Pittsburgh Bankruptcy Chief Sanctions Lying Lawyer, Foreclosure Mill Firm For Filing Manufactured Docs; Orders Both To Report To Disciplinary Board

In Pittsburgh, Pennsylvania, the Pittsburgh Tribune Review reports:

• The chief bankruptcy judge for Western Pennsylvania sanctioned an attorney and her Philadelphia law firm for filing deceptive documents in a foreclosure proceeding and then lying about them in a case against a Monroeville woman.

• The firm filed copies of three key letters created after the fact and never sent to the homeowner or her lawyer, U.S. District Judge Thomas O. Agresti ruled. Under Agresti's order last week, attorney Leslie A. Puida and the firm Goldbeck, McCafferty and McKeever must report to the Disciplinary Board of the state Supreme Court, which could impose penalties.(1)

• Puida could not be reached. The firm did not respond to a request for comment [last week]. A partner in the firm told the judge it initiated practices and procedures to avoid a recurrence.

For more, see Judge sanctions attorney, law firm in Monroeville case.

In related stories, see:

• ABA Journal: Law Firm Accused of UPL, After Admittedly Filing Foreclosures Without Attorney Review,(2)
• AOL's Daily Finance: Thousands of Pennsylvania Foreclosures Could Be on Shaky Ground.

(1) Under Judge Agresti's order, the court declined to slam the firm with monetary sanctions (the Trustee suggested the firm cough up $50K), "[g]iven the magnitude of the financial loss which GMM has already experienced in the form of attorney fees and lost client revenue as a result of this matter" (around $400K in out-of-pocket expenses which will not be reimbursed by insurance coverage), saying that banging them for more cash "could jeopardize the continued operation of GMM, possibly threatening the livelihoods of innocent employees who had nothing to do with the violations addressed in the Rule."

Likewise, Judge Agresti declined to impose monetary fines on Puida or suspend her from practicing in the bankruptcy court in the state's Western District (the Trustee suggested one year), for reasons that can be described as practical (and possibly humanitarian) as set forth in his order.

Judge Agresti's ruling is the latest in the ongoing litigation involving Countrywide Home Loans, and alleged fabricated evidence, suspected forgeries, and requests for allegedly improper fees or payments from bankrupt homeowners filed in this and other cases he has overseen in the U.S. Bankruptcy Court in Pittsburgh. See:

• The Wall Street Journal: Judge Rejects Countrywide Plan To Settle Suit on Foreclosure Bid (requires paid subscription; (requires paid subscription; if no subscription, TRY HERE),
• The Wall Street Journal: Judge Dings C’wide Settlement Over Alleged Forgeries (free access),
• In re Countrywide Home Loans, Inc. (Judge Agresti's April 1, 2008 opinion and order that OKs go-ahead for Countrywide subpoenas. "In each of these 10 cases, the UST identified actions engaged in by Countrywide that she claims were questionable or raised issues going to the integrity of the bankruptcy system" Agresti said in this order.).

(2) The following comment to the ABA Journal story was left by William A. Roper, Jr. which merits attention:

• Readers, reporters and editors have long since forgotten that the firm named in this suit was at the center of the In Re Hill case which led to the collapse of Countrywide and which telegraphed today’s robo-perjury and foreclosure fraud scandal almost three years ago. A review of some of the primary materials in In Re Hill is appropriate:
  
  http://www.scribd.com/doc/40761878/In-Re-Hill-Transcript-of-20-Dec-2007-Hearing?in_collection=2711712 (This document is the hearing transcript in the case In Re Hill, Case No. 01-22574, U.S. Bankruptcy Court, W.D. Pa. In a hearing before the Hon. Thomas P. AGRESTI it emerged that Countrywide had sent "recreated letters" to the counsel for the debtor),
  
  http://www.scribd.com/doc/40762581/In-Re-Hill-the-Recreated-Letters?in_collection=2711712 (Copies of the three "re-created" letters),
  
  http://www.scribd.com/doc/41551941/In-Re-Hill-Memorandum-Opinion-and-Order-05-Oct-2010?in_collection=2711712 (Chief Judge Agresti's October 5, 2010, memorandum opinion and order in In re Hill).
  
  *
  Nor was In Re Hill the first occasion when a U.S. Court found it appropriate to sanction GMM and attorney Ledlie PUIDA. Consider the Bankruptcy Court’s In Re Ennis decision from 2006:
  
  http://www.scribd.com/doc/44629988/In-Re-Ennis-Memorandum-Opinion-and-Order-of-28-Jul-2006?in_collection=2703239 (Judge Robert W. BENTZ Memorandum and Order imposing sanctions upon Countrywide, its foreclosure mill law firm Goldbeck, McCafferty & McKeever, and attorney Leslie PUIDA in the case of In Re Robert E. and Kathleen L. ENNIS, Case No. 05-11985, a matter before the U.S. Bankruptcy Court W.D. Pa.),
  
  Now, in December of 2010, we learn from the In Re Kemp case that BAC witnesses such as Linda DeMartini are asserting under oath that Countrywide NEVER DELIVERED the mortgage collateral to the mortgage trusts:
  
  http://www.scribd.com/doc/44619866/In-Re-Kemp-Decision-16-Nov-2010
  
  But BAC tells us that its witness was “mistaken” and that its outside counsel misunderstood its business. This is nothing more than business as usual at Countrywide/BAC where evidence fabrication, perjury and forgery are considered to be core competencies from which the firm derives a competitive advantage.

Widespread Unauthorized Practice Of Law Under Cover Of Philadelphia Foreclosure Mill To Throw Title To Foreclosed Homes Into Question?

Attorney Abigail Field writes at AOL's Daily Finance:

• Two Pennsylvania cases, one state and one federal, have exposed new types of document problems in foreclosure cases. One of the cases has potentially transformative consequences for thousands of troubled Pennsylvania homeowners.

• At the center of each is the same law firm: Goldbeck McCafferty & McKeever (GMM). A lawsuit filed by Patrick Loughren against GMM details how the firm allowed -- and perhaps still allows -- nonlawyers in its firm to file and prosecute thousands(1) of foreclosures. As long as a lawyer supervises foreclosure filings, and at least reads them before they're submitted to the court, that is acceptable.

• But Loughren is suing because all three named partners of GMM, Joseph Goldbeck, Gary McCafferty and Michael McKeever, have admitted under oath -- during depositions last September and in a separate case in December 2009 -- that no attorney ever read the filings.(2) The partners made clear that the practice has gone on for the past several years.

***

• [L]oughren's complaint is so detailed, and the partners' admissions so damning, that if this case is decided on the merits, it's hard to see how Loughren could lose. If Loughren does win, the consequences could be far-reaching: All current foreclosure actions filed by GMM could be dismissed on the grounds that lawsuits filed by nonlawyers are a "nullity," meaning they don't count. That's hundreds, potentially thousands, of cases across Pennsylvania.

• All completed foreclosures that were brought using this method could also be called into question for the same reason, and given that the practice has been going on for years, a Loughren win could throw into question the title to thousands of Pennsylvania properties. In addition, any homeowners who paid legal fees to the banks and GMM during their foreclosures could get that money back.

***

• Although the practice of having nonlawyers file suit wasn't at issue in that case, learning of it upset U.S. Bankruptcy Court Judge Thomas Agresti [in an unrelated case] so much he wrote in his Oct. 5, 2010 order:(3)
  
  "During the trial the Court also became aware of some apparently routine practices at GMM that raise issues that cannot be ignored. McKeever testified to a procedure at his firm whereby foreclosure complaints are prepared and filed by non-attorneys and never reviewed by an attorney, even though the "signature" of an attorney appears on the document. . . . Even though these actions are not being filed in this Court. . .concern for our sister courts in this Commonwealth compel the Court to at least make publicly known what it learned during the trial. Furthermore, often these fundamentally flawed foreclosure actions, form the basis for related relief in this Court should the state court defendant subsequently file a bankruptcy petition. Therefore, the Court is concerned about the continuation of this practice by GMM."

