, she might become the contemporary millinery rival to both Ms. Hopper and Ms. Abzug.

See also Foreclosure Halted As Questions Surround Court Filings; Brooklyn Judge Calls Multiple Corporate Hat-Wearing Bank Exec "A Milliner's Delight".

Ex-Homeowner Sues To Void Foreclosure Sale, Recover Home Allegedly Lost In Court Proceeding Tainted By Robosigner Scandal; Also Seeks $50K+ In Damages

In Erie County, Ohio, the Sandusky Register reports:

  • [A] Sandusky woman filed a lawsuit Wednesday claiming the foreclosure of her North Larchmont Drive home was spurred on by "robo-signing," where bank employees signed affidavits without bothering to review documents.

  • Rhonda D. McLaughlin filed her lawsuit against Bank of America, N.A., and Rhonda Weston, a vice president of Bank of America.(1) [...] Sandusky attorney Dan McGookey, a foreclosure specialist, is McLaughlin's attorney. It may be the first lawsuit filed in the U.S. by a private citizen seeking to undo an already completed foreclosure on grounds that a robo-signer was used, McGookey said.(2)


  • McLaughlin's lawsuit asks for Fannie Mae, now the owner of the North Larchmont Drive home, to give the home back to McLaughlin. [...] Fannie Mae is [also] named in the suit because it [now] owns the home.

For more, see Sandusky woman sues bank over "robo-" foreclosure.

For the lawsuit, see McLaughlin v. Bank of America, et al.

(1) Rhonda Weston is the robosigner in question in this case, and is alleged to be one of 10,000 Bank of America vice presidents, according to the BofA website (see lawsuit, paragraph 3).

(2) The lawsuit also seeks in excess of $25,000 in compensatory damages, in excess of $25,000 in punitive damages, and other costs and fees. The lawsuit alleges violations of the Ohio Consumer Sales Practices Act, O.R.C. Sec 1345; the Federal Fair Debt Collection Practices Act, 15 USC 1692; Ohio's "Baby RICO" statute, O.R.C. 2923.32, and the common law.

City of Baltimore v. Alleged "Ghetto Loans" Peddler - Round 3 In Reverse Redlining Suit Begins

In Baltimore, Maryland, The Baltimore Sun reports:

  • After two previous dismissals, the city made a third attempt [last] week to sue Wells Fargo Bank, accusing the company of causing increased foreclosures in Baltimore through racist, predatory lending.

  • The latest complaint, filed Thursday in U.S. District Court, contains 14 new paragraphs that purport to address concerns that led Judge J. Frederick Motz to twice before dismiss the case — namely a lack of evidence that the mortgage lender was responsible for housing vacancies and millions of dollars in associated damages.

For more, see City sues Wells Fargo a third time (Two other lawsuits were dismissed as inadequate).

Go here for earlier alleged ghetto loans peddler posts.

GMAC's Embarrassment Over Publicity Surrounding "Robosigner" Practices Not Enough To Kibosh Dissemination Of Troubling Maine Deposition Over Internet

GMAC's embarrassment over the recent dissemination of a certain deposition revealing its troubling "robosigner" practices was one of the highlights in Maine state court Judge Keith A. Powers' denial of the company's attempt to cover up the contents therein from the public(1) by requesting a protective order, as he sets forth in the following excerpt from page 3 of his September 24, 2010 ruling:

  • Stephan's deposition was taken to advance a legitimate purpose, and the testimony elicited has direct probative value to this dispute. Attorney Cox did not himself take action other than to share the deposition transcript with an attorney in Florida.

    That the testimony reveals corporate practices that GMAC finds embarrassing is not enough to justify issuance of a protective order. Further, Plaintiff has failed to establish that GMAC has been harmed specifically as a result of the dissemination of the June 7, 2010 transcript, given that similarly embarrassing deposition testimony from Stephan's December 10, 2009 Florida deposition also appears on the Internet, and will remain even were this court to grant Plaintiff's motion.

    Accordingly, because Plaintiff has failed to establish its burden of persuasion [...], its Motion of Entry of Protective Order is denied.

For the entire ruling, see Order - FNMA v. Bradbury.

(1) See Mother Jones: Did GMAC Try to Bury Its Foreclosure Smoking Gun? (The deposition the lender really, really doesn't want you to see).

