Saturday, December 25, 2010

Residents In Waterfront Townhouse Complex Forced To Flee From Homes After 'Rogue' Canal Swallows Up Backyard

In Sunrise, Florida, the South Florida Sun Sentinel reports:

  • The bizarre collapse of a canal bank in Sunrise forced the evacuation of a strip of townhouses, as residents scrambled into their clothes and hustled their children onto the sidewalk for safety.

  • No one knows yet what caused the accident Thursday night, which swallowed the backyards of several homes in the Spring Tree Cove West complex just north of Oakland Park Boulevard.

  • Engineers from the homeowners' insurance companies were on the scene Friday, walking along the jagged, muddy cliff that reached within a foot or two from the townhouses' back doors.


  • Six units were evacuated, and bright orange unsafe structure stickers were placed on the doors. A seventh unit is vacant. Lawn decorations of Santa, Christmas trees and snowmen stood behind yellow police tape. On Friday afternoon, as a police officer stood by, residents were allowed back into their homes to retrieve perishables, valuables and personal belongings.


  • Although sinkholes are rare in Broward, Miami-Dade and Palm Beach counties, where the limestone layer is thin, their numbers have been growing. [...] Palm Beach County did not have enough claims to be listed separately. [...] Sinkholes are abundant in the state's "sinkhole belt" of Hernando, Pasco and Hillsborough counties, where thicker limestone can form major sinkholes and where insurers have paid hundreds of millions of dollars for sinkhole damage.


  • [Resident Alan] Lueck, the man who saw the bank collapse, said he had alerted the city about a year and a half ago to a hole that had appeared in his backyard and led down to the canal. A city inspector came out and told him not to worry about it, he said, so he filled it in and forgot about it, until Thursday night.

For the story, see Sunrise condo residents displaced after backyards fall into canal.

Town Blocks Sale Of Flood-Prone, Nearly Uninhabitable Home; Says It Can't Afford R/E Tax Revenue Loss If State Converts Premises To Public Green Space

In Hillsdale, New Jersey, The Record reports:

  • The borough is refusing to allow a homeowner to sell a property that chronically floods to the state for public green space. Rosanne Vaccaro was accepted into a state program that buys properties in flood-prone areas, but she needs the borough's approval to complete the transaction. Mayor Max Arnowitz is blocking the deal, arguing that the borough can't afford to lose precious tax revenue.

  • Vaccaro pays almost $7,000 in annual property taxes on the home, which is valued at $355,000. After Hurricane Floyd hit in 1999, she said the house — located near the Pascack Brook — became nearly uninhabitable.

  • She has petitioned her state legislators, who have contacted Arnowitz on her behalf, but he refuses to budge. "It is amazing that I am still expected to pay property taxes on a house that is uninhabitable and give good money to a community that doesn't value me as a citizen," said Vaccaro, who moved to London six months ago after getting married. "Frankly, I feel persecuted, but for what I am not sure."

For more, see Hillsdale blocks home from being sold into flood program.

NYC Feds File Civil Suit Charging Rockland County Landlord Of 96-Unit Complex With Discriminatory Practices Targeting African-Americans

From the Office of the U.S. Attorney (NYC/Manhattan):

  • PREET BHARARA, the United States Attorney for the Southern District of New York, announced [] that the United States has filed a federal civil rights lawsuit under the Fair Housing Act against BURGUNDY GARDENS, LLC, for discriminating against African-Americans seeking to rent apartments at Burgundy Gardens Apartments, located in Valley Cottage, Rockland County, New York.


  • Burgundy Gardens Apartments is a residential complex consisting of approximately 96 rental apartment units. [...] Specifically, the United States alleges that Burgundy Gardens has engaged in racially discriminatory housing practices, including failing to inform African-American prospective tenants about available apartments, or telling African-Americans that certain apartments are not available, while telling non-African-American persons that such apartments were in fact available.

  • In addition, the Complaint alleges that Burgundy Gardens told African-American prospective tenants that the prices for rental apartments were higher than the prices quoted to non African-American persons. The United States further alleges that Burgundy Gardens failed to show African-American prospective tenants available apartments, while at the same time showing similarly situated non-African-American persons available apartments.

For the U.S. Attorney press release, see Manhattan U.S. Attorney Files Civil Rights Suit Against Rockland County Landlord For Discrimination Against African-American Prospective Tenants.

Friday, December 24, 2010

City Gives 40+ South Beach Tenants The Boot; Safety Issues Lead To 3-Day Notice To Vacate Shaky Structure, Leaving Residents Homeless For The Holidays

In Miami Beach, Florida, WPLG-TV Channel 10 reports:

  • Dozens of residents in Miami Beach were forced to move out by Thursday because of safety concerns at their apartment building. Repairs have been under way at the building on Fifth Street and Meridian Avenue for the past eight months. But the work was not finished in time, forcing the more than 40 residents who live there to move. Residents said they received notice Monday that they must move out by Thursday.

  • "I paid my rent, and two days later, I find out the building is going to be closed down and I've got to pack up everything I own to try to find a place," said 64-year-old resident Richard Main. The three-story building has been plagued by shoddy repair work and several code violations, including a subpar fire safety system and a deteriorating structure that officials said needs an engineer's assessment.


  • Eula Imperato is disabled and on a fixed income. She said she cannot just pick up and move away on such short notice. "I can't walk well. I lose my balance, so I have to use a wheelchair," Imperato said. "I don't know what I'll do if I don't find a place." Without the luxury of time, the residents, most of whom are senior citizens, are not sure where they will spend the holidays. "Without money, I'm homeless on the streets," Main said.

  • City officials said it is the building owner's responsibility to relocate the residents. The owner has told the city that will be done by Thursday, but if that does not happen, the city will arrange for temporary housing for the residents and bill the building owner.

For the story, see Citing Safety Concerns, City Forces Residents Out Of Apt. Bldg. (City Agreed To Provide Families With Housing For One Week).

Stroke-Stricken Mom To Lose Family Home After Convicted Thief/Son Scammed Her In $137K Ripoff, Stiffing Bank On House Payments

In Spokane, Washington, KXLY-TV Channel 4 reports:

  • A South Hill woman is about to lose her home to foreclosure because her son looted her life savings to feed his gambling addiction. Mary Jo English developed some health problems a couple of years ago and so her oldest son Mark assumed command of her finances including mailing the mortgage payments on her home.

  • However Mark never sent those checks because that would have limited the amount of money available for him to steal from his own mother. “We have to find some place to live within two weeks and I just don't know how that's going to happen,” Mary Jo English said.


  • It started with the pair of strokes that has left Mary Jo English's speech slurred. Her son used her illness to assume command of her finances. Police say he stole $137,000 of his mom’s money and lost it to the casinos.


  • Mary Jo didn't know she was behind on her house payments because Mark had redirected all of her mail to a post office box. Now her other son Daniel is struggling to raise the $21,000 Mary Jo needs to stop the foreclosure. “I’m hoping somehow to get the banks to give her her money back to replenish the money back into her account so she can pay back the money in arrears and to keep her house,” Daniel said.

  • Mark English was convicted of theft last month and ordered to make restitution to his mother but the money won't come soon enough to save his mom’s home.

For more, see Woman Loses Savings To Son's Gambling Habit.

The Screw-Ups Continue At BofA; Servicer Sends Notices Of Tax Delinquency To 1,100 Borrowers Who'd Actually Paid Their Taxes

In Clark County, Washington, The Columbian reports:

  • A letter sent to hundreds of Bank of America’s mortgage borrowers in Clark County contained news no one wants to hear: Your home could be foreclosed for nonpayment of property taxes. The letter from a Bank of America affiliate was sent to about 1,100 Clark County homeowners who’d actually paid their taxes.(1)

  • Homeowners were quick to take action. Clerks at the Clark County Treasurer’s office fielded hundreds of queries last week from worried homeowners, said Michelle Denman, the office’s tax service manager.