For more, see Thousands of Pennsylvania Foreclosures Could Be on Shaky Ground.

See also, ABA Journal: Law Firm Accused of UPL, After Admittedly Filing Foreclosures Without Attorney Review.

(1) Robinson v. Countrywide Home Loans, Inc. et al. (W.D. Pa. Motion to Compel - filed Oct. 8, 2010).

(2) Loughren v. Lion, et al. (Court of Common Pleas, Allegheny County, Pennsylvania - Complaint In Equity).

(3) DeAngelis v. Countywide Home Loans, Inc., et al. (In re Hill) (Bankr. W.D. Pa. Oct. 5, 2010 - Memorandum Opinion And Order sanctioning Countrywide).

Westchester County Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff Leads To Six Convictions, One Acquittal; One Mistrial

In Westchester County, New York, the Westwood-Washington Township Patch reports:

• Westwood resident Wilma Shkreli, also known as Wilma Gecay, will be sentenced Tuesday for her role in a $1.4 million mortgage fraud scheme in Westchester County, N.Y. Shkreli, 33, pled guilty in April to one count of Grand Larceny in the Second Degree, a class C Felony, according to the Westchester County District Attorney's Office. She could now be sent to New York state prison for between 1 1/3 and three years. She also faces a fine of $34,000.

• Four other defendants in the case pled guilty. One defendant was found guilty at trial, another was acquitted and a third proceeding was declared a mistrial.(1)

***

• Charges came after a nine-month investigation by the District Attorney's Office and the New York State Banking Department's Criminal Investigations Bureau. The defendants allegedly defrauded four families and two mortgage lenders in Westchester County out of $1.4 million from March 2004 to January 2007.

• According to officials, the defendants convinced property owners facing foreclosure to sign over their homes with the option of re-purchasing them in one to two years. The investigation found four families that were victims: from Croton-on-Hudson, Yorktown Heights, Cortlandt Manor and the City of Mount Vernon, all in Westchester County, N.Y.(2)

Source: Westwood Resident To Be Sentenced In New York Mortgage Fraud Case (Wilma Shkreli faces up to three years in prison).

See also, The Journal News: 1 convicted, 1 exonerated, 1 mistrial in mortgage-fraud trial (when link expires, TRY HERE and TRY HERE).

(1) The other defendants in this racket:

• Amerigo DiPietro, Brewster, N.Y.: Pled guilty Aug. 23 to three counts of Grand Larceny in the Second Degree, one count of Scheme to Defraud in the First Degree and one count of Conspiracy in the Fourth Degree. DiPietro faces five to 15 years in state prison and a forfeiture order of $243,795. He will be sentenced Jan. 31, 2011.
• Doreen Swenson and Herbert "Phil" Hall, Tarrytown, N.Y.: Pled guilty May 4 to one count of Grand Larceny in the Second Degree. The husband and wife who posed as foreclosure rescue specialists were sentenced to two to six years in state prison Aug. 5.

The following attorneys were also prosecuted in this matter:

• Attorney David Reback, Rye Brook, N.Y.: Pled guilty July 23 to four counts of Grand Larceny in the Second Degree, one count of Scheme to Defraud in the First Degree and one count of Conspiracy in the Fourth Degree. He faces five to 15 years in state prison and a forfeiture order of $50,000 and will be sentenced Jan. 31, 2011.
• Attorney Eileen Potash, Fresh Meadows, N.Y.: Convicted Nov. 29 on one count of Conspiracy in the Fourth Degree. Potash faces 1 1/3 to three years in state prison and will be sentenced Feb. 28, 2011.
• Attorney Frank Corigliano, Newtown, Conn.: Was acquitted of the charges against him following a jury trial.
• Attorney Mildred Didio, New York, N.Y.: Remains charged with two counts of Grand Larceny in the Second Degree, one count of Scheme to Defraud in the First Degree and one count of Conspiracy in the Fourth Degree. Her case resulted in a mistrial Nov. 30 and will reportedly be retried, according to this story.

(2) For earlier reports on this story, see:

• Westchester District Attorney press release: Indictment Unsealed In Countywide Mortgage Fraud Scheme (Eight Individuals Defrauded 4 Families For 1.4 Million Dollars),
• The Record: 4 Lawyers Indicted In $1.4 Million NY Scam.

2 Sale Leaseback Peddling Cops Accused Of Consumer Fraud Violations; "Equitable Mortgages" Required Disclosures Under TILA, HOEPA: Arizona AG

In Phoenix, Arizona, Courthouse News Service reports:

• Two men defrauded 140 homebuyers by acquiring title to their homes through so-called "sale-leaseback," then selling the homes elsewhere for hefty profits, the Arizona attorney general says. The state says Lee Brent Shaw and Mark P. Tallman and their companies, Better Choice Investments and Better Solutions, stripped their victims of their equity and their homes.(1)

• "This case involves an equity stripping scheme that defrauded over 140 Arizona homeowners, ultimately causing them to lost both their home and their home's equity," the complaint states. "Defendants obtained the homes through a foreclosure rescue scheme aimed at vulnerable, often low-income homeowners facing imminent foreclosure. In what is known as a sale-leaseback, defendants took title to the homes after the payment of the arrears on the homeowner's mortgages, in exchange for allowing the homeowner to stay in the property as a tenant. This transaction, also known as an equitable mortgage, violates Arizona law,"(2) the state attorney general says in Maricopa County Court.

• The state claims that no homeowners were told that their home would be immediately sold to an investor, nor that that if a trustee's sale took place "they would be entitled to excess proceeds," nor were they given the required information by the Homeowners Equity Protection Act or the Truth in Lending Act.(3)(4)

For more, see State Busts Sale-Leaseback Home Scheme.

For the lawsuit, see State of Arizona v. Shaw, et al.

(1) Earlier media reports identify this duo as police lieutenants with the Phoenix Police Department. See:

• KPHO-TV Channel 5: Two Phoenix Cops Accused Of Fraud, Racketeering (Lieutenants Lee Brent Shaw And Mark Tallman Face Multiple Investigations);
• The Arizona Republic: Phoenix lieutenants face probe over real-estate business (Two Phoenix police lieutenants are under investigation after residents complained that some of the 120 real-estate purchases conducted by their off-duty business were unethical or illegal).

(2) In a recent New Jersey case involving only one sale leaseback deal (see NJ Federal Judge Upholds Ruling Awarding $690K To Homeowner Screwed Out Of $116K In Sale Leaseback Scam; OK's Add'l $34K For Victims' Attorney Fees), substantially all of the court-awarded damages granted to a homeowner-couple were attibutable to actual damages for the stripped equity of $116,791.49 (which was then tripled to $350,374.47 pursuant to the applicable state consumer fraud statute), and $293,836.17 in statutory damages for violations of the Federal Truth In Lending Act, Federal Home Ownership and Equity Protection Act, and a state consmer lending law.

I wonder if anyone at the Arizona Attorney General's office has attempted to calculate the financial exposure that this duo faces resulting from the 100+ ripoffs they've been accused of perpetrating.

For the treatment of sale leaseback arrangements as equitable mortgages, see generally:

• When is a Sale-Leaseback an Equitable Mortgage?,
• Sale-Leasebacks: Things May Not Be What They Seem,
• Online References On Sale Leaseback Recharacterization.

(3) The pair was also accused of acting as unlicensed mortgage brokers and mortgage bankers.

(4) In this case and others (assuming the scammed homeowner can't establish that the conveyance is absolutely void, such as in the case involving forged land documents - in which case all subsequently acquired interests in the home are also absolutely void) where the scammed homeowner retains and maintains continued, undisturbed possession of the home after signing the 'ripoff' documents conveying title to another, a strong case can arguably be made that a successful attempt to void the title conveyance to the scammers could also lead to the voiding of any subsequent mortgage placed on the home, even if the lender had no actual knowledge of the scam and claims to have the protection of the recording statutes as a bona fide purchaser.

