Saturday, January 29, 2011

Beach Homes Along Central Oregon Coast Make For Trendy Targets For Off-Season Squatters

In Lane County, Oregon, The Examiner reports:

  • Elmer “Slim” Buchanan pulls a wagon full of his earthly possessions through this trendy coastal community that attracts high end lawyers, doctors and professionals from nearby Eugene who keep summer and weekend getaway homes along this picturesque seashore; at the same time, Buchanan says he’s “invisible to such people” until they find “us squatters living in their places.”


  • Police say it’s no surprise that “we have all these break-ins,” as the recession grows and so does the practice of squatting. In turn, the number of people living as squatters along Oregon’s coast during the off-season has more than doubled, say local police who are often called in to “kick the riff-raff out.” While police say it’s difficult to guess how many people are living in abandoned or seasonal homes along the coast, a volunteer organization in Eugene thinks as many as 2,000 or more are living this way in Western Lane County.


  • [T]here’s little or no surveillance of properties dubbed as seasonal or in foreclosure. The squatters say they know this, and then take advantage of this opportunity by getting one or more night’s rest from a cold and sometimes cruel world outside.

For the story, see Eugene area homeowners "dealing" with new wave of squatters.

Plumbing Assessments On Aging Fort Pierce Condo Complex Begin Overwhelming Elderly On Fixed Incomes

In Fort Pierce, Florida, WPTV-TV Channel 5 reports:

  • Nearly $6,000 in assessments per unit for plumbing repairs some call unnecessary have some residents at Inlet House Condominiums — where many homeowners are elderly and on fixed incomes — unable or unwilling to pay their bills.

  • Foreclosure measures have begun on nine of 60 units at the 55-and-up condo community at 2302 Sunrise Boulevard in Fort Pierce since July. The condo association put liens on another three units.

For more, see Plumbing assessments causing problems for Fort Pierce condo owners (Homeowners charged $6,000 for repairs).

See Deferred, Unfunded Maintenance A "Ticking Time Bomb" For Condo Associations; Tanking Real Estate Market, Unit Foreclosures Complicate Problem for an earlier post on a major problem sneaking up on unit owners in aging condominium complexes.

Upstate NY Media Outlet Calls For End Of Indian Nations' Real Estate Tax-Dodging "Charade"

In upstate New York, the editorial board of the Auburn Citizen writes:

  • The U.S. Supreme Court, in choosing to kick back a case involving county foreclosure on Oneida Indian Nation land, perpetuated the use of the state and federal court systems as a business strategy for New York state Indian nations.

  • What’s become clear in the past couple of years is that tribes such as the Oneidas and the Cayuga Indian Nation of New York have well-oiled litigation machines whose primary purpose is to avoid abiding by property and sales tax laws.

  • A few months ahead of a Supreme Court hearing on the foreclosure matter, the Oneidas suddenly decide to waive their right to sovereign immunity in those cases, thus kicking the case back to a lower court to consider other aspects of their contention that they’re not subject to foreclosure. The Oneidas knew that a ruling on the sovereign immunity issue by the high court would have brought an end to the charade, so they once again employed the strategy of delay through legal maneuvers.


  • We’re disappointed in the Supreme Court’s punting of the Oneida case because there are key legal questions that need some final answers. There’s a good chance that a similar foreclosure effort in Cayuga and Seneca counties against the Cayuga Nation will be headed up the appeals chain. We urge our leaders to fight that battle all the way to the Supreme Court, which we hope will do better the next time around.

For the op-ed, see Our View: Foreclosure issue needs a final ruling.

For bakground on this story, see 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.

Vacant Foreclosed Home Faces $250K Repair Job After Vandals Give Premises A 'Professional' Trashing

In Huntington Beach, California, KABC-TV Channel 7 reports:

  • A foreclosed home in Huntington Beach is undergoing $250,000 in repairs after vandals trashed the place. The real estate agent said it is the worst case he's seen in Orange County. The 3,000-square-foot house in a gated community on Radcliff Circle has extensive damage.

  • Chemicals and cement were poured down drains, walls were covered in mold and piles of wet clothes caused part of the floor to cave in.

  • "This is the worst malicious damage I've seen," said realtor Tom Moon. "They took a hose and weighted the clothes down so it might have been 1,000 pounds just to collapse the ceiling." Outside, the pool and Jacuzzi are greener than the grass. Most of the appliances and fixtures were taken, including the kitchen sink.

  • The realtor says he and the bank cannot prove who did it and it could be weeks to complete repairs. [...] At a foreclosure auction last August, the home listed at more than $1.7 million, but with no bids, it went back to the bank.

Source: Foreclosed Huntington Beach home vandalized.

Ohio Man Found Guilty Of Torching Home After Cashing Out By Refinancing Mortgage Four Times In Three Years

In Akron, Ohio, WKYC-TV Channel 3 reports:

  • The Summit County Prosecutor said Raymond Stewart, 38, of Sagamore Hills, was found guilty in a bench trial before Judge Thomas Parker of aggravated arson and insurance fraud.

  • On March 30, 2009, Stewart set his own home on fire. He lived in the house with his two children, six and eight years old. He bought the home in 2006 but had been in foreclosure once and had refinanced the mortgage four times. Each time he refinanced, he increased the amount he owed on the principal.

  • On the day of the fire, Stewart left with the kids and set it on fire, returning several times to check on its progress, the prosecutor said. The fire was called in by a neighbor at 11:05 pm. Sentencing is set for 1 p.m. Feb. 15. Stewart could receive up to 15 years in prison.

Source: Sagamore Hills man guilty of burning down his own house.

Friday, January 28, 2011

No State Insurance, Bonding Requirement For Closing Agents Leaves Unwitting Couple Victimized By Refinancing Ripoff Holding The Bag, Facing F'closure

In Parker, Colorado, The Denver Post reports:

  • Tim and Kim Canning of Parker did what tens of thousands of other Coloradans do each year: They refinanced their home, showed up at the closing, signed the papers, and that was that. So they thought.

  • But the $277,000 that was to be sent from the bank that refinanced the Cannings' home to pay off the old mortgage was stolen along its electronic journey, the target of organized cybercriminals out of Eastern Europe or perhaps Russia, according to people familiar with the case who refused to be identified because of the ongoing investigation.

  • What seemed an innocuous transaction got twisted into a two-year nightmare that's all but ruined the couple's credit, unnerved their patience and has them staring at the possible foreclosure of their dream home without ever having missed a single mortgage payment.

  • Worse still, what's happening to the Cannings could happen to anyone — and it has. The Colorado Division of Insurance, which regulates the title industry, said in a report to the legislature this month that "recently there has been an uptick in reported thefts," though it did not quantify the trend.

  • And the title company that handled the closing — Classic Title Agency in Aurora — isn't insured for the theft because state law doesn't require it, even though title companies handle billions of dollars in real estate transactions yearly.


  • Unless a homeowner hires a special licensed company whose job is to hold the proceeds of a sale — known as a "qualified intermediary" or a "1031 exchange" firm — and who must be bonded and insured, the proceeds are not protected.


  • "You can't imagine how upset I was when I heard that," Kim Canning said. "We hand them all this money and there's no guarantee that I'll still have my house in the end." Whether it's a loophole or a massive gap in regulations, title companies at a minimum should be required to have a bond and crime insurance, said industry advocate Garry Wolff, owner of TI Services.

  • At the moment, companies and their agents merely need to be licensed — pay a fee and pass a test — and prove a $10,000 net worth. "That's it," said Wolff, who has pressed for the insurance coverage for years without success. "With so much money on the table, consumers need to know they're protected."

For more, see Homeowners stuck if refinance money is stolen.

See also KMGH-TV Channel 7: Did Russian Mafia Steal Family's Refinancing Money? (Title Company Claimed Russian Mob Stole Money During Wire Transfer).

Nevada Regulator Orders Unlicensed Loan Modification Outfit To Cease & Desist; Says Company Clipped Six Homeowners Out Of $7,550

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

  • After getting six complaints, the state has issued a stop order against an unlicensed Las Vegas company that has been billing itself as loan and foreclosure consultants. The state Division of Mortgage Lending has filed an administrative complaint against American Home Services and its operators, Erika and Miriam Fimbres.

  • The state also seeks a $20,000 fine and is ordering the company to immediately return the fees it collected.


