Florida Bar Considers Whether Foreclosure Defense Lawyer Taking Mortgage On Home The Subject Of Legal Action To Secure Fees A Violation Of Ethics Rule

In South Florida, the Daily Business Review reports:

• Foreclosure defense attorney Peter Ticktin has told the Florida Bar that he has not done anything wrong by signing agreements that give him the right to take on mortgages on his client’s houses if he wins their foreclosure cases. The Bar launched an investigation of Ticktin after the New York Times reported earlier this month that his firm, the Ticktin Law Group, was obtaining second mortgages as payment from homeowners fighting foreclosure lawsuits [see Taking On a Second Mortgage to Pay the Foreclosure Lawyer].

• Ticktin said the Bar mailed him a copy of the article asking him to "explain" the matter. Last week, Ticktin sent a letter to the Bar drafted by his attorney, Kevin Tynan, claiming the method he uses to receive payment to defend clients from foreclosure is a "simple contingency fee." "If he wins and defeats the efficacy of a mortgage, he is entitled to a share of that win," said the letter addressed to Florida Bar counsel Theodore P. Littlewood.

• Francine Walker, a spokeswoman at the Florida Bar, said in an email the mortgages potentially violate a rule regulating The Florida Bar that states: "A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client."

• The rule provides an exception stating lawyers may "acquire a lien granted by law to secure the lawyer’s fee or expenses; and contract with a client for a reasonable contingent fee."

***

• According to the letter by Tynan, the only issue "that may be of concern" to the Bar is whether Ticktin’s retention agreement "to acquire a proprietary interest in the cause of action," violates the rules of professional conduct. According to Tynan, it does not.

For more, see Attorney Defends Taking On Mortgages as Contingency Fee.

Vegas Feds Say Woman Used Fraudulent Deeds In Foreclosure Rescue Ripoffs & Squatter Scams

The following allegations are set forth in a criminal indictment filed in U.S. District Court, Las Vegas, Nevada:

• From in or about late 2007, to in or about November 2009, KAREN TAPPERT offered, by word of mouth, a mortgage rescue service, but the way she ''rescued'' mortgages was by recording fraudulent deeds that purported to convey the property from the true title holder to an entity that she controlled.

***

• TAPPERT also engaged in a 'Squatter's scheme' whereby, she squatted on abandoned properties in which she had no ownership right. From in or around December 25, 2009, to at least February 2010, TAPPERT found properties that had already been foreclosed upon, and filed fraudulent deeds that purported to convey the property from the true title
  holder to an entity that she controlled. TAPPERT gained use of the property and, if she could, either rented out the property - or sold it.

For the indictment, see U.S. v. Tappert.

Boston Feds Charge Fugitive In Scheme To Rip Off Massachusetts Man Of $2.8M+ Waterfront Property

From the Office of the U.S. Attorney (Boston, Massachusetts):

• A New York fugitive from justice was charged [] in federal court with mail and wire fraud in connection with a scheme to defraud a Massachusetts man of his Hyannis waterfront property. MICHAEL HOWARD CLOTT, aka MICHAEL HOWARD, 58, currently in custody in New York, was charged in an indictment with three counts of mail fraud and three counts of wire fraud.

• The indictment alleges that while a fugitive from the New York case, Clott spent several months on Cape Cod from December 2009 through April 2010, during which he engaged in a scheme to defraud a Massachusetts man of a property valued at more than $2.8 million.

• According to the charges, Clott used the alias “Michael Howard,” and represented to others that he was an attorney and financial executive who specialized in purchasing, repairing and marketing bank-owned real estate. Clott persuaded a local real estate broker to sell a client’s property for half the asking price, then give the sale proceeds to Clott who would use his financial expertise to generate an after-tax benefit for the client equivalent to the client’s asking price.

• The indictment further alleges that instead of using the proceeds for the client’s benefit, Clott manipulated others to unwittingly assist in negotiating the proceeds check to enable him to deposit the funds in an account for Clott’s personal benefit. According to the indictment, Clott’s scheme was discovered in time to secure the funds before Clott could further disburse or conceal them.

For the U.S. Attorney press release, see Fugitive Charged With Defrauding Man Of Cape Cod Property.