Tuesday, October 26, 2010

Insurance Underwriter Demands "Crappy Title" Warranties From Banks When Issuing Title Policies On Sales Of REOs Acquired Thru Faulty Foreclosures

The Washington Post reports:

  • The title insurance industry is maneuvering to protect itself from losses if courts rule that banks have played fast and loose with the foreclosure process. But people who buy foreclosed properties from banks may face some degree of loss despite having a title policy.

  • Fidelity National Financial, the largest title insurance company, is leading the industry in demanding that lenders warrant that they have followed all legal procedures in the handling of foreclosures and indemnify the title insurers if a court decides otherwise.(1)


  • The plans and concerns of the other major providers of title insurance - First American Financial Corp., Stewart Title and Old Republic International - will be disclosed this week. [...] Along with Fidelity, they account for 90 percent of the title insurance market.

For more, see Title insurers seek insulation from foreclosures.

(1) Doesn't Fidelity National, through its connection with LPS and DOCX, have some link to the cause of much of this "crappy title" problem in the first place? (Or did Fidelity National already spin off its LPS/DOCX connection before the alleged robosigning took place? If one didn't know any better, one might think that this outfit is scrambling to cover its ass [buttocks] [seeking protection] from problems it may have played some role in creating in the first place.) See:

Indiana Couple File Federal Robosigner Suit Seeking Class Action Status; Allege Violations Of RICO, Debt Collection Statutes

In Indianapolis, Indiana, The Indianapolis Star reports:

  • An Indianapolis law firm has filed one of the first suits in the nation seeking class-action status in its case against mortgage lenders and servicers who used questionable tactics in thousands of home foreclosures. The federal lawsuit was filed Tuesday by Cohen and Malad, which specializes in class-action cases. The case comes as the smoldering foreclosure issue threatens to erupt into a national crisis for the mortgage industry.


  • Richard E. Shevitz, a Cohen and Malad attorney, said he's fielding calls from dozens of other lawyers and homeowners asking how they might join the lawsuit or file a similar one. The lawsuit, filed this week in U.S. District Court in Indianapolis, must be certified as a class action by a court before it can be opened to other plaintiffs. That could take months or even years. "We'll try to move this case forward as aggressively as we can," Shevitz said.

  • The plaintiff in the lawsuit is a Knightstown couple, Dwayne and Melisa Davis, who allege that two affidavits filed by their lender in their foreclosure were signed by "robo-signers" known to have scribbled their signatures on hundreds or thousands of foreclosure documents without personally reading them and sometimes using different titles and employer names.(1)


  • The two bank officials who signed the affidavits used to foreclose on the Davises' home in 2008 and sell it at a sheriff's sale are women whose names have come up in lawsuits in other states as "robo-signers."(2)

For more, see Indiana foreclosure suit seeks class action (Knightstown couple who lost home allege document 'robo-signers' aided lenders).

For the lawsuit, see Davis v. Countrywide Home Loans, Inc., et al.

See also Cohen & Malad Files National Class Action Lawsuit Against Lenders for Using Perjured Testimony to Obtain Foreclosures.

(1) "The defendants' and their enterprises' activities amounted to a conspiracy to undermine the justice system in foreclosure proceedings," the 25-page lawsuit says. "This foreclosure churning apparatus . . . allowed the defendants to . . . throw families from their homes with callous disregard for the basic protections of the law and established American notions of justice."

(2) The robosigners involved in the foreclosure at issue are the notorious Keri Selman, who gave a title as an assistant vice president for Countrywide Home Loans, and the equally notorious Melissa Viveros, who gave her title as vice president of Countrywide, according to the Davis lawsuit. See paragraph 66 of the lawsuit:

  • Like Selman, Melissa Viveros is a known robo-signer. She discloses publicly on her LinkedIn profile that she manages a team of 340 foreclosure specialists for Bank of America, and handles "a portfolio of approzimately 140,000 specialty, subprime, VA FHA accounts ensuring that state foreclosure timelines were met accordingly."

'Sewer Service' Suspicions Linked To S. Florida Foreclosure Mill; Court Filings Of "Lost Summons" Affidavits Skyrocket In Jacksonville Area

In Duval County, Florida, The Florida Times Union reports:

  • [E]ven the summons, the simple but important legal notice required to inform homeowners that they are being foreclosed on, has not been immune to the massive problems surrounding what has become known in Florida and across the nation as the foreclosure mess. The Times-Union has reviewed documents where the same name with obviously different signatures was used to certify that papers were served to the homeowner.