  • From November 2009 through September 2010, the division said American Home and the Fimbreses collected fees totaling $7,550 from six homeowners to obtain mortgage loan modifications or services to stop foreclosures. The complaint says the company and the Fimbreses never applied for a state license.

For the story, see State issues stop order against Las Vegas loan modification company.

Operator Of Loan Modification Racket Dodges Hard Time; Gets 9 Months In County Jail In $36K Ripoff That Led To Some Victims Losing Homes To F'closure

From the Office of the Nevada Attorney General:

  • Defendant Doninador Palalay a.k.a. Dominador Palalay, has been sentenced in a foreclosure rescue scam case. On September 9, 2010, Palalay pled guilty to one count of Theft –Obtaining Money in excess of $2,500 by Material Misrepresentation, a category B Felony, in connection with his role in operating a foreclosure rescue scam in Las Vegas during 2008 and 2009 under the business name of PDM Financial, Inc.(1)

  • Las Vegas District Court, Department 24, Judge James Bixler sentenced Palalay to a term of nine months incarceration in the Clark County Detention Center. In addition, the defendant was sentenced to probation for a period not to exceed five years and ordered to pay restitution to his victims in the amount of $36,332.50. [...] Finally, he was ordered to report this conviction to any potential employers and is barred from employment in the Mortgage Modification and Foreclosure Rescue industry.

For the Nevada AG press release, see Doninador Palalay Sentenced In Foreclosure Scam.

(1) "This case is particularly egregious because some of the victims lost not only money but also their homes as a result of Palalay’s conduct," said Attorney General Catherine Cortez Masto.

State Homestead Law Prevents Lawyer From Recovering Legal Fees From Property Insurance Damage Proceeds After Being Stiffed By Client/Florida Homeowner

The following facts are taken from an April, 2010 court ruling by a Florida appeals court:

  • Homeowner, Quiroga, suffered damages to his Florida homestead as a result of two hurricanes.

  • Quiroga retained the services of a law firm on a contingency fee basis to help him secure the benefits due him pursuant to a homeowner's insurance policy.

  • Upon securing the benefits of the insurance policy through the efforts of the law firm, Quiroga promptly showed his appreciation by firing them and terminating their contingent fee representation of him, stiffing them out of their legal fees in the process.

  • In attempting to recover the legal fees, the law firm filed a motion to impress a charging lien on the homeowner's insurance proceeds, at which point Quiroga claimed that said cash proceeds are exempt homestead property, not subject to attachment by means of a charging lien by reason of Art. X, § 4(a), Florida Constitution.

In agreeing with a lower court ruling, the Florida appeals court denied the law firm in its effort to recover its legal fees from the homeowner's insurance proceeds. According to the court:

  • The parties do not dispute the hurricane-damaged property is constitutionally exempt homestead property. See Cutler v. Cutler, 994 So. 2d 341, 343 (Fla. 3d DCA 2008) ("To qualify for protection under Article X, section 4 of the Florida Constitution, a parcel of property must meet constitutionally defined size limitations and must be owned by a natural person who is a Florida resident who either makes or intends to make the property that person's residence.").

    In the event a homestead is damaged through fire, wind or flood, the proceeds of any insurance recovery are imbued with the same privilege. Orange Brevard Plumbing & Heating Co. v. La Croix, 137 So. 2d 201, 203-04 (Fla. 1962).

    Because Quiroga did not and, as a matter of public policy in this State, cannot through an unsecured agreement, such as the contingent fee agreement in this case, enter into an enforceable contract to divest himself from the exemptions afforded him through Article X, section 4(a), see Chames v. DeMayo, 972 So. 2d 850, 853 (Fla. 2007), this Court is compelled to affirm the order under review, the equities of the matter notwithstanding.

    See Pub. Health Trust of Dade County v. Lopez, 531 So. 2d 946, 951 (Fla. 1990) ("The homestead protection has never been based upon principles of equity.") (citing Bigelow v. Dunphe, 143 Fla. 603, 197 So. 328, 330 (Fla. 1940)); Pierrepont v. Humphreys (In re Newman's Estate), 413 So. 2d 140, 142 (Fla. 5th DCA 1982) ("The homestead character of a piece of property . . . arises and attaches from the mere existence of certain facts in combination in place and time.")

For the ruling, see Quiroga v. Citizens Prop. Ins. Corp., 34 So. 3d 101 (Fla. App. 3d DCA, 2010).

Thursday, January 27, 2011

Media Spotlight, Public Interest Lawyer's Efforts Shame BofA, Fannie Into Returning Foreclosed Home, Giving Sustainable Loan Mod To Elderly Retiree

In Jamaica, Queens, columnist Joe Nocera writes in The New York Times:

  • In physics, the Heisenberg Uncertainty Principle states that the process of observing subatomic particles affects their behavior. We have a similar principle in journalism: the process of reporting a story can sometimes affect the behavior of those being reported on. Last Wednesday, the Heisenberg Journalism Principle was on full display in a courtroom at the Queens County Courthouse, in New York.

  • The case involved Lilla Roberts, the 73-year-old retired physical therapist I wrote about last month, whose home in Jamaica, N.Y., had been foreclosed on last summer by Bank of America without her knowledge and turned over to Fannie Mae, which was in the process of trying to evict her. With the help of a young public interest lawyer, Elizabeth Lynch, Ms. Roberts filed a lawsuit aimed at stopping the eviction and reversing the foreclosure, something Ms. Lynch conceded was a long shot.

For more, see Shamed Into Altering a Mortgage.

Mortgage Elimination Racket Using Forged Lien Satisfactions Filed In Public Records Continues To Suck In Desperate Homeowners Facing Foreclosure

In Stanislaus County, California, The Modesto Bee reports:

  • New variations on bogus mortgage elimination schemes are claiming victims throughout Stanislaus County, a fraud authority says. Con artists seem to be targeting Latino homeowners facing foreclosure, and some real estate professionals are getting sucked in as well, said Glenn Gulley, an investigator with the county district attorney's office.

  • "A lot of people are getting tangled up in this," Gulley said. His office has brought no charges yet; he confirmed investigations in hopes of warning other potential victims. In the latest variation, people behind on payments are told they can keep their homes by signing up for a new mortgage, typically at 25 percent of what they owe, with lower premiums, plus a fee that's commonly $1,000 to $3,000.

  • Fraudsters then file a reconveyance at the county recorder's office, claiming that the legitimate loan has been paid off. Duped homeowners sometimes pay thousands of dollars toward the "new" loan — and still end up losing their houses when the legitimate lender forecloses.

For more, see Mortgage elimination scams hit Stanislaus (Most recent victims speak little, no English).

Probe Continues Into Suspected Philly Rent-To-Own Racket; Unsophisticated Would-Be Buyers Duped Into Fixing Up Decrepit Homes & Ended In Foreclosure

In Philadelphia, Pennsylvania, the Philadelphia Daily News reports:

  • TWO-AND-A-HALF years have passed since Robert N. Coyle Sr. defaulted on bank loans on nearly 300 Kensington homes that he rented to the city's poorest in search of the American dream.

  • Dozens of tenants who had poured money into decrepit homes believing that they'd one day own them found themselves in the eye of a massive foreclosure storm, and one step from homelessness. That's when they dubbed Coyle "a dream killer" and a "slumlord millionaire."

  • Since the Daily News chronicled Coyle's shattered empire in October 2009, some tenants still fear they'll be evicted. Many of Coyle's homes sit vacant and boarded, making whole blocks resemble war zones. Meanwhile, a small army of bank executives, judges, attorneys, City Council members and criminal investigators battle to sort out the mess[.]


  • Coyle's attorney, Alan L. Frank, said that his client was a decent person who intended to meet his loan obligations and honor any rent-to-own agreements, but that Coyle - and the banks - were overly "optimistic" about the real-estate market. "I really do believe that this mess is not his fault," Frank said. "The banks were literally lining up. They were all pitching their money at [Coyle's real-estate] entities."

  • "Granted, the banks' lack of due diligence is striking, but, nevertheless, he put people in homes that were not livable and he promised them that no matter what happened, they'd become homeowners. He preyed on folks who wanted to buy into the American Dream."

For more, see 'Slumlord' vs. the American Dream: Their homes, their hopes ... gone?