Another Crackpot Claiming 'Adverse Possession' Defense Faces Criminal Charges In Vacant Home Hijacking Scam

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• During Henry VIII's reign in England, a law was written to punish owners who lost track of their land by granting ownership to anyone who put it to good use for a few decades. Now, in one of the most unusual side effects of the mortgage meltdown, police say a local man misused Florida's version of that ancient law to take over homes still in the foreclosure process and rent them out to unsuspecting families.

• Sarasota County Sheriff's detectives say Joel McNair ran a business called "Homes for Americans," in which he researched abandoned homes on the Internet to see if they were in foreclosure. If they were, he would change the locks, move out any furniture inside and rent out the home to a new family, according to arrest reports.

• [P]olice arrested McNair and charged him with fraud and grand theft over $100,000 in what amounted to the theft of two houses. McNair told police that in the past two months, he had taken over and rented out at least 11 houses in Sarasota County alone, and had done the same with more houses in Manatee and Hillsborough counties, according to the report.

• McNair, 60, told police he was simply taking advantage of a Florida statute called the adverse possession law, which allows people to claim the abandoned homes of others if they pay taxes and act like the owners for seven years. It has been on the books in Florida since 1869. "I spend a lot of time and money making sure it's legal," McNair told SNN Local News 6 before his arrest last week.

For more, see Home rental strategy a service or fraud?

Unwitting Investors, Novice Would-Be Homebuyers Allegedly Victimized By Massive Midwest "Rent-To-Own" Real Estate Ripoff

National Public Radio reports:

• An investment offer pitched to several thousand Canadians and Americans in 2008 on a traveling investment infomercial/seminar circuit has gone terribly wrong. Several companies offered buyers what they pitched as an opportunity to take advantage of the foreclosure crisis: buying foreclosed homes at low prices and then collecting payments on a rent-to-own basis from people who would live in those houses. Legal documents show about 1,200 properties across the Midwest were sold to investors from the U.S. and Canada, but deeds were rarely transferred.

For more, see Thousands Duped By Midwest Housing Scam.

Texas Man Pleads Guilty To Using Forged Deeds, Heirship Affidavits To Rip Off Real Estate From The Elderly & Recently Deceased

In Fort Worth, Texas, the Arlington Citizen-Journal reports:

• An Arlington man who stole real estate from the recently deceased and elderly pleaded guilty [] to three counts of mail fraud and one count of conspiracy to commit mail fraud, according to the U.S. attorney's office.

• Norris Lynn Fisher, 62, faces up to 20 years in prison, a $250,000 fine and restitution on each count. Government documents say Fisher acquired at least 100 properties in Tarrant County valued at more than $1 million. Fisher remains in prison. He made a plea agreement with the government that ensures he will cooperate in identifying assets to help make restitution and return properties to the rightful owners.

• Fisher used forgery and elaborate property transfers to illegally acquire dozens of lots and unoccupied properties from January 2004 through this February, according to court documents.

***

• [In one case, a] woman owned three Fort Worth properties that had been "fraudulently conveyed" to a California woman in June 2008, according to court documents. A notary listed on property records told officials that her signature and notary stamp had been forged. (In a July 2009 raid at Fisher's home, authorities seized seven notary stamps, according to court documents.)

For more, see Arlington man pleads guilty in real estate thefts.

For the U.S. Attorney (Northern District of Texas) press release, see Fort Worth Man Admits Running Scheme To Fraudulently Obtain Real Estate (Norris Fisher Faces Up to 80 Years in Federal Prison):

• Fisher conducted research and identified various distressed properties. Fisher preferred to target unoccupied properties or vacant lots belonging to elderly individuals and individuals who had recently died. After he identified a property that he wanted to illegally acquire, Fisher paid people to forge signatures and created a forged warranty deed that fraudulently reflected a transfer of the property from its true owner to a fictitious person.

• If the true owner of the property was deceased, he would create a fraudulent heirship affidavit which falsely claimed that a fictitious person was the heir to the deceased property owner, and therefore entitled to inherit the property.

Lender's Assembly Line Approach To Foreclosure Transforms $28K Loss Into $42K Loss, Booting Loan-Mod-Seeking Homeowner Onto Street In The Process

The Wall Street Journal's Developments blog recently reported on an interesting account of a foreclosure, titled “Two Cords of Wood,” written by Maine pro bono attorney Thomas A. Cox.
In it, Cox reportedly writes on how second mortgage holder KeyBank refused to restructure the payments on a $28,000 loan for one of his clients, despite the fact that the client was current on the payments on the first mortgage (approximately $50,000) and, instead, coughed up the $50K to buy out the first mortgage, and then foreclosed on the homeowner, spending $4,000 in foreclosure costs in the process.