  • While there is no simple way to know how often every type of irregularity occurs, there is documentation showing a sharp rise in one narrow area of concern. Instances where summonses entrusted to servers have been reported as lost, once fairly rare, have skyrocketed, making it harder to document the fate of important paperwork. From barely more than 100 annually six years ago, more than 2,000 summonses have been lost in Duval County in each of the last two years. Critics attribute the problems to both sloppiness and fraud.


  • An affidavit of service - the legal document required to verify that the summons was served properly - would be filed when the summons hadn't been served, [ex-paralegal Tammie Lou Kapusta for the foreclosure mill law office of David Stern] said.(1)


  • The process server in the case of both Jeffs and Browne was ProVest LLC, the Tampa process server that is located in the same building as Stern in Plantation. It was also ProVest that said it served three summonses on a Middleburg foreclosure case. Each return of service was signed by a Julie Parker, certifying that she had served the papers, or had tried to serve them and failed. But each of three signatures was different. Efforts to reach Parker were unsuccessful.


  • When a summons is served, the server keeps the original and turns it back in with the notice of service that becomes part of the court file. But in recent years, something's happened to a lot of those original summonses: They've been lost. The number of "affidavits of lost summons," the court document that must be filed in such a case, has skyrocketed in recent years.

For more, see Fraud in foreclosure summons a disturbing trend in Duval County (Summonses are being misplaced or forged by servers; critics say sloppiness and fraud leading to sudden spike).

A 2008 report, Justice Disserved, documents the victimization of lawsuit defeandants by improper service of process to those who ultimately had money judgments unknowingly entered against them, often to devastating effect.

Go here for other "sewer service" posts.

(1) Go here for the Deposition of Tammie Lou Kapusta.

Deposition: S. Fla. F'closure Mill Duped Fannie, Freddie During Visits When Conducting On-Site File Inspections; Possible Sewer Service Also A Conern

A recent story in the Jacksonville Business Journal highlights one part of a recent deposition given by Kelly Scott, a former employee with South Florida foreclosure mill, Law Office of David J. Stern, in the following excerpt:

  • Scott said Stern would get tipped off that Freddie Mac and Fannie Mae were coming to visit. “If certain files weren’t updated correctly and there was lack of process, they would change the client code in the file,” she said.

  • If it was Countrywide, they would change it into a different client name with a sticker and print it out, and then these files were transferred into a room where they would hide them and keep them behind closed doors until the client would leave.”

  • When Freddie Mac officials would leave the office, the staff would change the file codes back again, Scott said. She said she personally did this on five or six occasions, involving more than 500 files.

  • Scott said Stern would take care of the expense of bringing clients to the office: hotel, food, rental cars — “whatever the client needed.”


  • Scott said some managers would look the other way when process servers billed for service on three or more people at one address, even though the case involved only one person.

  • If they found files without the proper notice of service documents, they gave them to office manager Cheryl Samons, and the files would reflect the proper paperwork within an hour or two, Scott said.

For the story, see South Florida law firm at center of foreclosure investigation.

Go here for the Deposition of Kelly Scott.

Colorado AG: Sale Leaseback Peddler Stripped $1M+ In Equity By Targeting Financially Unsophisticated, Vulnerable Homeowners In F'closure Rescue Racket

Courthouse News Service reports:

  • Jason L. Lynn, now of Marion, Ohio,(1) and his company, Superior Financial Group, of Superior, Colo., defrauded people through "unlawful foreclosure consulting services," the Colorado attorney general claims in Denver County Court.(2) The state filed a similar complaint against Patrick Brunner, Jerry Ohu, Gregory Hoffman, William Schultz, Fortune Financial Group, and Platinum Financial Group, in the same court.(3)

Source: Foreclosure Scams (5th story from top).

For the lawsuit, see State of Colorado v. Lynn, et ano.

(1) According to the lawsuit, Lynn was a resident of Colorado until in or around September 2009, at which point it appears that he decided to skip town. The AG has tracked him down residing, upon information and belief, at 975 Champagne Drive, Marion, Ohio 43302, the suit states.

