South Florida Synagogue Dodges Foreclosure; Torahs, Ark, Other Religious Artifacts Receive Repo Reprieve From Earlier Yom Kippur Threat

In Boynton Beach, Florida, The Wall Street Journal reports:

• Is it a Hanukkah miracle? Congregation Chabad-Lubavitch Greater Boynton resolved a loan dispute with lender Stonegate Bank [last week], paving the way for the Florida synagogue to say goodbye to bankruptcy. The dispute involves a lawsuit the bank filed against the synagogue, to which it had given a $3.8 million mortgage loan, to foreclose on the property. In the agreement, the synagogue agreed to raise a minimum sum of $1.2 million. Court documents say that $800,000 of the $1.2 million is to be escrowed pending closing.

• In addition to Stonegate providing a partial release of the mortgage, it must also release its lien on all of the synagogue’s religious artifacts, including all Torahs, prayer books, talit (prayer shawls), the ark where the Torahs are housed and memorial boards.

• According to the Sun-Sentinel, Rabbi Sholom Ciment kvelled that the congregation rallied to help pay part of the loan by the deadline, which was Nov. 30. “We are joyfully grateful that all of this will be put behind us,” he said.

• This isn’t the first synagogue’s first lender kerfuffle that’s taken place during the holidays. Stonegate sought to recoup some of the aforementioned religious artifacts a few months ago during Yom Kippur.

Source: Florida Synagogue Resolves Foreclosure Dispute.

See also The Palm Beach Post: On eve of Hanukkah, synagogue near Boynton Beach gets best gift of all.

For an earlier post on this story, see Lender Threatens To Grab Five Torahs In F'closure Action Against Synagogue; "Oh, Too Bad!" Says Bank Prez When Told It Was Holiest Time Of Jewish Year.

South Florida Foreclosure Mill Files Lawsuit On Behalf Of Lender Against Woman For Foreclosure On Home She Sold In 1994

The South Florida Sun Sentinel reports:

• Cathy Hammers was abruptly awakened by a continuous loud banging on the front door of her Virginia home the Saturday night after Thanksgiving. She was then served foreclosure papers by Texas-based Nationstar Mortgage and the Fort Lauderdale law firm of Marshall Watson on a Port St. Lucie home Hammers and her parents sold in 1994 — 15 years ago, reports The Palm Beach Post.

• “When I talked to Marshall Watson, Sonya in their litigation department, and asked why I was being served foreclosure papers on a mortgage I did not sign, on a property I haven’t lived in for almost 20 years, she got snippety with me and asked if I had an attorney. Why would I need an attorney when they’ve made the mistake?” Hammers told The Palm Beach Post.

• By Thursday, Hammers said Marshall Watson had completely changed their tune. However, Hammers said she still planned to file her complaint with the Florida Attorney General’s Office to document Marshall Watson’s treatment of the situation, according to The Palm Beach Post.

For the full story, see Virginia resident gets foreclosure notice on Port St. Lucie home she sold in 1994.

Florida Retiree Dodges House Payments For 25 Years; Holds Off Foreclosing Lenders By Tying Them In Legal Knots

In Okeechobee County, Florida, The Wall Street Journal reports:

• Patsy Campbell could tell you a thing or two about fighting foreclosure. She's been fighting hers for 25 years. The 71-year-old retired insurance saleswoman has been living in her house, a two-story on a half acre in a tidy middle-class neighborhood here in central Florida, since 1978. The last time she made a mortgage payment was October 1985.

***

• Ms. Campbell has challenged her foreclosure on the grounds that her mortgage was improperly transferred between banks and federal agencies,(1) that lawyers for the bank had waited too long to prosecute the case, that a Florida law shields her from all her creditors, and for dozens of other reasons. Once, she questioned whether there really was a debt at all, saying the lender improperly separated the note from the mortgage contract.

• She has managed to stave off the banks partly because several courts have recognized that some of her legal arguments have some merit—however minor. Two foreclosure actions against her, for example, were thrown out because her lender sat on its hands too long after filing a case and lost its window to foreclose.

• Ms. Campbell, who is handling her case these days without a lawyer, has learned how to work the ropes of the legal system so well that she has met every attempt by a lender to repossess her home with multiple appeals and counteractions, burying the plaintiffs facing her under piles of paperwork. She offers no apologies for not paying her mortgage for 25 years, saying that when a foreclosure is in dispute, borrowers are entitled to stop making payments until the courts resolve the matter.

For more, see The 25-Year 'Foreclosure From Hell'.

(1) Reportedly, Ms. Campbell stopped making mortgage payments in 1985 because of an illness that caused her to lose income and get behind on her bills, she says. By then, the savings-and-loan crisis had begun to take hold. First Federal merged with First Fidelity Savings and Loan, which assumed ownership of the Campbell loan. In 1987, First Fidelity sold the mortgage to American Pioneer Savings Bank, an Orlando-based lender that collapsed in the early 1990s. The loan would change hands four more times, and four different lenders would try to foreclose on her. But every lender that held her loan either merged or collapsed. Each time ownership of the lender changed, the foreclosure case against Ms. Campbell would be dropped.

The loan eventually made its way to the Resolution Trust Corp., the federally owned asset manager that liquidated assets of insolvent S&Ls, and later, to the Federal Deposit Insurance Corp. In June 1998, the FDIC sold the mortgage to Commercial Services of Perry, which filed to foreclose in 2000. After another illness, Ms. Campbell deeded the house to her daughter, Deborah Pyper. Years later, after Ms. Campbell recovered, the house was deeded back to her. Ms. Pyper declined to comment.

She maintains that at this point, no one owns her mortgage note, and that because of fraud and paperwork mistakes by the banks that transferred it over and over again in the 1990s, the debt has been made void, the story states.

Judge Cancels Previously-Ordered Foreclosure Sale After Reviewing Testimony In Expert's Affidavit As To Dubious Nature Of Robosigner Documents

A recent story in the South Florida Sun Sentinel describes the approach taken by homeowner Gerta Kachko and foreclosure defense attorney Geoff Sherman in an attempt to get a previously-scheduled foreclosure sale cancelled:

• Sherman said the Aug. 10 [summary judgment] hearing lasted only a few minutes, with a Broward County Circuit Court judge ruling in favor of Deutsche Bank and setting a date of Dec. 8 for the condo to be repossessed.

• Sherman said he later read about issues in other cases involving an accused robo-signer. Intrigued, Sherman investigated further while Eugene Kachko hired an expert on mortgages and foreclosures to review his mother's case.

• The expert, West Palm Beach attorney Lynn Szymoniak, wrote in an affidavit that "it is clear" that Deutsche had not acquired the Kachko mortgage at the time it moved to foreclose. Szymoniak testified that Deutsche filed a document proving that it owned the Kachko mortgage only after filing the initial foreclosure, and it attempted to make the document effective retroactively.

• The document was signed by Linda Green and Linda Thoresen, who were identified as representatives of America Home Mortgage. But Szymoniak said Green and Thoresen actually were employees of Lender Processing Services Inc., a Jacksonville-based company whose services include drafting missing documents to facilitate foreclosures.

• Green and Thoresen "signed thousands of documents each week as needed in foreclosure cases, without any personal knowledge of the documents, often without any authority from the entities they claimed to be their employers and, in most cases, without ever reading such documents," Szymoniak wrote.

• She also noted that LPS told federal regulators in August that its document production operations were the subject of state and federal investigations. A spokewoman for LPS did not respond to an interview request.

• On Aug. 20, Sherman filed a motion for a rehearing, asking that the judge's ruling for Deutsche be vacated on the grounds that the bank allegedly committed fraud. Judge Eli Breger granted the order on Sept. 24, canceling the Kachko foreclosure. Four days earlier, GMAC Mortgage had become the first lender to suspend foreclosures.

Source: Broward homeowner alleges robo-signer wrongdoing in foreclosure case.