KeyBank then proceeded to boot Cox's client out of her home, and, with a cold winter approaching, is now stuck with a vacant home now reportedly listed for sale at $44,900.(1)

For the story, see A KeyBank Foreclosure Draws Fire.

(1) If my math is correct, and assuming KeyBank nets at most $40K from the sale of the home listed at $44,900, KeyBank appears to have 'skillfully' transformed a $28,000 loss from a worthless second mortgage that the homeowner was willing to make payments on into a $42,000 loss as a result of its manuever ($50K (1st mtg.) + $4K (f'closure costs) less $40K (est. sale proceeds) equals $14K loss on its sophisticated maneuver. Then add $28K worthless 2nd mortgage to get to $42K).

Don't Be A Tightwad - Cough Up The Cash For That Owner's Title Insurance Policy

Homebuyers looking to shave off a few bucks in closing costs by foregoing the purchase of an owner's title insurance policy(1) are cautioned against it in a recent column by real estate lawyer Harvey S. Jacobs in The Washington Post:

• Many homeowners mistakenly think that because the settlement lawyer did the [title] search and is providing a lender's policy, that the title must be clear. Why waste extra money on an owner's policy? This is an extremely shortsighted view for several reasons.

• First, even though a prudent settlement lawyer will do an exhaustive title search, that search may not uncover the very real risks present in these days of fraudulent foreclosures and/or forged documents.(2)

• Second, the lender's policy does not provide any protection for the owner in the event of a successful claim.

• Third, part of the benefit in a title policy is that the title insurance company assumes the legal costs to defend any claim. Without an owner's policy, the owner must bear his own legal costs to defend any claim, no matter how frivolous.

• Fourth, the marginal cost of buying an owner's policy, when a lender's policy is being issued (a so-called "simultaneous issue") is quite small. You do not pay full premium for owner's and lender's policies when they are being issued simultaneously.

• Finally, an owner's policy may entitle you to discounts off future title policies if you subsequently refinance, or for your buyer if you sell your home within [a certain period] of obtaining your owner's policy.

For more, see Title insurance is essential in protecting your investment.

See also Title Insurance: What Risks Does It Protect A Property Owner Against?

(1) Believe it or not, there are a few real estate agents out there who have been known to give this 'sage' advice to their clients and customers when buying a home, especially where mortgage financing is not needed and the buyer is paying "all-cash." When screening for a real estate agent to work with for a home search, it may not be a bad idea to ask the agent whether it's OK to pass on paying for an owner's title insurance policy as a way save on closing costs, and see how the agent responds. If the agent says it's a good idea to pass on getting the owner's title policy, it may be best to pass on working with that particular agent.

(2) Title losses arise from three principal sources:

• Errors in searching the records,
• Errors in interpreting the legal effect of those records,
• Facts outside the records, known as “off-record risks."

Among the off-record risks, or "hidden hazards," that a title insurance policy protects a homeowner and mortgage lender against are:

• (1) false personation of the true owner of the land, (2) forged deeds, releases, etc., (3) instruments executed under fabricated or expired power of attorney, (4) deeds delivered after death of grantor or grantee, or without consent of grantor, (5) deeds to or from defunct corporations, (6) undisclosed or missing heirs, (7) misinterpretation of wills, (8) deeds by persons of unsound mind, (9) deeds by minors, (10) deeds by aliens, (11) deeds by persons supposedly single but secretly married, (12) birth or adoption of children after date of a will, (13) surviving children omitted from a will, (14) mistakes in recording legal documents, (15) want of jurisdiction of persons in judicial proceedings (ie. where a court lacks subject matter jurisdiction over a case, or where it lacks personal jurisdiction over a defendant, for example, failure to properly serve a defendant with legal process), thereby leading to judgments that are either void or voidable, (16) discovery of will of apparent intestate, (17) errors in indexing, (18) falsification of records, (19) capacity of foreign fiduciaries, (20) claims of creditors against property sold by heirs or devisees, (21) deeds in lieu of foreclosure given under duress, (22) ultra vires deed given under false corporate resolution, (23) easements by prescription not discovered by a survey, (24) deed of community property recited to be separate property, (25) errors in tax records (ie. listing payment against wrong property), (26) deed from a bigamous couple, (27) defective acknowledgements (ie. notary public screw-ups when notarizing legal documents, (28) federal condemnation without filing notice, (29) descriptions apparently, but not actually, adequate, (30) corporation franchise taxes, a lien on all corporate assets, (31) erroneous reports furnished by tax officials, (32) administration of estates of persons absent but not deceased, (33) undisclosed divorce of spouse who conveys as consort's heir, (34) marital rights of spouse purportedly, but not legally, divorced, (35) duress in execution of instruments.