  • A Bank of America official acknowledged the mixup Monday, saying the bank had requested tax payment status reports on Bank of America mortgage-holders before the final payments were due. Many people do not pay taxes until close to the due date.

  • We sincerely apologize to those customers who received the letter in error,” said [the frequently apologetic] Jumana Bauwens, spokesperson for Bank of America Home Loans.

For more, see Bank of America’s tax letter misses its mark (Bank said payments for 1,100 homes were late — before due date).

(1) Reportedly, the letter offers a toll-free number for property owners to call if they are unable to pay the taxes, and a final section, with additional website and phone contact information, falls under the heading “THANK YOU FOR YOUR BUSINESS.”

West Virginia State Bar Disciplinary Board Stiffs Low, Middle Income Pro Se Litigants With New "Ghostwriting" Rule

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

  • The [West Virginia] State Bar's Lawyer Disciplinary Board recently ruled that attorneys no longer can offer behind-the-scenes legal help to people [representing themselves in court proceedings].

  • The new "ghostwriting"(1) rule seemingly will force many people to either hire an attorney or receive no legal assistance at all when they go before the court. In short, a lawyer must either be in a case all the way or not at all. "While the board finds that ghostwriting as a form of undisclosed representation is permissible under the Rules of Professional conduct, the attorney must disclose his or her identity when preparing pleadings and other documents filed with a tribunal," Board Chairman David A. Jividen wrote in his Nov. 8 opinion.(2)


  • The West Virginia Access to Justice Commission(3) voiced displeasure with the opinion. The opinion "will damage the ability of many low- and middle-income West Virginians to obtain access to justice in West Virginia," wrote Chairman Robert S. Baker in a June 9 letter to the LDB.

  • He said it "places unusually strong limitations on the practice of ghostwriting." "At a time when the American Bar Association and many state bars have voiced support for ghostwriting, the West Virginia Lawyer Disciplinary Board now seeks effectively to do away with the practice. This will injure both pro se litigants and our courts that serve substantial numbers of pro se litigants."

  • Baker said that changing economic times have brought "a sea change" in how people seek access to justice. "A litigant with limited means would rather obtain some help than none at all, and courts would rather pro se litigants have some attorney assistance than none at all. Unbundled representation is especially important in West Virginia Family Court, where estimates are that in about 75 percent of the cases both parties are appearing pro se."

  • Baker says West Virginians deserve better than to be lost without help in a legal system they often don't understand. "When the most important parts of pro se litigants' lives are at stake, attorneys can do better than leave them out in the cold," Baker wrote. He said alternatives exist.

  • "The ability to ghostwrite documents that do not result in an appearance by the attorney is essential to give litigants a guiding light through a confusing legal system," Baker wrote.

For the story, see State Bar board cracks down on ghostwriting.

(1) The story decribes "ghostwriting" as the authoring of a legal document for another who appears to be the actual author, and can include preparing pleadings or other documents filed with a court or preparing letters or other documents on behalf of a client.

(2) The opinion does say that attorneys don't need to disclose their identities if a letter or document is not intended to be filed with a court or "authorship is not otherwise required by law," the story states. Also, helping a client prepare forms adopted by or used by courts and government agencies does not require disclosure, according to the story.

(3) The West Virginia Access to Justice Commission addresses barriers to justice faced by moderate and low income West Virginians.

Thursday, December 23, 2010

Lawsuit: Title Company Ruined Texas Home Seller's Credit By Failing To Pay Off Existing Mortgage From Escrow Funds

In Jefferson County, Texas, The Southeast Texas Record reports:

  • A Jefferson County man claims his credit score was ruined after a title company failed to pay off a loan after he sold his home. Ronald Carlin filed a lawsuit Dec. 2 in Jefferson County District Court against Stewart Title Guaranty Co.

  • Carlin claims he hired Stewart Title to handle the transaction after he sold his home on Dawn Drive in Beaumont. "As part of the transaction, the Defendant was to pay any outstanding monies owed to Progressive Financial Services, the lender holding the mortgage on 5130 Dawn Drive at the time of the sale," the suit states. "Defendant has never paid off the Progressive Financial Services loan."

  • As a result of Stewart's failure to pay off the loan, Carlin suffered damage to his credit score and suffered mental anguish, the complaint says. In his complaint, Carlin alleges negligence and negligent misrepresentation, breach of fiduciary duty and breach of contract against the defendant.

Source: Beaumont man sues title company for ruining credit.

Foreclosure Mill's Apparent Failure To Arrange For Orderly Transfer Of Cases To New Counsel Leads To Chaos At South Florida Foreclosure Sales

In South Florida, The Palm Beach Post reports:

  • The transfer of thousands of files from the deposed David J. Stern law firm caused not just a foul-up in recent Palm Beach County foreclosure auctions, but is shutting down cases to the point that one defense attorney called the lack of action "malpractice."

  • Between Nov. 29 and Friday, there were 110 foreclosure sales in Palm Beach County in which the bank made no bid for the home, according to the Palm Beach County Clerk's office.

  • Unwitting investors put in winning offers as low as $200 for homes they'll probably never get because the auctions were not properly advertised, likely lost in the shuffle from Stern's office to other firms.

  • Foreclosure defense attorneys said hearings are being canceled, they don't know who is representing the banks in their cases, and that motions for Stern to withdraw from cases aren't being filed, leaving the firm as attorney of record.

  • The problems led Broward County Chief Judge Victor Tobin to issue a temporary administrative order outlining how Stern cases should be handled and requiring legal evidence be shown that the firm was terminated and new counsel hired. "It appears that Stern has not made arrangements for the orderly transfer of cases from him or his firm to new counsel for pending cases," Tobin wrote.

  • And Palm Beach County Clerk of Court Sharon Bock said the transfers are "just adding to the misery that is already happening" in the foreclosure courts.

For more, see Foreclosed homes hit auctions with no legal representation.

See also A house for $200? Foreclosure confusion leads to rock bottom auction prices.

Disbarred Lawyer Cops Plea In $2.4M+ Client Trust/Escrow Funds Swindle; Admits Snatching Closing Cash Meant For Loan Payoffs, Ripping Off Dead Client

In Broward County, Florida, the South Florida Sun Sentinel reports:

  • A disbarred Fort Lauderdale attorney pleaded guilty Thursday to a mail fraud charge, admitting he ripped off clients of more than $2.4 million. Joseph Sindaco, who practiced law in South Florida for three decades, stole from four clients' trust funds and used the money to pay personal expenses. He had specialized in estate and trust cases and real estate closings.

  • Sindaco, 63, now faces up to 20 years in federal prison when sentenced Feb. 24 by U.S. District Judge James I. Cohn. The recommended federal sentencing guidelines call for Sindaco to serve a prison term of at least 41 months, according to his plea agreement. In addition, he agreed to pay $2.4 million in restitution to his four victims. One of them lost $1.8 million. Sindaco's attorney, Robert Trachman, did not return a call to his office on Thursday.

  • Sindaco cut a deal in August with the Florida Bar to surrender his law license and be disbarred for five years. He admitted during those proceedings he misappropriated about $445,000 from two clients. The mail fraud charge against Sindaco arose from his handling of the estate of Werner Clauss, an 82-year-old who died at a Lauderdale Lakes nursing home in 2008. Sindaco liquidated Clauss' investment account and transferred the money to his law firm's trust account, according to federal court records.

  • Sindaco was supposed to send the money to one of Clauss' cousins but never did, according to Florida Bar records. The cousin alleged in a state court lawsuit that Sindaco claimed multiple times that a check was on the way, but it never came. The former attorney admitted he stole the $2.4 million from April 2006 to December 2009.(1)

Source: Disbarred attorney admits stealing $2.4 million (Joseph Sindaco faces up to 20 years in prison).