Incidents Of Wrongful Foreclosures Growing, Say Lawyers, Consumer Advocates

The Associated Press reports:

• People have always loved to complain about their banks. The push-button circus that passes for customer service. The larding on of fees. But the false foreclosure cases are hardly the usual complaints. These homeowners paid their mortgages — or loan modifications — on time. Some even paid off their loans. Worse, those on the receiving end of a bad foreclosure claim tell similar stories of getting bounced from one bank official to the next with no resolution while the foreclosure process continues apace.

• Many have to resort to paying a lawyer, even after presenting documentation. They say they have to sue not only to stop the wrongful foreclosure but also to attempt to win back their costs. There are no official statistics for these homeowners, but lawyers, real estate agents and consumer advocates say their ranks are growing.

For more, see Wrongful Foreclosures Puzzle Homeowners.

Vacant Foreclosed Home Hijacker Scraps "Adverse Possession" Defense; Cops Plea To Organized Fraud, Dodges Jail Time, Gets Two Years Probation

In Fort Lauderdale, Florida, Broward-Palm Beach New Times reports:

• The State Attorney's Office has wrapped up its case against Mark Guerette, the guy written about in the New York Times and here on the Juice for his work leasing empty, foreclosed homes to families in need by way of an antiquated squatter's-rights law.

• Guerette found around 100 foreclosed homes that had been neglected in Broward County, particularly North Lauderdale, and informed the banks that he intended to move in and start renting them out. He used "adverse possession," an old clause in the Florida Statutes that grants someone ownership of a neglected property if he takes care of it for seven years.

• After multiple meetings with detectives and Broward prosecutors in which Guerette and his lawyer say they cooperated fully, he pleaded "no contest" to charges of organized fraud in the second degree. He was then adjudicated guilty without a trial and given two years' probation. Guerette says he wanted to avoid a trial because he needs to deal with his own foreclosure and take care of his two children. [...] As part of his plea deal, Guerette agreed not to file any more claims of adverse possession for two years.

For more, see Fraud Case Ends With Probation for Rogue Foreclosure Landlord Mark Guerette.

Disbarred South Florida Title Attorney Gets 70 Months For Looting $2.7M From Escrow Account; Cash Intended To Pay Off Mortgages In R/E Closings

The South Florida Sun Sentinel reports:

• Disbarred Boca Raton attorney James B. Hayes was sentenced Friday to 70 months in federal prison for stealing clients' funds. Hayes, who pled guilty in September to making false statements on residential real estate settlement documents, was also ordered to pay more than $2.7 million in resititution.

• According to a release from U.S. Attorney Wilfredo Ferrer, Hayes, 57, a title attorney, withheld funds from clients and mortgage lenders during real estate transactions. The money was supposed to be used to pay off loans and cover transaction costs. The Florida Bar suspended his license to practice law last spring, but it found Hayes continued to practice law until he was permanently disbarred in August.

Source: Boca Raton attorney who stole $2.7 million from clients' funds jailed 70 months.

For the U.S. Attorney (Miami, Florida) press release, see Title Lawyer Sentenced For Stealing Trust Funds (Among those ccoperating in the investigation were The Florida Bar and title insurance companies Attorneys Title, Old Republic and Chicago Title).

Buyer Of Foreclosed Home Illegally Gives Unwitting Tenants The Boot Without Prior Notice, Ignoring Federal Protections Against Foreclosure Evictions

In Mableton, Georgia, WXIA-TV Channel 11 reports:

• It should not have happened: A family's belongings in heaps; and the family -- Patrick Duff, Sasha Davis and their now 10-day-old daughter Mia -- evicted from their rented house in Mableton on Thursday morning, without any warning, they say, insisting they did not know that their landlords had lost the home in a foreclosure on the Cobb County Courthouse steps. "The rug was yanked out from under us," Duff said on Thursday.

• "It says to me that something is very awry," Karen Gandolfo, an Atlanta mortgage and foreclosure consultant, said on Friday. "It says to me that there's the possibility that due process wasn't served."

***

• Maggie Kinnear of Atlanta Legal Aid told 11Alive News that what happened to Duff and Davis "should not happen anymore," because of the federal law signed by President Barack Obama in May, 2009 called the "Protecting Tenants At Foreclosure Act." She said the law was meant to prevent evictions of tenants when the landlords lose the houses in foreclosure.

• "If the tenant has a lease," which Duff and Davis did, from February, 2010 until February, 2011, "the law says they cannot be evicted after the foreclosure, they can stay on the property until the lease expires." If the buyer of the foreclosed house is not a financial institution or private investor, if it is someone who intends to move into it and live in it, then the tenants' lease is null and void, but "they must receive 90 days' notice to vacate," Kinnear said.(1)

***

• Duff and Davis said about the only contact they've had with the [foreclosed landlords] in recent weeks was on Thursday afternoon, a few hours after the eviction, when the[y] gave them their deposit back, a check for $1,600 -- their first and last months' rent.(2)

For the story, see Family Evicted Despite Law Protecting Tenants From Landlord's Foreclosure.

(1) According to the foreclosure deed recorded in this matter, the foreclosure sale took place on October 5, 2010, and the property was purchased by an outfit called REO Funding Solutions, LLC.

(2) While failing to tell the family the home was in some stage of foreclosure wasn't a very nice thing to do on the part of the now-foreclosed landlord, the Federal Protecting Tenants At Foreclosure Act takes the former owner off the hook for any responsibility for illegal evictions in violation of the statute and places it on the purchaser at the foreclosure sale, and any subsequent purchasers. The attention given in this story to the former landlords for failing to inform the tenants of the foreclosure (but who at least refunded the family of their security deposit) should be redirected to the lowlife(s) who now own(s) the home, and, if applicable, the snoozing judge who rubber-stamped the eviction proceeding without regard to the legal rights under the Federal law of any non-owner-occupants in possession of the home.

Indiana AG: Loan Modification Outfit, Out-Of-State Attorney Illegally Peddled Loan Modification Services To State Homeowners

In Evansville, Indiana, the Evansville Courier & Press reports:

• Indiana Attorney General Greg Zoeller personally filed a lawsuit in Vanderburgh Circuit Court [] claiming a for-profit foreclosure consulting company violated state consumer protection law.

• The lawsuit alleges that the California-based Hope4Homes signed contracts with an Evansville couple and 10 other Indiana residents for services as credit services organization and foreclosure consultant. The lawsuit claims the company is owned and operated by attorney Mahan Abbasi.

• According to the complaint, the company promised Harold and Sharon Matthews of Evansville that it would lower the interest rate on their mortgage by 2 percent. The couple signed numerous documents and an agreement to pay Hope4Homes $2,250 in three installments and they did pay $1,800 for the company's services, according to the complaint.

• The company then told the couple to stop making payments on their mortgage while it was "negotiating" a loan modification for them. The couple had been current on their mortgage payments, but as a result of agreement they fell three months behind and new loan terms were never negotiated, Zoeller said.

• No refund was provided, according to the complaint, even though the company advertised a complete money back guarantee and the couple demanded a refund.

• Molly Butters, the attorney general office's spokeswoman on consumer issues, said the Hope4Homes name was deceiving. "The name Hope4Homes is playing on some of those nationally recognized organizations that are legitimate," she said.

• Zoeller said the company is not registered to do business in Indiana and Abbasi is a licensed attorney in California but not Indiana. Additionally, the company had not registered with the attorney general's office with proof that it had a $25,000 surety bond.

For the story, see Greg Zoeller visits Evansville to sue foreclosure counselor.

'Zombie Debt' Buyer Hit With Federal Lawsuit For Allegedly Calling Consumer A "Lowlife S.O.B." In Attempt To Squeeze Him For Payment Of 'Stale' Debt

In Beaumont, Texas, The Southeast Texas Record reports:

• A debt collection agency is being sued after one of its debt collectors allegedly referred to the debtor as a "lowlife." Tommy Hubert filed suit against Capital Management Services on Nov. 18 in the Eastern District of Texas, Beaumont Division.

• Hubert states the defendant called his home after 9 p.m.,(1) a time which was inconvenient, and called Hubert a "lowlife S.O.B." The plaintiff states he has been called the abusive name after he repeatedly refused to pay any monies towards the debt as the alleged debt is more than 15 years old. Hubert claims that Capital Management made multiple phone calls regarding the debt and made false representations about the debt.

