Saturday, January 22, 2011

Mortgage Servicer Neglect Adds To Blight In Chicago Neighborhoods As Vacant Homes Left Lingering In Legal Limbo

In Chicago, Illinois, the Chicago Tribune reports:

  • A new type of property is adding to neighborhood blight: the bank walkaway. Research to be released Thursday, the first of its kind locally, identifies 1,896 "red flag" homes in Chicago — most of them are in distressed African-American neighborhoods — that appear to have been abandoned by mortgage servicers during the foreclosure process, the Woodstock Institute found.

  • Abandoned foreclosures are increasing as mortgage investors determine that, at sale, they can't recoup the costs of foreclosing, securing, maintaining and marketing a home, and they sometimes aren't completing foreclosure actions. The property, by then usually vacant, becomes another eyesore in limbo along blocks where faded signs still announce block clubs.

  • "The steward relationship between the servicer and the property is broken, particularly in these hard-hit communities," said Geoff Smith, senior vice president of Woodstock, a Chicago-based research and advocacy group. "The role of the servicer is to be the person in charge of that property's disposition. You're seeing situations where servicers are not living up to that standard."

For more, see More banks walking away from homes, adding to housing crisis (Research shows 1,896 red flag homes in Chicago appear to have been abandoned during foreclosure process).

Nassau DA: Long Island Man Facing Foreclosure Used Phony Raffle Racket In Home-Peddling Scam, Clipping Victims Out Of $100K+

In Mineola, New York, WCBS NewsRadio 880 AM reports:

  • It was too good to be true. A Long Island man is accused of selling more than $100,000 worth of raffle tickets for a million-dollar waterfront home, then reneging on the drawing and pocketing the cash for luxury vacations.

  • The Nassau County District Attorney’s office arrested 32-year-old Scott Cicerone of North Babylon and charged him with scamming thousands of people out of $100,000. Cicerone was facing arraignment Thursday on 21 counts of petit larceny and one count of scheme to defraud. His attorney said Cicerone will plead not guilty.

  • Authorities say Cicerone sold raffle tickets in 2009, promising to give the winner a $1 million lien free home in Massapequa.(1) The tickets were only $50 each. [...] But D.A. Kathleen Rice says the house was really in foreclosure and Cicerone instead used the ill-gotten gains to pay for a Mercedes and take trips to Las Vegas, Atlantic City, and California.

For more, see Long Island Man Charged In House Raffle Scam.

For the Nassau County DA press release, see Suffolk Man Charged With Scamming Victims Out of More Than $100K in 2009 Massapequa House Raffle Scam (Cicerone promised ticket-holders the chance to win million-dollar home; instead used cash for vacations).

(1) Cicerone advertised that the winner would receive the property lien free, never mentioning the $1 million lien on the house from the previously defaulted loan, but did qualify the raffle, however, claiming if they did not sell 30,000 tickets, the ticket buyers’ money would be 95% refunded, according to the Nassau County DA press release.

Rogue Bill Collector Contacted, Harassed Friends & Family In Attempt To Illegally Squeeze Cash From Debtor: Federal Lawsuit

In Sherman, Texas, The Southeast Texas Record reports:

  • An East Texas man is suing a collection agency after one of its agents contacted and harassed his friends and family. Jimmy Cotten filed suit against Nelson, Hirsch & Associates Inc. on Dec. 15 in the Eastern District of Texas, Sherman Division.Cotten states that the defendant contacted his cell phone several times a day, contacted his cousin and called his friends on more than one occasion in an attempt to collect a debt.

  • Cotten argues that these telephone calls were harassing and abusive tactics in violation of the Fair Debt Collection Practices Act and Texas Debt Collection Act. He claims the defendant's actions have caused him to suffer from humiliation, anger, anxiety, emotional distress, fear, frustration and embarrassment. The defendant is also accused of invasion of privacy by intrusion into private affairs and intentional infliction of emotional distress.

For the story, see Debt collector sued for calling debtor's friends, family.

Mass. AG Pinches Landlord For Filing Phony Cerification After Being Nabbed For Failure To Comply w/ Lead Paint Law When Renting To Family w/ Young Kid

From the Office of the Massachusetts Attorney General:

  • A Worcester area property owner has been arraigned for fraudulently claiming his property was in compliance with lead laws and endangering children, announced Attorney General Martha Coakley. Jaroslaw Pianka, age 40, of Charlton, was arraigned on charges of Child Endangerment, Larceny by False Pretenses, and Uttering (2 counts).

  • Authorities allege that Pianka, the owner of two properties located on Dale Court in Leicester, failed to comply with lead laws by submitting fraudulent certificates of lead compliance and representing that his properties had been properly deleaded. [...] A Worcester County Grand Jury returned indictments against Pianka on December 17, 2010.(1)

For the Massachusetts AG press release, see Property Owner Arraigned on Child Endangerment and Other Charges for Allegedly Failing to Comply with Lead Paint Laws.

(1) In one case according to authorities, a family with two children under the age of six rented one of Pianka'a properties under the verbal assertion that the property had been deleaded in February 2007. Massachusetts Law requires owners of properties containing dangerous levels of lead to abate or contain lead whenever a child under six years of age resides in the property. According to authorities, the family subsequently performed a home lead test which revealed lead in the property, and contacted the Leicester Board of Health to request a lead determination in March 2009.

According to the state AG, Further inspection of the property by the Board of Health found several areas that tested positive for lead and the Board of Health issued an order to Pianka to correct the lead in the property in April 2009. Following the order, in April 2009, Pianka reportedly provided the family with a copy of a letter of full deleading compliance and the Massachusetts Tenant Lead Law Notification and Certification Form, which is required by law to be provided by landlords to tenants prior to renting properties built before 1978, and reportedly also provided the letter of full deleading compliance to the Board of Health. According to authorities, a review of the letter conducted by the Massachusetts Department of Public Health’s Child Lead Poisoning Prevention Program determined the documentation to be fraudulent.

In a second case, Pianka was also cited for lead paint compliance at a second property after the Board of Health learned of additional alleged violations, the state AG said.

Massachusetts Landlord's Refusal To Renew Lease After Long-Time Tenant's New Child Triggered Lead Paint Abatement Obligation Leads To State AG Lawsuit

From the Office of the Massachusetts Attorney General:

  • A Boston real estate management company, its agent and property owner have been sued for violating state anti-discrimination law, Attorney General Martha Coakley’s Office announced. The Attorney General’s Office filed a housing discrimination complaint on January 3, 2011, against Mediate Management Company (“Mediate”), its agent Deborah Kooring, and Fenway Buttrick, LLC, in Suffolk Superior Court alleging that the defendants refused to renew the lease of a family because they reside with a young child whose presence required the defendants to comply with state lead paint laws.(1)


  • According to the complaint, the tenants lived for many years in an apartment unit owned by Fenway Butrick, LLC and managed by Mediate. In May 2010, the tenants submitted a lease renewal to the defendants and informed them that the tenants recently had a child who would be living with them in the apartment unit. Concerned for their child’s well-being, the tenants asked the defendants to inspect the apartment unit for lead paint hazards. The complaint alleges that after learning of the change in the tenants’ familial status, Mediate’s agent notified the tenants that their lease would not be renewed.

  • Mediate’s purported basis for the non-renewal included maximum occupancy limitations and square footage limitations, both of which bases later were shown to be incorrect. According to the complaint, in late May 2010, the tenants filed a complaint alleging discrimination with the Boston Fair Housing Commission (“BFHC”). The defendants subsequently submitted to a lead paint inspection which revealed high levels of lead paint and required the defendants to abate the lead hazard under Massachusetts lead paint laws.

For the Massachusetts AG press release, see AG Sues Boston Real Estate Management Company, Agent and Property Owner for Housing Discrimination.

(1)Anti-discrimination law prohibits landlords and real estate professionals from refusing to rent to prospective tenants because they have children. It further requires them to comply with lead paint laws designed to protect young children from known health hazards,” AG Coakley said. “Massachusetts is facing critical housing needs and residents must be treated fairly.”