State Court Of Appeals Slams Shut Rogue S. Indiana 'Debtors Prison', Limits Asset "Fishing Expeditions" In Attempts To 'Squeeze' Delinquent Borrowers

Valparaiso University School of Law Associate Professor Alan White recently wrote in Public Citizen's Consumer Law & Policy Blog:

  • A while back I reported on the revival of debtor's prison in a southern Indiana county court.(1) The Indiana Court of Appeals has now struck down the local county court rule that imposed contempt sanctions, including imprisonment, for debtors who failed to pay small claims judgments on ordinary civil debts. The county court rule provided for a "personal order of garnishment," which, unlike ordinary garnishment orders directed at third parties like banks and employers, would order the debtor herself to turn over any non-exempt funds in the debtor's possession, regardless of whether such funds actually existed.

  • The disabled and indigent defendant in the case at issue was found in contempt and ordered to serve 30 days in jail for failing to pay $10 monthly on a $445 judgment, despite not having any non-exempt assets or income.

  • The Court of Appeals cited the Indiana Constitution's provision that "there shall be no imprisonment for debt, except in case of fraud," and voided the local court procedures.(2) Congratulations to John Brengle and Katherine Rybak of Indiana Legal Services on achieving simple justice in this case.(3)

Source: Indiana closes debtors' prison.

For the court ruling, see Carter v. Grace Whitney Properties, ___ N.E.2d ___, 2010 Ind. App. LEXIS 2172 (November 23, 2010) (approved for publication).

For more on the attempted comeback of debtors' prisons, see Incarceration Over Unpaid Debts On The Upswing? De Facto 'Debtors' Prisons' May Be Making A Comeback As Market For 'Zombie Debt' Zooms.

(1) This is not the first time the Indiana Court of Appeals found itself compelled to reverse a ruling of a rogue trial judge in a situation similar to this one. See Button v. James, 909 N.E.2d 1007 (Ind. Ct. App., 2009), where a trial court improperly threatened an indigent debtor with imprisonment for his failure to propose a plan to pay a money judgment.

(2) Creditors' use of asset "fishing expeditions" in the form of continuous debtors' reexaminations in ongoing proceedings supplemental hearings as a "club" to hammer, harass, and otherwise squeeze a debtor was addressed by the appeals court in this excerpt:

  • Carter argues that the small claims court erred when it denied her request to limit future proceedings supplemental against her by Grace Whitney Properties. Carter requested that the small claims court issue an order that Grace Whitney Properties not be allowed to seek enforcement of the judgment in the absence of a good faith belief that Carter has property or income subject to court process, but the small claims court denied her request.

    We noted in Kirk, 585 N.E.2d at 1369, that a creditor cannot require a debtor to attend ongoing proceedings supplemental hearings and be reexamined continuously as to whether the debtor has acquired any new assets or income. "A second order or examination of the debtor requires a showing by the creditor that new facts justifying a new order or examination have come to the knowledge of the creditor." Kirk, 585 N.E.2d at 1369 (citing 33 C.J.S Executions § 365(3)(g) (1942)).

    If several examinations within a short time of one another have recently taken place, then facts should be shown from which it may be inferred that the judgment creditor will obtain useful information, and the examination is not being used as a club to enforce settlement of claims which the debtor is without property to pay

    Id. (quoting 33 C.J.S Executions § 365(3)(g) (1942), and citing Federal Loan Corp. v. Harris, 308 N.E.2d 125, 127 (Ill. Ct. App. 1974) (holding that a general "fishing expedition" for assets may be conducted on initial citation for supplementary proceeding; but thereafter, the judgment creditor must show existence of facts giving rise to belief the judgment debtor has property or income to satisfy the judgment)). Again, the judgment creditor has the burden of showing that the debtor has property or income that is subject to execution. Id.

    Having been made aware repeatedly that Carter is disabled and has no income or property that can be used to satisfy the judgment, Grace Whitney Properties must make a showing that new facts justifying a new order or examination have come to its knowledge in order to justify future proceedings supplemental. Future "fishing expeditions" are improper. Carter has made a prima facie showing that the small claims court erred when it denied her motion on this issue.

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

Media Report Features Notorious Robosigner With "Impressive Résumé"

In West Palm Beach, Florida, The Palm Beach Post reports:

  • Somewhere, presumably Georgia, lives a woman named Linda Green. According to investigators, her signature - and variations of it - appears on hundreds of thousands of questionable mortgage documents.

  • Linda Green has an impressive résumé. She has been a vice president of at least 14 banks and mortgage companies, including Wells Fargo and Bank of America. The documents with her signature are called mortgage assignments. By signing, she attests to the true owner of a mortgage, which proves that a bank has the right to foreclose on a home.

  • One of those homes belongs to Lynn Szymoniak, a Palm Beach Gardens lawyer who specializes in white-collar crime. Szymoniak, 61, has ferreted out economic crimes for years and federal prosecutors have called her as an expert witness in four trials. In July 2008, after negotiations with her lender over an increase to her ­adjustable-rate mortgage failed, she received foreclosure papers on her home. What she saw "made no sense."

For more, see Tracing the signs of foreclosure traps. multiple corporate hat-wearing vice president

Wednesday, January 26, 2011

Attempts To Bulldoze Through Foreclosure Legal Process Continue For Paperwork-Lacking Lenders; Uptick Seen In Judges' Impatience

In Staten Island, New York, the New York Post reports:

  • A house divided cannot stand. A house foreclosure case divided by two banks probably doesn't have standing -- in court -- either. Two banks, Home123 Corporation and US Bank, both lay claim to owning a house in Staten Island, according to a foreclosure filing.

  • The original lender, Home123, is the mortgage holder on the county's tax rolls, but US Bank and its servicer, Ocwen Loan Servicing, have filed the court papers, saying they have the right to the action. US Bank claims that they purchased the mortgage from Home123. But, the bank admits, "due to unforseen circumstances, the original Assignment of Mortgage and Endorsement Note were lost before they could be recorded."

  • That doesn't sit well with Joseph Sant, the lawyer representing the homeowner, who did not wish to be named. "US Bank is foreclosing on a home without proof that it owns the mortgage. That should not surprise anyone after the revelations of widespread robo-signing and document falsification in foreclosures," Sant says.

  • "What does surprise me is that the bank admits that it lacks key evidence needed to foreclose, yet is trying to bulldoze through the legal process anyways," Sant adds. A US Bank spokesman said the bank, acting as a trustee, did not bring the action. He said the bank is named so there is a plaintiff to send paperwork to.


  • Now, with thousands of foreclosure cases clogging New York's courts, local judges are growing increasingly impatient with faulty or erroneous paperwork that further burdens an already overstrained system. [...] Attorneys that represent homeowners are still wading through reams of problematic paperwork by lenders and servicers, which are attracting new scrutiny from the judicial bench.

For the story, see 2 banks, 1 house (SI foreclosure shows paperwork nightmare).

Suit: BofA Pocketed Entire $60K Insurance Cash From 'Ike-Damage' Claim To Cover $24K Foreclosure Deficiency; Refuses To Refund Balance To Homeowner

In Galveston, Texas, The Southeast Texas Record reports:

  • Ross Durant and Ilva Lucia Rodriguez of La Porte seek approximately $36,000 from Bank of America after their settlement check from the Texas Windstorm Insurance Association ["TWIA"] was used to cover costs generated by the foreclosure sale of their Galveston County property.

  • Durant and Rodriguez argue that Bank of America foreclosed their Hurricane Ike-damaged residence in Santa Fe and took their settlement funds without providing a refund, a lawsuit filed Jan. 12 in Galveston County District Court says.

  • According to the original complaint, the plaintiffs received a check in the amount of $60,000 from TWIA as a result of their lawsuit against the insurer. Bank of America acquired their mortgage from Countrywide Mortgage and seized the dwelling when Durant and Rodriguez fell behind on their payments, the original petition says. The place was sold at foreclosure for $205,000. The balance owed on the mortgage at the time was $228,627, resulting in a deficiency of $23,627.

  • "Because of the mortgage, the settlement check from the Texas Windstorm Insurance Association named both plaintiffs and Countrywide Mortgage as a payee," the suit says. Anthony Gunn, the complainants' original attorney, forwarded the check with their signatures to the defendant with a request that they receive the balance of the settlement less the deficiency, or an amount claimed of $36,373.

  • "The defendant has failed and refused to refund that balance," the suit says. "That refusal to refund the difference is a breach of contract."

Source: La Porte couple sues to recover settlement funds.