• "Defendant's actions were done maliciously and in willful, wanton and reckless disregard for the rights of the Plaintiff," the lawsuit states. The defendant is accused of violations of the Fair Debt Collection Practices Act, the Texas Debt Collection Practices Act and the [Texas] Deceptive Trade Practices Act.

• Hubert is asking for an award of statutory and actual damages, attorney's fees and interest and for an injunction prohibiting Capital management from continuing the behavior.(2)

Source: Debt collector is sued after calling debtor abusive names.

(1) The Federal Fair Debt Collection Practices Act generally prohibits debt collectors from contacting consumers before 8:00 am and after 9:00 pm. 15 USC 1692c(a)(1).

(2) See 'Zombie Debt' Buyer Slammed For $300K+ In Damages, $100K+ In Consumer's Attorney Fees For Pursuing Lawsuit On 'Stale' Debt for another story where a debt buyer files a lawsuit after the expiration of the applicable statute of limitations in an attempt to collect a 'stale' debt.

Incarceration Over Unpaid Debts On The Upswing? De Facto 'Debtors' Prisons' May Be Making A Comeback As Market For 'Zombie Debt' Zooms

In Anoka, Minnesota, the Minneapolis Star Tribune reports:

• As a sheriff's deputy dumped the contents of Joy Uhlmeyer's purse into a sealed bag, she begged to know why she had just been arrested while driving home to Richfield after an Easter visit with her elderly mother.

• No one had an answer. Uhlmeyer spent a sleepless night in a frigid Anoka County holding cell, her hands tucked under her armpits for warmth. Then, handcuffed in a squad car, she was taken to downtown Minneapolis for booking. Finally, after 16 hours in limbo, jail officials fingerprinted Uhlmeyer and explained her offense -- missing a court hearing over an unpaid debt. "They have no right to do this to me," said the 57-year-old patient care advocate, her voice as soft as a whisper. "Not for a stupid credit card."(1)

• It's not a crime to owe money, and debtors' prisons were abolished in the United States in the 19th century. But people are routinely being thrown in jail for failing to pay debts. In Minnesota, which has some of the most creditor-friendly laws in the country, the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009, a Star Tribune analysis of state court data has found.

• Not every warrant results in an arrest, but in Minnesota many debtors spend up to 48 hours in cells with criminals. Consumer attorneys say such arrests are increasing in many states, including Arkansas, Arizona and Washington, driven by a bad economy, high consumer debt and a growing industry that buys bad debts and employs every means available to collect.

• Whether a debtor is locked up depends largely on where the person lives, because enforcement is inconsistent from state to state, and even county to county. In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man "to indefinite incarceration" until he came up with $300 toward a lumber yard debt.

***

• How often are debtors arrested across the country? No one can say. No national statistics are kept, and the practice is largely unnoticed outside legal circles. "My suspicion is the debt collection industry does not want the world to know these arrests are happening, because the practice would be widely condemned," said Robert Hobbs, deputy director of the National Consumer Law Center in Boston.

***

• The laws allowing for the arrest of someone for an unpaid debt are not new. What is new is the rise of well-funded, aggressive and centralized collection firms, in many cases run by attorneys, that buy up unpaid debt and use the courts to collect.

• Three debt buyers -- Unifund CCR Partners, Portfolio Recovery Associates Inc. and Debt Equities LLC -- accounted for 15 percent of all debt-related arrest warrants issued in Minnesota since 2005, court data show.(2) The debt buyers also file tens of thousands of other collection actions in the state, seeking court orders to make people pay. The debts -- often five or six years old -- are purchased from companies like cellphone providers and credit card issuers, and cost a few cents on the dollar.

***

• Todd Lansky, chief operating officer at Resurgence Financial LLC, a Northbrook, Ill.-based debt buyer, said firms like his operate within the law, which says people who ignore court orders can be arrested for contempt. By the time a warrant is issued, a debtor may have been contacted up to 12 times, he said. "This is a last-ditch effort to say, 'Look, just show up in court,'" he said.

• Few debtors realize they can land in jail simply for ignoring debt-collection legal matters. Debtors also may not recognize the names of companies seeking to collect old debts. Some people are contacted by three or four firms as delinquent debts are bought and sold multiple times after the original creditor writes off the account.

***

• A year ago, Legal Aid attorneys proposed a change in state law that would have required law enforcement officials to let debtors fill out financial disclosure forms when they are apprehended rather than book them into jail. No legislator introduced the measure.

***

• Many debtors, like Robert Vee, 36, of Brooklyn Park, get a second surprise after being arrested -- their bail is exactly the amount of money owed. Hennepin County automatically sets bail at the judgment amount or $2,500, whichever is less. This policy was adopted four years ago in response to the high volume of debtor default cases, say court officials. Some judges say the practice distorts the purpose of bail, which is to make sure people show up in court.

For more, see In jail for being in debt (You committed no crime, but an officer is knocking on your door. More Minnesotans are surprised to find themselves being locked up over debts).

In related stories, see:

• St. Petersburg Times: Debtors' prison— again (In a little-noticed trend blamed on the state's hard economic times, several courts in Florida have resurrected the de facto debtor's prison — having thousands of Floridians jailed for failing to pay assessed court fees and fines),

• Atlanta Journal Constitution: Deal frees 'debtor prison' woman (A woman held in a halfway house for months beyond her original sentence because she could not pay a $705 fine was released Tuesday after an agreement between the state Department of Corrections and the Southern Center for Human Rights. Ora Lee Hurley had been caught in a legal Catch-22 that kept her confined to the Gateway Diversion Center in Atlanta for eight months beyond her initial 120-day sentence for a probation violation),

• AlterNet: Owe Money? Be Careful, or You Might End Up in Jail (Owing money is not a criminal offense in the USA. But big business has found a way to end-run this process. Reports of mild-mannered Americans getting arrested for being in debt are starting to pop up in states across the country. All over the Net, we've been reading about these poor saps snatched off the street -- right in front of their horrified children -- by glowering cops and locked up just for missing a few credit card payments),

• Public News Service: A Return to Debtor’s Prisons? (Debtor's prisons were outlawed in the 19th century, but recent practices by debt collectors in Iowa have civil rights experts wondering if the prisons are back in a new form. Here's the tactic being used by some collection agencies - ask a judge to issue a warrant for the arrest of a debtor if they don't make good on a court-ordered payment).

(1) Reportedly, Uhlmeyer walked free after her nephew posted $2,500 bail. It took another $187 to retrieve her car from the city impound lot. Her 86-year-old mother later asked why she didn't call home after leaving Duluth. Not wanting to tell the truth, Uhlmeyer said her car broke down and her cell phone died.

(2) See Top Five Companies Using Debt Arrest Warrants in Minnesota (To their credit, the Minneapolis Star Tribune confesses to using these warrants four times during 2005-2009).

Minnesota AG: Loan Modification Rackets Touted 'Attorney' & 'Charitable' Status To Dupe Homeowners Into Paying Illegal Upfront Fees

From the Office of the Minnesota Attorney General:

• Minnesota Attorney General Lori Swanson [] filed lawsuits against two out-of-state companies that charged Minnesota homeowners up to $3,500 in unlawful fees to help them renegotiate their home mortgages. [...] The first lawsuit was filed against Balanced Legal Group of California and its attorney, Deepak Parwatikar, which charged homeowners up to $3,500 for supposed mortgage help. The second lawsuit was filed against Home Protection Coalition of Wyoming, which charged homeowners up to $2,300.

• As regulators around the country have cracked down on widespread mortgage assistance scams, Attorney General Swanson said that her Office has seen an uptick of complaints involving companies that (1) tout their attorney status to build credibility to get people to sign up for their services, and (2) get people to sign up for expensive services by warning homeowners to hire them because there are other fraudulent companies that make false promises of mortgage help.(1)

For the Minnesota AG press release, see Attorney General Swanson Files Lawsuits Against Two Companies That Use The Threat Of Foreclosure Scams To Dupe Citizens Into Paying Thousands Of Dollars In Unlawful Fees For Supposed Mortgage Help (Attorney General warns citizens not to pay advance fees to companies for assistance in renegotiating their home mortgages).