Friday, January 21, 2011

New Law Allows Fla. HOAs To Begin Muscle-Flexing Against Non-Paying Unit Owners; Cable TV Shutoff Among 'Extreme' Collection Measures Used

The Palm Beach Post reports:

  • Throughout South Florida, where homeowner associations reign over the fading fortunes of gated communities and condominiums, governing boards are using more aggressive - some say guerrilla - tactics to collect late fees.

  • Emboldened by a new law that allows boards to ban non-paying homeowners from community common areas, associations also are restricting residents' access to their homes by disabling devices that allow automatic entry into neighborhoods.

  • As foreclosures swelled with the real estate collapse, associations begged lawmakers last year for more muscle to recover delinquent home­owner dues, which typically go hand-in-hand with missed mortgage payments.

  • They complain banks are slow to foreclose on properties with bulging association fees because they must pay the bills after repossession. The result: homes wallowing in years of association debt.

  • The argument behind the law is that the owners who are not paying for the maintenance of facilities, such as pools, clubhouses and tennis courts, should not get to use them. But a wider interpretation is also forcing some debtors to wait in the visitors' line at entrance gates. In condominiums where [electronic] key fobs are used to gain entrance, homeowners with association debt sneak in behind other residents or head to the security desk for permission to enter.

  • Residents say blocking access to their homes is just bullying, and in conflict with other language in the law. Attorneys who represent associations say it's one of the most effective ways to collect late fees - along with turning off cable TV.

  • "We are beyond the days when you tar and feather people, and I don't think we can put a scarlet letter on someone," said attorney Gary Poliakoff, whose Fort Lauderdale-based firm represents associations. "These are some harsh measures, but they are causing the owner to reflect on the fact that they are forcing others to pick up the burden of maintaining the community."


  • The Community Advocacy Network, which supported last year's legislation on the common-use-area restrictions, is going back to lawmakers this year asking for clarifications in the law. One request is for stronger language allowing the suspension of cable TV. "You would be surprised how compelling it is when HBO and Showtime may be turned off," [attorney Donna] Berger said. "They seem to find the money then."

For more, see HOAs fight back against homeowner behind on fees (A new law allows homeowners associations to keep people who don’t pay their share out of the pool and other common areas).

Georgia Deputies Stumble Into Home-Based Meth Lab While Serving Foreclosure Notice; Score Big Bust

In Tift County, Georgia, WFXL-TV Channel 31 reports:

  • The routine serving of a bank foreclosure notice turns into a big drug bust in Tift County. Tift County Sheriff’s Department Information Officer David Hare tells FOX 31 News that sheriff’s deputies were serving a bank foreclosure notice Wednesday afternoon at 1241 WB Parks Road when they saw signs of a possible meth lab operation.

  • Hare says additional law enforcement officials were called to the scene to execute a search warrant of the home. They reported finding chemicals inside the home and on the adjacent property that were being used to manufacture methamphetamine.

  • Hare says officers with the Mid-State Narcotics Task Force arrested the homeowner, 43-year-old Michael Willis and charged him with manufacturing methamphetamine, possession of a firearm by a convicted felon, forgery, and manufacturing fake Georgia driver’s licenses.

For the story, see Deputies serving foreclosure notice cash in on meth lab.

California Attorney Admits Breaking Into Foreclosed Clients' Former Homes On Their Behalf At Least A Half Dozen Times In Squatting Protest

In Southern California, the Los Angeles Times reports:

  • Jim and Danielle Earl had fallen behind on their mortgage payments after a business reversal. But the six-bedroom house that they shared with their brood had already been sold to an investment company, [Ventura County Superior Court] Judge Barbara A. Lane pointed out. The eviction would stand.

  • Incensed, [attorney Michael T.] Pines vowed to hire a locksmith and enter the vacant house illegally. "I'm going back there," Pines declared, gripping the lectern. "And I hope I get arrested." "I certainly hope not," Lane shot back. "That is a blatant disregard of this court's order."

  • With Pines, the threat at the October hearing couldn't be written off as courtroom theatrics. The 58-year-old attorney admits to breaking into homes at least half a dozen times, including one before with the Earls, leaving the clients to squat in their homes while he defends their legal right to possession. His unconventional methods have gotten him fined by a judge in San Diego, arrested in Newport Beach and threatened with contempt — and jail — in Ventura.


  • Pines has yet to wrest a house back. His most high-profile client, baseball legend Lenny Dykstra, took Pines' advice last July to move back into his foreclosed Thousand Oaks mansion against a bankruptcy judge's orders. That move, followed by a victory party at the estate, brought an order barring the former outfielder from the property. Dykstra fired Pines after one month and lost the house in a foreclosure sale in November.

For more, see Lawyer advises foreclosed clients to break back into their homes (Michael Pines, who was baseball legend Lenny Dykstra's attorney, admits to breaking into homes at least half a dozen times, leaving clients to squat while he defends their legal right to possession).

Landlord Gets The Squeeze As Lender Refuses To Renew Short Term Balloon Mortgages; Bank Opts To Foreclose Instead Despite Prompt Payment History

In Springfield, Missouri, KYTV Channel 3 reports:

  • Imagine never being late or missing a payment, but still losing your home to foreclosure. It's happening across the nation to owners of rental properties. An owner of multiple rental properties can't typically get a traditional loan, so he'll get a one-, three- or five-year note that's renewed when it expires. Several property owners in the Ozarks are getting turned down for renewals even though they've never been late or missed a payment. The result is they lose their properties to foreclosure and the income that goes with it.

  • When Don Hosey got into the home rental business nearly a decade ago, he never imagined this is how it would end. "That's how I feel. They don't care," Hosey said about his bank.

  • He owns 10 properties in Springfield. He say he's never been late on a payment. He's never missed a payment. In fact, his properties were making him a profit of about $2,500 a month. So he can't figure out why his bank would refuse to renew his loans. Instead, it sent him a letter demanding that he immediately pay off the loans on all 10 properties. "I have to pay the balances on all properties or they take them back and foreclose on me," he said.

  • In fact, they've already foreclosed on two properties, including a six-plex, his biggest money maker. His bank didn't return a reporter's calls but told him why they wouldn't refinance his loans.


  • Hosey is not alone. The owner of Metro Housing Finders, an organization that places tenants, says he knows of at least a half dozen owners in the same position.

For the story, see Banks foreclose on rental property owners with excellent payment histories.

"My Dream Is Done Now" Laments Steel City Man After Losing Recently Repaired Home To Demolition, Despite Removal From City's 'Tear Down' List

In Pittsburgh, Pennsylvania, the Pittsburgh Tribune Review reports:

  • When Andre Hall bought a house in the West End, he thought he "finally had a piece of Pittsburgh." On Monday, Hall, 40, returned to do repair work on the house at 3224 Motor St. to find workers demolishing it.

  • "I don't come for a week over the holiday, and as soon as I come back, I see a backhoe on top of the house," he said. "Why did they demolish the house? They could see I had put in new windows and had slabs of drywall."

  • John Jennings, acting chief of Pittsburgh's Bureau of Building Inspection, said his department notified contractors P.J. Deller Inc. on Nov. 3 that the house no longer was slated for demolition. "A couple things went awry," Jennings said. "The house next door was to be demolished, and the contractor, in error, took this house down as well."


  • Hall, who works in home repairs, said he was about three weeks away from being able to move into the home. He planned to live there with his girlfriend, Shawna Jones, and his five children. The couple lives in a one-bedroom apartment in East Liberty. "My dream is done now," he said. "Someone needs to man up and take responsibility for this."

For the story, see West End demolition leaves property, owner empty.