BofA Gearing Up For Major PR Damage Control Effort In Light Of WikiLeaks Promised Document Dump?

AlterNet reports:

  • WikiLeaks founder Julian Assange is promising to unleash a cache of secret documents from the hard drive of a U.S. megabank executive. In 2009, he told Computer World that the bank was Bank of America (BofA). In 2010, he told Forbes that the information was significant enough to "take down a bank or two," but that he needed time to lay out the information in a more user-friendly format.

  • Recent new reports suggest that BofA is now moving into high gear on damage control, creating a "war room" and buying up hundreds of derogatory Internet domain names including and (BofA's CEO).

  • Before the big banks start calling for Assange's internment at Guantanamo, the question worth considering is what does Wikileaks have on America's largest bank?

For more, see What Does Wikileaks Have on Bank of America? (Reports suggest that BofA is now moving into high gear on damage control, creating a "war room" to fight off an upcoming release of WikiLeak documents).

Lawsuit: BofA Attempted Foreclosure On 'Ike-Ravaged' Home Over Unpaid $107K Loan Despite Sitting On $196K Pile Of Cash From Insurance Proceeds

In Harris County, Texas, Ultimate Clear Lake (a product of the Houston Chronicle and reports:

  • A woman is suing Bank of America after her home, located in Clear Lake, was damaged by Hurricane Ike. Marie Holmes filed a lawsuit on Jan. 13 in the Harris County District Court against BAC Home Loans and Bank of America, alleging breach of contract and breach of duty.

  • Holmes says that the defendant continues to hold onto $196,000 in insurance funds, distributed to repair the damage caused to her Clear Lake home by Hurricane Ike. According to the brief, Holmes, whose current principal balance on the home is $106,985.35, repeatedly asked the defendants to use the insurance funds to pay off her mortgage.

  • To date, the defendants have failed to honor her request, have charged her over $28,000 in interest and late fees, and have posted her home for foreclosure on numerous occasions, Holmes says.

  • Holmes is seeking actual and exemplary damages, as well as attorney’s fees and court costs. She is being represented in the case by Austin attorney Molly Rogers. Harris County District Court Case No. 2010-02490.

Source: Clear Lake resident sues Bank of America over insurance funds, foreclosure postings.

Fla. High Court Boots Lawyer From State Bar For "Preying Upon...Vulnerable Couple" Involving Conduct In Private Transaction Unrelated To Law Practice

In an August, 2010 ruling, the Florida Supreme Court gave what appears to be a well-deserved boot to now-former attorney Sherry Grant Hall from the legal profession in the state for her conduct in connection with a failed attempt to egregiously arm-twist an elderly married couple, Irving and Clara Godwin (Irving suffered from Alzheimer's disease), into selling property that they had been leasing to her.(1)

Her actions culminated by forging the Godwins' signatures on a phony real estate purchase contract and recording it in the public records, thereby creating a cloud on the Godwin's title and sabotaging their efforts to sell the property to other interested parties.

Some of the notable points in this case were:

  • There was no formal attorney-client relationship between the parties. Hall was engaged in a personal transaction with the Godwins that was unrelated to her legal practice in which no professional services were offered and no legal fees were involved. Thus, the misconduct was in her personal capacity, not in her professional capacity;

  • Hall had been a member of The Florida Bar since 1986 and had no prior disciplinary history,

  • The court rejected the recommendation of the referee to dish out only a 90-day suspension, finding that disbarment was the only appropriate sanction.

Some of the facts of the case:

  • Hall began misrepresenting to Mrs. Godwin that their original lease agreement, which contained an agreement to negotiate a possible sale was actually an agreement to sell the property to Hall;

  • Shortly thereafter, the Godwins felt compelled to retain an attorney to fend off Hall's continued misrepresentations;

  • Despite being told that, according to the advice of her newly-retained attorney that she was not required to sell Hall the property under the Lease Agreement, Hall continued to harass Mrs. Godwin about selling her property;

  • The Godwin's daughter testified that Hall threatened to sue the Godwins and tie them up in court, insinuating that they could lose their property from protracted litigation, and insisting that the Godwins had to sell the property to her;

  • After Mrs. Godwin decided to list her property for sale with a real estate agent, Hall continued her misconduct—by seeking to drive away any possible contenders for the property. She wrote a letter to the real estate agent misrepresenting to him that she had a contract with the Godwins to purchase their property. The real estate agent testified that Hall threatened to report him to the real estate commission and have his license revoked if he sold the Godwins’ property;

  • Finally, Hall forged the Godwins' signature on a phony real estate purchase contract and recorded it in the public records, and sent it to the Godwins' attorney, stating that the Godwins were obligated to sell the property to her.

In reaching its ruling to boot Hall from the legal profession in the state, the Florida high court made the following observations about her conduct (bold text is my emphasis, not in the original text):

  • Respondent’s brazen misrepresentations and continual harassment distinguish this case from other forgery cases. Although the referee found only one rule violation, Respondent’s misconduct is egregious.

    Her misrepresentations caused the Godwins to lose two buyers for their property. Respondent’s threats to the Godwin’s realtor caused him to withdraw the Godwins real estate listing.

    Due to Respondent’s continued harassment, the Godwins were forced to hire an attorney to defend themselves.

    Even though Respondent was not acting in a formal attorney-client relationship, she was still a member of The Florida Bar and bound by its ethical rules.

    Respondent misused her status as an attorney to harm the Godwins: (1) by recording the fraudulent document in the clerk’s office, in order to tie up the Godwins’ property; (2) by asserting that the Godwins and their realtor would suffer for not complying with her legal claims; and (3) by forcing the Godwins to hire counsel to resolve the legal problems that Respondent created.

    Even after being informed that the Godwins had hired counsel, Respondent continued to directly harass them. This Court does not look favorably on those who use their standing as an officer of the court to deliberately harm others—especially when they intentionally hurt members of the public for their own personal gain.

    Further, in the instant case, Mr. and Mrs. Godwin were seniors, and Mr. Godwin was suffering from Alzheimer’s disease. Respondent was preying upon this vulnerable couple.

    Respondent put pressure on the Godwins by sending letters, making phone calls, and visiting them, in an effort to achieve her goal of purchasing the property. Further, Respondent continuously misrepresented to third parties that she had a contract for sale, when she knew, or should have known as an attorney, that she had no contractual right to purchase the Godwins’ property. Based on this evidence, the referee orally pronounced from the bench that Respondent "violated the rules of the Bar by harassing lots of people."

    Further, Respondent deliberately and intentionally engaged in felonious conduct by recording the fraudulent Lease Agreement and Agreement for Sale in the county clerk’s office. As a lawyer, Respondent knew or should have known that the recording of this instrument in the clerk’s office was a felony (uttering a forged document).(2) By the terms of the original agreed-upon paragraph, Respondent should have known that she did not have an agreement to purchase the land.

    Nevertheless, Respondent recorded the fraudulent document in the clerk’s office to misrepresent to the public at large that she had a right to purchase the Godwins’ property. By recording the fraudulent document, Respondent placed a cloud on the title of the property she desired, which impeded the Godwins from selling or transferring the property to anyone else. It is apparent that Respondent committed these misdeeds for her own benefit, in an effort to secure the

For the ruling, see The Florida Bar v. Hall, No. SC07-863, 2010 Fla. LEXIS 1406; 35 Fla. L. Weekly S 458 (August 26, 2010).

(1) The court described Hall's conduct as a "lengthy process of harassment and abuse of the legal system" and said that she "purposefully used her knowledge of the law to harm others, for her own personal benefit."

(2) For those wondering if there were any criminal charges brought against Hall for manufacturing the bogus real estate purchase contract, forging the Godwins' signatures thereto, and recording the dubious document in the public records, the ruling notes Hall's successful effort to buy her way out of a criminal conviction in this excerpt:

  • The State Attorney’s Office charged Respondent with two felonies—grand theft and uttering a forged instrument (the fraudulent recording of the Lease Agreement and Agreement for Sale).

    In August 2006, Respondent entered into a Deferred Prosecution Agreement (DPA) in which she agreed, among other things, to (1) quitclaim any interest in the Godwins’ property to give them clear title to the property within forty-eight hours of signing the agreement; (2) pay the Godwins $15,000 in restitution; (3) acknowledge in writing that the existing lease between Respondent and the Godwins was null and void; (4) vacate the pasture land and relinquish any rights she might have had under the lease; (5) execute any documents necessary to eliminate any cloud on the title of the Godwins’ property resulting from the lease; and (6) ensure that all sub-tenants or other persons occupying the pasture under Respondent’s lease would vacate the property.