In Arizona, (as well as in most other jurisdictions), any purchaser of real estate, or lender acquiring a security interest therein, has a duty to conduct a physical inspection of the realty, and where a physical inspection of the property would reveal an adverse interest or where there is a party in possession other than the record title owner, the purchaser or lien claimant has a duty to inquire of the possessor as to his interest and is charged with knowledge of the facts discoverable from such an inquiry or inspection.

Failure to make such inspections or inquiries could potentially:

• leave the purchaser's or lender's interest in the property subject and subordinate to any legal rights and equities that the scammed victim can establish, and

• disqualify the subsequent purchaser or lender from the protections accorded a bona fide purchaser or bona fide encumbrancer.

See, for example, Bianconi v. Smith, 3 Ariz. 320; 28 P. 880 (1892):

• "Common, ordinary business prudence would have suggested some investigation as to the source of appellee's title, and some inquiry as to who was in possession, before purchasing the property; and appellant's neglect of these indicated either gross carelessness or a degree of credulity not usually exhibited by men of ordinary experience."

and Keck v. Brookfield, 409 P.2d 583 (Ariz. App. Ct. 1965):

• A purchaser of land in possession of one other than the holder of the record title is compelled to inquire of the possessor by what title he holds possession, or he will be held to have taken subject to whatever rights a proper inquiry would disclose that the possessor had. Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574, 577, 296 P. 260 (1931).

For more on the duty of a subsequent purchaser or encumbrancer to conduct inspections and make the appropriate inquiries of persons in possession of real estate in Arizona, (for which there is case law dating back over a century), see:

• Arizona Bona Fide Purchaser, Possession, Duty Of Inquiry.

In other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

For some insights on the various legal theories and strategies to attacking this type of scam in litigation brought on behalf of the screwed-over homeowner, see:

• Foreclosure Rescue Scams I (part of a larger work from the National Consumer Law Center),
• Foreclosure Rescue Scams II (work made available online by the State of Washington Office of the Attorney General).

Judge Slams 'Zombie Debt' Buyer In Class Action Over Phony Robosigned Affidavit Filed In Credit Card Collection Lawsuit

The Wall Street Journal reports:

• Employees in Encore [Capital Group']s Midland [Funding] subsidiary work with outside law firms to file debt-collection suits. Midland has a proprietary computer system called "You've Got Claims" that generates unsigned affidavits. In these documents, which are signed and submitted to the court, employees attest that borrowers owe the amount of debt that Midland is suing to collect.

• In a deposition filed as part of a civil lawsuit against Midland, employee Ivan Jimenez testified that he signs 200 to 400 affidavits a day. The percentage of documents checked for accuracy against other records is "very few and far between," he says. "As far as what I deal with, they just come from the printer as far as where we get them."

• U.S. District Judge David A. Katz ruled last year that the debt-collection company violated federal and Ohio laws by trying to collect $4,516.57 in credit-card debt using a phony affidavit. The company certified that the debt was genuine "based entirely" on the printout, rather than personal knowledge of the debtor, the judge concluded.

• He refused a request to throw out the lawsuit, which won class-action status. Judge Katz wouldn't comment on specifics of the case, though he says it shows that lawyers for borrowers should "be more diligent in looking to the underlying documentation" for debts being pursued by collectors.(1)

Source: Boom in Debt Buying Fuels Another Boom—in Lawsuits.

(1) Presumably, the Federal law violated here was the Fair Debt Collection Practices Act. I'm surprised there isn't a flood of class action 'sightings' alleging 'Fair Debt' violations involving robosigned affidavits in the context of mortgage foreclosure actions.

The 'Piling On' Continues For S. Fla. Foreclosure Mill As Fired Workers File Suit, Seek Class Action Status For Getting The Axe Without Proper Notice

In Plantation, Florida, The Miami Herald reports:

• Four former employees of the Law Firm of David J. Stern and its' related foreclosure processing company -- DJSP Enterprises, have filed a federal lawsuit claiming they were not given proper notice before being fired. The employees allege Stern violated the Worker Adjustment and Retraining Notification Act, or WARN, which mandates that employers give employees 60 days notice before being terminated.(1) [...] Attorneys for the employees are asking for the case to be given class action status.

For more, see Former employees suing prominent Broward attorney.

(1) The Worker Adjustment and Retraining Notification Act (WARN) protects workers, their families, and communities by requiring most employers with 100 or more employees to provide notification 60 calendar days in advance of plant closings and mass layoffs. Employees entitled to notice under WARN include managers and supervisors, as well as hourly and salaried workers. WARN requires that notice also be given to employees' representatives, the local chief elected official, and the state dislocated worker unit.

FBI Manhunt For Hawaiian Sale Leaseback Peddlers Continues; Couple Who Copped Pleas To Ripping Off Homeowners Failed To Show Up For Sentencing

In Honolulu, Hawaii, the Honolulu Star Advertiser reports:

• What ever happened to the FBI manhunt for an Oahu couple who never showed up for sentencing in a mortgage fraud scam?

• FBI agents continue chasing leads and have expanded the search for John and Julieanne Dimitrion to the mainland. "Our fugitive investigation has indicated that they have some personal contacts in the Washington, D.C., area and the West Coast of the U.S. mainland," said FBI Special Agent Tom Simon in Honolulu.

***

• The FBI launched the manhunt after the couple failed to show up for sentencing at U.S. District Court on July 6. The Dimitrions pleaded guilty in April to operating a fraud scheme that led to several families losing their homes, the FBI said.

• The couple persuaded distressed homeowners to sign over their properties, promising to invest the proceeds of the home sales. Instead, they spent the money on themselves. Losses to their victims exceeded $1 million.

For the story, see FBI continues search for couple behind mortgage scam.

For an earlier post on this story, see Federal Judge Issues Arrest Warrants For Foreclosure Rescue Scammers For Failing To Appear At Sentencing In Sale Leaseback, Equity Stripping Ripoff.

"Concern For Our Sister Courts In This Commonwealth" Cause PA Bkptcy Judge To Ring Warning Bell Regarding Unreviewed F'closures Filed By Non-Lawyers

In an October 5, 2010 order issued from a U.S. Bankruptcy Court in Pittsburgh, Pennsylvania, Chief Judge Thomas P. Agresti expressed his concerns over certain dubious practices by Philadelphia-based foreclosure mill law firm Goldbeck, McCafferty and McKeever ("GMM") in the following excerpt:

• During the trial the Court also became aware of some apparently routine practices at GMM that raise issues that cannot be ignored. McKeever testified to a procedure at his firm whereby foreclosure complaints are prepared and filed by non-attorneys and never reviewed by an attorney, even though the “signature” of an attorney appears on the document. 12/8 Tr. at 83-84.

• This would seem to be a violation of the Pennsylvania Rules of Civil Procedure, which provide that the signature of an attorney on a document filed with a Pennsylvania court is a certification that the document has been read by the attorney. See Pa.R.Civ.P. 1023.1(c).

• Even though these foreclosure actions are not being filed in this Court and thus do not expose GMM to sanctions, concern for our sister courts in this Commonwealth compel the Court to at least make publicly known what it learned during the trial. Furthermore, often these fundamentally flawed foreclosure actions, form the basis for related relief in this Court should the state court defendant subsequently file a bankruptcy petition. Therefore, the Court is concerned about the continuation of this practice by GMM.(1)

For Chief Judge Agresti's order, see DeAngelis v. Countywide Home Loans, Inc., et al. (In re Hill) (Bankr. W.D. Pa. Oct. 5, 2010 - Memorandum Opinion And Order sanctioning Countrywide).

In a related story, see Thousands of Pennsylvania Foreclosures Could Be on Shaky Ground.

(1) Judge Agresti's ruling is the latest in the ongoing litigation involving Countrywide Home Loans, and alleged fabricated evidence, suspected forgeries, and requests for allegedly improper fees or payments from bankrupt homeowners filed in this and other cases he has overseen. See:

• The Wall Street Journal: Judge Rejects Countrywide Plan To Settle Suit on Foreclosure Bid (requires paid subscription; (requires paid subscription; if no subscription, TRY HERE),
• The Wall Street Journal: Judge Dings C’wide Settlement Over Alleged Forgeries (free access),
• In re Countrywide Home Loans, Inc. (Judge Agresti's April 1, 2008 opinion and order that OKs go-ahead for Countrywide subpoenas).

Improper Invocation Of Court Jurisdiction, Grant Of Void Judgments Of No Concern To Some Judges In Unchallenged Foreclosure Actions

In Central Florida, Sarasota Herald Tribune columnist Tom Lyons writes:

• Circuit Judge Lee Haworth says a judge has to be neutral in foreclosure cases, and can't act as a defense attorney when there isn't one. But does being neutral really mean a judge must be gullible when there is no one in court to point out obvious problems with documents filed by a bank?(1)

• I'm not convinced neutrality forces judges to ignore major and possibly fraudulent errors in mortgage transfer documents, especially when foreclosure mills have become infamous for filing them.

***

• Aside from it being impractical to scour documents in every foreclosure case, [Haworth] says it's improper for judges to question such evidence [of dubious documents] even when they notice it, unless a defense lawyer or defendant raises the issue. Haworth knows some judges -- ones he describes as more activist than he is -- disagree. "Each judge makes their own call," he said.(2)

For more, see Being neutral doesn't mean being gullible.

(1) See The Tampa Tribune: Judges fulfill proper role in state's foreclosure crisis for a similar position expressed by another Florida chief judge, J. Thomas McGrady, the chief judge of the Sixth Judicial Circuit of Pasco and Pinellas counties.

(2) Said another way, Judge Haworth's position is that trial judges have absolutely no obligation to determine whether:

• a plaintiff in a lawsuit has properly invoked the jurisdiction of the court,
• a controversy between the parties named in the lawsuit does, in fact, exist, and
• the necessary parties to the alleged controversy have been brought before the court

unless those issues have been specifically raised by a defendant.

Foreclosing lenders' failure to properly establish that it had the right to bring the foreclosure action appears to lead to the conclusion that such an action lacks subject matter jurisdiction, and the judgment rendered therein is null, void, and with no effect.

See Cone v. Benjamin, 157 Fla. 800; 27 So. 2d 90 (Fla. 1946) for one example of legal precedent in Florida supporting the proposition that, with respect to the effect it may have on real estate, a judgment in favor of a party invoking the jurisdiction of the court (plaintiffs in foreclosure actions, for example) who had no right, title or interest in the real estate, nor any duty to perform with reference thereto, is without jurisdiction, and is null and void, and wholly without effect. The relevant excerpts from the Florida Supreme Court ruling in this case follow (bold text is my emphasis, not in the original text):

• Our view is that the decree in the chancery suit, in so far as it directly affected the real estate, or any right or title therein, was void, because the complainant administrator, who invoked the jurisdiction of the court, had no right, title or interest in the real estate, nor any duty to perform with reference thereto. See 39 Am. Jur. 858-863; Lovett v. Lovett, 93 Fla. 611, 112 So. 768.

***

• For the reason above pointed out, we hold that, under Section 4898 C.G.L. of 1927, the said chancery decree was ineffective as against these appellants insofar as it authorized the administrator, under the supervisor and director of the County Judge, to distribute the personal property to the known heirs of the husband, and that it was wholly without effect on the title to the real estate.

--------------------------------

In the above-referenced case, Lovett v. Lovett, 93 Fla. 611, 112 So. 768 (Fla. 1927), the Florida Supreme Court discusses what it is for a court to have "subject matter jurisdiction" in a particular case, and concludes its discussion with this summary (bold text is my emphasis, not in the original text):

• So that, when it is said that a Court has jurisdiction of the subject-matter of any given cause, if these words are to be given their full meaning, they imply, generally speaking, (1) that the Court has jurisdictional power to adjudicate the class of cases to which such case belongs; and (2) that its jurisdiction has been invoked in the particular case by lawfully bringing before it the necessary parties to the controversy, and (3) the controversy itself by pleading of some sort sufficient to that end; and (4) when the cause is one in rem, the Court must have judicial power or control over the res, the thing which is the subject of the controversy. This, is a general way, is what we mean when we say that a Court has "jurisdiction of the subject-matter and the parties" to a cause.

Where the party invoking the jurisdiction of the court by filing the foreclosure action fails to establish that it had any right, title or interest in the real estate, or any duty to perform with reference thereto, it seems clear that neither:

• the necessary parties to the controversy have been lawfully brought before the court, nor
• the Court has "judicial power or control over the res, the thing which is the subject of the controversy"

two of the prerequisites for having subject matter jurisdiction over the case that are necessary for rendering valid judgments.

Recent Bankruptcy Court Ruling Provides Ammunition For Both Financially Strapped Borrowers, Mortgage-Backed Security Investors

Bloomberg News reports:

• Testimony by a Bank of America Corp. employee in a New Jersey personal bankruptcy case may give more ammunition to homeowners and investors in their legal battles over defaulted mortgages. [...] In the case, U.S. Bankruptcy Judge Judith H. Wizmur on Nov. 16 rejected a claim on the home of John T. Kemp, ruling his mortgage company, now owned by Bank of America, had failed to deliver the note to the trustee. That could leave the trustee with no standing to take the property, and raises the question of whether other foreclosures could similarly be blocked.

***

• Wizmur’s ruling is being scrutinized by lawyers for borrowers seeking to stall repossessions as a way to press lenders to modify their debt. Attorneys for homeowners have already won cases by calling into doubt the legitimacy of affidavits used to take back properties. “If this is correct, many, many, many foreclosures already occurred in which this plaintiff didn’t have the note,” said Bruce Levitt, the South Orange, New Jersey, attorney representing Kemp. “This could affect thousands or hundreds of thousands of loans.”

***

• The Kemp case is also being examined by lawyers for investors in mortgage-backed securities. Owners of the bonds have been cooperating in an effort to force sellers to take back loans, saying they were misled about their quality. The Wizmur ruling may give investors an additional opportunity to push for mortgage buybacks on grounds that the bonds weren’t created in keeping with securitization contracts. “It may mean investors who think they bought mortgage- backed securities bought securities that aren’t backed by anything,” said Kurt Eggert, a professor at Chapman University School of Law in Orange, California.

For more, see BofA Mortgage Morass Deepens After Employee Says Notes Not Sent.

Troubles Faced By Unraveling S. Florida Foreclosure Mill A Blessing For 100s Of Homeowners As Some Cases Involving Law Firm Put On Indefinite Hold

In Central Florida, the St. Petersburg Times reports:

• Hundreds of mortgage mediation cases in the Tampa Bay area and other parts of Florida have been put on indefinite hold because of growing problems at a law firm that once represented many of the nation's biggest banks.

• Beset by allegations of sloppy and fraudulent documentation, the David J. Stern Law Firm has lost some of its lender clients and must withdraw from their foreclosure cases. Until the banks hire new lawyers, efforts to mediate agreements with homeowners in those cases cannot continue.

• The delay is a mixed blessing for the homeowners. They will be able to stay in their houses longer, though likely at the cost of mounting interest and late fees. But the need to withdraw from so many cases marks another chapter in the stunning decline of the Stern firm, which once handled a fifth of all Florida foreclosures and made its founder a multimilllionaire.

For more, see Mortgage mediation cases on hold as fraud allegations unravel David J. Stern Law Firm.

Housing Lawyers To Lawmakers: Flood Of Phony Foreclosure Documents Have Created Chaos In The Courts!

Bloomberg News reports:

• Mortgage lenders and their servicers, by flooding courts with falsified foreclosure documents, have created chaos in the judicial system, housing lawyers told lawmakers. “As we allow the mortgage loan industry to circumvent the rule of law, we show that corporate interests can get away with such massive dishonesty,” said Thomas A. Cox, a foreclosure- defense lawyer. “We thereby encourage more of it.”

• Cox, who works for Maine Attorneys Saving Homes, a legal aid service in Portland, made his remarks in written testimony prepared for a House Judiciary Committee hearing(1) on the causes of the foreclosure crisis. He and other witnesses scheduled to testify today described a chaotic system in which mortgage lenders routinely committed perjury and covered up mistakes. “There is a persistent refusal in the servicing industry to be honest about its conduct,” Cox said.

***

• James A. Kowalski, a Jacksonville, Florida, foreclosure defense lawyer, described a homeowner who is facing simultaneous foreclosure lawsuits filed by two different trustees both claiming to own the same loan. [...] In separate court filings Kowalski provided to the committee, Wells Fargo and U.S. Bank each claimed that [a Kowalski client's] loan had been signed over to them. “It’s a bedrock securitization problem,” Kowalski said in an interview before today’s hearing. “Once we allowed the securitization model and the concept of the securitized trust servicer to run the show, we ended up going down this road.” Cox said mortgage-backed securities have created “utter chaos” and raised doubts about who has the right to foreclose.

• Judge F. Dana Winslow, who has presided over more than 1,000 foreclosures as a New York State Supreme Court justice, said judges might have “inadvertently contributed to the creation of the foreclosure crisis by accepting, without question, the submissions of lending institutions seeking foreclosure.” That could be changing, Winslow said in his prepared testimony. “Courts have come to recognize the need to scrutinize the evidentiary submission of lenders and their agents,” Winslow said.

For the story, see Lapses in Home Foreclosure Documentation Said to Cause `Chaos' in Courts.

(1) For more on this congressional hearing, including the link to the webcast video, see Foreclosed Justice: Causes and Effects of the Foreclosure Crisis.

Prepared testimony from witnesses on the chaos cretaed in the courts by lenders, their loan servicers, and their out-of-control foreclosure mill law firms:

• Hon. F. Dana Winslow, Nassau County Supreme Court Justice, New York State Supreme Court, Mineola, NY;
• James A. Kowalski, Jr., Law Offices of James A. Kowalski, Jr., PL, Jacksonville, FL;
• Thomas A. Cox, Volunteer Program Coordinator, Maine Attorneys Saving Homes Project, Portland, ME;
• Vanessa G. Fluker, Vanessa G. Fluker, Esq., PLLC, Detroit, MI;
• Christopher L. Peterson, Associate Dean for Academic Affairs/Professor of Law, S.J. Quinney College of Law - University of Utah, Salt Lake City, UT.

Central Florida Non-Profit Law Firm Says Foreclosure Mill Broke "Fair Debt", State Consumer Laws; Seeks Class Action Status For Clients In Foreclosure

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• A man fighting to save his North Port home is the latest to challenge the law office of David J. Stern, a onetime powerhouse firm handling foreclosures and now struggling under accusations it seized homes using sloppy and illegal paperwork.

• Christopher Contreras' lawsuit accuses the law firm of trying to foreclose on his home, and countless other Florida homes, with paperwork signed by a man who has admitted to signing thousands of documents without knowing what they were. The North Port contractor is asking a judge to let other Florida homeowners in the same position join his claim as a class-action lawsuit.

• Contreras and his attorneys say two documents in Contreras' case were signed by Jeffrey Stephans, whose now infamous sworn statement caused GMAC Mortgage to halt foreclosures nationwide in the past few months. Stephans said in a deposition that he signed up to 10,000 documents a month without knowing what information was in a file, or if the information was correct, earning him the name "robo-signer." He also said notaries who were supposed to watch him sign documents were not in the same room.

• Gulfcoast Legal Services(1) attorney Elizabeth Boyle, who is handling Contreras' case, says it is the first try at a class-action case challenging robo-signing at the state level. [...] Stern's firm "prepared a bogus and false assignment of mortgage in an effort to fabricate a chain of title" needed to retake the home about two weeks before filing, according to Contreras' lawsuit.

• Stephans signed documents as an officer of two different companies, and has said he did not know whether the contents of those documents were accurate, Contreras' lawsuit states. The mortgage assignment says it was executed in February and is signed by Stephans as "Vice President of MERS," or the Mortgage Electronic Registry System. In April, Stephans, this time signing as the "Limited Signing Officer" of GMAC, executed an affidavit concerning the amounts Contreras still owed on the home.

• Contreras's suit says the foreclosure case violates the Fair Debt Collection [Practices] Act and state consumer and unfair trade practices laws.

For the story, see Legal tests mount in robo-signings (FORECLOSURES: North Port suit is first to seek class- action case at state level).

(1) Gulfcoast Legal Services is a non-profit corporation providing free legal aid to income eligible residents of the greater Tampa Bay area, with offices in Pinellas, Manatee, Sarasota and Hillsborough Counties. They provide legal help with housing and mortgage foreclosure problems, family or domestic violence issues, immigration matters, SSI/disability and consumer matters. They also provide immigration services to residents of Pasco County, and has a special project to help seniors in Pinellas, Manatee and Sarasota Counties.

Crappy Real Estate Titles, Void Foreclosure Judgments Arising From Unchallenged Faulty Legal Process Not A Concern For One Central Florida Chief Judge

In Central Florida, a recent story in the Sarasota Herald Tribune brings more attention to the issue of "crappy titles" that are resulting by reason of judges' 'hands-off' policy of allowing unchallenged foreclosure actions to proceed, despite the mounting evidence of problems in the legal process:

• The vast majority of errors involve homeowners who fell behind or stopped making payments, not people whose homes were seized by mistake. Because of that, problems with foreclosure documents have often been dismissed as technicalities. But experts say a greater threat looms.

• An orderly real estate market depends on the legal transfer of property. Someone who bought a home from a bank that used questionable paperwork might have trouble selling the property. In addition, previous owners may be able to sue to get their house back. Experts expect a flood of legal challenges based on inaccurate documents.(1)

• "Every one of them is suspect. Some of them are clearly criminal. All of them need to be investigated by law enforcement," said Sarasota real estate attorney Michael Belle, who reviews foreclosure filings as part of a court-sponsored program.

The attitude of the chief judge of one Central Florida jurisdiction about the whole paperwork mess as it specifically relates to unchallenged foreclosure cases is described in this excerpt from the story:

• Judges do not question the documents unless homeowners question them first, so they continue to rule in favor of lenders. Twelfth Circuit Chief Judge Lee Haworth said judges must remain neutral in court, and cannot raise possible defenses -- such as bad paperwork -- on behalf of homeowners who choose not to fight, or don't know how to fight, their foreclosure.(2) "The judges will accept, as they do in every case, pleadings that are represented by counsel as legitimate," said Haworth. "It's the defendant's case. ... If they don't want to hire an attorney, that's their business."

For the story, see Shortcuts on the foreclosure paper trail.

(1) The foreclosing lenders' failure to properly establish that it had the right to bring the foreclosure action appears to lead to the conclusion that such an action lacks subject matter jurisdiction, and the judgment rendered therein is null, void, and with no effect.

See Cone v. Benjamin, 157 Fla. 800; 27 So. 2d 90 (Fla. 1946) for one example of legal precedent in Florida supporting the proposition that, with respect to the effect it may have on real estate, a judgment in favor of a party invoking the jurisdiction of the court (ie. the plaintiffs in foreclosure actions) who had no right, title or interest in the real estate, nor any duty to perform with reference thereto, is without jurisdiction, is null and void, and wholly without effect. The relevant excerpts from the Florida Supreme Court ruling in this case follow (bold text is my emphasis, not in the original text):

• Our view is that the decree in the chancery suit, in so far as it directly affected the real estate, or any right or title therein, was void, because the complainant administrator, who invoked the jurisdiction of the court, had no right, title or interest in the real estate, nor any duty to perform with reference thereto. See 39 Am. Jur. 858-863; Lovett v. Lovett, 93 Fla. 611, 112 So. 768.

***

• For the reason above pointed out, we hold that, under Section 4898 C.G.L. of 1927, the said chancery decree was ineffective as against these appellants insofar as it authorized the administrator, under the supervisor and director of the County Judge, to distribute the personal property to the known heirs of the husband, and that it was wholly without effect on the title to the real estate.

--------------------------------

In the above-referenced case, Lovett v. Lovett, 93 Fla. 611, 112 So. 768 (Fla. 1927), the Florida Supreme Court discusses what it is for a court to have "subject matter jurisdiction" in a particular case, and concludes its discussion with this summary (bold text is my emphasis, not in the original text):

• So that, when it is said that a Court has jurisdiction of the subject-matter of any given cause, if these words are to be given their full meaning, they imply, generally speaking, (1) that the Court has jurisdictional power to adjudicate the class of cases to which such case belongs; and (2) that its jurisdiction has been invoked in the particular case by lawfully bringing before it the necessary parties to the controversy, and (3) the controversy itself by pleading of some sort sufficient to that end; and (4) when the cause is one in rem, the Court must have judicial power or control over the res, the thing which is the subject of the controversy. This, is a general way, is what we mean when we say that a Court has "jurisdiction of the subject-matter and the parties" to a cause.

Where the party invoking the jurisdiction of the court by filing the foreclosure action fails to establish that it had any right, title or interest in the real estate, or any duty to perform with reference thereto, it seems clear that neither:

• the necessary parties to the controversy have been lawfully brought before the court, nor
• the Court has "judicial power or control over the res, the thing which is the subject of the controversy".

two of the prerequisites for having subject matter jurisdiction over the case that are necessary for rendering valid judgments.

(2) See LYONS: Being neutral doesn't mean being gullible.

DOJ U.S. Trustee Program Says "Show Me!" Begins Putting The Screws To F'closing Lenders Claiming Legal Standing, Littering Courts w/ Sloppy Paperwork

The New York Times highlights two recent Atlanta, Georgia-area federal bankruptcy court cases evidencing the U.S. Department of Justice's United States Trustee Program and its efforts in stepping up the scrutiny over foreclosing lenders' claims of legal standing in foreclosure actions:

• In both cases, Donald F. Walton, the United States trustee for the region, has intervened, filing motions contending that the banks trying to foreclose have not shown they have the right to do so. The matters involve borrowers operating under Chapter 13 bankruptcy plans overseen by the court in the Northern District of Georgia. In both cases, the banks have filed motions with the bankruptcy court to remove the automatic foreclosure stay that results when a court confirms a debtor’s Chapter 13 repayment plan. If the stay is removed, the banks can foreclose.

• In one case, the borrower had her Chapter 13 plan confirmed by the court early last month. About two weeks later, Wells Fargo asked the court for relief from the stay so that it could foreclose.

• Responding on Nov. 16, Mr. Walton asked the court to deny the bank’s request because it had failed to produce any facts showing that it was entitled to foreclose — either as the holder of the underlying note or as the agent for the holder.

• The other case involves a couple who had their Chapter 13 plan confirmed by the court in March 2009. A month ago, Chase Home Finance, a unit of JPMorgan Chase, asked the court for relief from the automatic stay so that it could start foreclosure proceedings.

• Again, Mr. Walton objected, asking the court to deny the request on the same grounds as argued in the Wells Fargo matter — in this case, that Chase hadn’t proved that it controlled the note on the property.

• Jane Limprecht, a spokeswoman for the trustee program, confirmed that it was ratcheting up its scrutiny on banks’ foreclosure practices.

For more, see Don’t Just Tell Us. Show Us That You Can Foreclose.

Media Probe Draws More Light To Lawlessness In Florida's Court-Run Foreclosure Process

In Central Florida, the Sarasota Herald Tribune reports:

• To get a sense of the lawlessness in Florida's court-run foreclosure process, look no further than public records at the Sarasota and Manatee county courthouses. There, on foreclosure documents open to everyone, is the evidence that at least one law firm's employees repeatedly broke a state law in a rush to push cases through the courthouse so banks could seize people's homes.

• The evidence -- missing signatures and misdated documents that could not have been signed on the dates specified -- can be found on an important document called a "mortgage assignment." The paperwork helps prove a lender has the legal right to seize a property. Without it, a bank would have a costlier and more time-consuming legal path to foreclose, even if a homeowner never makes another mortgage payment.

• Faced with that prospect, employees in David J. Stern's law offices bent and broke the rules designed to ensure the documents judges rely on to award foreclosures are authentic, a Herald-Tribune investigation found.

For more, see Shortcuts on the foreclosure paper trail.

Mercedes-Driving Squatter Makes Himself At Home Using Vacant Three-Story Mansion In Foreclosure As 'Party House'

In Southern California, NBC Los Angeles reports:

• In an upscale enclave in the San Fernando Valley, there's a new neighbor on the block. He drives a big Mercedes, sometimes a fancy SUV and residents say he's been living in a three-story mansion, which was empty and going into foreclosure.

• His name is Dawud Walli, and neighbors say he moved into a huge empty home last July, furnishing nearly every room of the house. "We feel unsafe. We can't sleep. We have families," say some of the residents who live nearby. They say Walli made this a party house.

• Inside, we found booze and condoms scattered about. But no one really knew what went on here, because some of the windows were covered with tape and garbage bags. "They don't want to make contact with the neighbors. They do not want to make eye contact with you. They do not talk to you," says someone who lives nearby.

• Prosecutors say this is happening across Southern California. They've caught squatters illegally living in homes in Bel-Air, Marina Del Rey and Winnetka. "It's a huge problem and growing every day," says Los Angeles City Attorney Maureen Rodriguez. "It's just amazing how nervy they can be: presenting false leases," says Rodriguez.

For more, see Is Your New Neighbor a Squatter?

Do-It-Yourself Mortgage Cancellation Racket A New Foreclosure Avoidance Technique?

In Atlanta, Georgia, WSB-TV Channel 2 reports:

• A Channel 2 Action News Investigation has uncovered a new scheme homeowners are using to avoid foreclosure. It involves canceling their own mortgage, and some homeowners told Investigative Reporter Jodie Fleischer it’s working. But at least one local official calls it fraud.

• The Internet is flooded with offers promising to help save your house. Susan Weidman started her research after losing her husband to a brain tumor. With mounting bills, she didn’t want to lose her home, too. “I didn’t really set out to think that I could possibly get a free house. I just wanted to stall,” Weidman said. Weidman said she hasn’t paid her mortgage in a year. She received several foreclosure notices but the sale never happened.

• “I’d like to think it was the paperwork I filed all right, because everything I filed was basically with fair warning and asking them questions that they refused to answer,” she said.

• Weidman filed several documents with the Cobb County clerk of court including a document that challenged the mortgage and another that revoked her power of attorney.
  “The way they foreclose,” she said “is basically signing your name to a foreclosure document.”

• But Weidman told Fleischer there was one document in particular that made the difference. She canceled her own mortgage by signing her name for World Savings Bank. “You actually signed this as attorney-in-fact for the CEO of the mortgage company,” Fleischer asked. “That’s right…, for John Stumpf,” replied Weidman. She sent a letter to the bank telling the CEO she was going to sign his name. Because he didn’t respond, she said, that effectively gave her permission to do so.

• But the Cobb Clerk of Court said it’s fraud and a felony. Fleischer found at least 15 different homeowners who have done the same thing in Cobb County. “They’re desperate, they’re reaching for straws and these people tell them they have a straw,” said Cobb County Clerk of Court Jay Stephenson.

• Stephenson said “these people” are the ones teaching homeowners what to file. Fleischer found one advertisement for a seminar held in DeKalb County last year by a group called the Underground Railroad Network. Lateef Kareem-Bey spoke at the group’s Stone Mountain office on behalf of one Gwinnett county couple facing foreclosure. The couple signed for the bank and said their mortgage was fully paid, but still got evicted.

• Stephenson said it won’t be long before desperate homeowners start getting prosecuted for their paperwork.

For more, see 2 Investigates: Homeowner Tricks To Get Out of Paying Mortgage.

Judge Slams 'Adverse Possession' Defense; Trial Gets 'Go-Ahead' For Attorney Accused Of Hijacking Vacant Home In F'closure, Pocketing Rent From Tenant

In Allegan, Michigan, The Allegan County News reports:

• Allegan attorney John Watts has been ordered to stand trial on all the charges against him. Watts, 65, was in Allegan County District Court Friday, Nov. 19, for a preliminary hearing before visiting Judge Richard A. Santoni.

• Watts, of Cheshire Township, was arrested in May and charged with five felonies in three cases including two counts of false pretenses and one count each of embezzlement between $1,000 and $20,000, unlawfully driving away a motor vehicle and passing false title. He has pleaded not guilty to all charges.

• At the hearing Friday, Santoni heard testimony on one of the false pretense charges. Police and prosecutors allege that in that case, Watts rented a home in Martin that didn’t belong to him and tried to collect rental income from it.

***

• [Watts' defense attorney James] Shek [] made an argument regarding the state’s adverse possession laws that in this state it was technically legal to occupy unoccupied property and take ownership if the rightful owner didn’t attempt to eject you over a certain term of years. Shek said this was a “conundrum” of Michigan law.

• Santoni, a Kalamazoo County district judge brought in because both of Allegan County’s district judges recused themselves, didn’t agree with any of those arguments. “Adverse possession is not a defense to a criminal act and I find that legal argument without merit,” he said.

For more, see Watts case moves to circuit court.

'Ike' Victim Sues Loan Servicer Claiming Improper Withholding Of Insurance Proceeds Makes It Difficult To Complete Repairs To Hurricane-Damaged Home

In Galveston, Texas, The Southeast Texas Record reports:

• Shirley Peebles seeks to recover from Green Tree Servicing insurance funds she claims are necessary for repairs to her property in Bacliff. Peebles and Green Tree Servicing were issued a check in the amount of $9,759 after Hurricane Ike inflicted damage to the complainant's property, according to a lawsuit filed Nov. 16 in Galveston County District Court.

• Recent court documents state that the defendant maintained a security interest in the aforementioned property by way of a loan. Green Tree Servicing "has continued to hold a portion of the proceeds and has made it extremely difficult for (Peebles) to make repairs," the original petition says.

For more, see Bacliff woman wants insurance funds released so home can be repaired.

Feds Announce Recent Actions Against Various Alleged Upfront Fee Foreclosure Rescue Rackets

The Federal Trade Commission recently announced:

• The Federal Trade Commission [] announced a series of law enforcement actions as part of the FTC’s continuing crackdown on scams that target homeowners behind in their mortgage payments or facing foreclosure.

• At the FTC’s request, federal courts have halted two allegedly bogus mortgage relief operations that posed as government mortgage assistance programs, pending trial. In addition, 17 marketers have been banned from selling mortgage loan modification and foreclosure relief services under court judgments and settlements in several previously filed law enforcement actions. The FTC has charged another mortgage relief operation with contempt for violating 2008 court orders.

• All of these cases involved alleged false claims that the defendants can obtain dramatically lower mortgage interest rates in exchange for hefty up-front fees.(1)

For the names of the outfits and individuals targeted by the FTC, and the details underlying its actions against these rackets, see FTC Announces Series of Actions Against Mortgage Relief Operations Charged with Deceiving Distressed Homeowners.

(1) Among the outfits' alleged bad acts are:

• Pocketing upfront fees using false claims of high sucess rates and promises to give full refunds if they failed to obtain loan modifications,
• Misrepresenting that they would stop, postpone, or prevent foreclosure,
• Misrepresenting loan and modification terms,
• Misrepresenting their ability to improve someone’s credit history,
• Advising people to stop making mortgage payments,
• Falsely saying that negotiations with their lenders were under way in response to consumers' inquiries,
• Falsely claiming that a lawyer would negotiate the terms of consumers’ home loans with lenders,
• Falsely claiming that only selected customers meeting certain conditions could “qualify” for modification assistance, when in fact, these rackets pocketed upfront fees from pretty much everyone who applied for help,
• Falsely claiming that it had attorneys and forensic accountants on staff,
• Using mailers that falsely peddled loan modification services as federal programs, and having those mailers signed by an attorney in the consumer’s state,
• Misrepresenting themselves as part of the federal government,
• Misrepresenting an affiliation with the federal government,
• Using logos that simulated government seals,
• Falsely claiming to have taken reasonable and appropriate measures to protect consumers’ personal information from unauthorized access,
• Improperly disposing of consumers’ information in unsecured dumpsters,
• Stopped responding to consumers' phone calls or e-mails,
• Disconnecting their businesses' phone numbers,
• Changing the name of their business while continuing to make promises and take money from consumers,
• Using mailers that appear tailored to individual recipients, expressing certainty that the consumers could receive a loan modification by stating that consumers had been “PRE-SELECTED” because their loan situation met the defendants’ criteria, and specifying the consumer’s “New 30 Year Fixed Payment.”

Feds Finalize Rules Regulating Upfront Fee Foreclosure Rescue 'Rackets'

The Federal Trade Commission recently announced:

• Homeowners will be protected by a new Federal Trade Commission rule that bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable. [...] The FTC is issuing the Mortgage Assistance Relief Services (MARS) Rule to protect distressed homeowners from mortgage relief scams that have sprung up during the mortgage crisis.

***

• All provisions of the rule except the advance-fee ban will become effective December 29, 2010. The advance-fee ban provisions will become effective January 31, 2011.

For more, including the ban on advance fees, disclosure requirements, prohibited claims, and the exemption for attorneys, see FTC Issues Final Rule to Protect Struggling Homeowners from Mortgage Relief Scams (Rule Outlaws Advance Fees and False Claims, Requires Clear Disclosures).

Go here for the Text of the Federal Register Notice.

Another Homeowner Falls For Servicer's Loan Modification Promise, Then Has Home Sold Out From Under Her

In Birmingham, Michigan, WXYZ-TV Channel 7 reports:

• Debra Graves has been begging her bank for help for years. [...] Graves seemed like the ideal borrower – she put 30% down on her home in Birmingham, and says she always paid on time. Until – like so many in Michigan – she lost her job. “I have done everything that Wells Fargo has asked me to do, and they have not worked with me at all,” said Graves.

• Graves says, after 3 years of calling -- she finally got through to someone in the president’s office at the bank – she was assured they were trying to modify her loan. “She made promises to me. She said they would bump my Sheriff’s sale back to November 7th,” said Graves.

• Graves took on roommates -- she even took a low-paying retail job just to show she had some income to qualify for the modification. But then Graves found out, her house had been sold at Sheriff’s sale in September – and Wells Fargo never told her. “How could they do this to me? I never thought, at my age, that I would be worried about whether or not I would have to move in with my mom. It’s just a really bad situation to be in,” said Graves.

For more, see Steaming mad about loan modifications.

Oregon AG Targets Loan Modification Outfit In Lawsuit For Allegedly Clipping Homeowners Out Of $80K+ In Illegal Fees

From the Office of the Oregon Attorney General:

• Attorney General John Kroger [] announced a lawsuit that accuses the California-based American Team Mortgage, Inc., of repeatedly violating Oregon's Unfair Trade Practices Act and Mortgage Rescue Fraud Protection Act.

***

• The lawsuit filed [] in Marion County Circuit Court alleges that since January 2009, American Team Mortgage charged 32 homeowners a total of more than $80,000 in fees for mortgage loan modifications. Most of those fees were charged in advance of providing services in violation of Oregon law, the suit alleges.

• The company obtained loan modifications for only a fraction of their Oregon clients, and possibly as few as two, the suit claims. Despite American Team Mortgage's poor record of obtaining loan modifications and despite promises to refund clients it could not help, the company refunded only two of the 32 Oregon homeowners who paid advance fees for loan modifications.

• By June 2010, the lawsuit alleges, American Team Mortgage effectively went out of business. Its phone number was disconnected. Mail was returned. Dozens of Oregon homeowners were left without a loan modification or a refund. At least one client lost his home to foreclosure. Others are facing foreclosure.

For the Oregon AG press release, see Lawsuit Accuses California Loan Modification Company Of Cheating Oregon Homeowners (The lawsuit alleges that American Team Mortgage charged more than $80,000 in fees from nearly three dozen Oregon homeowners in violation of Oregon law).

Minnesota AG Files Unrelated Suits Charging Two Out-Of-State Outfits With Running Illegal Upfront Fee Loan Modification Rackets

In Hennepin County, Minnesota, the Star Tribune reports:

• Minnesota Attorney General Lori Swanson filed lawsuits Wednesday against two out-of-state firms that she says are taking advantage of people in or near foreclosure who seek mortgage modifications. Swanson said the firms represent a new tactic of "advance-fee" mortgage-modification cons that try to capitalize on negative publicity about such schemes by portraying themselves as good guys who can help protect homeowners.

***

• The latest lawsuits were filed in Hennepin County District Court. One alleges that a Los Angeles law firm called the Balanced Legal Group and a California lawyer named Deepak S. Parwatikar offered mortgage modification services in Minnesota without being licensed to practice here, and they collected upfront fees of $3,500 or more from clients before performing any services. That's against the law, Swanson said.

***

• The defendant in the other lawsuit is a Cheyenne, Wyo.-based firm called Home Protection Coalition, which did business under the name Housing Recovery Program. The suit says the firm claims to be a tax-exempt organization sponsored by the federal government to help struggling homeowners, but it isn't registered as a tax-exempt organization.(1)

For more, see Swanson targets new foreclosure schemes (Attorney general files suits against two firms, accusing them of using a new type of "advance-fee" mortgage-modification con).

For the lawsuits, see:

• State of Minnesota v. The Balanced Legal Group, et ano.,
• State of Minnesota v. Home Protection Coalition, dba Housing Recovery Program.

(1) Reportedly, the firm allegedly copied the distinctive logo of a federal campaign called the "Loan Modification Scam Alert," simply deleting the word "scam" from the logo, and it claims its services are free of charge, but, in fact, it solicits a "donation" of $2,300 before working with clients, the suit says.

NH Attorney Peddling Loan Modifications Abandons Clients After Regulator Issues Cease & Desist Order

In Concord, New Hampshire, the Concord Monitor reports:

• Closed firm fulfilled duties, he says. The website is still up, but the phone line has been cut off. Dan Dargon's law firm no longer exists. Not all of Dargon's clients got the memo, however. A month after the Dargon Law Firm shut its doors amid an investigation by the state into its loan modification practices, clients who say they were never informed of the firm's closure don't know what's happened to their cases.

• "I never got a phone call, never got an e-mail - I didn't get mail," said Glen Whelden, 43, of Pelham, who paid Dargon $2,500 last year to get help lowering his monthly mortgage payments.

***

• Dargon said [] clients have no reason to be angry with him. He said he's fulfilled the terms of their contracts, which specified that he would submit their loan modification requests to lenders but didn't guarantee specific results. "If they want to call somebody, call (Banking Commissioner) Peter Hildreth, or whoever that deputy guy is," Dargon said. "Ask them what they're thinking and how they're going to take care of them now. "Not to be rude about it," he added, "but this was not our fault."

• Dargon said Gorham attorney Don Lader agreed to take on the 300 client files that were still active when Dargon closed the doors to his Concord office in September, months after the state Banking Department issued him a cease-and-desist order to stop modifying loans without a state license.

For more, see Irate clients want word from lawyer.

Nevada Regulator Clips Loan Modification Outfits Out Of $110K In Fines, Probe Costs In Unrelated Cease & Desist Orders

In Carson City, Nevada, the Las Vegas Sun reports:

• A Las Vegas loan modification and foreclosure consulting business has been fined $50,000 by the state for mishandling the money of homeowners. The state Division of Mortgage Lending also issued a closure order against U.S. Loan Modification Services, owned by Jeff and Gail Strum, which was licensed in January.

• The order, signed by Commissioner Joseph L. Waltuch, said the business didn't keep the money of its clients in a separate account as required by regulations and it converted the money from homeowners to its own use. The complaint said the Strums “withdrew moneys collected from homeowners from its bank account without being able to explain what the money was used for.”

• It ordered the business to return the money collected from homeowners and for the Strums to hire a certified public accountant to reconcile the books. The Las Vegas business, after an appeal hearing, was also ordered to pay the division more than $15,000 to cover the cost of its investigation, lawyer time and administrative work.

• The division also announced it has ordered a closure order and imposed a $15,000 fine on Pronto Solutions and Angela Gavilan. It directed the company to cancel all of its contracts with homeowners and refund them their money. Waltuch said the company has been operating without a state license. It did not request an appeal hearing.

• The division imposed a $30,000 fine and ordered GSH 360 FM and Marsha Tolentino of Las Vegas to stop acting as a foreclosure and loan modification consultant. The order says GSH 360 and Tolentino never applied for a state license and is not a tax-exempt, nonprofit corporation as advertised. GSH 360 FM can ask for an appeal hearing.

• It also ordered Mortgage Planners Advantage and Roy Donald to stop conducting its business as a foreclosure and loan modification consulting business without being licensed by the state. It also ordered the company to refund all the money it collected from homeowners. No appeal hearing was requested.

Source: Las Vegas loan modification, foreclosure firm fined $50,000.

For the Cease & Desist Orders and imposed fines, see:

• U.S. Loan Modification Services, LLC, Jeff Strum and Gail Strum,
• Pronto Solutions and Angela Gavilan,
• GSH 360 FM and Marsha Tolentino,
• Mortgage Planners Advantage and Ray Donald.

Loan Servicer Pockets Three Months Of Loan Modification Payments, Then Forecloses Home Out From Under Unwitting Borrower Anyway

In Ceres, California, KXTV-TV Channel 10 reports:

• After struggling for more than a year to get their house payments reduced, Carol Ann Rangel received formal notification from Citimortgage in May that her family had been approved for a loan modification.

***

• News10 first featured the Rangels in November, 2008, as they began the long process of seeking a loan modification. The letter from Citimortgage was dated May 20, 2010:
  
  Congratulations! You are approved to enter into a trial plan under the Home Affordable Modification Plan! This is the first step toward lowering your mortgage payments. If you make your new payments timely . . . we will not conduct a foreclosure sale.

• Rangel provided News10 with banking statements showing electronic payments to Citimortgage in the amount of $723.15 on June 1, June 29 and July 29.

• Rangel called Citimortgage on Aug. 30 because she had not received a coupon for the September payment. That's when she learned her home had been sold at auction 11 days earlier. "I never received a letter, never received a phone call, never received any notice that my home was being auctioned," Rangel said.

For more, see Ceres homeowner's loan modified; house auctioned anyway.

(1) This homeowners and others who are similarly situated could have a claim against the loan servicer to enforce its promise to hold off on foreclosure, even if not contractually obligated to do so. For more, see Court: "Promissory Estoppel" Could Make Lender’s Verbal Agreement To Halt F'closure Sale Enforceable, Even Absent Consideration For Promise To Stall.