(2) According to the lawsuit, the Colorado AG seeks to permanently enjoin Defendants, including Jason L. Lynn, individually, from engaging in deceptive trade practices, to obtain civil penalties and restitution, to disgorge unjust proceeds, and to recover attorney fees and costs. The suit alleges violations of the Colorado Consumer Protection Act, C.R.S. §§ 6-1-10 1 6-1-1120, and further alleges that Lynn is a "foreclosure consultant" within the meaning ofthe Colorado Foreclosure Protection Act, C.R.S. §§ 6-1-1101 to 6-1-1120.

The following excerpt from the Colorado AG's lawsuit (paragraphs 23-31) sets forth the general allegations made against Lynn (bold text is my emphasis, not in the original text):

  • 23. Beginning in 2005 and continuing through 2007, Jason Lynn, acting through his company Superior Financial Group, LLC, targeted financially unsophisticated and vulnerable Colorado homeowners in foreclosure and obtained more than $1,000,000 of equity through unlawful foreclosure consulting services involving sale-leaseback schemes. Lynn executed this scheme through the use of disparate bargaining power and inadequate disclosures. Homeowners not only lost all their equity to Lynn but in some cases their homes to eviction.

    24. Lynn promised victims that they could save their homes from foreclosure by selling them to Lynn's investors and then leasing the home from the investor for two years with an option to repurchase it. Upon information and belief, nearly all the homeowners were unable to repurchase the home, in part because significant amounts of equity were stripped from the home for Lynn's personal use and to compensate his investors, and the repurchase price was therefore unreasonable.

    25. Rather than provide meaningful assistance to homeowners, Lynn obtained substantial equity from the homeowners at closing without disclosing the amount and purpose of the sales proceed assignment to Lynn.

    26. Through advertisements on television and in newspapers and through referrals, Lynn targeted financially unsophisticated and vulnerable homeowners who had significant equity in their homes as a result of lengthy ownership, but nevertheless faced foreclosure because of economic hardship or personal tragedy.

    27. Lynn induced these homeowners to sell their homes to avoid a foreclosure sale, stay in their longtime homes, and have a opportunity to resume ownership. Some of the homeowners had spent many years, and some decades, in their homes and wanted to remain and once again repurchase their homes--and where thus susceptible to Lynn's deception and predatory conduct.

    28. After determining the amount of equity that could be obtained based on the existing mortgage and the estimated value, Lynn approached homeowners with a sale contract and a lease agreement containing an option to repurchase the property. Homeowners were not allowed to negotiate the sale price of their home or the repurchase price. Rather, Lynn misled the homeowners to believe that working with Superior Financial Group, LLC was the best way to save their home. Through deceptive, false, and misleading conduct, Lynn induced the victims to sign the sale contract and lease agreement.

    29. Lynn promised the victims that once they sell the home, they would remain in the home as a tenant with the option to repurchase the home when their credit or financial condition improved. Lynn informed the victims that he would use the equity from the sale, which was transferred at closing to Superior Financial Group, LLC through a proceed assignment, to assist the homeowners with rent payments and repairs. At no time, however, did Lynn disclose the actual purpose or amount of the proceed assignment. Moreover, he did not disclose that he himself would use the homeowner's equity for his personal use.

    30. At the closing, the homeowner victims would assign, without warning or disclosure, all the equity in their home through a proceed assignment to Superior Financial Group, LLC, which was presented to them for the first time at the closing.

    31. Lynn obtained equity from the victims up to $106,994 per transaction. The victims not only lost substantial equity in their homes as a result of this scheme, but many also lost the homes when they were evicted or forced to leave when the investor allowed the home to go into foreclosure.


This type of foreclosure rescue scam is the kind of title transfer where the deed conveying title that has been successfully attacked in Colorado through application of the state consumer protection statute, and has led to an award of triple damages on behalf of the victimized homeowner. See Appeals Court Reverses $3M+ Jury Award To Equity Stripping Victims; Homeowners Forced To "Settle" For Triple Damages ($741K) Under State Consumer Fraud Act.

A successful attack on a sale leaseback scam perpetrated on a homeowner could also conceivably result in the voiding of the mortgage loan that financed the equity stripping scam upon a finding that the lender is not entitled to the protection of the state recording statutes as a bona fide purchaser due to its failure to inquire of the occupants of the property that were in open possession thereof into any unrecorded rights and/or equities they may have.