Thursday, January 20, 2011

Disbarred Lawyer Sentenced In $2.37M Client 'Refi' Theft; Cash Meant For Lien Payoffs; Attny Ripoff Reimbursement Fund Expected To Step In, Cough Up

In Saratoga County, New York, The Glens Falls Post Star reports:

  • A Wilton lawyer who prosecutors say was running a "mini-Madoff" scheme to help bankroll a lavish lifestyle that included a home on a Caribbean island was sentenced to up to 15 years in state prison on Friday in Saratoga County Court.

  • Patrick M. Reidy, 48, was arrested in August 2009 after several real estate clients of his began discovering that mortgage payments - given to Reidy to forward on their behalf - had not been received by the mortgage holders. Reidy was re-directing foreclosure payments after forging documents that gave him power of attorney, a move that kept homeowners from learning their payments had not been made until they went to get new loans, according to court papers.

  • Reidy ultimately bilked 19 area residents out of $2.37 million - money prosecutors said was used to buy property in the Caribbean, at least two nice cars and a nearly $600,000 home in Wilton.


  • When and how Reidy will make restitution remains unclear. A restitution hearing is scheduled for March 18 to determine the amount owed and to whom the money should be paid.

  • If Reidy is unable to make restitution immediately, the state's Lawyers' Fund for Client Protection is expected to step in and make payments on his behalf. The fund is supported through lawyer fees and is intended to compensate those who have been victimized by [New York State] lawyers. Attorneys for the fund will pursue compensation from Reidy if and when the fund makes payments on his behalf.(1)


  • A father of three who was recently divorced, Reidy has already spent 14 months in county jail. He will be eligible for parole in a little less than four years, though he could ultimately spend up to 15 years in prison. Reidy has also been banned from ever practicing as an attorney in New York again.

For the story, see Lawyer sentenced in mortgage fraud case.

(1) 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.

Nassau DA: B'klyn Man Used Bogus Mtg. Satisfactions & Title Policy, Prepared His Own Title Report, Forged Dead Lawyer's Name To Pocket $5.3M In Loans

From the Office of the Nassau County, New York District Attorney:

  • Nassau County District Attorney Kathleen Rice announced [] that a Brooklyn man has pleaded guilty to obtaining $5.3 million in mortgages from two different Nassau County financial lenders by using fake documents, a dead attorney’s signature and forged mortgage satisfactions that showed previous mortgages were paid off.

  • Mayer Goldberger, 46, of Sunset Park, Brooklyn, pleaded guilty to two counts of Grand Larceny in the First Degree. He faces up to 25 years in prison on each conviction at his March 9 sentencing and agreed to repay his victims the maximum amount of approximately $5.3 million, which will be by civil judgment.

  • Rice said that in 2002 and 2003, Goldberger obtained loans on properties located in Hartford, Connecticut from lenders in New York totaling $1.4 million. Goldberger owned these properties under his company’s name, Hartford LLC. In 2005 and 2006, forged documents were filed stating the $1.4 million had been paid off.

  • Goldberger then used those forged documents to obtain a $3 million loan from the New York Community Bank in Jericho in 2007. In reality, Goldberger still owed the entire original $1.4 million.

  • Using the same forged mortgage satisfactions he used in 2006 to obtain the New York Community bank loan, Goldberger received another loan for $2.3 million from BRT Realty Trust in Great Neck in 2008. In addition to the forged satisfactions, Goldberger furthered his criminal scheme by preparing his own title report through a company he owned called Speedy Title Services LLC, a conflict of interest BRT had no knowledge of.

  • That report failed to disclose the existence of the $3 million loan and omitted mentioning the $1.4 million in mortgages that he knew were not paid off. It did, however, include a bogus 2007 mortgage supposedly issued by Hartford LLC to Hartford & York LLC, another company solely owned by Goldberger. This led BRT Realty Trust to believe that once the Hartford & York LLC loan was paid off, BRT would have the first lien on the Connecticut properties. But this was not the case.

  • In addition, Goldberger misrepresented that Speedy Title Services was acting as an authorized agent of First American Title Insurance Company. In doing so he caused a forged certificate of title and policy of title insurance to be delivered to BRT Realty Trust. These documents not only misrepresented that Speedy Title Services was acting on behalf of American Title Insurance Company, but also contained the forged signature of a deceased attorney.

For the Nassau County DA press release, see Brooklyn Man Pleads Guilty to Stealing $5.3M from Nassau Lenders in Multistate Mortgage Fraud Schemes (Goldberger stole mortgage proceeds from Jericho and Great Neck banks; used dead attorney's signature for closing).

Sticky-Fingered Closing Agent Gets 12 Yrs, Agrees To Indemnify Title Insurer Left Holding Bag In $3.8M+ Escrow Account Ripoff Affecting 11 Home Buyers

From the Office of the New Jersey Attorney General:

  • Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor announced that the owner of a title company in Red Bank was sentenced to prison [last week] for stealing $3.8 million in loan proceeds intended for payment of mortgage balances and other closing costs.

  • According to Director Taylor, Ronald P. Mas Jr., 35, of Red Bank, a mortgage broker, settlement agent and owner of Olde Gotham Title and Settlement Services LLC in Red Bank, was sentenced to 12 years in state prison. [...] He executed a consent judgment to pay full restitution of $3,841,616 to the title company that insured the mortgages. [...] Mas pleaded guilty on Aug. 26, 2010 to an accusation charging him with second-degree money laundering and second-degree theft by failure to make required disposition of property received.(1)

  • He admitted that between April 2009 and February 2010, he stole $3,841,616 that he received from various mortgage lenders for real estate closings on behalf of 11 home buyers across New Jersey.


  • The state investigation revealed that Mas diverted loan proceeds into his Ameritrade account. Instead of paying off the client’s old mortgage, Mas would make monthly mortgage payments and invest the balance of the loan proceeds into the Ameritrade account. Mas made monthly payments on some mortgages using funds from new loans provided for clients. At the end of February 2010, Mas had a total loss of over $3.4 million in his Ameritrade account. As a result, 11 mortgages were not paid.

For the NJ AG press release, see Red Bank Title Company Owner Sentenced to State Prison for Stealing $3.8 Million in Closing Funds to Play Stock Market.

(1)Home buyers, lenders and title insurers must be able to rely on title agents, who are routinely entrusted with hundreds of thousands of dollars in closing funds,” said Attorney General Dow. “When such agents violate their fiduciary duty and steal from clients, as this defendant did, they should face a stiff sentence.”

Closing Attorney Gets 18 Months For Pocketing $500K+ In Clients' Refinancing Proceeds Intended To Pay Off Existing Mortgages

From the Office of the U.S. Attorney (Buffalo, New York):

  • U.S. Attorney William J. Hochul, Jr. announced [] that Robert R. Goods, 49, of Snyder, N.Y., who was convicted of bank fraud, was sentenced to 18 months in prison and ordered to pay $521,800 restitution by Chief U.S. District Court William P. Skretny.

  • Assistant U.S. Attorney Trini E. Ross, who handled the case, stated that Goods, a mortgage settlement attorney, misused money wired into his business account to pay off mortgages on properties which had been refinanced at SunTrust Bank.

  • For example, in February 2010, SunTrust Bank wired $423,531 into the defendant's business account to pay off a preexisting mortgage, however, Goods instead used that money for other matters.

  • In another instance, in March 2010, SunTrust Bank wired $128,000 into the defendant's business account to pay off the pre-existing mortgage, but once again, he used the money for other things. As a result of the defendant's actions, SunTrust Bank suffered a loss of $521, 872. 84.

For the U.S. Attorney press release, see Ex-Attorney Sentenced In Mortgage Fraud Scheme.

Thanks to Bill Collins of Frontier Abstract, Rochester, NY for the heads-up on this story.

Wednesday, January 19, 2011

Las Vegas Man Gets 9 Months In Jail, Five Years Probation For Ripping Off Homeowners Out Of $36K+ In Foreclosure Rescue Racket

In Las Vegas, Nevada, KVVU-TV Channel 5 reports:

  • A man who pleaded guilty to scamming homeowners facing foreclosure has been sentenced to nine months in jail and probation for five years. Doninador Palalay ran a foreclosure rescue scam under the name PDM Financial Inc., according to the Nevada Attorney General’s office.