(1) In connection with the lawsuit against Balanced Legal Group of California and its attorney, Deepak Parwatikar, the AG alleges that they peddles the following pitches on its website:

• “The banks have attorneys so you need to have a law firm on your side to protect your interests. Your home is one of your most treasured assets. DON’T use a non-attorney company that claims to work with attorneys to try and negotiate a solution concerning this treasured asset” and

• “BEWARE of brokers, ‘attorney based’, ‘attorney assisted’ and other boiler room type providers. Remember this is a relatively new industry and there is little regulatory control. The laws are constantly changing and these entities often skirt or break laws.”

Regarding the lawsuit against Home Protection Coalition of Wyoming, the AG alleges:

• [I]n 2009, the United States Congress funded a campaign called the “Loan Modification Scam Alert” to warn homeowners of fraudulent modification scams. The lawsuit against Home Protection Coalition alleges that the organization falsely posed as 501(c)(3) corporation and mailed Minnesota homeowners solicitations that bear an almost identical logo to the “Loan Modification Scam Alert.” Home Protection Coalition’s website also states as follows:
  
  “Due to the current foreclosure crisis, a bill has been introduced to Congress. This bill allows Home Protection Coalition to offer assistance to homeowners through the Economic Foreclosure Stimulus Plan.
  
  This initiative may reduce your mortgage payment by as much as 40%. . . . Home Protection Coalition is a not for profit housing counseling agency that employs forensic mortgage auditors, paralegals, attorneys and highly skilled lender specific negotiators that will write a loan modification that fits your specific financial needs.”

• To further deceive consumers, Home Protection Coalition calls its $2,300 fee a charitable “donation.” In addition to charging the company with violations of Minnesota’s mortgage modification laws which prohibit advance fees, the lawsuit alleges that the organization engaged in charitable solicitation fraud.

Bank of America In Middle Of Another Mortgage Servicing Screw-Up; Promises To Give Back Home It Now Admits Was Foreclosed On In Error

In Jamaica, Queens, author and New York Times' columnist Joe Nocera gives his account of another Bank of America foreclosure fiasco resulting in the wrongful foreclosure of the home of 73-year old Lilla Roberts, and the subsequent efforts to fight back with the help of her attorney, Elizabeth Lynch with MFY Legal Services.(1) Combined with some 'media heat', Bank of America and Fannie Mae ultimately acknowledged that foreclosing on Ms. Roberts home had been a mistake.(2)

He concludes his column with this less-than-optimistic observation:

• Let’s face it: Ms. Roberts got a break. Because she had a dogged lawyer, who had the wit to get a New York Times columnist interested in her case, a terrible mistake was uncovered. As a result, an unjustified foreclosure may well be reversed. But it has to make you wonder how many other people have lost their homes because of similar mistakes. I can’t bear to venture a guess. It’s too sickening to contemplate.

For the story, see A Happy Ending to a Raw, but Common, Tale.

(1) MFY Legal Services is a not-for-profit law firm in New York City that provides free legal advice, counsel and representation to low-income New Yorkers on a wide range of civil legal issues, including housing, public benefits and entitlements, employment, mental health and adult home issues, consumer problems, and adoptions by foster care parents.

(2) According to the story, the notorious Buffalo, NY-based foreclosure mill law firm of Steven J. Baum, P.C. participated in the foreclosure process, and which, at one point, tried to get Ms. Roberts to waive her legal rights as a condition for a loan modification agreement.

Arizona AG Files Separate Suits Against Two Outfits Peddling Mtg Principal Reduction Services; Allegedly Promised Discount Purchases Of Existing Loans

From the Office of the Arizona Attorney General:

• Attorney General Terry Goddard [] filed complaints against two Arizona companies, alleging violations of the Arizona Consumer Fraud Act in connection with the marketing of purported "principal reduction” services for home mortgages.

• One lawsuit was filed against Principal Reduction Group, LLC, of Scottsdale, and its owner, Brian Cutright. It alleges that between July and September of this year the company has charged some 100 Arizona homeowners up to $6,000 to participate in its principal reduction program.(1)

***

• Goddard, together with Superintendent Lauren W. Kingrey of the Arizona Department of Financial Institutions, filed a second lawsuit [] against Queen Creek Mortgage, LLC, of Mesa, a licensed mortgage broker, which has marketed its service to some 180 homeowners this year at fees of up to $5,500.

For the Arizona AG press release, see Goddard Sues Two Companies over ‘Principal Reduction’ Services.

(1) The complaint alleges that Principal Reduction Group mailed hundreds of thousands of mailers to Arizona homeowners that were designed to appear as if they were from the homeowners' lenders announcing the lenders' principal reduction program and the possibility that the homeowners might qualify for it. The complaint further alleges that Principal Reduction Group misled consumers by emphasizing its purported relationship with investors who would purchase homeowners' mortgage notes at a discount and then pass on some of the savings to the homeowner in the form of a lower mortgage payment.The company allegedly failed to disclose that the company had no binding agreement with any investor to do anything for its clients and misrepresented successful results when, in fact, the company had not achieved principal reductions for any of its clients. The company is also accused of falsely telling consumers that federal programs and funds were a component of its services.

(2) The complaint alleges that the company touted its partnership with investors who would purchase its clients' mortgage notes at a discount and pass on some of the savings to consumers in the form of lower mortgage payments. In fact, Queen Creek Mortgage had no binding agreement with any investors to do anything on behalf of the company's clients. The complaint also alleges that Queen Creek Mortgage misrepresented the relevancy of federal programs and funds to its program. The company is alleged to have misled clients by telling them they could expect significantly lower mortgage payments if they joined the program. The company is further accused of failing to disclose that it would send clients' files and personal information to an out-of-state third party for work on their files once Queen Creek Mortgage collected the clients’ fees. The out-of-state company was not licensed to engage in mortgage broker or mortgage banker activities in Arizona.

Bay Area Prosecutors: Duo Who Ripped Off 60 In Loan Modification Racket Face Multiple Felony Fraud, Theft Charges

In Alameda County, California, Westlaw News & Insight reports:

• Two Californians took thousands of dollars from residents with the false promise that they would stop banks from foreclosing on their homes and renegotiate their loans, state prosecutors have alleged in a criminal complaint. Instead, Angeline Lisa Lizarrago, 68, and Michael Douglas Young, 67, pocketed the money, according to the complaint filed in the Alameda County Superior Court.

• Many of their clients lost their homes to foreclosure and did not receive refunds from the defendants as promised, prosecutors said. Lizarrago and Young allegedly ran the scheme for a year through their company, Avemos Financial Group in Fremont, Calif.

• They are charged with a total of 23 counts of felony fraud and theft. If convicted Lizarrago could spend more than 15 years in prison, while Young faces up to 12 years. Lizarrago has four prior convictions for writing bad checks and grand theft, the complaint says.

• Prosecutors also accuse Lizarrago of duping an 89-year-old man and his wife into paying $25,000 for a foreclosed property. She allegedly took the money but never provided them with the home. Although the charges that Lizarrago and Young face stem from 11 cases of fraud and theft, prosecutors said there are 50 more victims who have yet to be identified.

People v. Lizarrago et al., No. 429998, criminal complaint filed (Cal. Super. Ct., Alameda County Sept. 29, 2010).

Source: Two persons charged in California foreclosure rescue scam.

Alleged Forensic Loan Audit Racket, Sister Outfit Seek Bankruptcy Court Protection

In Rancho Cordova, California, KXTV-TV Channel 10 reports:

• A foreclosure rescue company described as a "scam" in a lawsuit filed by the state attorney general has filed for bankruptcy protection. US Loan Auditors filed for Chapter 7 liquidation and its sister company, My US Legal Services, filed for Chapter 11 reorganization in US Bankruptcy Court in Sacramento last Thursday.

• Both companies and their principals have been named in a $60 million lawsuit filed by the attorney general's office Oct. 6. The lawsuit claims US Loan Auditors was a foreclosure rescue scam that snared hundreds of California homeowners.