    In September 2006, the criminal charges were dismissed because Respondent had complied with the requirements of the DPA.

Tuesday, January 25, 2011

Defunct Mortgage Lenders Seek Bkptcy Court OK To Physically Destroy 1000s Of Boxes Of Original Loan Documents Despite Paperwork Concerns In F'closures

In Wilmington, Delaware, Reuters reports:

  • Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes of original loan documents.

  • The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost. A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose.

  • In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records "threatens to impair federal law enforcement efforts." The former subprime lender shut down in February 2007. In a January 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain Inc. Luria stated that destruction is necessary to eliminate $16,000 per month in storage costs as he disposes of the last assets of the bankrupt company.

  • In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company's former headquarters in Melville, Long Island. AHM had been one of the biggest originators of subprime loans until it abruptly collapsed and closed in August 2007. The boxes are the last still held by AHM. Sass stated that the local fire marshal wants the documents removed as a fire hazard, and he said the cost of moving them would be prohibitive.

  • In accordance with a 2009 court order, the bankrupt company earlier had destroyed the contents of thousands of other boxes after banks and other loan servicers had been given a chance to request and pick up particular files.

  • The issue of document destruction is sensitive because in recent months evidence has turned up that vast numbers of original loan documents by major lenders were never transferred as required when the mortgages were securitized and sold to investors.


  • The two companies' bankruptcy cases are unrelated, and the overlapping timing of the two hearings Monday in Wilmington, Delaware, bankruptcy court is coincidental, people involved with the cases said.

For the story, see Judges to weigh mortgage document destruction.

L.A. Feds Pinch Pair For Allegedly Using Property They Didn't Own As Loan Collateral & Fabricating Documents To Support Their False Claims

From the Office of the U.S. Attorney (Los Angeles, California):

  • Two brothers were taken into federal custody [...] on charges that they bilked private lenders out of more than $5 million by pledging as collateral properties they did not own and fabricating numerous documents to support their false claims.

  • Henrik Sardariani, 42, and his brother, Hamlet Sardariani, 40, both of Sylmar, were arrested without incident [...] by special agents with the Federal Bureau of Investigation and IRS - Criminal Investigation.


  • According to the indictment, which was unsealed after their arrests this morning, the Sardarianis used their fraudulent scheme to obtain well over $5 million from the victim lenders in under eight months.

  • The indictment alleges that, to obtain the loans on several properties, the Sardarianis created fraudulent deeds of trust, corporate records and other documents to make it appear that they held title to the properties. The brothers allegedly fabricated fraudulent reconveyances to create the false impression that the other loans on the properties had been paid off and that there was sufficient equity to secure the loans.

  • The fraudulent reconveyances bore forged signatures and fraudulent stamps of notaries public, according to the indictment which further alleges that the Sardariani brothers and a co-conspirator presented these fraudulent reconveyances to title companies and victim lenders.

For the U.S. Attorney press release, see Sylmar Brothers Arrested In Loan Fraud Case That Collected Over $5 Million In Only Eight Months.

Federal Court Temporarily Stalls F'closure; Appears Likely That Servicer Failed In 'Pre-Entry Of Default Notice' Legal Obligations To Homeowner: Judge

In San Francisco, California, Courthouse News Service reports:

  • A woman can stay in her home, for now, after a federal judge granted her a temporary restraining order preventing Wells Fargo from proceeding with a foreclosure. Keng Hee Paik said the bank had not provided her "with 'any documents whatsoever'" when she took out a $750,000 home loan.


  • "On the current record it appears likely that - at the least - defendants did not comply with their legal obligations attending contacting plaintiff prior to entry of notice of default, and that failure must be cured before any foreclosure sale can proceed," wrote U.S. District Judge William Alsup, who found Paik would likely suffer irreparable harm if the foreclosure proceeds.

For more, see Judge Slaps Wells Fargo in Foreclosure.

For the court ruling, see Paik v. Wells Fargo Bank, N.A., et al.

Two Admit Roles In Fractional Interest Deed Transfer Foreclosure Rescue Scam That Abused Bankruptcy Process To Stall Sales On 1400+ Homes

In Los Angeles, California, Westlaw News & Insight reports:

  • Two people have admitted that they participated in a fraud scheme by using falsified bankruptcy petitions to delay foreclosures on more than 1,400 properties in California.(1) The scheme improperly postponed foreclosures on $725 million worth of mortgages and caused banks and lenders to lose out on loan payments from homeowners, according to a statement released by U.S. Attorney Andre Birotte of the Central District of California.


  • Birotte said the three advertised a foreclosure rescue service that promised at-risk homeowners that their properties could be saved in exchange for monthly payments of about $1,500.

  • After collecting the first fee installment, the defendants had the property owner sign a deed that granted a one-eighth interest in the home to a fictitious person, according to the charges. The defendants then filed a bankruptcy petition in the name of the nonexistent individual without the homeowner’s knowledge, Birotte said.

  • The fraudulent bankruptcy filing triggered an automatic stay of the foreclosure proceedings in each instance. When a lender would succeed in having the bankruptcy case dismissed, the defendants would have their client sign another deed that granted another interest in the home to a different fictitious person, according to the charges. The defendants would then file another bankruptcy case in the new fictitious person’s name, prosecutors said.

  • The fraudulent deeds and bankruptcy filings allowed the defendants to repeatedly postpone foreclosures while collecting $550,000 in fees from homeowners, Birotte said. While the defendants profited, lenders incurred legal fees to defend their interests in the bankruptcy cases and suffered unspecified losses on unpaid mortgages, he added.

Source: 2 admit roles in California foreclosure rescue scheme.

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

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

(1) Reportedly, Darwin Bowman, 74, pleaded guilty to bankruptcy fraud on Dec. 15 and Co-defendant Robin Phillips, 53, entered her guilty plea Nov. 29. A third defendant, Irving Cohen, 74, is still facing charges in the scheme, which operated between 2006 and July 2010, according to prosecutors.

Failing To Name MERS In Utah Quiet Title Suits Leads To Default Judgments, Mortgage-Free Title For Homeowners; Lawyers Say MERS Not Entitled To Notice

In Salt Lake City, Utah, The Salt Lake Tribune reports:

  • A Utah court case in which the owner of a Draper townhouse got clear title to the property, even though he still owed $132,000 on it, raises new legal and financial questions about a property-records database created by mortgage bankers.

  • The award of a title free of liens means that whoever owns the promissory note on the Draper property — likely a group of faraway investors — no longer has the right to foreclose to collect on a delinquent loan. Indeed, the townhouse owner has sold the property and kept the money. Those who own the promissory note probably don’t even know what occurred.


  • Last year, the owner of the Draper property contacted attorney Walter T. Keane to help him deal with lenders, though Keane won’t say what the problem was and the owner declined an interview request. Keane filed what’s called a “quiet title action,” a lawsuit in which the owner seeks clear title to a property free of liens by lenders or others.


  • The lawsuit over the title to the townhouse named Garbett Mortgage and Citibank FSB as the holders of promissory notes as recorded on trust deeds filed with the recorder’s office. Integrated Title Services was listed as trustee of the Garbett Mortgage trust deed, while First American Title was the trustee of the CitiBank trust deed. But there also was another entity listed on the trust deeds called the Mortgage Electronic Registration Systems (MERS).


  • Under the state’s quiet title laws, Keane said he did not have to name MERS or serve it legal papers in the lawsuit because it was not the legal owner of title to the property. Those were title companies. In addition, attorneys contend, MERS cannot be the “beneficiary” or holder of the promissory note because it readily has admitted it has no financial interest in any notes or mortgages.

  • Normally, a trustee named in a trust deed has a legal duty in Utah to the entity that holds the promissory note and for fair dealing with the homeowner. But in the townhouse case, First American Title filed a response to the quiet title action saying that it had no idea who had the right to collect payments on the promissory note, nor did it admit to knowing any other basic information about the property.

  • The fact of the matter is First American Title doesn’t know who the beneficiary of the trust deed is and basically they disavow any interest in it,” Keane said. “It’s an acknowledgement [the recording system on this property is] a fiction, that they don’t have any real interest in it.”