  • He pleaded guilty to a charge of theft. In addition to jail and probation, Palalay must pay back more than $36,000 in restitution. Palalay’s wife, Marie Tejada Medina, also pleaded guilty to a charge of theft and will be sentenced Feb. 22. A third person connected to the scam is on the run, officials said. Anyone with information about Benjamin Aquino Moreleda III should contact the attorney general’s office at 702 486-3777.

Source: Vegas Man Sentenced In Foreclosure Scam (Defendant's Wife To Be Sentenced In February). loan modification

Ventura County DA Charges Four In Alleged Foreclosure Rescue Racket That Targeted Primarily Non-English Speaking Homeowners For Upfront Fee Fleecing

In Ventura County, California , the Ventura County Star reports:

  • Ventura County prosecutors have filed a felony complaint against four people alleging they ran a fraudulent home foreclosure rescue program from an Oxnard office. Prosecutors allege that Maria Victoria Santos, 55, of Ventura, along with Felipe Carlos Segovia Castro, 67, of Moreno Valley; Laura Cecilia Carlson, 64, of Hacienda Heights; and Margie Joanna Vargas, 22, of Orange, targeted predominantly monolingual Spanish-speaking clients facing foreclosure on their homes.

  • The four defendants collected thousands of dollars in upfront fees from their clients after promising to save their homes from foreclosure. However, prosecutors allege their clients received no actual services and lost thousands of dollars in addition to their homes.


  • Santos faces 11 counts of foreclosure consultant fraud and seven counts of grand theft. Castro is charged with one count of foreclosure consultant fraud. Carlson, a licensed real estate saleswoman, and Vargas, a licensed notary public, are both charged with two counts of foreclosure consultant fraud.


  • The charges arise out of what authorities say was a fraudulent home foreclosure rescue business called USA Home Recovery Service, run by Santos out of an office on Fifth Street in Oxnard. Prosecutors said Santos advertised her services on local radio stations broadcasting in Spanish to Spanish-speaking residents in Ventura County.

  • Those who suspect they were victimized in this operation are asked to contact the Ventura County District Attorney’s Office Real Estate Fraud Unit at 662-1750 and file a complaint.

Source: 4 accused of foreclosure rescue fraud.

Go here for the Ventura County DA press release.

NC Upfront Fee Loan Modification Racket Gets Clipped For 80K+ In Restitution, Civil Penalties After Pocketing Cash In Exchange For Broken Promises

In Raleigh, North Carolina, the Greensboro News & Record reports:

  • A company that operated in Colfax and Charlotte has been banned from doing foreclosure assistance work in the state. The state Attorney General's office said [] that Reginald Keith Turner, who did business as Hazelton Management and The Carley Group, is prohibited from doing foreclosure assistance, loan modification and debt relief work in the state.

  • The Attorney General’s Office said it first warned Turner to stop violating the law in late 2008. Instead, he reopened his business under a new name, The Carley Group, and continued taking consumers’ money.

  • The state then filed suit against Turner, alleging that he charged homeowners an advance fee of as much as $2,500 but did little or nothing to help save their homes. Turner shut down his operations and left North Carolina after the state won a temporary court order against his foreclosure rescue work in June 2010.(1)

Source: State bans foreclosure rescue firm that operated in Colfax.

For the NC AG press release, see Phony foreclosure rescue outfit banned from reopening in NC.

(1) Go here for a list of other foreclosure rescue rackets shut down by the NC AG.

Judge Says Deportation Constitutes 'Good Cause' For F'closure Rescue Scammer's Failure To Appear At Sentencing 'Buydown' Hearing; Grants 2-Month Delay

In Santa Maria, California, the Santa Maria Times reports:

  • A Superior Court judge has postponed a ruling on whether the former manager of a Los Angeles-based foreclosure consultation business with an office in Santa Maria will have her felony convictions reduced to misdemeanors for committing prohibited foreclosure practices.

  • Irma Gonzalez Diaz, 42, was set to be sentenced Thursday by Judge Edward Bullard in Santa Maria on the three felony counts, which he had indicated he would consider reducing to misdemeanors if she followed his terms, including paying restitution to the victims.

  • She was not in court for the hearing, however, because she has been deported due to her illegal immigration status, and she has not made any restitution. [...] The sentencing hearing was postponed to March 17.


  • Investigators said Diaz took part in a scam whereby victims whose homes were in or nearing default paid her money to refinance their homes, but she didn’t complete the process. Diaz has been deported to Mexico, according to her attorney, Catherine Swysen. “I do find good cause for her not appearing today,” Bullard replied to that information.

For the story, see Sentencing postponed in mortgage scam case.

Tuesday, January 18, 2011

10,000 GMAC Foreclosure Cases Get The Boot In Maryland Over 'Stephan'-Robosigned Affidavits

Firedoglake reports:

  • In a major ruling Friday, a coalition of nonprofit defense lawyers and consumer protection advocates in Maryland successfully got over 10,000 foreclosure cases managed by GMAC Mortgage tossed out, because affidavits in the cases were signed by Jeffrey Stephan, the infamous GMAC “robo-signer” who attested to the authenticity of foreclosure documents without any knowledge about them, as well as signing other false statements.

  • In court Friday, GMAC agreed to dismiss every case in Maryland relying on a Stephan affidavit. They can refile foreclosure actions on the close to 10,000 homes, but only at their own expense, and subject to new Maryland regulations which require mandatory mediation between borrower and lender before moving to foreclosure.

  • Civil Justice and the Consumer Protection Clinic also want any cases with affidavits from Xee Moua of Wells Fargo, who has also admitted to robo-signing, thrown out, but that case has not yet been settled.

For more, see 10,000 GMAC Foreclosures Stopped in Maryland.

Foreclosure Industry Begins Spinning Meaning Of Recent 'Ibanez' Ruling

AOL Daily Finance columnist Abigail Field writes:

  • K&L's basic pro-bank spin is this:

    Completed Massachusetts foreclosures aren't a big problem because they're not "automatically" invalidated.

    A complete set of securitization documents successfully transfers mortgages, and perhaps blank assignments can just be filled in, so there's no fundamental problem foreclosing in the future.(1)

  • Those claims are misleading and wrong.

For more, see Fixing Massachusetts Foreclosures Won't Be So Easy.

See also, Credit Slips: Ibanez and Securitization Fail.

(1) See The Reports of My Death are Greatly Exaggerated Foreclosures in Massachusetts Following the Supreme Judicial Court Decision in Ibanez for the entire text of the foreclosure industry 'spin sheet.'

Long Island Judge Slams Lender, Attorney For Careless Filings In Foreclosure Action

In Suffolk County, New York, State Supreme Court Justice Jeffrey Arlen Spinner recently slammed a foreclosing lender and its legal counsel for wasting his time for filing crappy paperwork in an attempt to take the home of a purportedly delinquent borrower. He denied the lender's request to move forward with the foreclosure, and set a date for a hearing to detemine what sanctions, if any, the alleged culprits will be hammered with.

An excerpt from his ruling (bold text is my emphasis, not in the original text):

  • Curiously and in direct derogation of the mandatory provisions of 22 NYCRR § 202.7, Plaintiff has failed to specify or insert a return date for the application and has apparently served its papers with no return date. Not surprisingly, counsel for Defendants has neither answered nor responded thereto, presumably due to the lack of both a stated return date and appropriate notice.


  • This Court must question how, under the circumstances presented here, Plaintiff can, with unbridled temerity, demand enforcement of the Loan Agreement against Defendant STEPHEN STEELE, who has not executed that instrument and against Defendant SUSAN STEELE, who is not even a party to that agreement. The most cursory reading of these instruments reveal the obvious facts as set forth above. This posture by Plainitff strains credulity and causes the Court to seriously question Plaintiff's good faith in commencing this action.