For the U.S. Attorney (Fort Lauderdale) press release, see Broward Lawyer Pleads Guilty To Stealing More Than $2 Million From Trust Funds:

  • As an attorney, he handled real estate closings for clients, mortgage lenders and estate transactions. In this capacity, Sindaco misappropriated approximately $2,4443,857 of funds that were supposed to be used to pay off prior loans and also clients’ funds from his law firm’s trust account. Instead of using the money as directed, however, Sindaco stole the money and sent letters to clients falsely stating that he was holding their money or disbursing it according to their directions.

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

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

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

Sticky-Fingered Closing Agents Get Prison For Roles In $4.1M Escrow Account Ripoff; Used Check-Kiting Scheme In Failed Attempt To Conceal Dirty Deeds

From the Office of the U.S. Attorney (Springfield, Missouri):

  • Beth Phillips, United States Attorney for the Western District of Missouri, announced [] that the owners of Guaranty Title, formerly headquartered in Nixa, Mo., have been sentenced in federal court for their roles in $4.1 million wire fraud, bank fraud and money laundering conspiracies.

  • Richard G. “Rick” Burton, 60, of Nixa, Mo., and Kathy Cyrena Allen, also known as Kathy Stanton, 53, of Sarcoxie, Mo., were sentenced in separate hearings before U.S. District Judge Greg Kays on Tuesday, Nov. 30, 2010. Burton was sentenced to six years and six months in federal prison without parole. Allen was sentenced to three years and three months in federal prison without parole. The court also ordered Burton and Allen to pay $4,150,663 in restitution, for which they are jointly and severally liable.

  • Burton and Allen participated in a scheme to defraud financial institutions and individuals of more than $4.1 million through a series of illegal financial transfers related to stolen escrow payments. They attempted to conceal their criminal activities through a substantial check-kiting scheme. Both Burton and Allen pleaded guilty to conspiracy to commit wire fraud and conspiracy to commit money laundering. Allen also pleaded guilty to conspiracy to commit bank fraud.


  • Burton and Allen admitted that they took a portion of the escrow money that had been transferred into these escrow accounts. In violation of Guaranty’s promise not to do so, they caused $3,467,709 of stolen escrow funds to be diverted into the firm’s business operations account and used the money for the day to day business operations of Guaranty.

For the U.S. Attorney press release, see Owners Of Guaranty Title Sentenced For $4.1 Million Fraud.

Wednesday, December 22, 2010

Feds Raid Foreclosure Rescue, Sale Leaseback Peddler's Office; Snatch Computer Files, Documents; 'F-Rated' Outfit Targeted By Complaints, Media Probe

In Rancho Bernardo, California, KGTV-TV Channel 10 reports:

  • The FBI raided the office of a Rancho Bernardo financial firm on Thursday after a joint investigation by 10News and 10News' media partner The San Diego Union-Tribune into the firm's owner and practices. At the office, agents took computer files and other documents on Thursday belonging to Michael Monaco, the owner of Investors Finance, Inc., which offers to buy homes in foreclosure and lease them back to the people living there.


  • Last month, in a joint investigation with the 10News I-Team and 10News' media partner The San Diego Union-Tribune, Monaco squirmed when he was asked about the 1,300 desperate homeowners who each paid him $1,400 upfront to save their homes and then could not even get a call back from him.


  • Monaco has been sued for fraud and breach of contract 17 times. Investors Finance has an "F" rating with the Better Business Bureau and several complaints have been filed.

For more, see FBI Raids Rancho Bernardo Financial Firm's Office (Investors Finance, Inc. Offers To Buy Homes In Foreclosure, Leasing Them To People Living There).

For a previous story, see Customers Unhappy With Rancho Bernardo Man's Mortgage Firm.

Brooklyn Judge Rips Foreclosing Lender, Lawyer For Littering Courtroom With Unverified Paperwork

In Brooklyn, New York, the New York Post reports:

  • Lawyers handling foreclosures in New York will think twice about showing up in court without the proper paperwork after a Brooklyn judge ripped into lender Citigroup and its unprepared lawyer.

  • On Monday, Brooklyn Supreme Court Judge Arthur Schack mocked the bank and its lawyer for failing to ensure the accuracy of papers filed in a foreclosure case. "The court does not work for Citi and cannot wait for Citi, a multi-billion-dollar financial behemoth to get its act together," Schack said, in throwing out the case.

For more, see Judge reams Citi housing lawyer.

For Justice Schack's ruling, see CitiMortgage, Inc. v Nunez, 2010 NY Slip Op 52142(U) (NY Sup. Ct., Kings County, December 13, 2010).

(1) According to an October 20, 2010 press release, New York State Chief Judge Jonathan Lippman said the purpose of the new rule is 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."

Process Servers Probed For Alleged Slipshod Business Practices

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

  • The Florida attorney general is investigating two companies that deliver foreclosure notices to homeowners, one based in South Florida, on civil allegations of slipshod business practices.

  • State regulators this month began examining Gissen & Zawyer Process Service Inc., of Miami, for "numerous complaints." Among them: filing questionable statements with the court, back-dating documents and questionable billings. The attorney general also has begun investigating ProVest LLC of Tampa, one of the largest process servicing outfits in the nation, for similar complaints.

For more, see AG investigates two companies delivering foreclosure court papers.

9 To 33 Year Sentence No Bar To O.J.'s Florida Homestead Exemption; Ex-Football Star To Keep Benefit Despite 'Scoring' Extended Stay In Nevada Prison

In Miami, Florida, The Miami Herald reports:

  • O.J. Simpson may not be coming back to South Florida for a good long while, but he's still entitled to a homestead exemption on his Kendall home. So ruled the Miami-Dade County property appraiser's office after a neighbor complained that the convicted armed robber and long-ago football and TV star's current extended residency at a Nevada prison should preclude him from receiving the property-tax break usually afforded to Florida homeowners.

  • Now the miffed neighbor, David Weston, thinks someone in Tallahassee should take another look. What bothers Weston, he says, is not so much the fact that it's Simpson getting the tax break, but more generally that state rules allow felons serving prison sentences -- even those doing so out of state -- to keep their exemptions.


  • Florida Department of Revenue rules, which govern the homestead exemption, require that the property be the homeowner's primary residence. But the rules also clearly state that a felony conviction by itself doesn't disqualify anyone. Nor does a temporary absence -- "regardless of the reason for such,'' the rule book says, "providing an abiding intention to return is always present.''

  • So there is no legal basis to rescind Simpson's exemption, said Lazaro Solis, deputy property appraiser. In fact, the only way Simpson could lose the exemption is if he rents out the home, Solis said.

  • A county inspector paid a visit and found Simpson's son, Justin, living there. Justin Simpson, 22, told the inspector he's going back and forth to an out-of-town school, Solis said.


  • O.J. Simpson, now 63, moved to Miami with Justin and his older sister, Sydney, who is now 25, in 2000, five years after he was acquitted of murdering their mother, Nicole Brown, in Los Angeles. Simpson's Miami sojourn was cut short when he and a co-defendant were convicted in October 2008 of leading a bungled heist at a Las Vegas hotel to retrieve memorabilia the disgraced star claimed was stolen by dealers. Simpson, who has appealed, was sentenced to serve nine to 33 years at a Nevada state prison on charges of armed robbery, kidnapping and conspiracy.(1)

For the story, see O.J. Simpson in jail, but still gets tax break.

(1) The right of convicted felons to retain their homestead rights, despite being shipped off to prison for a long time, is not unique to Florida. See Sexual Assault Victim's Attempt To Satisfy Money Judgment By Snatching Now-Vacated, Jailed Perpetrator's Texas House Squelched By Homestead Claim, involving a recent Texas Court of Appeals ruling holding that the home of a convicted felon retained its homestead character, and thereby exempted it from forced sale by judgment creditors - including the victim of his crime, despite his having to spend the next 35 years away from it in a state prison.