  • Garbett Mortgage also told the court it no longer held an interest in the property. Integrated Title never filed a response to the lawsuit but did withdraw as a trustee with the Salt Lake County Recorder’s Office. “Considering the owner of the property [the title companies who were trustees] failed to dispute the matter, and further considering that the original lender claims no further interest, the court nullified the trust deeds prior to setting any type of trial date,” Keane said.

  • So in the four months that the process took, the owner was able to gain title and deny the owners of his loan the ability to foreclose on the property for nonpayment. That means the promissory note owned by investors may be worth far less than they paid for it because it is no longer backed by an asset. [...] Keane said he’s been able to obtain quiet title in the same manner in two other cases.

  • Another attorney, Abraham Bates, said he recently also won a quiet title action in a similar case in Salt Lake County. [...] Bates said under Utah laws, it was not necessary to serve MERS legal papers, as it was not in the Draper townhouse case.


  • Bates said he has more than 100 lawsuits pending over MERS-related questions and has hired more attorneys for his firm to handle the increasing load.

For the story, see How accurate are property records?

Monday, January 24, 2011

Post-'Ibanez' Fallout Begins; Mass. High Court Takes Case Of Unwitting 3rd Party Buyer Left Holding The Bag w/ Void Title On Improperly F'closed Home

In Boston, Massachusetts, Bloomberg reports:

  • Massachusetts’ highest court will consider whether a home buyer can rightfully own a property if the bank that sold it to him didn’t have the right to foreclose on the original owner.

  • The state’s Supreme Judicial Court, which agreed last month to take the appeal, already ruled Jan. 7 that banks can’t foreclose on a house if they don’t own the mortgage. The lower court decision now under review said the buyer of residential property in Haverhill, Massachusetts, never really owned it because U.S. Bancorp foreclosed before it got the mortgage.

  • It appears to be the next step in the conversation,” Paul R. Collier III, who represented the borrower in the earlier case, U.S. Bank v. Ibanez, said in a phone interview. Like the Ibanez case, the court’s decision may resonate with other states as they grapple with the rights of new homebuyers who may be hesitant to complete a purchase for fear of uncertain title, and with how such a trend may hobble the broader housing market.


  • The latest case, Bevilacqua v. Rodriguez, could affect trusts that bundled mortgages and sold securities to investors. [...] The Ibanez and Bevilacqua cases both originated before Massachusetts Land Court Judge Keith C. Long in Boston.

  • Francis J. Bevilacqua III went to Long’s court to force the original owner to say whether he had a claim on the property in Haverhill, about 36 miles (58 kilometers) north of Boston. A city assessment website lists four condominiums at the location with a total value of $600,300.

  • Bevilacqua asked Long whether he could try to find the original owner through newspaper notices, said his lawyer Jeffrey B. Loeb, of Rich May PC in Boston, in a phone interview. In August, Long ruled that Bevilacqua wasn’t the property’s owner and didn’t have standing to inquire about claims. U.S. Bancorp, which sold Bevilacqua the property in 2006, conducted an invalid foreclosure because it didn’t properly own the mortgage at the time, Long said.

  • The mortgage transfer to U.S. Bancorp, which oversees the mortgage-backed trust containing the loan, happened after the foreclosure, Long said. All Bevilacqua had was a deed from an invalid foreclosure sale, the judge said.(1)

  • I have great sympathy for Mr. Bevilacqua’s situation -- he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title -- but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied,” Long wrote.


  • Both Costello and Collier, the lawyer for Ibanez, said Bevilacqua is the first so-called third-party buyer case to come before the high court since the Ibanez decision.(2)The third-party buyers obviously have claims against the selling entity, the servicing entity and any title insurer and any attorney that was engaged,” Collier said. The court has tentatively set oral argument for April, according to Susan Mellen, the court clerk.


  • The third-party issue has become a major one for title insurers in the state, said Richard D. Vetstein, a real-estate lawyer in Framingham, Massachusetts. “What’s going to happen to all these people?” Vetstein said. “The people who don’t have title insurance are really in big trouble.”

  • The court may have left the issue of third-party buyers unaddressed in Ibanez anticipating a ruling in the Bevilacqua case, said Thomas Adams, a partner at New York law firm Paykin Krieg & Adams LLP. “That’s a big issue to leave outstanding,” said Adams, a former analyst at bond insurer Ambac Financial Group Inc. “If Judge Long’s decision holds, then that’s a big deal.”

For the story, see Faulty Foreclosure Case in Massachusetts High Court May Hurt Home Buyers.

For Massahusetts Land Court Judge Keith C. Long's ruling now under review before the state high court, see Bevilacqua v. Rodriguez, MISC 10-427157 (KCL), 2010 WL 3351481 (Mass. Land Ct. Aug. 26, 2010) (go here for Judge Long's one-sentence judgment).

(1) Judge Long kicked off his ruling now under review with the following Introduction (bold text is my emphasis, not in the original text):

  • Plaintiff Francis Bevilaqua holds no title to the property at 126-128 Summer Street in Haverhill. That title is held by defendant Pablo Rodriguez. What Mr. Bevilaqua has is a quitclaim deed from US Bank, N.A., which conducted an invalid foreclosure sale on the property (it was not the holder of the mortgage at the time the sale was noticed and conducted as required by G.L. c. 244, § 14) [Note 1] and thus acquired nothing from that sale. See US Bank v. Ibanez, 17 LCR 202 (Mar. 26, 2009) & 17 LCR 679 (Oct. 14, 2009) and cases cited therein. US Bank therefore had nothing to convey, and its purported conveyance to Mr. Bevilaqua was a nullity. See Bongaards v. Millen, 440 Mass. 10, 15 (2003).

    Despite this, Mr. Bevilaqua now seeks to create a full, fee simple title in himself — quite literally, something from nothing — through the “try title” procedure of G.L. c. 240, §§1-5. He cannot do so, for the reasons set forth below. Accordingly, his complaint is DISMISSED in its entirety, with prejudice.

(2) See Albice v. Premier Mortgage Services Of Washington, Inc. (if link expires, TRY HERE, or TRY HERE - latter link may require free registration with, 157 Wn. App. 912; 239 P.3d 1148 (Wn. Ct. of App., Div. II, September 28, 2010) for an example of a case outside of Massachusetts where the Washington State Court of Appeals ruled that a 3rd party foreclosure purchaser was left holding the bag where one of the technicalities of the state foreclosure process was not strictly followed when the sale of real estate owned by a defaulting borrower was conducted.

For the briefs filed in Albice, see:

Use Of Undisclosed “Appearance Attorneys” In Foreclosure Actions - No "Interloping Counsel" Allowed In My Courtroom, Says Bankruptcy Judge

A recent story in the Sarasota Herald Tribune on The Florida Bar's failure to take disciplinary action against Florida foreclosure mill attorneys for their alleged ethical lapses alludes to one of the practices that is arguably making it difficult to affix fault on the these attorneys - the use of 'coverage' or 'appearance' attorneys:

  • Circuit Judge Lee Haworth, chief judge of the judicial district that includes Sarasota and Manatee counties, says he only reports lawyers after he sees a pattern of egregious violations in cases.

    "I think one of the problems we have is identifying exactly who it is at fault here," Haworth said. "Lawyer A will file the pleadings, but Lawyer B will show up."

    Law firms from across the state also hire local lawyers to represent them at hearings. "The judges are not always face to face with the people who are causing the most problems," Haworth said.

The use of a late-appearing, undisclosed 'appearance' or 'coverage' attorney - was addressed and rejected by U.S Bankruptcy Judge Philip H. Brandt in a 2009 ruling (involving a failed attempt by mortgage loan servicer to establish that it was a "real party in interest" in a homeowner/debtor's Federal bankruptcy proceeding) in this excerpt from the ruling (footnotes in the orginal text omitted, bold text is my emphasis, not in the original):

  • The careful reader will have noticed that none of the foregoing rules directly address the situation where the original attorney continues as counsel of record, but another lawyer, not of the same firm, joins for some portion of the representation. But, read together, the requirement of corporate representation and the continuing role of counsel of record preclude interloping counsel. For other attorneys not part of the same firm as record counsel to represent a party, something must be done of record. Customarily, this is accomplished by filing a notice of association, and it is common when lead counsel is distant and the use of local counsel for particular matters in the case will promote efficiency, or the new counsel provides particular expertise. Once the notice of association is served and filed, all parties to the case are aware of the changed representation, and associated counsel receives notice directly of events and filings in the case.