• US Loan Auditors allegedly promised troubled homeowners it could save them from foreclosure by conducting a "forensic audit" to challenge the loan documents. According to the lawsuit, the sister company, My US Legal Services, would then file "cookie cutter" lawsuits against lenders that were generally dismissed by the courts. [...] One of the principals, attorney James Sandison, has also filed for personal bankruptcy protection.

***

• [Company attorney Austin] Cooper suggested homeowners who believe they are entitled to a refund file a claim with the US Bankruptcy Court for the Eastern District of California.

For the story, see Rancho Cordova firm accused as 'scam' in lawsuit files bankruptcy.

See Media Pounding Continues For California-Based Forensic Loan Audit Peddler; Federal Judge Calls Outfit's Practices "The Blue Ribbon Of Shams!" for an earlier post on this group.

Homeowner Files Suit Seeking Class Action Status; Says Wells Told Her To Stop Mortgage Payments To Qualify For Loan Modification, Then Foreclosed

In Cobb County, Georgia, Courthouse News Service reports:

• A homeowner claims Wells Fargo instructed her to stop making her monthly mortgage payments to qualify for its loan modification program, then foreclosed after she followed the bank's instructions. The class action seeks damages for RICO fraud, in Cobb County Court.

• Lisa Smoak Reid claims the bank "lulled [her] into inaction by offering to work out options to resolve her delinquency, but failed to provide any means to do so, and has failed to provide the plaintiff with the amount of the deficiency."

***

• Reid wants an emergency hearing and injunction to stop the foreclosure proceedings and set aside the foreclosure permanently. She also wants $15 million in punitive damages for RICO fraud, breach of fiduciary duty, breach of contract and emotional distress.

For more, see Mortgage 'Modification' Called RICO Fraud.

For the lawsuit, see Reid v. Wells Fargo Bank NA.

'Zombie Debt' Buyer Slammed For $300K+ In Damages, $100K+ In Consumer's Attorney Fees For Pursuing Lawsuit On 'Stale' Debt

Buried in a story on explosion of debt collection lawsuits by 'zombie debt" buyers, which recently appeared in The Wall Street Journal, contained these excerpts:

• Once debt buyers sue to retrieve debt, they are subject to state laws that impose a statute of limitations, often between five and seven years after the borrower stops making loan payments.

• In 2007, CACV, a unit of debt collector SquareTwo Financial Corp., sued Timothy McCollough in state court in Montana to recover $3,800 on a credit card from J.P. Morgan Chase & Co., and another $5,500 in interest, collection costs and $480 in lawyer's fees.

• Mr. McCollough wrote to the court in March 2008, explaining that he had been living on Social Security income since suffering a head injury in 1990. He says that he hadn't made any payments or used the credit card for more than eight years, putting his account beyond the state's statute of limitations for debt collection. He asked the court to dismiss the suit, saying: "This is the third time they have brought me to court on this account. Do I have to sue them so I can live quietly in pain?"

• In April 2009, a judge awarded damages of $310,000 plus $108,000 in legal fees and costs to Mr. McCollough.

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

Bank Fails Again To Convince NY Bkrptcy Judge It Has Standing To F'close On Bronx Borrower; Invited To Try Again; Admits It Doesn't Know Who Owns Note

In New York City, AOL's Daily Finance reports:

• U.S. Bankruptcy Court Judge Martin Glenn denied Wells Fargo's request for permission to foreclose on Tandala Mims's house in the Bronx for a second time on Thursday because he still wasn't satisfied that Wells -- as opposed to some other bank -- had the right to do so.(1)

• In its attempts to prove its legal standing to foreclose so far, Wells Fargo has submitted two different versions of Mims's note, certifying each as a true and accurate copy of the original. The bank has also submitted a document assigning the mortgage to it that was problematic, as I explained in an article earlier this week.

• One issue with the assignment was that the company allegedly doing the assigning is defunct. Another is that -- through the magic of MERS -- a Wells Fargo employee was signing on behalf of the assigner. Essentially, that puts Wells Fargo on both sides of the contract, a conflict of interest.

***

• Describing himself as "deeply concerned," Judge Glenn noted that, in looking at the documents, questions kept "popping out," and he made the point that Wells Fargo hadn't answered the questions he had raised in his initial order against it. In one of the hearing's more dramatic moments, the judge asked Wells Fargo who the investor in the note was -- the MERS database doesn't say -- and Wells admitted it didn't know.

For more, see Judge Rejects Wells Fargo Foreclosure Documents Again.

See Wells Fargo, Upstate NY Foreclosure Mill To Face The Heat In Explaining Dubious Documents Filed In Foreclosure Matter for last week's post on this story.

(1) See In re Mims II - Order. While the judge ruled against Wells, he gave the bank permission to try again, the story states.

Two Phoenix Cops Shelved On Administrative Leave After Agreeing To $458K Settlement With AZ AG For Roles In Alleged Illegal Sale Leaseback Deals

From the Office of the Arizona Attorney General:

• Attorney General Terry Goddard [last week] announced a judgment totaling $458,000 in civil penalties and restitution(1) for consumers as a result of a mortgage fraud investigation and lawsuit. [..] On November 24, 2010, Goddard filed a lawsuit(2) on behalf of his Office and the Arizona Department of Financial Institutions against Lee Brent Shaw of Gilbert and Mark Tallman of Chandler and their limited liability companies, Better Choice Investments, LLC, and Better Solutions, LLC, alleging that they defrauded some 148 Arizonans of their homes. Both Shaw and Tallman are also Phoenix Police Officers.

The Associated Press reports that Shaw and Tallman have been put on administrative leave after agreeing to the settlement, and further reports that a police statement says an internal investigation is now under way. See 2 Phoenix officers on leave after settling suit with AG that accused them of mortgage fraud.

For the Arizona AG press release, see Goddard Announces $458,000 Judgment in Fraud Case Involving Two Police Officers.

For the lawsuit and the consent judgments in this case, see:

• Lawsuit,
• Consent Judgment-Shaw,
• Consent Judgment-Tallman,
• Consent Judgment-Better Choice Better Solutions.

See also 2 Sale Leaseback Peddling Cops Accused Of Consumer Fraud Violations; "Equitable Mortgages" Required Disclosures Under TILA, HOEPA: Arizona AG for an earlier post on this story.

(1) According to the terms of the settlement, the defendants must:

• Pay $310,000 in restitution to homeowners victimized by their scheme.
• Pay $148,000 in civil penalties to the Attorney General’s Office and the Arizona Department of Financial Institutions.
• Pay $27,717 in costs and attorney’s fees.
• Refrain from participating as a director or officer in any financial institution or enterprise licensed by the Arizona Department of Financial Institutions.
• Refrain from engaging in any activity requiring the issuance of a license under the authority of the Arizona Department of Financial Institutions.
• Refrain from any ownership interest in a sale-leaseback transaction.

It sounds like the duo got a pretty good deal from the state AG's office. Unlike this suit involving multiple sale leaseback deals and 100+ alleged victims, a recent New Jersey civil lawsuit resulted in a significantly higher monetary award and related to only one sale leaseback deal with one homeowner-couple. 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 the homeowner-couple in the New Jersey case were attibutable to actual damages for the stripped equity and statutory damages for violations of the Federal Truth In Lending Act, Federal Home Ownership and Equity Protection Act, and a state consmer lending law.

Presumably, the settlement with the Arizona Attorney General also insulates the pair from any possible criminal liability that may have possibly arisen from their alleged activities. See Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals for those incidents that led to criminal prosecutions in sale leaseback deals.

For some insights on the various legal theories and strategies to attacking this type of scam in civil lawsuits brought on behalf of screwed-over homeowners, 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),
• DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (a publication from the National Consumer Law Center).

(2) According to the Arizona AG's press release:

The lawsuit alleged that between 2003 and 2007, the two defendants, through their Better Choice Investments, LLC, purchased sale-leaseback transactions from solicitors who had convinced homeowners to sell their homes for far less than the market value, promising to save them from foreclosure.