    Distilled to its essence, a mortgage is a conveyance of an interest in land that is expressly intended to constitute security for some obligation, most commonly an indebtedness, Burnett v. Wright 135 NY 543, 32 NE 253 (1895). It follows logically then that in order for a mortgage to be valid and subsisting, there must be an underlying obligation that is to be secured by an interest in the real property, owed by the obligor to the obligee, which contains both the right of the obligee to foreclose and the right of the obligor to redeem, Baird v. Baird 145 NY 659, 40 NE 222 (1895), R.H. Macy & Co. v. Bates 280 AD 292, 114 NYS 2d 143 (3rd Dept. 1952). Absent these essential elements, a valid mortgage cannot exist because it is the underlying obligation which gives rise to the validity of the mortgage as a lien upon the real property. Here, the Loan Agreement that has been presented to the Court facially appears to run counter to New York's Statute of Frauds, G.O. L. § 5-701. Since there has been presented to this Court no valid underlying obligation and no further explanation, the mortgage appears to fail as a matter of law.

    This situation is all the more disturbing when it is considered that the sworn statements contained in the both the Complaint and the Affidavit in Support Of the Motion for Summary Judgment expressly and falsely assert that Defendant SUSAN STEELE executed the Loan Agreement. This is compounded by the sworn statement of Shana Richmond, Plaintiff's foreclosure specialist, which is dated April 28, 2010 and which contains the same painfully obvious mis-statements of fact.

    Going further, Plaintiff's counsel has submitted an Affirmation dated December 2, 2010 which purports to comply with Administrative Order no. AO548/10 in which he ratifies and confirms, in essence, the incorrect assertions in the Complaint and the Summary Judgment application. Aside from the papers themselves, it appears that counsel's affirmation runs afoul of the provisions of 22 NYCRR § 130-1.1.


  • Here, it is irrefutable that Defendant SUSAN STEELE was not a party to the Loan Agreement and certainly did not execute the same. It is equally indubitable that Defendant STEPHEN STEELE did not execute the Loan Agreement that has been presented on this application. Nonetheless, Plaintiff has vigorously prosecuted this action, demanding foreclosure of the mortgage as well as money damages against both named Defendants. Under these circumstances, the Court is compelled to conduct a hearing to determine whether or not Plaintiff has proceeded in good faith and what sanction, if any should be imposed should the Court find a lack of good faith.(1)

For the ruling, see Beneficial Homeowner Serv. Corp. v Steele, 2011 NY Slip Op 50015(U) (NY Sup. Ct. Suffolk Cty., January 7, 2011).

Thanks to Bill Collins of Frontier Abstract, Rochester, NY for the heads-up on this court ruling.

(1) Based on the points made by Justice Spinner, don't be surprised if the shameless lender's attorney shows up to court, hat in hand, prepared to invoke what has been referred to as the "pure heart and empty head" defense.

See, e.g.:

  • In re Rivera, 342 B.R. 435, 460 (Bankr. D. N.J. 2006), stating that this defense was unavailable to a law firm facing Rule 11 sanctions in a bankruptcy case that resulted in the imposition of a $125,000 fine on the firm in connection with the chronic filing of unreviewed paperwork in foreclosure actions.
  • Warner v. Hillcrest Medical Center, 914 P.2d 1060 (Okla. Ct. Civ. App. 1995), stating:

    `There is no room for a pure heart, empty head defense under [§ 2011].'" First National Bank and Trust Company of Vinita v. Kissee, 859 P.2d 502, 512 (Okla. 1993) (emphasis in original) (footnotes omitted). "Rule 11 requires lawyers to think first and file later, on pain of personal liability." Stewart v. RCA Corp., 790 F.2d 624, 633 (7th Cir. 1986).

Federal Appeals Court Reinstates 85-Year Old Widow's 'Fair Debt' Suit Alleging Illegal Fee Gouging After Missing Final Payment On 30-Year Mortgage

In Philadelphia, Pennsylvania, The Washington Post reports:

  • An elderly New Jersey widow billed $5,800 after missing the final payment on her 30-year mortgage can pursue her lawsuit against the debt collectors, a U.S. appeals court ruled.(1) Lawyers for Dorothy Rhue Allen call the fees charged by two banks and a law firm "unfair or unconscionable" and say they violate state and federal consumer-protection laws.

  • Allen, now 85, had borrowed $40,000 to buy the Deptford, N.J., home in 1976. She failed to make the final $432 payment in 2006 because she was in the hospital, her lawyer said. "She's just a wonderful little old lady that got sick," lawyer Lewis Adler told The Associated Press on Friday.


  • In Allen's case, LaSalle Bank and Cenlar Federal Savings Bank, both of Trenton, N.J., filed court foreclosure papers in 2007. Adler's firm asked how much it would take to resolve the problem. The banks, along with a law firm,(2) outlined $5,797 in charges, including nearly $2,400 in legal fees.

  • According to Allen's lawsuit, those charges are far higher than allowed under federal and state laws, including the [Fair] Debt Collection Practices Act. For example, court rules limit attorney fees to $15, not the $910 charged; document searches to $75, not $335; and process serving to $175, not $475, the suit said. "The lenders are sloppy and aggressive, trying to collect every penny," Adler said.

For more, see Widow, 85, missed last house payment; fights fees.

For the ruling, see Allen v. LaSalle Bank, N.A., No. 09-1466 (3rd Cir. January 12, 2011).

(1) According to the ruling, the lawsuit requested class action status.

(2) According to the ruling, the law firm was Fein, Such, Kahn & Shepard, PC.

89-Year Old Widow Dodges Foreclosure, Gets Mortgage-Free Home After Being Tricked Into Signing For $400K+ Loan; Scammer Believed To Have Fled Country

In San Mateo County, California, The Oakland Tribune reports:

  • An 89-year-old Pacifica woman who was conned out of $600,000 by a contractor and faced foreclosure has won a lawsuit that prevents her eviction, an attorney said. As part of the settlement worked out Thursday in San Mateo County Superior Court, the lien on Pauline Reade's house was lifted and she won't have to repay a $420,000 loan that had been taken out on her property without her knowledge, said the woman's attorney, Niki Okcu, who took the case pro bono. Reade also won some compensation, though Okcu declined to provide details, saying the settlement was confidential.

  • Reade sued Fetuu Tupoufutuna, a handyman who became her caretaker, as well as Deutsche Bank National Trust Co. and GMAC Mortgage, after she learned her home was going to be auctioned to repay a loan of which she had no knowledge. She later learned that Tupoufutuna had tricked her into signing the loan papers by telling her he needed her signature to get a permit to repair a backyard shed, attorneys said.(1)

  • Okcu said Reade met Tupoufutuna sometime before 2006 when he was circulating in her neighborhood offering handyman services. He did some work on her house and then began to get involved in her finances. Reade is a widow, has no children and no family in the area. Tupoufutuna took out what was initially a $312,000 home equity loan on Reade's home in September 2006, attorneys said. He made some payments, but eventually stopped reimbursing the bank, attorneys said.

  • During the same time, he had also stolen hundreds of thousands of dollars from the woman, Okcu said. Reade's first knowledge of the loan came in March 2009, when she got a letter saying that her home was to be sold at public auction.

  • Reade told a neighbor what had happened and then the police. Okcu and Hope Nakamura of the Legal Aid Society of San Mateo County(2) filed suit to stop the foreclosure in April. San Mateo County prosecutors in March filed criminal charges against Tupoufutuna, but he is believed to have fled the country, Okcu said.

  • "She is in her house," Okcu said. "Hopefully, she will be able to pick up the pieces of her life and move on."

Source: Pacifica woman wins lawsuit, keeps house after being conned.

(1) California has some pretty handy case law to support a case to void deeds, mortgages, and other land documents when unwitting property owners get tricked into signing paperwork that jeopardizes the title to their home through some type of equity refinancing ripoff where the victim seeks to establish that a purported conveyance is actually wholly void (ie. void ab initio, a legal nullity, etc.), and not merely voidable (ie. valid until successfully challenged), the distinctions being:

  • the effect of such a challenge on the rights of 3rd party, bona fide purchasers and encumbrancers/lenders, and
  • the time frame within which such a challenge can be brought.