    The practice of undisclosed “appearance attorneys” creates problems — other parties (and the court) are sandbagged, and the Debtor, trustee, other creditors, and counsel cannot readily communicate regarding scheduling or substance. In addition to the ramifications of this practice, explored in In re Wright, 290 B.R. 145 (Bankr. C.D. Cal. 2003); Hon. Jim D. Pappas, Simple Solution = Big Problem, 46 The [Idaho] Advocate 31 (Oct. 2003); and Neil M. Berman, Judge, This is Not My Case . . ., Norton Bankr. L. Adviser 3 (May 2004), the lack of formal association could raise questions about the informally-appearing attorney’s authority to speak for, and make judicial admissions on behalf of, the client (the contrary suggestion would not be a promising argument).

    While this defect is not dispositive, clarity of representation on the record is important to judicial economy and the orderly representation of other parties. So I will require, absent emergency or significant hardship, formal notice of association to be filed not later than the confirmation of the hearing. And there is no remedy for self-inflicted harm — law firms undertaking distant representations must be prepared to appear or timely associate local counsel who will. As corporations must be represented by counsel in federal court, the consequence of not having counsel of record at hearing will be that the party’s position may be deemed without merit. See LBR 9013-1(e)(1).6 This is the flip side of Woody Allen’s observation that “Eighty per cent of success is showing up” — if you (or your counsel of record if you are a corporate entity) don’t, your chance of success approaches zero.

    In short, henceforth only counsel of record or individuals representing themselves will be heard.

It may be that judges presiding over foreclosure actions may want to take a cue from Judge Brandt and stop allowing these foreclosure mill law firms from freely substituting attorneys when handling these cases without imposing some measure of control so that fault can be less difficult to assign when screw-ups occur.

For Judge Brandt's ruling, see In re Jacobson, 402 B.R. 359 (Bankr. W.D. Wash. 2009).

Feds Breathing Heavy In Probe Into Suspected Bay Area Foreclosure Sale Bid-Rigging Scams

In Oakland, California, KTVU-TV Channel 2 reports:

  • The FBI Tuesday was investigating a dark underside to the Bay Area's mortgage crisis that finds some unscrupulous investors colluding to keep prices low when foreclosed homes are sold at auction.

  • Folks at the Community Realty Property Management office on Fruitvale Avenue weren't talking when KTVU tried to ask if the FBI had been there last week. One man who spoke only said he couln't confirm anything. But sources told KTVU the FBI recently raided the Community Realty Property Management office.

  • FBI Spokeswoman Julie Sohn wouldn't say if the company was a target of the investigation, but did confirm that the FBI "...conducted enforcement actions throughout the Bay Area [as] part of a long-term investigation of anti-competitive practices at trustee sales of foreclosed homes."

  • That means that people were suspected of violating the Sherman Act at public auctions by rigging bids. Instead of competing, individuals or groups agreed not to bid against each other to buy houses at rock-bottom prices. A Stockton real estate executive recently pled guilty to conspiring to rig bids.(1) Law enforcement sources said they expect similar indictments in the Bay Area.

  • The FBI was seeking the public's help, asking anyone who may have observed so-called anti-competitive practices at foreclosure sales to call their tip line at 415-553-7400.

Source: FBI Investigating Foreclosure Auction Conspiracy In Bay Area.

See also, the San Francisco Chronicle: FBI looks into bid rigging at courthouse auctions:

  • The probe is shaking up the tight-knit world of investors who bid at these auctions. The issue, sources say, is that some participants allegedly pay others to refrain from bidding on certain properties to keep their prices low.

  • A real estate agent who attended some San Francisco auctions in hopes of buying investment property described what he witnessed.

  • "If you start to bid, there are about five guys who work together and who box you in," said the man, who asked not to be named for fear of retribution. "One guy came up to bid who clearly was not part of that crew. The guys were bidding. At some point, (their ringleader) turned to (the outsider) and said, 'You must really like this property. It must be really important to you.' He had a piece of paper in his hand; he showed it to the guy. The guy nodded OK and then disappeared into the building."

  • The man said he was positive that the outsider was being paid off not to bid, although he did not witness money changing hands.

  • At Alameda County's auction Wednesday, most investors declined to discuss the issue, but some said they welcomed the FBI's interest. "This has been going on for many years," said one man who declined to give his name. "It's a closed group that doesn't always allow the properties to go up to their true value."

Go here for other posts & links on bid rigging at foreclosure and tax sale auctions.

(1) See U.S. Attorney's press release: California Real Estate Executive Pleads Guilty to Bid Rigging:

  • According to court documents, after the conspirators' designated bidder bought a property at a public auction, they would hold a second auction. Then each participating conspirator in turn would bid amounts above the public auction price he or she was willing to pay. The conspirator who bid the highest amount at the end of the rounds won the property. That difference between the price at the public auction and that at the second auction was the group's illicit profit, and it was divided among the conspirators in payoffs.

Wells Fargo Joins GMAC In Yanking Homes From The Foreclosure Docket; Begins To Take 'Sloppy Paperwork' Issue More Seriously

The Wall Street Journal reports:

  • Wells Fargo & Co. said on Wednesday that it has begun dismissing an unspecified number of pending foreclosures in Maryland as a result of potential flaws in its document-handling practices. The disclosure came after GMAC Mortgage Corp, a unit of Ally Financial Inc., told a Maryland court on Friday that it would similarly dismiss around 250 pending foreclosures in the state in order to avoid a potentially lengthy class-action lawsuit.


  • Wells Fargo said it began to request dismissals of foreclosures in late December on all loans that had a foreclosure affidavit signed by a Wells Fargo employee. Paperwork signed by outside foreclosure attorneys wouldn't be affected. The bank didn't say how many foreclosures might be affected.


  • The action represents the latest fallout from the mortgage industry's use of robo-signers and illustrates the risk to banks that their potentially sloppy paperwork invites further lawsuits, slowing the foreclosure process. In other states, banks have moved to simply replace flawed affidavits with corrected ones rather than voiding and refiling foreclosures, which can be more expensive and time consuming.

  • Anthony DePastina, a lawyer at Civil Justice, the Baltimore legal nonprofit group that represents the homeowners, says banks may ultimately face similar actions in other states. "This could lead to a cascade event," he said in an interview Tuesday.

  • Because the dismissals involve only foreclosures that haven't yet been sold, the remedy doesn't necessarily resolve potential problems with properties that have already been sold to third parties.

  • Maryland doesn't require banks to conduct foreclosure proceedings through courts, but unlike other nonjudicial states, Maryland requires banks to go back to court and confirm completed foreclosure sales. The state also makes it easier for homeowners to challenge those foreclosures in court before the property is sold.

For the story, see Wells Fargo to Refile Some Foreclosures in Maryland (may require paid subscription; if no subscription, GO HERE, then click appropriate link for the story).

SW Florida Courts Sees 100s Of F'closures Dropped; Failure To Properly Transfer Notes Into Securitization Trusts May Leave Lenders Behind 'Eight-Ball'

In Lee County, Florida, The Fort Myers News Press reports:

  • Banks in recent weeks have been dropping hundreds of their Southwest Florida foreclosure lawsuits instead of facing defendants at trial, according to local attorneys and court records.

  • Opinions varied sharply on whether that means banks are just taking a breather before refiling with stronger evidence - or giving up for good on hopelessly flawed cases.

  • Some foreclosures at large law firms were never actually read by the attorneys who filed them here and elsewhere, and some of the mortgages that ended up in mortgage-backed securities sold to investors were never legally transferred by the banks, defense attorneys have alleged.


  • [E]ight voluntary dismissals were filed Tuesday alone by seven different banks including Bank of America, one of the largest filers of foreclosures in this area. Bank of America did not reply to a request for comment Tuesday. At one court hearing alone, attorney Kevin Jursinski said, one of his associates watched as "50 in a row" were withdrawn.

  • "Can they re-litigate?" Fort Myers-based attorney Carmen Dellutri asked. "I don't think so." [...] He said he's seeing cases withdrawn in large numbers in Lee, Collier and Charlotte counties, and he heard from an attorney in Jacksonville the situation is the same there.

  • April Charney, a Jacksonville-area legal aid attorney who's an expert on foreclosure issues, said for the most part banks have no way to prosecute their cases because the mortgages in mortgage-backed securities were never actually legally transferred to the trusts.