"I Lost My House. I Lost Everything" Says Widow After Underwriter Allegedly Stiffed Her Of $250K Payout From Deceased Hubby's Life Insurance Policy

In Southern California, the Los Angeles Times reports:

  • American General Life Insurance Co. markets its policies as protection for "the hopes and dreams of American families" — a promise Ian Weissberger took to heart during his losing battle with Lou Gehrig's disease.

  • But after the Cathedral City mortgage broker died in 2005, American General cancelled his life insurance policy and refused to pay his widow the $250,000 benefit. The Weissbergers' premiums were paid up. There was no foul play suspected. There was no question Sheila Weissberger was the widow and sole beneficiary. And Ian's illness was diagnosed months after he took out the policy.

  • The problem, the insurer told Sheila Weissberger, was that Ian's application for coverage was incomplete. American General concluded that he had failed to disclose conditions, including bipolar disorder and pulmonary disease, that, according to his doctors, he did not have.

  • For the company, which collected $2.3 billion in premiums last year, the amount at issue was minute. But it was no small matter for Sheila, 62, who reached a confidential financial settlement with American General earlier this year.

  • "I lost my house. I lost everything," she said in an interview. "It was very, very devastating."(1)

For more, see Flaws can cancel life insurance — after death (If a policy is less than 2 years old, companies may dispute the claim, and thousands were denied last year).

(1) According to the story, most states long ago banned limitless rescissions to stop abuses by insurers, but in California and elsewhere, they are allowed during the two years immediately after a policy is signed. Experts and consumer advocates say some insurers have turned that into a "gotcha period," seizing on flaws after claims are made that they could have looked for before issuing coverage, the story states.

Recently-Recorded, Forged Mystery Lien Threatens To Kibosh Short Sale Of Home Facing Imminent F'closure; Title Agents Refuse To Insure Over Dirty Deed

In Elk Grove, California, KXTV-TV Channel 10 reports:

  • The pending sale of a home on the brink of foreclosure could collapse because of a fraudulent deed of trust recorded on the property-- and no one involved in the transaction can imagine a possible motive.


  • [Homeowner JT] Tiumalu's Realtor found a buyer and got approval from both the first and second mortgage holders to close escrow by the end of December. But this week, a preliminary title report showed a mysterious new $26,500 deed of trust that was recorded on Oct. 13.

  • The phony deed of trust puts the house in Alameda County, the signatures of the homeowners are forged, and the notary stamp appears to be counterfeit. Although the document is clearly fraudulent, it's enough to cloud the title and kill the sale.


  • Realtor Megan Laherrere, who was negotiating the short sale with the lenders for Montoya, said a quiet title action could take months and cost thousands of dollars in legal fees. "We contacted title and their bonds will not cover removing it. The title insurance won't cover it. Nobody wants to touch it," Laherrere said.

For more, see Mystery lien could torpedo Elk Grove home sale.

Tuesday, December 21, 2010

Recent Jury Verdict Proves Borrowers Aren't Alone In Being Screwed Over By Sleazy Servicers As Litigation Exposes Their Bag Of Tricks

The New York Times reports:

  • ALL the revelations this year about dubious practices in the mortgage servicing arena — think robo-signers and forged signatures — have rightly raised borrowers’ fears that companies handling their loans may not be operating on the up and up.

  • But borrowers aren’t the only ones concerned about potential mischief. Investors who hold mortgage securities are increasingly worried that servicers may be putting their interests ahead of those who own the loans.


  • Last week, a jury in federal district court in Reno, Nev., awarded a group of 50 mortgage investors $5.1 million in punitive damages against defendants in a loan servicing case. Although the numbers in the case aren’t large, its facts are fascinating. Indeed, the case exposed some of the tricks of the servicers’ trade.


  • Because loan servicers operate behind the scenes, it’s hard for investors who own these mortgages to monitor fee-gouging. In addition, the servicing contracts make it difficult to fire administrators — under a typical arrangement, investors holding at least 51 percent of the loans must agree on termination. In short, loan servicing is a perfect setup for administrators who want to take advantage of both borrowers and lenders.

For more, see Opening the Bag of Mortgage Tricks.

Lenders Face Difficulties In Scramble To Find Qualified Attorneys Willing To Pick Up Dumped South Florida Foreclosure Mill's Caseload

In Plantation, Florida, the Daily Business Review reports:

  • As the one-time largest plaintiffs foreclosure law firm in Florida, the Law Offices of David J. Stern at its peak handled 20 percent of all foreclosures in the state, processing more than 70,000 foreclosure cases on behalf of major lenders like Fannie Mae, Freddie Mac, Bank of America and JPMorgan Chase in 2009.

  • Now that the Plantation law firm has been dropped by a number of lenders and servicers including Fannie Mae and Freddie Mac, ex-clients are scrambling to find law firms and lawyers to fill the void.


  • But the replacement law firms haven't found it easy to find enough qualified law firms to take the work, and the transition has slowed a system already clogged with overwhelming numbers of cases. Some judges are not willing to delay cases due to the change in attorneys as Stern files are turned over to new lawyers.(1) More and more counties are requiring in-person rather than telephonic hearings.

For more, see Lenders, Servicers Scramble to Shift Foreclosure Cases to New Firms (The head of one coverage attorney service has been swamped with requests but says there's a shortage of qualified attorneys).

(1) Reportedly, transitioning cases from Stern's firm to others has not been seamless, judging by one hearing. According to the story, some banks have assigned their main counsel as transition firms to farm out the work. That is the case with CitiMortgage, which handed Akerman Senterfitt 30,000 residential foreclosure files. According to a Nov. 23 hearing transcript obtained by the Daily Business Review, Edmund Whitson III, a Tampa-based Akerman attorney, pleaded with a Punta Gorda judge for a postponement on a 2-year-old foreclosure case, and the judge wasn't happy.

Approved "Sandbagging" Of Homeowners At Court Hearings, Banks Filing Incomplete Affidavits Reflect Disregard For Procedure By Some F'closure Judges

Jacksonville, Florida foreclosure defense attorney Chip Parker writes in The Florida Times Union:

  • With all due respect to Judge J. Thomas McGrady, his recent guest column reflects the state of denial demonstrated by our judiciary about the general failure of Foreclosure Court in Jacksonville and throughout Florida.(1) In the nearly two decades that I have practiced law in Florida’s courtrooms, I have never witnessed a process so blatantly tilted in favor of one party, which happens to be the mortgage industry.

  • McGrady references a procedure known as summary judgment, which he correctly points out as an efficient proceeding for disposing of cases when no issue of fact is present. Because summary judgment is an extraordinary measure that terminates a homeowner’s ability to keep his home, there are strict legal requirements that ensure fairness in the process.

  • All evidence upon which the mortgage company intends to present to prove its case must be provided to a homeowner 20 days before the hearing, but in reality, the bank lawyers often “sandbag” defendants by presenting key evidence at the hearing.

  • Additionally, affidavits — written testimony sworn under penalty of perjury — are always used to prove the bank’s case. Since the bank affidavits reference amounts due by the homeowner, business records must be attached but, in reality, never are. These affidavits are particularly disturbing because many servicers now admit that they were executed by employees who had no idea whether the statements were true.

  • Judges’ own statements reflect how out of touch they are with the issue of foreclosure fraud and how willing they are to overlook thousands of instances of lying by plaintiffs in most every foreclosure case. As a group, they shrug off the lies as sloppy paperwork.”

  • While McGrady correctly states that a judge’s job isn’t to “go behind the paperwork submitted in summary judgment,” it is the judge’s job to disallow evidence that clearly fails to comply with the rules of procedure even if the homeowner isn’t present.

  • Area judges have stated on the record that they do not require these rules to be followed in foreclosure cases, and lawyers throughout the state describe similar situations in their courtrooms.

For more, see Guest column: In reply: Serious flaws in foreclosure courts allowed to continue.

(1) See J. Thomas McGrady: 'Rocket docket' is a misnomer.