See generally, Schiavon v. Arnaudo Bros., 84 Cal. App. 4th 374; Cal.Rptr.2d 801 (Cal. App 6th Dist. 2000) (bold text is my emphasis, not in the original text):

  • A deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing. (Erickson v. Bohne, supra, "130 Cal.App.2d at pp. 555-556.) A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations. (Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106 [215 Cal.Rptr. 748].) The same rules apply to the reconveyance of the property interest under a deed of trust as to the conveyance of property by grant deed. (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 43 [198 Cal.Rptr. 418] (Wutzke).)


  • Although the law protects innocent purchasers and encumbrancers, "that protection extends only to those who obtained good legal title. [84 Cal.App.4th 380] [Citations.] ... [A] forged document is void ab initio and constitutes a nullity; as such it cannot provide the basis for a superior title as against the original grantor." (Wutzke, supra, 151 Cal.App.3d at p. 43; see also cases cited ibid.)

See also, Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.

Go here for more on void vs. voidable transactions.

(2) The Legal Aid Society of San Mateo County is a non-profit, public interest law firm that provides free civil legal services to San Mateo County’s low-income residents.

Oneidas Dodge Potentially Adverse Supreme Court Ruling In R/E Tax-Dodging Case; 11th Hour Waiver Of Lawsuit Immunity Moots High Court's Role In Case

The Associated Press reports:

  • The U.S. Supreme Court has dismissed a case involving two New York counties that are trying to foreclose on land owned by the Oneida Indian Nation to settle a property tax dispute. The court agreed in October to hear the case. It centers on the issue of whether tribal immunity from lawsuits prevents Madison and Oneida counties from foreclosing on tribal land.

  • The justices said in an unsigned opinion Monday that the Oneidas have agreed since to waive their immunity. They said that eliminates the high court's role in the case. The court instructed the 2nd U.S. Circuit Court of Appeals to consider other issues raised in the dispute. The case involves about 17,000 acres. The federal government has agreed to put most of the land into trust.

Source: High court dismisses Oneida foreclosure case.

See also The Utica Observer Dispatch: Supreme Court sends Oneidas foreclosure case back to lower court:

  • The U.S. Supreme Court kicked the longstanding foreclosure lawsuit involving the Oneida Indian Nation back to a lower court Monday. In doing so, it decided not to rule on whether Indian tribes can block foreclosure cases using sovereign immunity.The court’s decision came after the Nation voluntarily waved its immunity. The counties have been seeking to foreclose on Oneida property for years, saying they hope the effort induces payment of property taxes from the 1990s.

  • What the Supreme Court did do, however, was vacate a previous judgment barring Oneida and Madison counties from foreclosing on Oneida land.That means the 2nd U.S. District Court of Appeals will hear the case once again – but without the argument of sovereign immunity.(2)

For an earlier post on this story, see Federal Appeals Court Gives Indian Tribes The "Go-Ahead" To Buy Real Estate, Stiff Counties On Lawfully-Owed Property Taxes & Get Away With It.

(1) According to the Supreme Court (bold text is my emphasis, not in the original text):

  • We granted certiorari, 562 U. S.___(2010), on the questions "whether tribal sovereign immunity from suit, to the extent it should continue to be recognized, bars taxing authorities from foreclosing to collect lawfully imposed property taxes" and "whether the ancient Oneida reservation in New York was disestablished or diminished." Pet. for Cert. i. Counsel for respondent Oneida Indian Nation advised the Court through a letter on November 30, 2010, that the Nation had, on November 29, 2010, passed a tribal declaration and ordinance waiving "its sovereign immunity to enforcement of real property taxation through foreclosure by state, county and local governments within and throughout the United States." Oneida Indian Nation, Ordinance No. O-10–1 (2010). Petitioners Madison and Oneida Counties responded in a December 1, 2010 letter, questioning the validity, scope, and permanence of that waiver; the Nation addressed those concerns in a December 2, 2010 letter.

    We vacate the judgment and remand the case to the United States Court of Appeals for the Second Circuit. That court should address, in the first instance, whether to revisit its ruling on sovereign immunity in light of this new factual development, and — if necessary — proceed to address other questions in the case consistent with its sovereign immunity ruling. See Kiyemba v. Obama, 559 U. S. ___ (2010) (per curiam).

    Petitioners are awarded costs in this Court pursuant to this Court’s Rule 43.2.

For the Federal appeals court ruling that was the subject of this appeal, see Oneida Indian Nation of N.Y. v. Madison County, 605 F.3d 149 (2d Cir. 2010).

(2) More from the Utica Observer Dispatch:

  • Oneida County Executive Anthony Picente Jr. said his reaction to the situation is “mixed” because the county was hoping the Supreme Court would resolve the issue. Now there is no clear indication of how long it will take. “Legally, the decision’s a victory for us,” he said. “But practically it doesn’t feel like a victory because we expected to win the entire argument at Supreme Court.”

    Officials had speculated a Supreme Court ruling could have implications for Indian tribes across the country. In opposing letters to the Supreme Court, attorneys from both sides engaged in a sharp back-and-forth about the waiver.

    David Schraver, an attorney for the counties, said he is “unaware of any other case in which a party has aggressively litigated an issue for fully 10 years – including up to this court and back once more – and then attempted to moot the issue through purely unilateral action. …

    But attorney Seth Waxman, who works for the Oneidas, said there is “no basis” for Schraver’s suggestion that the waiver was an attempt by the Nation to shield itself from an unfavorable ruling.

Monday, January 17, 2011

Massachusetts High Court: Mortgage Does Not Follow The Note

One of the key points from the recent Massachusetts Supreme Judicial Court ruling in U.S. Bank Nat’l Ass’n v. Ibanez, was that (unbeknownst to me, the Wall Street securitization wizards, the mortgage industry, and maybe a couple of other people) the long-standing principle of common law that a mortgage or deed of trust is a mere incident to the promissory note and that these security agreements automatically "follow the note" upon assignment of the latter does not hold in Massachusetts,(1) as Justice Gants, writing for a unanimous court, tells us in this excerpt (bold text is my emphasis, not in the original text):

  • Second, the plaintiffs contend that, because they held the mortgage note, they had a sufficient financial interest in the mortgage to allow them to foreclose. In Massachusetts, where a note has been assigned but there is no written assignment of the mortgage underlying the note, the assignment of the note does not carry with it the assignment of the mortgage. Barnes v. Boardman, 149 Mass. 106, 114 (1889). Rather, the holder of the mortgage holds the mortgage in trust for the purchaser of the note, who has an equitable right to obtain an assignment of the mortgage, which may be accomplished by filing an action in court and obtaining an equitable order of assignment. Id. ("In some jurisdictions it is held that the mere transfer of the debt, without any assignment or even mention of the mortgage, carries the mortgage with it, so as to enable the assignee to assert his title in an action at law.... This doctrine has not prevailed in Massachusetts, and the tendency of the decisions here has been, that in such cases the mortgagee would hold the legal title in trust for the purchaser of the debt, and that the latter might obtain a conveyance by a bill in equity"). See Young v. Miller, 6 Gray 152, 154 (1856). In the absence of a valid written assignment of a mortgage or a court order of assignment, the mortgage holder remains unchanged. This common-law principle was later incorporated in the statute enacted in 1912 establishing the statutory power of sale, which grants such a power to "the mortgagee or his executors, administrators, successors or assigns," but not to a party that is the equitable beneficiary of a mortgage held by another. G.L. c. 183, § 21, inserted by St.1912, c. 502, § 6.

For the ruling, see U.S. Bank Nat’l Ass’n v. Ibanez, No. SJC-10694 (January 7, 2011).