  • She said much of the recent wave of voluntary dismissals may be a result of a Massachusetts Supreme [Judicial] Court ruling Jan. 7 upholding a judge's decision two foreclosures were invalid because the banks didn't prove they owned the mortgages, which he said were improperly transferred into two mortgage-backed trusts.

  • Now, she said, many mortgages simply aren't fixable. "You can't go back and securitize. You run a red light, you can't go back and unrun it."

For the story, see Banks drop foreclosures in Southwest Florida (Hundreds of lawsuits dismissed).

Sunday, January 23, 2011

Foreclosed Florida BofA Borrowers Demand Return Of Their Homes, $5M+ In Damages In Lawsuit Seeking Statewide Class Action Status

From a press release from the law firm Forizs and Dogali, P.A.:

  • Teresa O’Neal and Marco Delgado, through the law firm of Forizs & Dogali, P.A., have filed a statewide class action against Bank of America alleging improper action during mortgage foreclosures.

  • This case is different from other similar lawsuits because it focuses on Bank of America’s current ownership of the foreclosed property. The Plaintiff group includes only borrowers who were improperly foreclosed out of homes which are now, after foreclosure sales, owned by Bank of America. The complaint seeks to restore the borrowers’ rights in their homes, and seeks to establish that Bank of America’s claim of ownership can be invalidated. The number of Florida homes which Bank of America now owns after improper foreclosures is unknown, but the Plaintiffs estimate the number in the thousands.

  • The Plaintiffs allege the improper foreclosure practices by which Bank of America obtained ownership of the properties includes false and forged affidavits, certificates of service, and other documents. They also allege that the documents systematically contained inaccurate facts, or were signed by persons who lacked required knowledge, or were forged. The Plaintiffs propose that all prior foreclosure sales which were based upon such documents are subject to being invalidated by the borrowers.

  • In addition to seeking a declaration regarding the invalidity of prior foreclosure sales through which Bank of America took ownership of their homes, Ms. O’Neal and Mr. Delgado allege that Bank of America violated Florida’s racketeering laws, and that Bank of America’s use of the court system to deprive them of their homes was in violation of their civil rights, and that Bank of America’s conduct violated the federal Fair Debt Collection Practices Act. The Plaintiffs’ damages are alleged to exceed $5 million.

Source: Homeowner Class Action Filed Against Bank of America, Challenging Ownership of Homes Obtained Through Improper Mortgage Foreclosures.

Florida Bar Maintains 100% 'Success' Rate When Clearing Foreclosure Mill Attorneys Accused Of Ethical Misconduct

The Sarasota Herald Tribune reports:

  • Florida courthouses are rife with evidence of errors and fabrications made by attorneys handling foreclosure cases, and yet so far no lawyers have been disciplined. With pressure mounting to police its own members, the Florida Bar established a special category of complaints listed as "foreclosure fraud."

  • But in 20 complaints investigated in that category, the Bar has not found cause to discipline anyone -- even lawyers who admitted to breaking ethical rules. Some observers say that early track record of ignoring misdeeds by its members raises questions about whether the system of self-policing for lawyers can handle the depth of wrongdoing in the foreclosure crisis.

  • The complaints have been filed by judges, lawyers, homeowners and the Florida Bar itself, and reflect the issues seen in courtrooms almost daily for the past two years, including forged signatures and backdated documents used to improperly seize homes in foreclosures. In addition, attorneys for lenders have filed false motions, left out important information that would hurt their case, or skipped mandatory mediations and court hearings.


  • The convoluted way foreclosure cases are handled by attorneys makes placing blame difficult. At the largest foreclosure firms, dubbed "foreclosure mills," several lawyers work on different parts of a case and other non-lawyers prepare many of the documents.

  • Some complaints against lawyers in foreclosure cases were closed without discipline because a homeowner complained about the wrong lawyer in a case where several did work. Even judges have trouble figuring out which attorney is responsible for the bad behavior.

  • Circuit Judge Lee Haworth, chief judge of the judicial district that includes Sarasota and Manatee counties, says he only reports lawyers after he sees a pattern of egregious violations in cases. "I think one of the problems we have is identifying exactly who it is at fault here," Haworth said. "Lawyer A will file the pleadings, but Lawyer B will show up."

  • Law firms from across the state also hire local lawyers to represent them at hearings. "The judges are not always face to face with the people who are causing the most problems," Haworth said.

For more, see Foreclosure lawyers' misdeeds ignored in Florida? (Despite complaints, ethics breaches slip past discipline system).

Lawsuit Forces Chase To Admit Improperly Clipping 1000s Of Military Families, F'closing On 14 Homes In Violation Of SCRA; Agrees To Cough Up About $2M

NBC News reports:

  • One of the nation's biggest banks — JP Morgan Chase — admits it has overcharged several thousand military families for their mortgages, including families of troops fighting in Afghanistan. The bank also tells NBC News that it improperly foreclosed on more than a dozen military families.

  • The admissions are an outgrowth of a lawsuit filed by Marine Capt. Jonathan Rowles. Rowles is the backseat pilot of an F/A 18 Delta fighter jet and has served the nation as a Marine for five years. He and his wife, Julia, say they’ve been battling Chase almost that long.

  • The dispute apparently caused the bank to review its handling of all mortgages involving active-duty military personnel. Under a law known as the Servicemembers Civil Relief Act (SCRA), active-duty troops generally get their mortgage interest rates lowered to 6 percent and are protected from foreclosure. Chase now appears to have repeatedly violated that law, which is designed to protect troops and their families from financial stress while they’re in harm's way.

  • A Chase official told NBC News that some 4,000 troops may have been overcharged. What’s more, the bank discovered it improperly foreclosed on the homes of 14 military families.


  • [In a statement to NBC News, a Chase spokesperson] said that beginning this week Chase will be mailing a total of about $2 million in refunds to families that may have been overcharged. She says most of the families improperly foreclosed on have gotten or will get their homes back. A bank official described what happened here as “grim,” but emphasized the mistakes were inadvertent, not malicious.

For more, see No. 2 bank overcharged troops on mortgages (NBC News exclusive: JPMorgan Chase also improperly foreclosed on homes).

Go here for a statement to NBC News from a JP Morgan Chase & Co. representative in response to a report about foreclosing on the homes of military families.

More Attorneys Seek Class Action Status When Defending Forclosures Involving Sloppy Lender Paperwork; Seen As Way To Make Most Of Scant Resources

In St. Paul, Minnesota, the Minneapolis Star Tribune reports:

  • Jane Bowman has to turn away many Minnesotans who desperately need a lawyer to guide them through foreclosure hell. But if the court grants class-action status to one of her current cases involving jumbled foreclosure paperwork, Bowman could potentially help thousands of people nationwide.

  • The project's staff currently includes Bowman and fellow attorney Kari Rudd. Mark Ireland, the project's founding attorney, recently resigned to become a Ramsey County District Court Judge. The group's small stature means they must be very selective about which cases to take, focusing on the ones that are most likely to influence the legal landscape and help the greatest number of people.

  • Take the case of St. Cloud homeowners Steven and Tamara Gewecke, who have been fighting their foreclosure for three years. They assert that U.S. Bank doesn't have the right to foreclose because the legal authority to do so was not properly transferred to the bank. Bowman alleges that when the bank couldn't show the proper paperwork that should have accompanied the mortgage when it changed hands four times, it fabricated some. "They skipped over these middle steps," said Bowman, which is an issue "because you don't want somebody to show up with your mortgage and say 'You owe me the money.' You have to have proof.''


  • Bowman goes to court this month to request class-action status for her case. To this layperson, a class-action suit seems particularly appropriate. What homeowner do you know who can make sense of a paperwork puzzle that even the experts can't seem to figure out? And if you're dealing with foreclosure, I can't see how you could pay a lawyer. Very few lawyers can afford not to charge.

For the story, see Tiny law project looking for big case (A local nonprofit is fighting foreclosures one case at a time).

(1) The Housing Preservation Project is a nonprofit public interest advocacy and legal organization whose primary mission is to preserve and expand affordable housing for low income individuals and families, and is based in St. Paul, Minnesota. The Foreclosure Relief Law Project is an effort to identify viable legal and advocacy strategies which can avert foreclosures and keep homeowners in their homes, and which can stabilize neighborhoods by reducing the blighting effects of widespread foreclosures.