See, for example, Martinez v. Affordable Hous. Network, Inc., 123 P.3d 1201; 2005 Colo. LEXIS 1075 (Colo. 2005), in which the Colorado Supreme Court applied the bona fide purchaser doctrine in a sale leaseback, foreclosure rescue scam:

  • It is well settled in Colorado that, with certain exceptions inapplicable here, possession of real estate is sufficient to put an interested person on inquiry notice of any legal or equitable claim the person or persons in open, notorious, and exclusive possession of the property may have. See Hitchens v. Milner Land, Coal & Townsite Co., 65 Colo. 597, 601, 178 P. 575, 576 (1919);  Colburn v. Gilcrest, 60 Colo. 92, 94, 151 P. 909, 910 (1915);  Yates v. Hurd, 8 Colo. 343, 344, 8 P. 575, 576 (1885);  Tiger v. Anderson, 976 P.2d 308, 310 (Colo.App.1998).

Such a result was recently achieved in a recent Minnesota case applying the applicable state consumer protection statute involving a similar fact pattern. See Minn. Sale Leaseback, Equity Stripping Victim Wins Back Free & Clear Home With Help From Non-Profit Law Firm As Judge Voids Sale & Subsequent Mortgage.

(3) Attorneys General in Massachusetts, Arizona, Maryland and Washington State have enjoyed recent success in bringing civil lawsuits prosecuting sale leaseback foreclosure rescue peddlers by invoking their respective state consumer protection statutes, See:

The Feds, state and local law enforcement authorities have all brought criminal prosecutions in equity stripping, sale leaseback cases cases involving the use of third party investor/straw buyers in the process of pocketing the equity out of a victim's home. See, for example, the following posts for the year 2010:

It goes without saying that if there was any fraud committed by Jason Lynn in obtaining the mortgages for his straw buyer investors in his Colorado civil case, he makes for a nice juicy target for a criminal prosecution by the Colorado Feds.

Monday, October 25, 2010

West Palm Beach Judges To Stop Ignoring Court Procedural Rules In Uncontested Foreclosure Actions

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

  • Thousands of Palm Beach County homes have been repossessed by lenders that failed to follow a court rule requiring evidence be attached to foreclosure affidavits, something judges often allowed to happen when no one contested the case.(1)

  • After revelations in recent weeks that sworn affidavits from several major banks and home loan servicers may be flawed, Palm Beach County Chief Judge Peter Blanc said banks will increasingly have to prove their foreclosure claims with sworn or certified supporting paperwork.


  • "In the past when affidavits came in on defaults, the judges haven't been requiring the documents because no one was there objecting," said Blanc, who added that about 80 percent of foreclosures in the county are not contested. "Dealing with the volume we are dealing with we want to make sure that all or i's are dotted and t's crossed."


  • Foreclosure defense attorneys have argued for months that in the rush to take back homes, that large law firms representing lenders and overwhelmed judges ignored the evidence rule. Only when attorneys or homeowners protested did the rush to summary judgment slow, they claim.

For more, see Palm Beach County judges want more evidence in uncontested foreclosures.

(1) What happens now to all the foreclosures that have slipped through in disregard of this rule. Are those foreclosure judgments now absolutely void (ie. void ab initio), or are they merely voidable, but nevertheless subject to attack?

While they're at it, in cases where foreclosure mills and others submit bogus "lost note" affidavits to cover up for their inability to "produce the note" prior to obtaining a foreclosure judgment, Florida judges should at least be sure to comply with Section 673.3091(2) of the Florida Statutes ("Enforcement of lost, destroyed, or stolen instrument"), which states the following with regard to a lender's attempt to enforce a lost, destroyed, or stolen promissory note or other negotiable instrument (bold text is my emphasis, not in the original text of the statute):

  • The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

"Adequate protection" has commonly been believed to mean the posting of a "lost note" indemnification bond in the amount of double the face amount of the homeowner's mortgage to adequately protect the homeowner against loss that might occur if, in the future, someone else comes along with the actual note that was purportedly lost and attempts to enforce it against the homeowner.

For an example of what one Miami judge did when a lender proceeded to foreclose without posting a "lost note" indemnification bond after being court ordered to do so, see Daily Business Review: Blasting Bank's Lawyer, Judge Wipes Out Homeowner's $207,000 Mortgage. Go here for the associated transcript of the May 6, 2010 court hearing, in which Judge Jennifer Bailey voided the promissory note and stuck the bank with the tab for the homeowner's attorney fees for good measure.