Duo Forks Over $25K In Upfront Restitution For Conditional 'Buyout' Of Convictions For Running Illegal Loan Mod Operation

In Livingston County, Michigan, the Daily Press & Argus reports:

  • Two women accused of illegally charging an estimated 15 customers money upfront for loan modification services were ordered Tuesday to complete community service and probation under a delayed sentence.


  • Michelle Rene Garbuschewski and Lisa Marie Joboulian both pleaded guilty in November to one count of violating the Credit Services Protection Act in exchange for the state attorney general's office dismissing a second identical count for illegally charging homeowners facing foreclosure upfront fees for mortgage-modification assistance.


  • Garbuschewski, of Howell, and Joboulian, of Northville, were each given an 11-month delayed sentence that will leave both with no conviction if they successfully complete probation during that time frame. They also were ordered to serve 10 hours of community service.


  • The plea deal calls for both women to pay a total of $40,000 in restitution to an estimated 15 victims even though only two victims are identified in the charges. On Tuesday, [District Judge Theresa] Brennan ordered $25,000 in restitution, which was paid Tuesday and will repay seven victims. The judge set a Jan. 14 hearing date to determine the amount, if any, of additional restitution to other victims, according to court records.

For the story, see Women accused of illegal service charges get probation, community service.

Colorado Homeowner Files Federal Suit Challenging Constitutionality Of State's Foreclosure Process & Law

In Denver, Colorado, The Denver Post reports:

  • Denver attorney John Prater sued the state of Colorado in federal court Friday, alleging that it is allowing lenders to seize properties without the due process required under the U.S. Constitution. "Colorado's foreclosure process and law are unconstitutional," said Andrew O'Connor with the Prater Legal Offices.

  • He said borrowers aren't getting a fair hearing under the state's current system of public trustees and limited "Rule 120" court hearings. Prater is fighting a foreclosure on his Douglas County home and filed a federal lawsuit after failing to get the hearing he wanted in state courts.

  • Under Colorado's current system, lenders can foreclose even if a fraudulent origination contributed to the delinquency. They can foreclose even while promising a loan modification that never gets fulfilled. And they can foreclose without ever providing proof before a judge that they have clear legal standing to do so, O'Connor said.

  • He said Colorado serves a lender's interest by having judges in Rule 120 hearings address only two issues: Is a borrower in the active military, which allows special consideration, or are they delinquent?

For more, see State's foreclosure rules challenged (Borrowers say they don't get a fair hearing from public trustees and limited court hearings).

Boston Retiree Faces The Boot From Family Home Of 50+ Years After Being Victimized In $500K+ Home Equity Ripoff

In Boston, Massachusetts, The Boston Herald reports:

  • Nancy Henry could be spending Christmas out on the street. In what her attorney called a mortgage swindle, the 76-year-old retired accountant is facing foreclosure of the two-bedroom row house in Cambridge that has been her family home for more than 50 years.

  • "I’m supposed to be out by Dec. 15, but I don’t know where I would go,” said Henry, who lives in the home with her adult son. “I’m praying something can be worked out at the last minute, so I can stay put.”

  • Todd Kaplan, an attorney with Greater Boston Legal Services,(1) said Henry was the victim of a complicated scheme to deprive her of the home and take more than $500,000 of equity from the property that was never repaid, forcing the foreclosure. “Miss Henry was the victim of a scam to deed over her house,” Kaplan said. “She is facing eviction and holding on by her fingernails.”

  • Henry said the scammer promised to sell the home for her and use the proceeds to purchase a ranch-style house where she could live on one floor. Instead, she said, the man sold the home - which has an assessed value of $443,000 - for $228,000 in 2007 to a “straw buyer” and “flipped” the property six months later for $580,000. The new “owner,”, with Henry still living in the home, took nearly $500,000 out in home-equity loans that were never repaid.

  • City Life/Vida Urbana, a Boston anti-poverty agency, organized a “stop the foreclosure vigil” at Henry’s home last night. They argue that the mortgage holder, Provident Funding Associates, should stop the eviction while any one of several solutions is explored. They want Provident to agree to sell the house to a Cambridge nonprofit as an affordable home or rental. Sarah Billeri, the attorney representing Provident Funding Associates at Harmon Law Offices, did not return a call seeking comment.

Source: Homeowner to be on street after alleged scam.

See also Cambridge resident says she was scammed into foreclosure.

(1) Greater Boston Legal Services provides free civil (non-criminal) legal assistance to low-income people in Boston and thirty-one additional cities and towns, ranging from legal advice to full case representation, depending on client need.

Monday, December 20, 2010

Nevada AG Slams BofA w/ Suit Over Allegedly Deceptive Loan Servicing Practices, Loan Modification Program Misrepresentations

From the Office of the Nevada Attorney General:

  • Attorney General Catherine Cortez Masto announced today that her office is filing a lawsuit against Bank of America Corporation, N.A., BAC Home Loans Servicing, LP, Recon Trust Company ("Bank of America") for engaging in deceptive trade practices against Nevada homeowners.

  • The lawsuit, filed in the Eighth Judicial District of the State of Nevada, was triggered by consumer complaints and follows an extensive investigation into Bank of America’s alleged deceptive practices involving its residential mortgage servicing, particularly its loan modification and foreclosure practices.


  • Because of Bank of America’s false promises, many Nevada consumers continued to make mortgage payments they could not afford, running through their savings, their retirement funds or their children’s education funds. Additionally, due to Bank of America’s misleading assurances, consumers deferred short-sales and passed on other attempts to mitigate their losses. And they waited anxiously, month after month, calling Bank of America and submitting their paperwork again and again, not knowing whether or when they would lose their homes. Whatever the consumers’ particular circumstances, they all suffered the stress and frustration of being misled by Bank of America while trying to take responsible action to modify their mortgages so they could continue to make their payments and remain in their homes.


  • Bank of America’s misconduct in misrepresenting its mortgage modification program was confirmed in interviews with consumers, former employees and other third parties and through review of relevant documents. Former employees describe an environment in which Bank of America failed to staff its modification functions with employees who had the necessary training, skills and experience. According to employees, the modification process was chaotic, understaffed and not oriented to customers. Employees were even reprimanded for spending too much time with individual consumers.(1)

For the Nevada AG press release, see Nevada Attorney General Sues Bank Of America For Deceiving Nevada Homeowners.

For the lawsuit, see State of Nevada v. Bank of America Corporation, et al.

(1) See The New York Times: Two States Sue Bank of America Over Mortgages:

  • One former employee said, “The main purpose of the training is to teach us how to get customers off the phone in less than 10 minutes.” Another employee said, “When checking on a borrower’s status, I often found that the modification request had not been dealt with or was so old that the request had become inactive. Yet, I was instructed to inform borrowers that they were ‘active and in status.’ One time I complained to a supervisor that I felt I always was lying to borrowers.”

Arizona AG Slams BofA With Lawsuit Saying Lender Showed "Callous Disregard" In Jerking Around Borrowers Seeking Loan Modifications

From the Office of the Arizona Attorney General:

  • Attorney General Terry Goddard announced that his Office [] filed a lawsuit against Bank of America Corporation and its affiliated companies (“Bank of America”) alleging violations of the Arizona Consumer Fraud Act and violations of the consent judgment entered in March 2009 between Arizona and the Countrywide companies owned by Bank of America.

  • The lawsuit, filed in Maricopa County Superior Court, was triggered by hundreds of consumer complaints and follows a year-long investigation into Bank of America’s residential mortgage servicing practices, particularly its loan modification and foreclosure practices.(1)

  • Goddard stated that Bank of America, the nation’s largest residential mortgage loan servicer, should be leading the way out of the country’s foreclosure crisis. Instead, he said, “Bank of America has been the slowest of all the servicers to ramp up loss mitigation efforts in response to the housing crisis. It has shown callous disregard for the devastating effects its servicing practices have had on individual borrowers and on the economy as a whole.”


  • As a result of Bank of America’s deceptive practices, many homeowners who were already contending with other financial hardships have been led to unnecessarily deplete their dwindling savings in futile attempts to obtain the promised relief and save their homes.

  • Many homeowners who tried to obtain a modification from Bank of America ended up owing more principal on their loans or having less equity (becoming more “underwater”) in their homes. Others gave up their chances to pursue other financial options, such as short sales, while trying to modify their loans with Bank of America. These consumers endured months of frustrating delays, not knowing whether or when they would lose their homes. They called Bank of America and resubmitted their paperwork over and over again in futile efforts to get the help they were promised.

For the Arizona AG press release, see Terry Goddard Charges Bank of America with Mortgage Fraud.

For the lawsuit, see State of Arizona v. Countrywide Financial Corporation, et al.

Go here for FAQ’s regarding the State’s Lawsuit against Bank of America.

(1) According to the press release, the complaint alleges that, since the consent judgment was entered, Bank of America has repeatedly violated the judgment’s provisions related to loan modifications. Instead of providing the relief to which eligible homeowners were entitled, Bank of America has failed to make timely decisions on modification requests and proceeded with foreclosures while modification requests were pending in violation of the agreement.

The complaint also alleges that Bank of America has violated the Consumer Fraud Act by misleading Arizona consumers about its loss mitigation process and programs, including matters such as:

  • Whether homeowners must be delinquent on their mortgage payments to be considered for a loan modification.
  • How much time it would take to receive a decision from Bank of America on a modification request or a short sale request.
  • Whether foreclosure would proceed while a modification or short sale request was pending, or while a homeowner was making trial payments.
  • Whether the homeowner had been approved for a loan modification.
  • Failure to provide valid reasons why the homeowner was declined for a modification.
  • Whether the homeowner would be approved for a permanent modification if the consumer successfully made all trial modification payments.

BofA Looks To Unload At Least $1B In Crappy Paper; Lender/Servicer May Be Tiring Of Continued Hammering To Public Image

The New York Post reports:

  • Bank of America, the country's No. 1 mortgage lender, battling to fix or get out of more than 1 million past due home loans, has put at least $1 billion of the toxic paper on the block, The Post has learned.

  • Buyers for the loans, which BofA has already written off, are circling. Bids are due by the end of December, sources said. The sale of the block of mortgage assets, which includes loans and mortage-servicing rights, seems to signal that Chief Executive Brian Moynihan, who has said he will battle to clean up the mess, thinks the best way out is through a sale.


  • Moynihan's move may be prompted by upcoming regulations that would force the bank to set aside more reserves for risky assets. [...] BofA also wants to improve its public image by not being in the news for foreclosing on homeowners.

For the story, see Bank of America to sell $1B in toxic paper.

Philly Feds Continue Attack On Equity Stripping Sale Leaseback Peddlers; Indict 4, File Civil Suit In Alleged Racket Involving 120 Properties

In Philadelphia, Pennsylvania, the Philadelphia Inquirer reports:

  • The U.S. Attorney's Office in Philadelphia filed criminal charges Tuesday against the operator of a local mortgage foreclosure rescue scheme involving $31 million in fraudulent loans on 120 properties.

  • Anthony J. DeMarco III offered to buy the houses of people facing foreclosure, allowing victims to stay in the houses and pay rent until they recovered financially and could buy the house back, the government said. In reality, the indictment alleged, DeMarco's real estate companies, DeMarco REI Inc. in Philadelphia and OPM Group L.L.C. in King of Prussia, lined up straw buyers for the houses, used fraudulent documents to obtain mortgage loans, and stole $11 million in the process.

  • Authorities arrested DeMarco, 31, of Conshohocken, on Tuesday. He is being held pending a detention hearing Friday. His attorney, Chris Warren, did not return a call seeking comment. A call to DeMarco's residence in Conshohocken before the arrest was not returned.


  • In what it called a novel move, the U.S. Attorney's Office on Tuesday asked U.S. District Judge Michael M. Baylson for broad relief that would stop evictions and foreclosures related to DeMarco's companies.(1)

  • Robert P. Cocco, a Philadelphia consumer lawyer who has several cases pending against DeMarco, welcomed that effort. "It helps save the victimized homeowner the emotional and financial burden of foreclosure defense or stay of sheriff sale," he said.

  • Also charged in the 15-count indictment were DeMarco REI employees Michael R. Roberts and Eric Boscove, as well as Sean Ryan, a title agent at Settlement Engine Inc. of Pittsburgh. Ryan allegedly played a vital role in the scheme by helping to make fake the down payments needed for the loans. Charges include conspiracy, mail fraud, bank fraud, and money laundering. Only Ryan could be reached Tuesday. Contacted at his work number, he said: "No comment."

Source: U.S. charges local foreclosure-rescue operator with fraud.

For the U.S. Attorney (Philadelphia) press release, see Charges & Civil Complaint Filed In Foreclosure Rescue Scheme (Civil Complaint Seeks Help For Scam Victims Facing Foreclosure).

For the charges brought in this criminal/civil, 'dual' prosecution, see:

See Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals for other incidents that led to criminal prosecutions in sale leaseback deals.

(1) The novel move here is that, in addition to bringing the criminal indictment against the four suspects, the U.S. Attorney's Office has also filed a civil lawsuit against DeMarco and his two companies in an attempt to, according to the civil complaint (see U.S. v. DeMarco REI, Inc., et al, at paragraph 5):

  • "seek[] relief that will extend beyond the parties to reach the homeowners, the "straw" purchasers, and the mortgage lenders. One purpose of the action is to bring all the individuals and entities that have a stake in the properties before the Court to create an orderly process by which the damage caused by the defendants' fraud can be mitigated. That process, sanctioned by the applicable statutes, will mean that non-party, non-defendants should be enjoined from engaging in any transactions that will affect the properties at issue here."

Couple Holding Purchase Money Note & Mortgage Left Holding The Bag After Unwittingly Signing Negligently-Prepared Satisfaction By Closing Agent

A Florida appeals court recently let a closing agent off the hook for any potential damages caused by negilgently preparing a satisfaction of mortgage and getting the unwitting couple holding the promisssory note secured by said mortgage to sign the satisfaction.

The Court said that, because the unwitting couple "never intended to extinguish [the debtor/maker's] obligations under the note, the mistaken satisfaction of the mortgage is subject to rescission and reformation and thus the [unwitting couple] never lost the ability to collect on the note."

Accordingly, because the unwitting couple never lost the ability to collect from the debtor/maker on the note, they failed to establish injury or damage proximately caused by the closing agent's screw-up, an essential element in supporting a negligence claim against the agent.(1)

I guess the court is telling the unwitting couple that their legal gripe is primarily with the guy who owes them the money, and not the closing agent who screwed up the paperwork.(2)

For the ruling, see All Real Estate Title Services, Inc. v. Vuu, Case No. 2D09-1196 (Fla. App. 2d DCA, November 17, 2010).

(1) In reaching its conclusion, the Florida appeals court found as follows (and essentially makes the legal case that the unwitting couple should have made against the debtor/maker obligated on the promissory note; bold text is my emphasis, not in the original text):

  • Cancellation or renunciation of a promissory note and release of security is ineffective if it is unintentional or procured by mistake. Gover v. Home & City Sav. Bank, 574 So. 2d 306 (Fla. 1st DCA 1991); see also § 673.6041, Fla. Stat. (2001). A court may apply equitable principles to reverse the cancellation of a mortgage satisfaction when that satisfaction is the result of mistake or inadvertence. United Serv. Corp. v. Vi-An Constr. Corp., 77 So. 2d 800, 803 (Fla. 1955); First Family Mortg. Corp. of Fla. v. White, 549 So. 2d 1049, 1050 (Fla. 3d DCA 1989). Thus, the Vuus' unintentional renunciation of the note by way of the mistaken satisfaction of mortgage did not, and could not, have extinguished their rights under the note.

    To support a negligence claim, the Vuus were required to show (a) the existence of a duty recognized by law requiring Boyd and All Real Estate to conform to a certain standard of conduct for the protection of others, including the Vuus; (b) a failure on the part of Boyd and All Real Estate to perform the duty; and (c) injury or damage proximately caused by such failure. See Lisanti v. City of Port Richey, 787 So. 2d 36, 37 (Fla. 2d DCA 2001); Landrum v. John Doe Pit Digger, 696 So. 2d 926, 928 (Fla. 2d DCA 1997). Because the Vuus' right to recover under the note has not been extinguished, they have failed to carry their burden of showing that they have suffered any injury from the preparation of the satisfaction of the mortgage.

    Accordingly, we reverse the judgment in favor of the Vuus and remand for the entry of a judgment in favor of Boyd and All Real Estate.

(2) For those wondering if there may have been possible fraud and/or collusion betwween the closing agent and the debtor/maker obligated on the promissory note against the unwitting couple, they were not issues addressed by the ruling; the ruling was silent as to whether the unwitting couple made any allegations with regard thereto.

Indiana Appeals Court: Failure To Comply With HUD Servicing Regulations A Valid Affirmative Defense In Foreclosure Action Involving FHA-Insured Loan

Lexology reports:

  • In a recently-published case of first impression in Indiana, the Court of Appeals of Indiana has held that a lender’s failure to comply with HUD servicing regulations on an FHA-insured loan may be asserted as a valid affirmative defense to a mortgage foreclosure action.

  • In Lacy-McKinney v. Taylor, Bean & Whitaker Mortgage Corp., 2010 Ind. App. LEXIS 2161 (Ind. Ct. App. Nov. 19, 2010), the appellate court reversed the trial court’s grant of summary judgment in favor of the lender, and remanded the matter for further proceedings to resolve the factual dispute over whether HUD’s servicing guidelines had been followed.

  • In reaching its result, the court drew from reported cases in Illinois, New York, Florida, Pennsylvania and New Jersey which essentially conferred third party beneficiary rights on borrowers arising out of the HUD servicing regulations pertinent to FHA-insured loans.(1)

  • It proceeded to hold that as a “condition precedent to foreclosure,” the lender was required to demonstrate its compliance with the HUD regulations regarding acceptance of partial payments (24 CFR § 203.556) and the face-to-face meeting protocols in default situations (24 CFR § 203.604(d)). Having found that a genuine issue of fact existed as to both, the appeals court held that summary judgment for the lender should not have been granted.

Attorney Joseph F. Zielinski of Indiana Legal Services, Inc., South Bend, Indiana, represented the homeowner in this case.(2)

For more, see Indiana Appeals Court allows HUD regulations to be affirmative defense to foreclosure (requires subscription; if no subscription GO HERE, then click appropriate link for the story).

(1) The Indiana appeals court made these observations regarding the out-of state cases:

  • The rationale for allowing noncompliance with HUD servicing responsibilities to be used as an affirmative defense to foreclosure on an HUD-insured mortgage was set forth by the Illinois Appellate Court in Bankers Life Co. v. Denton, 458 N.E.2d 203 (Ill. App. Ct. 1983). There, a mortgagee filed a complaint seeking to foreclose on the Dentons‘ HUD-insured mortgage, which was in default. Denton, 458 N.E.2d at 206. In their answer, the Dentons raised the mortgagee‘s noncompliance with the HUD servicing responsibilities as an affirmative defense. Id. The trial court granted mortgagee‘s motion to strike the Dentons‘ affirmative defense and entered a judgment of foreclosure and sale against the Dentons. The Dentons appealed, contending that they could use noncompliance of HUD regulations as an affirmative defense to the foreclosure.

  • After citing to the applicable mortgage servicing responsibilities, which included the requirement of a face-to-face meeting, the Denton court noted:

    It is evident from the language of the servicing regulations that the mortgagee must comply with these provisions prior to the commencement of a foreclosure proceeding. Therefore, . . . we believe that the failure to comply with these servicing regulations which are mandatory and have the force and effect of law can be raised in a foreclosure proceeding as an affirmative defense.

    While it is true that 24 C.F.R. 203.500 provides that a pattern of refusal or failure to comply with the servicing requirements will be cause for withdrawal of a mortgagee‘s approval to participate in the federal mortgage insurance program, we do not believe this to be an adequate remedy for the individual mortgagor. The legislative purpose of the National Housing Act . . . is to assist in providing a decent home and a suitable living environment for every American family. Thus, the primary beneficiaries of the act and its implementing regulations are those receiving assistance through its various housing programs. This would include the defendant as mortgagors of a H.U.D. insured mortgage.

    Therefore, in order to effectively insure that the interests of the primary beneficiaries of the H.U.D. mortgage servicing requirements are being protected, mortgagors must be allowed to raise noncompliance with the servicing requirements as a defense to a foreclosure action. H.U.D.‘s withdrawal of a mortgagee‘s approval to participate in the mortgage insurance program after repeated violations of the servicing requirements is a useless remedy for the individual faced with the immediate problem of the foreclosure action; an action which could possibly be avoided by . . . further efforts to arrange a revised payment plan

    Id. at 205.


  • Following reasoning similar to that found in Denton, the states of Florida, Maryland, and New York have likewise held that HUD servicing responsibilities may be raised as an affirmative defense in foreclosure actions even though the regulations do not create a private right of action. See Cross v. Fed. Nat’l Mort. Ass’n, 359 So.2d 464 (Fla. Dist. Ct. App. 1978) (mortgagee‘s failure to provide defaulted HUD-insured mortgagor with notice required under mortgage servicing regulations was affirmative defense that precluded summary judgment in favor of mortgagee); Wells Fargo Home Mortg., Inc. v. Neal, 922 A.2d 538,547 (Md. 2007) (mortgagor may not wield HUD regulations as sword but may assert regulatory noncompliance as shield to foreclosure on HUD mortgage); Federal Nat’l Mortg. Ass’n v. Ricks, 372 N.Y.S.2d 485, 497 (N.Y. Sup. Ct. 1975) (mortgagors may interpose as first defense, failure of mortgagee to comply with provisions of HUD Handbook).

  • Some courts have styled a mortgagee‘s noncompliance with HUD regulations as an equitable defense (unclean hands and failure to do equity). See e.g., Heritage Bank, N.A. v. Ruh, 465 A.2d 547 (N.J. Super. Ct. Ch. Div. 1983) (courts may exercise equity power in refusing to grant foreclosures when mortgagees have flagrantly disregarded forbearance or casting); Fleet Real Estate Funding Corp. v. Smith, 530 A.2d 919 (Pa. Super. Ct. 1987) (summary judgment in favor of mortgagee reversed upon finding that court could exercise equity powers to restrict foreclosure by mortgagee who had not followed or applied forbearance provisions of the HUD regulations and Handbook). We find it problematic to treat such noncompliance merely as an equitable remedy. If noncompliance with HUD regulations is merely ―unclean hands,‖ a court may be precluded from requiring compliance in cases where the mortgagor is also deemed to have unclean hands. See Ruh, 465 A.2d at 558 (court of equity, fulfilling reasons and objects for its existence may, in furtherance of natural justice, aid one who is comparatively more innocent). Hence, the equitable approach is limited in its ability to promote a mortgagee‘s compliance with HUD regulations. Instead, we agree with the reasoning of Denton and view the affirmative defense of noncompliance with HUD regulations as the failure of the mortgagee to satisfy a HUD-imposed condition precedent to foreclosure.

  • To hold that compliance with these regulations is not an affirmative defense, as Taylor-Bean suggests, would circumvent the public policy of HUD. The New Jersey Superior Court described this policy as follows:

    Families who receive HUD-insured mortgages do not meet the standards required for conventional mortgages. It would be senseless to create a program to aid families for whom homeownership would otherwise be impossible without promulgating mandatory regulations for HUD-approved mortgagees to insure that objectives of the HUD program are met. Foreseeable obstacles to these families‘ maintaining regular payments, such as temporary illness, unemployment or poor financial management, should be handled with a combination of understanding and efficiency by mortgagees or servicers. Poor servicing techniques such as computerized form letters and unrealistic forbearance agreements as were used by Associated defeat the purpose of the National Housing Act and the HUD program. The prevention of foreclosure in HUD mortgages wherever possible is essential. The HUD program‘s objectives cannot be attained if HUD‘s involvement begins and ends with the purchase of the home and the receipt of a mortgage by a low-income family. Id.

    Associated E. Mortg. Co. v. Young, 394 A.2d 899, 906 (N.J. Super. Ct. Ch. Div. 1978).

(2) Indiana Legal Services, Inc. is a nonprofit law firm that provides free civil legal assistance to eligible low-income people throughout the state of Indiana.

Sunday, December 19, 2010

Recently Defeated In Election, Consumer-Friendly Ohio AG To Take Battle Against Financial Fraud National

In Columbus, Ohio, The Colombus Dispatch reports:

  • Outgoing Ohio Attorney General Richard Cordray has a new federal job lined up, but he still has his eye on a statewide office - most likely governor - in 2014. Cordray confirmed [] that he has been appointed enforcement watchdog for the new U.S. Consumer Financial Protection Bureau, an agency under the umbrella of the Federal Reserve System.

  • "It gives me the opportunity to work on a 50-state basis on the issues that are near and dear to my heart in the state of Ohio," Cordray said. He will be the chief enforcer over a broad range of consumer issues, including mortgages, credit cards, student loans and nonbanking financial activities.


  • Cordray, 51, a Democrat, lost his re-election bid last month to Republican Mike DeWine, a former U.S. senator and lieutenant governor. [...] In his two years as attorney general, Cordray was zealous in pursuing fraudulent mortgage and foreclosure practices. He went after GMAC Mortgage; its parent, Ally Financial Inc.; American International Group; and Bank of America Corp.

For more, see Cordray headed to Washington.

"We Will Put People In Jail!" Vows Iowa AG Referring To Ongoing Robosigner Probe

Reuters reports:

  • Iowa's attorney general, who is leading a nationwide probe of questionable home foreclosures, met with struggling homeowners on Tuesday and said he may bring criminal charges in his state.

  • "We will put people in jail," Iowa Attorney General Tom Miller said, referring to cases in his state he plans to prosecute with the U.S. Attorney in southern Iowa.

  • A public furor erupted in September over whether banks cut corners in the foreclosure process, using so-called "robo-signers" of legal documents to justify taking homes. Miller heads up the multi-state foreclosure probe comprised of all 50 state attorneys general. They have met with leading U.S. mortgage servicers to discuss a settlement over allegations related to shoddy foreclosure paperwork, which some homeowners say have resulted in illegal evictions.

For more, see Iowa may bring criminal charges in foreclosures scandal.

Media Attention Continues On Use Of False Attorney Signatures On Foreclosure Documents

ProPublica reports:

  • Many foreclosures have been thrown into question because of flawed documentation such as inaccurate affidavits describing a mortgage's history. But three recent court cases point to another type of flaw in foreclosure filings that could place thousands more cases in doubt: false attorney signatures on court documents.



  • In October, the Baltimore Sun reported that lawyers from two Maryland firms that handle foreclosures acknowledged that they had not in fact signed many affidavits filed with their signatures and had submitted "corrective affidavits" to try to remedy the problem. The two lawyers, who have reportedly filed more than 20,000 foreclosure cases in Maryland since 2008, told the Sun that they had reviewed the content of all their affidavits although they did not always sign them themselves.


For more, see False Attorney Signatures Cast New Doubts on Foreclosures.

Central Florida Robosigning Operation Goes On The Offensive; Sues Foreclosure Defense Attorney For Alleged Libel, Slander

Barry Ritholtz writes in The Big Picture:

  • Sometimes, the best defense is a good offense. That seems to be the approach that notorious robo-signing firm Nationwide Title Clearing has taken in responding to some of its critics.

  • If you are unfamiliar with their name, you might recall earlier this Fall when depositions of several Nationwide robo-signers employees went viral on YouTube (We mentioned these here and here).

  • This, amongst other perceived sleights has upset Nationwide Title, who has sued a St. Petersburg foreclosure defense lawyer, Matthew Weidner, for alleged libel and slander. This is likely to be a terrible, terrible idea.

For more, see When Robosigners Attack!

Foreclosed Minnesota Homeowner Says She Was Duped Into Signing Away Deed & Redemption Rights For $5K; Sues To Undo Title Transfer

In Washington County, Minnesota, Minnesota Public Radio reports:

  • Many [Minnesota] homeowners in foreclosure may not be aware there's another option that would allow them to keep their homes. Under state law, they can buy their home back after the sheriff's sale for the price of the winning bid. That bid can be tens or even hundreds of thousands of dollars less than what they owed on the house.

  • But the law is not widely known, and as a result many homeowners have lost out on the chance to stay in their homes. Marie Forsell, who owned a home in Washington County, is one of them.


  • After Forsell's house was sold at a sheriff's sale this fall, people started showing up at her doorstep with offers of help. Investors offered her money -- $5,000 -- in exchange for her deed. The $5,000 sounded pretty good at that time, because Forsell figured she could never scrape together enough money to redeem her house.

  • What Forsell didn't know was how much her house had sold for at the sheriff's sale. After she'd agreed to take the $5,000, Forsell found out that her house -- on which she owed close to $600,000 -- had sold at auction for only about $86,000. [...] That's when Forsell discovered something else: under state law she could have bought her home back during the redemption period that follows the sheriff's sale, for far less than what she owed.


  • The investors who bought Forsell's deed also bought her rights to redeem her house. Now, they can put it back on the market for a profit. [...] The deal Forsell agreed to amounts to equity stripping, according to her attorney Jerome Ritter. He says homeowners in foreclosure are vulnerable to such deals because they may not know their rights.

  • "They trusted people who said, 'I am here to help, here is some money, it's the best you can get,'" he said. "They made it work because they did not tell the homeowner the true set of facts, and that is wrong."

  • Minnesota updated its foreclosure laws this year in an effort to prevent mortgage fraud. The law requires people seeking title to a foreclosed property after the sheriff's sale -- and before the end of the redemption period -- to notify the homeowner that the house can be redeemed for the sheriff's sale price, if it's less than the amount owed before the sale.


  • Forsell is suing the investors she made the deal with, claiming they broke the law. She hopes a judge will grant her a second chance to get her house back.

For the story, see Little-known law could help foreclosed homeowners.

Central Florida Judge Lets Foreclosure Mills Off The Hook On Inflated Process Server Fees

In Central Florida, The Tampa Tribune reports:

  • Pasco County Circuit Judge Susan Gardner has agreed to let some attorneys "off the hook" – this time - for legal fees she says are inflated. "But I'm not approving these fees to be added to the final judgment," Gardner said. "And I think attorneys now know that I'm watching, and I'm not tolerating unreasonable fees."

  • Gardner decided last month to take a closer look at her foreclosure cases after former employees of a large foreclosure firm testified to overbilling and forging documents. The judge plastered files with adhesive notes detailing concerns over a mountain of fees to serve notice of foreclosure lawsuits to homeowners and to people who don't exist.

  • "Routinely, routinely, I'm seeing charges of $1,600, $1,800, $1,000, $800, any of those are ridiculous, and there had better be a good reason for it," Gardner said at the time. These fees should typically be $45 to a couple hundred bucks, she said.

  • Some of the lawyers who submitted affidavits to the court saying the fees are "reasonable" often sign their names and bar numbers in an illegible scribble, court records show. The judge ordered five lawyers to show why the fees were reasonable. Their explanations didn't please Gardner, but she said she decided to make this a warning.

  • "I was a little weak on holding someone's feet to the fire because I wasn't sure who to blame," Gardner said. "Everyone involved was following someone else's instructions."

For more, see Pasco judge warns attorneys about high foreclosure fees.