The solicitors persuaded struggling homeowners to deed them their homes in return for assuming their monthly mortgage payments and paying off the full value of their delinquent payments, often using funds advanced by defendants. The lease agreement provided for a monthly fee equivalent to the mortgage payment to remain in the home as a renter. Neither the owner’s mortgage lender nor servicer was notified of the transfer of title.

After the initial paperwork was signed, the deal was quickly turned over to defendants Shaw and Tallman, in return for a commission paid to the solicitors. The defendants recruited a pool of investors willing to assume co-ownership and refinance, for a 50 percent share in the profits.

The owners-turned-renters had the option to repurchase the house within one year for a fee of approximately $15,000, if they met all of the conditions of the sale-leaseback agreement. If the owner-turned-renter violated any of the conditions, such as by making a late rental payment or being evicted, the option to repurchase the home became void and the individual was subject to immediate eviction.

Almost all of the owners-turned-renters proved unable to repurchase their properties, at which time the defendants sold or refinanced the home at full market value, earning profits in the tens of thousands of dollars.

Colorado AG Announces Two Civil Lawsuits Targeting Alleged Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff Operations

From the Office of the Colorado Attorney General:

• Colorado Attorney General John Suthers announced [last week] that his office has filed separate lawsuits against three businesses and five individuals accused of defrauding homeowners in Denver, Boulder, Broomfield and Adams counties through deceptive foreclosure rescue schemes. [...] All of these defendants are suspected of defrauding homeowners out of substantial equity in their homes through an elaborate foreclosure rescue scheme in violation of the Colorado Foreclosure Protection Act.

• According to the complaints filed in Denver District Court, consumers facing foreclosure were approached by the defendants with a proposal to save their homes. The defendants promised to use the equity in the homes to halt the foreclosures and, in some cases, to make improvements to the properties.

• Homeowners were instructed to transfer title to their properties to investors arranged by defendants,(2) who would then lease the properties back to the original homeowner with an option to repurchase their homes. The complaints allege that many homeowners were subsequently evicted and that none of them were ever able to exercise their repurchase options. All of the equity in their homes was lost to the defendants.(3)

For the Colorado Attorney General press release, see Attorney General announces lawsuits against individuals, companies engaged in fraudulent foreclosure rescue activities.

(1) The first complaint, State of Colorado v. Lynn, et ano., charges Jason L. Lynn (DOB: 3/10/1977) and Lynn’s company, Superior Financial Group.

The second complaint, State of Colorado v. Brunner, et al., charges Patrick C. Brunner (DOB: 7/27/1979), Brunner’s company, Platinum Financial Group, Jerry Ohu (DOB: 6/10/1974), Ohu’s company, Fortune Financial Group, Gregory D. Hoffman (DOB: 8/21/1969) and William J. Schultz (DOB: 7/29/1974).

(2) According to the civil lawsuits filed by the Colorado Attorney General, the sale leaseback peddlers arranged for a sale of the homes to investors, converting any of the home equity into cash by financing the deal with a mortgage loan from a financial institution, and subsequently using assignments to divert those net proceeds into their own pockets.

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

• Massachusetts: Massachusetts AG Concludes Civil Action Against Equity Stripping Attorney, Five Confederates For Using Sale Leaseback Racket To Rip Off Homeowners (for the lawsuit setting forth the allegations, see Commonwealth of Massachusetts v. Sohmer, et al.),

• Massachusetts: Mass AG Obtains Civil Judgments Against Five Accused In Equity Stripping, Sale Leaseback, F'closure Rescue Racket; Case Against 9 Others Still Pending,

• Arizona: Two Phoenix Cops Shelved On Administrative Leave After Agreeing To $458K Settlement With AZ AG For Roles In Alleged Illegal Sale Leaseback Deals (for the lawsuit setting forth the allegations, see State of Arizona v. Shaw, et al.),

• Arizona: Foreclosure Rescue Operator To Cough Up $690K+ To Resolve Arizona AG Civil Charges In Alleged Sale Leaseback Equity Stripping Scam (for the lawsuit setting forth the allegations, see State of Arizona v. Winer, et al.),

• Arizona: Arizona Foreclosure Rescue Operator Ordered To Pay $1.2M In Home Sale, Leaseback Program (for the Arizona Attorney General press release setting forth the allegations, see Terry Goddard Files Fraud Suit Against Virtual Realty),

• Maryland: MD AG Wins "Rescue" Scam Civil Suit; Settles w/ Lenders Who Financed Bogus Sale Leasebacks, Saves Homes For Some, Clips Closing Agent For $100K (for the Maryland Attorney General press release setting forth the allegations, see Attorney General Gansler Announces Judgment of More Than One Million Dollars in Restitution and Penalties in Foreclosure Rescue Scam),

• Washington State: Washington AG Scores Big Win In Bogus Equity Stripping, Land Trust/Sale Leasebacks & Surplus Ripoffs; Foreclosure Rescue Operator Tagged For $4.2M (for the lawsuit setting forth the allegations, see State of Washington v. Kaiser, et al.).

The New Jersey Attorney General's Office has also brought civil lawsuits in sale leaseback cases which are currently pending:

• Foreclosure Rescue Operator Violated State Consumer Fraud Act By Using Bogus Sale Leasebacks To Strip Equity From Homeowners, Says NJ AG In Civil Suit (for the lawsuit, see Milgram v. Property Solutions of NJ Inc., et al.),

• NJ AG Targets 39 In Suits Alleging Equity Stripping, Sale Leaseback Scams; Involved $13.5M In Bogus Loans & 48 Homeowners Screwed Out Of $3M+, Says AG (for the lawsuits, see Milgram v. Vest Financial LLC, et al. and Milgram v. JP Global Property Management, Inc., et al.).

(3) Although this action was brought as a civil lawsuit in which no criminal allegations have been made, the sale leaseback arrangements alleged by the Colorado AG, which employ the use of a third party investor to obtain institutional financing to sap the equity out of the target homes, appear to be simliar in nature to those deals that have been the subject of criminal prosecutions by various law enforcement authorities. See Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals.

Sale Of Property Coupled w/ Buyback Right Under Contract For Deed Deemed An Equitable Mortgage; MN Federal Court Looks To Substance Over Form Of Deal

A U.S. District Court in Minnesota recently had an opportunity to review a somewhat complex transaction involving a title transfer of real estate by a property owner to another, coupled with a Contract for Deed calling for a future title transfer back to the property owner that was designed to obtain needed funds.

In declaring the arrangement to be an equitable mortgage,(1) the court disregarded the form of the arrangement as an outright sale with a repurchase contract and ruled that the deal, in substance, was merely a financing transaction intended to generate needed cash.(2)

For the ruling, see Hartman v. Smith, Civil File No. 09-01618-MJD/RLE (D.Minn. Sept. 17, 2010) (ruling available online courtesy of courtops.org, a service of the Minnesota State Bar Association).

(1) For the treatment of sale transactions coupled with leaseback or other deferred buyback 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.

(2) The court made the following analysis of Minnesota law in reaching its conclusion (bold text is my emphasis, not in the original text):

• Courts generally presume that a deed is a conveyance. Ministers Life & Cas. Union v. Franklin Park Towers Corp., 239 N.W.2d 207, 210 (Minn. 1976).
  
  However, Minnesota courts have adopted the doctrine of "equitable mortgage" "to prevent any overreaching by one party which would unfairly exploit the other party's financial position or relative lack of experience in real estate dealings." Id.
  
  Essentially, if "the real nature of the transaction between the parties is that of a loan, advanced upon the security of realty granted to the party making the loan, it may be treated as an equitable mortgage." First Nat'l Bank of St. Paul v. Ramier, 311 N.W.2d 502, 503 (Minn. 1981).
  
  The intent of the parties is paramount, and to overcome the presumption that a deed is a conveyance, it must be clear that both parties intended that the transaction result in a mortgage. Ministers Life & Cas. Union, 239 N.W.2d at 210.
  