Trio Charged In Foreclosure Rescue Scam Involving Fractional Interest Deed Transfers, Abuse Of Bankruptcy Process Affecting $750M In Mtgs, 1500 Homes

In Southern California, the Los Angeles Times reports:

• Federal prosecutors have accused three Southern California residents of running a massive foreclosure rescue scam that used phony bankruptcy filings to stall foreclosures of nearly 1,500 homes, involving $750 million in mortgages.

• The three suspects allegedly found homeowners on the verge of foreclosure and promised to ward off the proceedings for fees usually amounting to $1,500 a month.

• Prosecutors said the suspects secretly assigned partial ownership of the participating homes to fictitious people and filed bankruptcies using the fake names, forcing lenders to delay foreclosures for months or in some cases years.

• Irving Cohen, 74, of Van Nuys and Robin Phillips, 53, of Claremont have agreed to plead guilty to bankruptcy fraud charges, according to the U.S. attorney's office of the Central District of California. A third suspect, Darwin Bowman, 74, of Van Nuys was indicted in September and is awaiting a Feb. 8 trial at the federal courthouse in Los Angeles.

***

• The homeowners, who responded to advertisements placed by the suspects, did not know about the false bankruptcies or that fractional ownership of their homes had been transferred to fictitious people, prosecutors said. "The defendants in this case exploited bankruptcy rules as they methodically victimized lenders in their scheme and targeted vulnerable homeowners while enriching themselves," said Steven Martinez, assistant director in charge of the FBI's Los Angeles office, which investigated the case.

For more, see 3 Southern Californians accused of running foreclosure rescue scam (The suspects allegedly used phony bankruptcy filings to stall foreclosures of nearly 1,500 homes, involving $750 million in mortgages).

See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a report describing fractional interest deed transfer and other foreclosure scams involving the abuse of the bankruptcy courts (available online courtesy of the Loyola of Los Angeles Law Review).

Go here for other posts on fractional interest deed transfer, foreclosure rescue bankruptcy scams.

'Zombie Debt' Buyers Begin To Drive Flood Of Collection Lawsuits In Courts Throughout Country

The Wall Street Journal reports:

• Across the nation, there is a surge in lawsuits against people who aren't paying their bills, driven by the debt-buying industry that has boomed in the past three years as a sea of souring loans and credit-card obligations have become cheaper and cheaper to buy amid hard economic times.

• Handing debt over to collectors is an important step in cleaning up the financial system, but the explosion in lawsuits—many for small sums—creates problems for the legal system. "There exists a real danger that the courts will be perceived as mere extensions of collection agencies," says Thomas Donnelly, an associate judge in Cook County, Ill.

• There are no nationwide figures available, but a survey of 20 judges across the nation by The Wall Street Journal yielded anecdotes of court calendars choked with debt-collection suits. For example, Judge Donnelly says he has heard as many as 400 cases a day, filed by debt buyers, debt collectors and their attorneys who have often lugged their filings to his courtroom in crates.(1)

***

• Just like the current flap over foreclosures, debt buyers have run into trouble with judges in several states for taking shortcuts with papers filed in collection cases. "Everyone is hysterical about the robo-signing" by a mortgage-company worker who testified that he signed foreclosure documents without reviewing details of each case, says Ira Rheingold, president of the National Association of Consumer Advocates. "What's overlooked is that…the scale in collection cases far exceeds what we're focused on now."

***

• Roughly 94% of collection cases filed against borrowers result in default judgments in favor of the debt buyer, according to industry estimates. The majority of borrowers don't have a lawyer, some don't know they are even being sued, and others don't appear in court, say judges.

• A growing number of cases brought by debt buyers are plagued by sloppy, incomplete or even false documentation of debts, according to the 20 judges around the country interviewed by the Journal. Mistakes might arise from the way that debt flows from the lender to the debt buyers. Bulk purchases of consumer debts sometimes include just a spreadsheet listing each person's name and the amount owed. Sales agreements usually limit how much additional information the buyer may request about the original debt.

For more, see Boom in Debt Buying Fuels Another Boom—in Lawsuits.

(1) Excepting states with generous homestead exemption laws, judgments obtained in these collection suits generally end up becoming liens on the home and any other real estate owned by the debtor.

Head Of Virginia-Based Loan Modification Outfit Hit With Multiple Felony Charges Accusing Him Of Ripping Off Homeowners Seeking House Payment Help

In Prince George's County, Maryland, the Business Gazette reports:

• A Virginia man has been accused of targeting Maryland residents for fraudulent mortage loan modifications that caused some residents to have their homes foreclosed. A Prince George's County grand jury indicted Howard Shmuckler, 67, of Virginia Beach on Tuesday on 10 counts of aggregate theft over $500, 10 counts of conspiracy to commit theft, and 10 violations of operating a credit business without a license, according to Prince Geroge's County's state's attorney's office.

• Although residents across Maryland fell victim to the scam, the charges were brought against Shmuckler in Prince George's County because some victims lived in the county, and the county state's attorney's office has a prosecutor dedicated to mortgage fraud cases, said Shannon M. Davis, a spokeswoman for the Maryland Department of Labor, Licensing and Regulation.

***

• Fees between $1,750 and $6,000 were paid up front by homeowners to render services, and more than $1.2 million was collected in total by the business, according to the regulatory office. Some of the residents who paid Shmuckler's company lost their homes to foreclosure due to the scam, authorities said.

For the story, see Man indicted for scamming Maryland homeowners (279 homeowners paid company for mortgage services they never received).

See also NBC Washington: Mortgage Relief Scam Alleged in Prince George's County.

For an earlier post on Shmuckler, see Northern Virginia Loan Modification Firm The Target Of Media Scrutiny, Customer Protests.

Judges Not Immune To 'Robosigner' Disease; J'ksonville Rubber-Stamper Says 'Rocket Docket' Works "Fine & Fair" While Declining To Be Named For Story

In Duval County, Florida, Financial Times reports:

• “I am required to bring this case to a conclusion. I am setting the date of foreclosure for January 12. I wish you well,” the duty judge told Anthony Bell, who was soaking up his tears with the last tissue from a box placed in front of him at courtroom 58 of the Duval County Courthouse. After eight minutes, that was the end of case 5543, “Wells Fargo Bank versus Anthony Bell”, for a property in Orange Park, Jacksonville.

***

• “The bank was just interested in getting some money back. And the judge, well, he needed to get my case out of the way as quickly as possible,” Mr Bell said as he left the courthouse.

• After dismissing Mr Bell, the judge began signing off on uncontested home repossession cases as fast as his clerk could pile up the folders, sometimes less than a minute per file. Thousands of cases are awaiting judgment and more are filed each day. “We are overbooked, just like airlines,” the judge, who declined to be named, told the Financial Times afterwards. “But it’s all working fine, fine and fair.”

For more, see US fast-tracks foreclosures through courts.

Confessions Of A BofA Robosigner; Says Bank's Foreclosure Operations "Were Chaotic & Stressful," Shudders To Think Of All Docs w/ His Name On Them

In Southern California, CNN Money.com reports:

• It only took him a second to sign each foreclosure document. That's how good [ex-Countrywide Financial employee] Tam Doan got at his job in Bank of America's pre-sale foreclosure department in Southern California. Of course, he didn't have time to actually read the paperwork he was signing, he said, and in some cases, he didn't even know what documents he was putting his pen to. "I had no idea what I was signing," said Doan. "Either you were in or you were out."

***

• Doan approached CNNMoney after the so-called robo-signing scandal came to light last month. After 18 months at Bank of America, he was terminated in early September for failing to follow policy, according to the servicer.

***

• Unlike Countrywide, which he described as orderly, Doan said Bank of America's foreclosure operations were chaotic and stressful. There weren't enough people to do the job and they didn't receive the training needed to do it properly.

***

• While Bank of America has accused him of trying to take advantage of the current media frenzy surrounding robo-signing, he said he is speaking out because the servicer wrongfully terminated him. Now that he's not in the thick of the foreclosure process, Doan said he has had time to reflect on what his actions meant. Each signature likely led to a borrower losing his or her home. While he got numb to that fact while he was on the job, he now feels guilty. "I shudder to think how many foreclosure documents have my name on it," he said.

For more of Doan's confession, see I was a robo-signer.

Virginia Feds Bag Operator Of Alleged Mortgage Elimination Racket Resulting In $10M+ In Losses

From the Office of the U.S. Attorney (Alexandria, Virginia):

• A federal grand jury [] indicted Linda Sadr, 51, of Manassas, Va., for her alleged involvement in a “mortgage elimination” scheme that caused more than $10 million in losses.

***

• According to the federal indictment, from 2004 through 2008, Sadr is accused of marketing a scheme known as a “Mortgage Elimination Program.” Sadr allegedly falsely represented to potential homeowner clients that lenders were acting illegally with regard to refinanced mortgages and that she could obtain a discharge of newly refinanced loans because of the lenders’ illegal actions.

• Sadr allegedly proposed that she, acting through her businesses, would represent homeowner clients and challenge the lenders for their purportedly illegal actions, and any monetary settlements obtained from successful challenges against the lenders would be applied against the balances due on the refinanced mortgages, thereby eliminating the mortgages.(1)

• In general, those homeowner clients with sufficient equity in their homes who participated in the Mortgage Elimination Program were allegedly required to refinance their mortgages with maximum cash-out refinance loans.

• Subsequent to settlement, individual homeowner clients were required to pay 10 to 15 percent of the proceeds of the cash-out refinance loan as a fee to Sadr or to one of the entities she controlled. Clients were also required to give Sadr the equivalent of 12 to 18 months of advance mortgage payments to be held in “escrow,” an amount that Sadr allegedly claimed she would use to pay the refinanced mortgages for the homeowner clients until their mortgages were eliminated.

For more, see Manassas Woman Indicted for Alleged Mortgage Elimination Scheme.

(1) Presumably, the purported challenges to the mortgages were somehow based on alleged violations of the Federal Truth In Lending Act and the Home Ownership and Equity Protection Act (and, possibly, any applicable Virginia consumer lending statute).

Texas AG: Racket Targeted Unsophisticated 'Owner-Financed' Mortgage Holders By Sneaking Obscure Clauses Into Purchase Contracts To Facillitate Ripoffs

From the Office of the Texas Attorney General:

• Texas Attorney General Greg Abbott is charging two Lubbock mortgage companies and their owners with orchestrating a complex scheme to defraud Texas property owners. The State’s enforcement action names Enhance Mortgage Corp. and Templeton Mortgage Co. Inc. as defendants and charges both with violating the Texas Deceptive Trade Practices Act.

• According to court documents filed by the State, Enhance and Templeton primarily targeted former property owners who had previously self-financed the sale of their property to independent purchasers.(1)

***

• According to state investigators, the defendants contacted former property owners who lacked knowledge about real estate transactions and offered to buy their owner-financed mortgages. Court documents indicate the defendants would offer to pay landowners up-front cash in exchange for their owner-financed mortgages—and therefore the right to receive monthly mortgage payments. Some of the former property owners were retirement-aged. State investigators believe they were targeted because they were likely to be enticed by the promise of up-front cash rather than a 20 to 30-year payment stream.

• Under Texas law, it is generally legal to purchase and sell interests in real property, including the rights of owner-financed mortgages. However, the defendants are charged with perpetrating a complex scheme that relied upon obscure contractual provisions to defraud former property owners with little or no financial or legal expertise.(2)

For the Texas AG press release, see Attorney General Abbott Takes Enforcement Action Against Lubbock Mortgage Firms (Enhance Mortgage Corp. and its affiliate, Templeton Mortgage Co. deceived former property owners in mortgage-purchase scheme).

For the lawsuit, see State of Texas v. Enhance Mortgage Corporation, Inc., et al.

(1) According to the Texas Attorney General, under such an arrangement, which is known as an owner-financed mortgage, the seller agrees to receive mortgage payments from the buyer over time—rather than requiring the buyer to get a bank loan and pay the entire purchase price up front. Once the owner-financed mortgage transaction is complete, the buyer takes possession of the property. As the financer of the transaction, the seller retains an ownership interest in the property, which includes the right to receive monthly mortgage payments from the buyer.

(2) In one example described by the Texas Attorney General, one former property owner had previously sold his property to a buyer, who still owed $76,500 under the terms of the owner-financed mortgage. The defendants offered to pay the former property owner $30,000 cash in exchange for the right to receive the full $76,500 in future mortgage payments. Once the former property owner agreed to the $30,000 offer, the defendants drew up a contract and had the underlying property appraised.

Unbeknownst to the former property owner, the contract provided that the defendant’s cash purchase price would be reduced if the property’s appraisal amount was less than the purchase amount—despite the fact that the mortgage would still yield the same amount of money regardless of the property value. After learning that he would be paid the lower appraised amount—rather than the original $30,000 agreed-upon price—the former property owner attempted to reject the deal. In response, the defendants filed a lawsuit against the former property owner in an attempt to force him to accept the lower amount of money.

At one point, defendants Enhance and Templeton had as many as 75 lawsuits on file in the Lubbock County District Court. According to state investigators, the scheme orchestrated by Enhance and Templeton was specifically designed to defraud individuals who lacked knowledge or experience about complex real estate transactions. The State’s enforcement action alleges that the defendants’ dealings with the former property owners were not only deceptive—but that they violated Texas property laws.

Short-Selling Homeowners: Beware Of Lurking Bill Collectors, 'Zombie Debt' Buyers Looking To Squeeze You For Unpaid Mortgage Loan Deficiency Balances

In Phoenix, Arizona, USA Today reports:

• Some former homeowners who went through short sales to avoid foreclosure are finding they are still in debt to their lenders. Because the short-sale concept, which allows people to sell their homes for less than they owe, is designed specifically to help homeowners avoid having to pay their lenders more money, some sellers have been careful to negotiate their deals so the lender, by contract, can't later seek payment. Those who haven't done so are at risk.

***

• Tricia Goldblatt sold her Phoenix home through a short sale last year after losing her job as an executive assistant at an engineering firm. A few months ago, she started receiving calls from a collection agency. "They are telling me I owe $10,000. I did a short sale to get out from under my mortgage," she said. "I don't have that money. I had to move in with my mom."

• Goldblatt said she thought the documents for her short sale specifically stated her liability for both her first and second mortgage would be terminated. But the collection agency said it bought the note on her home-equity loan from her lender and wants to be paid.

***

• [M]any sellers think that once the short sale is completed, they are free of liability. That's when the unwelcome calls can begin. There usually is a lag between a short sale and when a lender will try to collect on unpaid debt or sell it to a collection agency. It was almost a year after Goldblatt's short sale when she was contacted by the collection agency.

For more, see Some homeowners still owe after short sale.

Media Pounding Continues For California-Based Forensic Loan Audit Peddler; Federal Judge Calls Outfit's Practices "The Blue Ribbon Of Shams!"

ABC World News with Diane Sawyer reports:

• U.S. Loan Auditors and similar outfits are promising to conduct "forensic audits" of mortgage transactions to find evidence of "predatory lending" and fraud, and use that evidence to haul lenders into court and obtain new mortgages at far more favorable interest rates, officials say.

• The companies make "very bold claims" but "in most cases forensic loan audits cannot help homeowners to cancel their mortgages," said James Reilly Dolan, assistant director for financial practices at the Federal Trade Commission.

• In October, California Attorney General Jerry Brown sued U.S. Loan Auditors, its legal arm My U.S. Legal Services and the companies' owners for $60 million, accusing them of scamming hundreds of homeowners out of anywhere from several thousand dollars to, in one case, $55,000.(1)

***

• Sacramento U.S. District Judge John A. Mendez spoke harshly of the company's practices in a separate case brought by Bank of America against U.S. Loan Auditors. "This has sham written all over it. This is the blue ribbon of shams," Mendez said during a hearing in August. Consumers "are spending a whole lot of money for services that aren't delivering anything," he said.

For more, see Officials: New Foreclosure Scam Preys on Desperate Homeowners (Victims Lose Thousands of Dollars -- and Their Homes).

(1) See:

• California AG's press release: Brown Files $60 Million Lawsuit Against Fraudulent Forensic Audit Loan Modification Scam,
• California AG's lawsuit: People v. US Loan Auditors, Inc., et al.

See also Cal. AG Tags Forensic Loan Audit Firm, Others w/ $60M Suit; Says Litigation Mill "Littered Courts w/ 100s Of Suits That Have Scant Chance Of Success."

U.S Loan Auditors has also been hit with a separate lawsuit seking class action status. See:

• Call Kurtis: U.S. Loan Auditors Sued (Former Customers File Class Action Lawsuit, And Claim False Advertising),
• For the class action complaint, see Ma, et al. v. U.S. Loan Auditors, LLC, et al.

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.