See also Lexology: Massachusetts Supreme Judicial Court foreclosure decisions (requires subscription; if no subscription, TRY HERE):

  • The Court did not address the question of whether U.S. Bank and Wells Fargo were the holders and owners of the notes, but held that, under Massachusetts real property law, the mortgage does not automatically follow the note and must also be assigned to the foreclosing lender prior to the foreclosure sale.

(1) Contrast with the laws of:

  • Connecticut: The Appellate Court of Connecticut, in LaSalle Bank, N.A. v. Bialobrzeski, AC 30911, 123 Conn. App. 781; 3 A.3d 176 (September 21, 2010), discussing the applicable state statute (bold text is my emphasis, other alterations in the original):

    "[Section] § 49-17 permits the holder of a negotiable instrument that is secured by a mortgage to foreclose on the mortgage even when the mortgage has not yet been assigned to him. . . . The statute codifies the common-law principle of long standing that the mortgage follows the note, pursuant to which only the rightful owner of the note has the right to enforce the mortgage. . . . Our legislature, by adopting §49-17, has provide[d] an avenue for the holder of the note to foreclose on the property when the mortgage has not been assigned to him." (Citations omitted; internal quotation marks omitted.) Chase Home Finance, LLC v. Fequiere, 119 Conn. App. 570, 576-77, 989 A.2d 606, cert. denied, 295 Conn. 922, 991 A.2d 564 (2010).

  • Arkansas: Leach v. First Cmty. Bank, CA07-05, 2007 Ark. App. LEXIS 671 (Ct. App., Div II, 2007) (unpublished) (bold text is my emphasis):

    Arkansas has long followed the rule that, in the absence of an agreement or a plain manifestation of a contrary intention, the security of the original mortgage follows the note or renewal thereof, i.e., instead of there being a presumption of payment or settlement of the original indebtedness by the execution of the renewal note, and thereby a release of the security, the presumption is that, upon the execution of the new note or bond, the same security is available for its payment. Simpson v. Little Rock North Heights Water District No.18, 191 Ark. 451, 86 S.W.2d 423 (1935). This is in keeping with the weight of authority holding that, because the renewal of a note does not change the identity of the debt represented by the obligation, the validity or operation of an assignment as security is not affected by the circumstance that a renewal note is executed to replace the original note. See generally 3 LEE R. RUSS ET AL., COUCH ON INSURANCE § 37.50 (3d ed. 2005).

  • Minnesota: Jackson v. Mortg. Elec. Registration Sys., A08-397770 N.W.2d 487 (2009):

    We have held that, absent an agreement to the contrary, an assignment of the promissory note operates as an equitable assignment of the underlying security instrument. First Nat'l Bank of Mankato v. Pope, 85 Minn. 433, 434-35, 89 N.W. 318, 318-19 (1902).

  • Texas: Nicholson v. Washington Mut., NUMBER 13-00-394-CV, 2001 Tex. App. LEXIS 6119 (Tex. App.-Corpus Christi [13th Dist.], 2001) (bold text is my emphasis).

    The mortgage of a property is an incident of the debt; and as long as the debt exists, the security will follow the debt. J.W.D., Inc. v. Federal Ins. Co., 806 S.W.2d 327, 329-30 (Tex. App.-Austin 1991, no writ); Lawson v. Gibbs, 591 S.W.2d 292, 294 (Tex. Civ. App.-Houston [14th Dist.] 1979, writ ref'd n.r.e.). Accordingly, while the deed of trust may never have been assigned to Lehman, it followed the debt. Because the Nicholson note was indorsed in blank by American and delivered into Lehman's constructive possession, Lehman became the holder of both the note and the deed of trust which followed the note.

  • Florida: WM Specialty Mortg., LLC v. Salomon, 874 So. 2d 680 (Fla. App. 4th DCA, 2004): A Florida appeals court, quoting from the state Supreme Court ruling in Johns v. Gillian, 134 Fla. 575, 184 So. 140, 143 (Fla. 1938) (bold text is my emphasis):

    However, it has frequently been held that a mortgage is but an incident to the debt, the payment of which it secures, and its ownership follows the assignment of the debt. If the note or other debt secured by a mortgage be transferred without any formal assignment of the mortgage, or even a delivery of it, the mortgage in equity passes as an incident to the debt, unless there be some plain and clear agreement to the contrary, if that be the intention of the parties.

Brooklyn Jurist Continues Slamming Sloppy Lenders, Foreclosure Mills; Charges Law Firm With "Delinquent Conduct"

AOL Daily Finance columnist Abigail Field writes:

  • Now, Judge Arthur M. Schack of Brooklyn has taken things a step further. Since the banks in cases before him have yet to begin complying with the new court rules, he has started throwing out foreclosure cases. But the question isn't whether the banks will now choose to start complying with the rule: The question is: Will they even be able to?

  • The first case Judge Schack tossed was Citibank, N.A. v. Murillo, which he dismissed with prejudice on Jan. 7, as the blog StopForeclosureFraud reported. The attorneys for Citibank in that case were from the Steven Baum law firm, a foreclosure mill that has been sanctioned for its involvement in frivolous cases. If the Baum firm couldn't file a timely affirmation in the Murillo case, how many of its other cases will it be able to file affirmations in?(1)

  • Schack tells me he's thrown out a dozen or so more since Murillo, and he says until the banks and their attorneys start obeying his order to comply with the new affirmation rule, he'll keep tossing cases. A court order is a court order, Schack explains. "They can't just ignore it. In Murillo, they asked for more time, but they didn't give me a reason. It doesn't matter who you are, you have to obey court orders."

  • By dismissing these cases "with prejudice," Schack is forcing the banks to start the whole process over if they wish to foreclose. Given how long foreclosures take to complete, that alone is a significant penalty. Moreover, if the banks do refile any of these cases, they will be reassigned to him. "We don't have judge-shopping in Brooklyn," Schack explains. So the banks will have to get their papers in order before they refile.

For more, see Why a New York Judge Is Throwing Out Foreclosure Cases.

(1) Commenting on the negative effect on the functioning of the court system and the adjudication of claims resulting from attorneys' chronic failure to comply with the rules of proper practice, Justice Schack noted (bold text is my emphasis, not in the original text)):

  • The failure of plaintiff's counsel, Steven J. Baum, P.C., to comply with two court orders, my November 4, 2010 order and Chief Administrative Judge Pfau's October 20, 2010 order, demonstrates delinquent conduct by Steven J. Baum, P.C. This mandates the dismissal with prejudice of the instant action. Failure to comply with court-ordered time frames must be taken seriously. It cannot be ignored. There are consequences for ignoring court orders. Recently, on December 16, 2010, the Court of Appeals, in Gibbs v St. Barnabas Hosp. (___NY3d ___, 2010 NY Slip Op 09198), instructed, at *5:

    As this Court has repeatedly emphasized, our court system is dependent on all parties engaged in litigation abiding by the rules of proper practice (see e.g. Brill v City of New York, 2 NY3d 748 [2004]; Kihl v Pfeffer, 94 NY2d 118 [1999]). The failure to comply with deadlines not only impairs the efficient functioning of the courts and the adjudication of claims, but it places jurists unnecessarily in the position of having to order enforcement remedies to respond to the delinquent conduct of members of the bar, often to the detriment of the litigants they represent. Chronic noncompliance with deadlines breeds disrespect for the dictates of the Civil Practice Law and Rules and a culture in which cases can linger for years without resolution. Furthermore, those lawyers who engage their best efforts to comply with practice rules are also effectively penalized because they must somehow explain to their clients why they cannot secure timely responses from recalcitrant adversaries, which leads to the erosion of their attorney-client relationships as well. For these reasons, it is important to adhere to the position we declared a decade ago that "[i]f the credibility of court orders and the integrity of our judicial system are to be maintained, a litigant cannot ignore court orders with impunity [Emphasis added]." (Kihl, 94 NY2d at 123).