  In order to determine intent, courts may look to the documents relating to the transaction. Id. The lack of terms such as "debt," "security," or "mortgage" are strong evidence indicating that the transaction is not a mortgage. Id. However, the fact that documents do not express the existence of a loan is not conclusive, and the intention of the parties is to be ascertained by looking at "all the facts and circumstances surrounding a transaction." Gagne v. Hoban, 159 N.W.2d 896, 899 (Minn. 1968). "In the final analysis, the question of whether the parties to a conveyance really intended it to be absolute or security for indebtedness is for the triers of fact." Id. at 900. The true inquiry is whether the parties intended an outright sale or whether the "purpose and effect of the transaction is to give security on real property for a debt." Id. at 899.

***

• In addition to looking to the intent of the parties, courts will also consider the following factors in making a determination as to whether a conveyance should be construed as an equitable mortgage:
  
  1) the disparity between the value of the property and the price paid;
  2) the nature of the solicitation that gave rise to the transaction;
  3) attempts to sell the property on the open market;
  4) whether there was a negotiated sale price; and
  5) whether there was continuous occupancy.
  
  Brown v. Grant Holding, LLC., 394 F. Supp.2d 1090, 1098-99 (D. Minn. 2005).
  
  Turning to the Brown factors, the Court concludes that they also weigh in favor of finding an equitable mortgage. The vast disparity between the Subject Property’s sale price of $280,000 and the appraised value of $2.5 million suggests that the transaction operated as a loan. See Jones v. Rees-Max, LLC, 514 F. Supp. 2d 1139, 1146 (D. Minn. 2007) (holding that a disparity of $278,000 in value and purchase price of $214,000 was large enough to weigh in favor of equitable mortgage).
  
  The nature of the solicitation involved frequent assurances from Smith that this arrangement would allow them to keep their home. The home was never placed on sale in the open market. There was no negotiated sale price, but rather an amount of money needed for the Plaintiffs’ financial needs at the time.
  
  Plaintiffs continued to occupy the premises upon executing the Contract for Deed and continued to pay real property taxes and homeowner’s insurance as a part of their monthly payments.
  
  Finally, Plaintiffs made post-conveyance improvements to the property.
  
  In light of these facts, the Smiths’ admissions, and Prime’s failure to state a position on this issue, the Court finds it appropriate to enter a declaratory judgment that the agreements the Smiths and Plaintiffs entered into on February 21, 2007 constituted an equitable mortgage.

Lenders & Their Attorneys Continue To Litter U.S. Courtrooms With False Affirmations In Home Foreclosure Actions

Among the latest attorneys ruffling New York Supreme Court Justice Arthur M. Schack's feathers in a foreclosure action is Donna D. Maio, Esq. of Matthews & Matthews, as evidenced by this excerpt from a recent ruling:

• Both Mr. Phelps and Ms. Maio should have discovered the defects in Ms. Taylor's verification of the subject complaint. The jurat states that the verification was executed in the State of New York and the County of Suffolk [the home county of plaintiff's counsel], but the notary public who took the signature is Deborah Yamaguichi, a Florida notary public, not a New York notary public. Thus, the verification lacks merit and is a nullity.

• Further, Ms. Yamaguchi's notarization states that Ms. Taylor's verification was "Sworn to and subscribed before me this 4th day of June 2008." Even if the jurat properly stated that it was executed in the State of Florida and the County of Duval, where Jacksonville is located, the oath failed to have a certificate required by CPLR § 2309 (c) for "oaths and affirmations taken without the state." CPLR § 2309 (c) requires that:
  
  An oath or affirmation taken without the state shall be treated as if taken within the state if it is accompanied by such certificate or certificates as would be required to entitle a deed acknowledged without the state to be recorded within the state if such deed had been acknowledged before the officer who administered the oath or affirmation.

• The Court is distressed that Ms. Maio falsely affirmed on November 11, 2010 that "pursuant to CPLR § 2106 and under the penalties of perjury," that "the Summons and Complaint and all other documents filed in support of this action for foreclosure are complete and accurate in all relevant respects," when the instant motion papers are incomplete and the verification is defective.

• Moreover, the purpose of the October 20, 2010 Administrative Order requiring affirmations by plaintiff's counsel in foreclosure cases is, according to Chief Judge Lippman, in his October 20, 2010 press release, to ensure "that the documents judges rely on will be thoroughly examined, accurate, and error-free before any judge is asked to take the drastic step of foreclosure."(1)

For the court ruling, see Washington Mut. Bank v Phillip, 2010 NY Slip Op 52034 (NY Sup. Ct. Kings County, November 29, 2010).

(1) Go here for the required Attorney Affirmation form.

ACLU Jumps Into Robosigner Fray; Files Motion To Reverse Lower Court Injunction Prohibiting Posting, Distributing Of Depositions On YouTube

In Central Florida, the Sarasota Herald Tribune reports:

• The ACLU of Florida filed a motion [] appealing Sarasota Judge Rick DeFuria's decision not to allow a law firm to put depositions of so-called “foreclosure robo-signers” on its web site.

• The motion in Florida's Second District Court of Appeal asked the court to reverse an injunction directing Christopher Forrest and The Forrest Law Firm, of Tampa, to remove video depositions of mortgage robo-signers from YouTube, and barring Forrest and others from distributing the depositions, according to a statement from the ACLU. Forrest represents Sarasota homeowners Peter and Barbara Morlon in a foreclosure proceeding.

• “Putting the videotaped depositions of “robo-signers” on YouTube gives the world an opportunity to see how the practices of banks and title companies are affecting homeowners facing serious financial problems,” Howard Simon, ACLU of Florida Executive Director, said in the statement. “This is a public service that shouldn't be subject to a court-imposed gag order.”

For more, see Court fight over 'robo-signer' depositions.

See Forrest v. Deutsch Bank National Trust Company for the initial appellate brief filed by the ACLU.

Upstate New York Foreclosure Mill Operation Continues To Attract Media Spotlight

Bloomberg News recently ran a less-than-flattering 'profile' on Buffalo, NY-based foreclosure mill law firm Steven J. Baum, P.C. that highlights some of the attention this outfit has recently attracted. A couple of excerpts:

• Steven J. Baum’s New York foreclosure law firm has attracted lawsuits and fines for its actions during the housing crisis, with one judge likening its arguments to something out of the “Twilight Zone.” As recently as last month, Baum’s firm, which one lawyer for homeowners said processes about half the foreclosures in New York state, was ordered to pay $14,532.50 in legal fees and costs and a $5,000 fine by Nassau County District Court Judge Scott Fairgrieve in Hempstead, New York.

• The judge said that when Paul Raia refused to vacate a Garden City co-op after foreclosure, Baum’s firm filed an eviction petition that misidentified the lender. “Falsities were contained in five paragraphs out of only ten paragraphs in the entire petition,” Fairgrieve wrote in his Nov. 23 decision.(1)

***

• New York State Supreme Court Justice Arthur M. Schack in Brooklyn called the firm’s explanations in one case “so incredible, outrageous, ludicrous and disingenuous that they should have been authored by the late Rod Serling.” [...] “Steven J. Baum PC appears to be operating in a parallel mortgage universe, unrelated to the real universe,” the judge wrote in that May decision.(2) “Next stop, the Twilight Zone,” he said, quoting from Serling’s TV series about science fiction and the supernatural.

***

• In January, Diana Adams, the U.S. trustee monitoring bankruptcy cases in Manhattan, reserved the right to seek sanctions against Baum’s firm in the bankruptcy case of a Bronx homeowner. The trustee accused Baum client JPMorgan of filing documents “that appear to be either patently false or misleading,” according to a court a filing recommending sanctions against the bank.

For more, see `Twilight Zone' Foreclosure Law Firm Draws Fine, Suits in New York Courts.

See also:

• "The MERS Mortgage Twilight Zone",

• NY Trial Judge: Buffalo-Based Foreclosure Mill Law Firm's Actions "A Dereliction Of Professional Responsibility!" (which notes that Suffolk County, New York, State Supreme Court Justice Melvyn Tanenbaum has also given the foreclosure mill law firm Steven J. Baum, P.C. a real hammering as evidenced by these short form copies of Justice Tanenbaum's 30 recent orders excoriating this outfit over its court filings in which "The court deems plaintiff's counsel's actions to be an intentional failure to comply with the directions of the court and a dereliction of professional responsibility").

(1) Federal Home Loan Mtge. Corp. v Raia, 2010 NY Slip Op 52003 (Dist. Ct. Nassau Cty, 1st Dist., November 23, 2010).

See also Federal Home Loan Mtge. Corp. v Raia, 28 Misc 3d 1212, 2010 NY Slip Op 51287 (Dist. Ct. Nassau Cty, 1st Dist., July 22, 2010) for an earlier ruling in this litigation from Judge Fairgrieve that ultimately led to the sanctions imposed on the Baum law office in the latest ruling.

(2) HSBC Bank USA, N.A. v Yeasmin, 27 Misc 3d 1227, 2010 NY Slip Op 50927 (NYS Sup. Ct. Kings County, May 24, 2010).

See also Brooklyn Judge Journeys Through "The Twilight Zone" In Recent Ruling Slamming Standing Lacking Lender, Notorious Foreclosure Mill Law Firm.

In his ruling, Justice Schack gives this parting shot that merits some note if you're a plaintiff's attorney or stockholder in HSBC Bank contemplating a future stockholder derivative action against HSBC:

• The Court can only wonder if this journey through the mortgage twilight zone and the dissemination of this decision will result in [Vice President Loan Documentation Thomas] Westmoreland's affidavit used as evidence in future stockholder derivative actions against plaintiff HSBC. It can't be comforting to investors to know that an officer of a financial behemoth such as plaintiff HSBC admits that "[a]n investigation of each and every loan included in a particular mortgage pool, however, is not conducted, nor is it feasible" and that "the fact that a particular mortgage pool may include loans that are already in default is an ordinary risk of participating in the secondary market."

Report: LPS Shifted Robosigning Operations To Others In Response To Heat About Phony F'closure Docs Allegations; Notaries w/ Too Many Questions Axed

A recent investigative report by Reuters contains this excerpt reporting how foreclosure services outfit Lender Processing Services reacted to the heat brought upon on when it began being hit with allegations manufacturing bogus documents in foreclosure cases:

• Reuters has learned that rather than stamping out the practice, LPS in December 2009 began transferring signing operations out of its own offices and into those of firms it has close relationships with. [LPS spokeswoman Michelle] Kersch confirmed that LPS sent personnel to work "at client locations to assist clients during this period."

• For example, LPS arranged through a local employment service to hire about a dozen notaries, sending them to work at a new signing operation set up in the Jacksonville office of American Home Mortgage Servicing, one of LPS's biggest clients.

• Records from county recorders' offices show that at least as recently as October, American Home Mortgage Servicing employees signed exactly the same type of questionable mortgages assignments that LPS staffers at DocX and in Minnesota had signed. These included assignments done on behalf of defunct companies like American Brokers Conduit, and after foreclosure actions already had been filed. Reuters obtained a partial list of the names of the LPS-hired notaries. Copies of mortgage assignments available publicly show that these notaries notarized many of these assignments, including ones signed on behalf of defunct companies.

• In interviews, two of the notaries, who asked that they not be identified, said the American Home Mortgage Servicing office also set up a "robosigning" operation for affidavits, another type of document required in foreclosure cases. The employees who signed the affidavits were swearing that they had verified the facts listed in them, such as the specific amounts owed by homeowners.

• But the two notaries, who said they were dismissed after raising questions with supervisors about the practices, said that each morning about a half-dozen American Home Mortgage Servicing employees in about an hour would sign some 200 affidavits received via LPS's computer system, without reading them, let alone verifying the facts they contained. "In that time, come on, you have not verified figures in 200 documents. That's impossible," one of the notaries said.

For the story, see Special report: Legal woes mount for a foreclosure kingpin (requires a five-page "click-through" to read the entire story; for those who prefer the entire story on one web page, TRY HERE, TRY HERE, or TRY HERE).

Media Report: Storm Clouds Continue To Darken Over Accused Bogus F'closure Document Manufacturing Racket; Feds Impanel Grand Jury, Join Class Action

In Jacksonville, Florida, an invetigative report by Reuters on the alleged fraudulent foreclosure document manufacturing racket Lender Processing Services ("LPS") reveals that LPS' legal problems are more serious than the outfit's CEO Jeff Carbiener recently let on to Wall Street analysts in an October 29, 2010 conference call:

• Questionable signing and notarization practices weren't limited to its subsidiary, called DocX, but occurred in at least one of LPS's own offices, mortgage assignments filed in county recorders' offices show.

• And rather than halt such practices after the federal investigation got underway, the company shifted the signing to firms with which it has close business ties. LPS provided personnel to work in the new signing operations, according to information from an LPS spokeswoman and court records including an October 21 ruling by a judge in Brooklyn, New York.(1) Records in county recorders' offices, and in the judge's opinion, show that "robosigning" and preparation of apparently false documents went on at these sites on a large scale.

***

• A spokeswoman for LPS confirmed to Reuters that it had helped other firms establish operations that performed the same function. [...] Interviews with key players and court records also show that pending investigations and lawsuits pose a bigger threat to the company than Carbiener let on.

***

• The criminal investigation in Jacksonville by federal prosecutors and the Federal Bureau of Investigation is intensifying. The same goes for a separate inquiry by the Florida attorney general's office. Individuals with direct knowledge of the federal inquiry said that prosecutors have impaneled a grand jury, begun calling witnesses and subpoenaed records from LPS.

***

• Meanwhile, the threats from four class action lawsuits filed in federal courts appear to be greater than the company has indicated, especially one filed in Mississippi. In a highly unusual move, a unit of the U.S. Justice Department has joined that suit as a plaintiff.

• The lawsuit alleges that LPS extracted many millions of dollars in kickbacks from law firms through an illegal fee-sharing arrangement, in exchange for doling out lucrative foreclosure work to them. The lawsuit also charges that LPS illegally practices law and routinely misleads homeowners and federal bankruptcy judges.

***

• Copies of LPS internal documents obtained by Reuters and testimony in lawsuits shed new light on the company's unusual dealings with its vast network of law firms. LPS relentlessly pressed them for speed. The result was almost instant filing of foreclosure documents, mostly prepared by clerical workers, not lawyers, according to court records, including deposition testimony by LPS officials. Several judicial opinions from around the country and evidence from investigations in Florida show that these documents often were riddled with inaccurate information about the amount homeowners owed, and were signed and notarized en masse without anyone at the firms checking the information in them.

***

• In an April 2009 court decision, Diane Weiss Sigmund, a federal bankruptcy judge in Philadelphia, specifically faulted lawyers whose firm filed LPS-transmitted documents in court using clerical workers to sign the name of a lawyer who hadn't looked at them. In that case, it turned out that, contrary to the documents supplied via the LPS system, the homeowners weren't in default on their mortgage.

• Referring to the LPS computer system, the judge stated, "the flaws in this automated process become apparent." She added: "An attorney must cease processing files and act like a lawyer."(2)

For more, see Special report: Legal woes mount for a foreclosure kingpin (requires a five-page "click-through" to read the entire story; for those who prefer the entire story on one web page, TRY HERE, TRY HERE, or TRY HERE).

(1) For Justice Arthur M. Schack's ruling, see OneWest Bank, F.S.B. v Drayton, 2010 NY Slip Op 20429 (NY Sup. Ct., Kings County, October 21, 2010).

(2) In re Taylor, Case No. 07-15385-DWS (Bankr. E.D. Pa., April 15, 2009), at page 32. Judge Sigmund concludes her 58-page opinion with this parting shot at robosigning foreclosure document processor outfits and the foreclosure mill law firms they hop into bed with:

• At issue in these cases are the homes of poor and unfortunate debtors, more and more of whom are threatened with foreclosure due to the historic job loss and housing crisis in this country. Congress, in its wisdom, has fashioned a bankruptcy law which balances the rights and duties of debtors and creditors. Chapter 13 is a rehabilitative process with a goal of saving the family home. The thoughtless mechanical employment of computer·driven models and communications to inexpensively traverse the path to foreclosure offends the integrity of our American bankruptcy system. It is for those involved in the process to step back and assess how they can fulfill their professional obligations and responsibly reap the benefits of technology. Nothing less should be tolerated.