Justice Schack then continued on (alterations, emphasis in the original):

  • "Litigation cannot be conducted efficiently if deadlines are not taken seriously, and we make clear again, as we have several times before, that disregard of deadlines should not and will not be tolerated (see Miceli v State Farm Mut. Auto Ins. Co., 3 NY3d 725 [2004]; Brill v City of New York, 2 NY3d 748 [2004]; Kihl v Pfeffer, 94 NY2d 118 [1999]) [Emphasis added]." (Andrea v Arnone, Hedin, Casker, Kennedy and Drake, Architects and Landscape Architects, P.C., 5 NY3d 514, 521 [2005]). "As we made clear in Brill, and underscore here, statutory time frames —like court-order time frames (see Kihl v Pfeffer, 94 NY2d 118 [1999]) — are not options, they are requirements, to be taken seriously by the parties. Too many pages of the Reports, and hours of the courts, are taken up with deadlines that are simply ignored [Emphasis added]." (Miceli, 3 NY3d at 726-726).

Recent Massachusetts High Court Ibanez Ruling Leaves Question On 3rd Party Bona Fide Purchaser Unanswered (Or Did It?)

One question that the Massachusetts Supreme Judicial Court in the recent Ibanez ruling left unanswered is noted in this excerpt from Justice Robert J. Cordy's concurring opinion, with whom Justice Margot Botsford joined:

  • What is more complicated, and not addressed in this opinion, because the issue was not before us, is the effect of the conduct of banks such as the plaintiffs here, on a bona fide third-party purchaser who may have relied on the foreclosure title of the bank and the confirmative assignment and affidavit of foreclosure recorded by the bank subsequent to that foreclosure but prior to the purchase by the third party, especially where the party whose property was foreclosed was in fact in violation of the mortgage covenants, had notice of the foreclosure, and took no action to contest it.(1)

For the ruling, see U.S. Bank Nat’l Ass’n v. Ibanez, No. SJC-10694 (January 7, 2011).

(1) It typically follows that where a foreclosure sale is found to be "wholly void" (ie. absolutely void, void ab initio, void from inception, a legal nullity, nugatory, ineffectual, of no legal effect, etc. - and as distinguished from a foreclosure sale that is treated as being merely voidable - a sale that, although infected with minor defects, is treated as valid and binding until challenged and annulled by the injured party), a bona fide third party foreclosure purchaser acquires no title at all - in the same way as though it had acquired its interest through a forged deed, thereby leaving it holding the bag (unless he/she obtained a title insurance policy - in which case it may be the title insurer left doing the bag-holding). It can be said that when a foreclosure sale is found to be wholly/absolutely void, "there are lasting consequences to everyone in the subsequent chain of title." See Julian v. Buonassissi, 414 Md. 641; 997 A.2d 104 (Md. 2010), making this observation in the context of a deed being found to be "void ab initio or of no legal effect." (go here for more on the distinction between void and voidable).

Reference is made here to the opinion in chief, wherein Justice Ralph D. Gants, writing for a unanimous court, touched on the issue of a void foreclosure sale in the following excerpts (footnotes from the text of the opinion omitted; bold text is my emphasis, not in the original text):

  • Recognizing the substantial power that the statutory scheme affords to a mortgage holder to foreclose without immediate judicial oversight, we adhere to the familiar rule that "one who sells under a power [of sale] must follow strictly its terms. If he fails to do so there is no valid execution of the power, and the sale is wholly void." Moore v. Dick, 187 Mass. 207, 211 (1905). See Roche v. Farnsworth, 106 Mass. 509, 513 (1871) (power of sale contained in mortgage "must be executed in strict compliance with its terms"). See also McGreevey v. Charlestown Five Cents Sav. Bank, 294 Mass. 480, 484 (1936).

    One of the terms of the power of sale that must be strictly adhered to is the restriction on who is entitled to foreclose. The "statutory power of sale" can be exercised by "the mortgagee or his executors, administrators, successors or assigns." G.L. c. 183, § 21. Under G.L. c. 244, § 14, "[t]he mortgagee or person having his estate in the land mortgaged, or a person authorized by the power of sale, or the attorney duly authorized by a writing under seal, or the legal guardian or conservator of such mortgagee or person acting in the name of such mortgagee or person" is empowered to exercise the statutory power of sale. Any effort to foreclose by a party lacking "jurisdiction and authority" to carry out a foreclosure under these statutes is void. Chace v. Morse, 189 Mass. 559, 561 (1905), citing Moore v. Dick, supra. See Davenport v. HSBC Bank USA, 275 Mich. App. 344, 347-348 (2007) (attempt to foreclose by party that had not yet been assigned mortgage results in "structural defect that goes to the very heart of defendant's ability to foreclose by advertisement," and renders foreclosure sale void).

    A related statutory requirement that must be strictly adhered to in a foreclosure by power of sale is the notice requirement articulated in G.L. c. 244, § 14. That statute provides that "no sale under such power shall be effectual to foreclose a mortgage, unless, previous to such sale," advance notice of the foreclosure sale has been provided to the mortgagee, to other interested parties, and by publication in a newspaper published in the town where the mortgaged land lies or of general circulation in that town. Id. "The manner in which the notice of the proposed sale shall be given is one of the important terms of the power, and a strict compliance with it is essential to the valid exercise of the power." Moore v. Dick, supra at 212. See Chace v. Morse, supra ("where a certain notice is prescribed, a sale without any notice, or upon a notice lacking the essential requirements of the written power, would be void as a proceeding for foreclosure"). See also McGreevey v. Charlestown Five Cents Sav. Bank, supra. Because only a present holder of the mortgage is authorized to foreclose on the mortgaged property, and because the mortgagor is entitled to know who is foreclosing and selling the property, the failure to identify the holder of the mortgage in the notice of sale may render the notice defective and the foreclosure sale void. See Roche v. Farnsworth, supra (mortgage sale void where notice of sale identified original mortgagee but not mortgage holder at time of notice and sale). See also Bottomly v. Kabachnick, 13 Mass. App. Ct. 480, 483-484 (1982) (foreclosure void where holder of mortgage not identified in notice of sale).


  • We now turn briefly to three other arguments raised by the plaintiffs on appeal. First, the plaintiffs initially contended that the assignments in blank executed by Option One, identifying the assignor but not the assignee, not only "evidence[ ] and confirm[ ] the assignments that occurred by virtue of the securitization agreements," but "are effective assignments in their own right." But in their reply briefs they conceded that the assignments in blank did not constitute a lawful assignment of the mortgages. Their concession is appropriate. We have long held that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title in land to the bearer of the assignment. See Flavin v. Morrissey, 327 Mass. 217, 219 (1951); Macurda v. Fuller, 225 Mass. 341, 344 (1916). See also G.L. c. 183, § 3.

In a related note, a September 28, 2010 ruling from the Washington State Court of Appeals, in Albice v. Premier Mortgage Services Of Washington, Inc. (if link expires, TRY HERE), 157 Wn. App. 912; 239 P.3d 1148; 2010 Wash. App. LEXIS 2199 (Wn. Ct. of App., Div. II, September 28, 2010) appears to have addressed an issue under Washington law closely resembling the unanswered 3rd party bona fide purchaser question in Ibanez.

The Washington appeals court in Albice found that a technical defect in following the applicable statute rendered a foreclosure sale wholly void, despite any claim of bona fide purchaser status made by a 3rd party foreclosure sale buyer who purchased the foreclosed real estate. The court went further to hold that, given the specific facts of the case, the 3rd party foreclosure sale buyer either knew or should have known of the technical defects that were fatal to the foreclosure sale and, consequently, did not qualify as a bona fide purchaser anyway, thereby allowing the foreclosure to be undone, regardless of whether the sale was void, or merely voidable.

It should be noted that, like Massachusetts, Washington is a non-judicial foreclosure state. The foreclosure sale in Albice, like in Ibanez, was carried out pursuant to a power of sale contained in the security agreement. One distinction between the two cases is that in Albice, the security agreement foreclosed was a deed of trust, whereas in Ibanez, the security agreement was a mortgage (possibly a distinction without a material difference).

For the briefs filed in Albice, see: