Saturday, February 5, 2011

Cops Pinch NYC Mailman Facing Foreclosure For Illegally Clipping Coupons, Unloading Them On eBay For Quick Cash

In New York City, the New York Post reports:

  • Citing pressure from an impending foreclosure, a Queens postal worker stole thousands of retail-store coupons before they were mailed out -- and sold them at a discount on eBay, cops said yesterday.

  • Thomas Tang, 38, of Baldwin, Long Island, allegedly pilfered more than 7,000 coupons from JCPenney, Kohl's and Lowe's and sold them in batches on the Internet auction site. Working out of the Corona branch, Tang told investigators that he netted roughly $35,000 from the sale of JCPenney coupons between October 2009 and January of this year.


  • "I have two small children, and my wife is pregnant," he told cops, according to court documents. "I also have a mortgage, and I have to pay cash for my chil dren's baby sitter. I did not want this to happen, but it was the only way I could avoid having my house fore closed on." With his tearful wife looking on, the 13-year veteran of the postal service pleaded not guilty yesterday to felony grand larceny and was held on $10,000 bail.

For the story, see Mailman 'clipped' coupons (Stole & sold 'em: cops).

Montana Airlift Dumps Tons Of Hay With More To Come In Rescue Effort To Save Hundreds Of Hungry Horses Abandoned At Recently Foreclosed Ranch

In Billings, Montana, ABC News reports:

  • A helicopter airlifted 20 tons of hay, and deputies hauled even more to a sprawling southeastern Montana ranch where hundreds of horses are starving. The horses belong to James H. Leachman, who pleaded not guilty Friday to 10 misdemeanor counts of animal cruelty in an initial court appearance in Billings. Leachman was supposed to remove the animals last July when his business, Leachman Cattle Co., lost the ranch at a federal foreclosure sale.

  • Leachman said little during the hearing. But in an interview with The Associated Press, he blamed the horses' problems on the family that bought his ranch. He said the horses had survived Montana's harsh winters for years on natural forage, but this year were confined by the new landowners to areas that already were overgrazed. "There's only been one side told," Leachman said. "They put them in a pasture that had no grass."

  • Justice Court Judge Larry Herman told Leachman not to enter the property to provide care for the horses without first making arrangements with authorities. Each animal cruelty count is punishable by up to one year in jail and a $1,000 fine.

  • Leachman, 68, ran a horse breeding business called Hairpin Cavvy. Five of his horses have died in recent weeks, and a Montana veterinarian warned that others would start dying if they did not receive food.


  • Yellowstone County Sheriff's Office officials hauled more hay with a tractor and a flatbed to about 75 horses stuck in an isolated pasture.

For more, see Hay Dropped to Starving Horses at Montana Ranch (20 tons of hay airlifted to hundreds of horses starving at Montana ranch).

See also, The Billings Gazette: First hay drop for starving horses a success:

  • An estimated 500 to 700 horses belonging to James Leachman are spread over 20 miles across a handful of ranches and Crow Reservation leases. [...] So far, 250 tons of hay have been donated for the rescue effort, dubbed Operation Home Place.

Fear Of Footing Bill For Tear-Down, Potential Environmental Cleanup Costs Causes County To Can 'Back Tax' Foreclosure Sale, Cancel Lien

In Genesee County, New York, The Batavian reports:

  • The owner of the former Wiss Hotel at 80 Main St., Le Roy, will get to keep the property, despite owing thousands of dollars in back taxes. The property was headed for the county's March foreclosure auction, but the Genesee County Legislature cast a unanimous vote Wednesday night saying essentially, "we don't want it."

  • The building, owned by New Jersey resident Emily Pangrazio, is in such a state of disrepair, county officials said, the only thing to do with it is tear it down, which would cost more than $100,000. The county could not take title without take responsibility for the building's disrepair, even just to auction it off later.

  • There's also concern that a former gas station next door could have leached contaminants onto the property, creating a potentially costly clean up requirement. If the county became part of the chain of title for even one day, county taxpayers could wind up footing the bill for any environmental impacts.

  • By voting to cancel the tax lien, the property -- with numerous alleged code violations -- becomes an issue for the owner and the Village of Le Roy to deal with. Several people have noted that a couple of weeks ago, crews were inside the former hotel removing fixtures and other items, basically stripping the building of salvageable items, according to witnesses.

Source: County decides not to take on risk of foreclosing on a property in Le Roy.

City Gives Eight Rent-Paying Families The Boot After Power Shut Off To Bldg; Rent Skimming Landlord Said To Have Stiffed Bank, Ignored Electric Bill

In Lawrenceville, Georgia, Fox 5 Atlanta reports:

  • Some Lawrenceville renters said that they didn't have power or a warm place to stay Tuesday night after being told their building was in foreclosure. Eight families were affected. The families live off of North Dale Road in Lawrenceville. The residents said they woke up at home Tuesday morning with no idea they would [have] nowhere to sleep.

  • Lawrenceville resident Malika Beyah said she arrived home to discover she had no power, no heat and no home. "The apartment went [into] foreclosure. We found out today when the city of Lawrenceville came and turned off the power. The apartment manager told us we have to leave the premises," said Beyah.

  • Residents said they were told the man they paid their rent to, the owner of the converted apartments hasn't been paying the mortgage or electricity.

For more, see Lawrenceville Apartment Building Goes Into Foreclosure (Eight families displaced).

Bank Accused Of Changing Locks On Foreclosed Child Care Center, Forcing Locked-Out Young Kids To Wait In Cold Until Fire Department Showed Up

In Elkins, Arkansas, KHBS-TV Channel 40/29 reports:

  • Sheri, the owner of an Elkins childcare facility said Arvest Bank changed the locks on her foreclosed building without giving her notice, forcing children to wait outside in the cold. "We didn't know the date last week when it foreclosed," said England.

  • England said the children had to stand outside in the cold for some time before the Elkins Fire Department let them wait at the station next door until a locksmith let her and the children back into the building.


  • Parent Mecca Pennington said she was angry at Arvest Bank for locking the children out of the building. "I was furious. Just the fact that someone will do that knowingly, knowing that there's 20 plus children going there, and there was no where for them to go," Pennington said.

For more, see Parents Angry After Bank Locks Children Out Of Foreclosed Child Care Center.

Friday, February 4, 2011

Mortgage Servicer Screw-Up While Processing Loan Modification Request Leads To Foreclosure, Says Boot-Facing Homeowner

In Maricopa County, Arizona, KPHO-TV Channel 5 reports:

  • A Valley homeowner said a mistake by Chase bank has cost her home. "I hope they can sleep at night," said Kat Grover about the bank's employees. Freddie Mac foreclosed on Grover's Maricopa home on Jan. 11.

  • Grover said Chase Bank representatives failed to inform Freddie Mac officials she was still working on a modification plan for her mortgage payment. Grover said the mortgage company's representatives told her they would not have gone through with the foreclosure if they had known she was still working on a loan modification with Chase Bank.

  • "The bottom line is, between Dec. 15 and Jan. 11, somebody didn't do their job and I lost my house over it," said Grover. She has to vacate her home by Feb. 18.

For the story, see Valley Homeowner Says Chase Mistake Triggered Foreclosure.

NYC Getting Away With Eminent Domain Abuse In East Harlem Land Grab & There's Nothing We Can Do About It, Says State Appeals Court

In New York City, the New York Post reports:

  • In a little-noticed ruling that could pack a punch for property owners, a judge has blasted the city for abusing eminent domain in its bid to seize buildings in East Harlem -- yet says there's nothing he can do about it.

  • In a searing statement, Justice James Catterson of the state Appellate Division accused the city of falsely claiming "blight" as a ploy to transfer private property to developers.

  • "In my view, the record amply demonstrates that the [East Harlem] neighborhood in question is not blighted . . . and that the justification of under-utilization is nothing but a canard to aid in the transfer of private property to a developer," Catterson said of the city's argument that it can grab two blocks between 125th and 127th streets along Third Avenue because the area is economically depressed.(1)

  • "Unfortunately for the rights of the citizens affected by the proposed condemnation, recent rulings . . . have made plain there is no longer any judicial oversight of eminent-domain proceedings," the justice wrote.

  • Catterson and a panel of four other Appellate Division justices dismissed the matter of Uptown Holdings vs. New York City on Oct. 12, 2010, infuriating the half-dozen East Harlem merchants who had brought the lawsuit hoping it would save their livelihoods.

For more, see Wrong from blight (Judge rips land grab).

(1) Judge Catterson's entire remarks, contained in his concurring opinion, follow:

  • In my view, the record amply demonstrates that the neighborhood in question is not blighted, that whatever blight exists is due to the actions of the City and/or is located far outside the project area, and that the justification of underutilization is nothing but a canard to aid in the transfer of private property to a developer. Unfortunately for the rights of the citizens affected by the proposed condemnation, the recent rulings of the Court of Appeals in Matter of Goldstein v New York State Urban Dev. Corp. (13 NY3d 511 [2009]) and Matter of Kaur v New York State Urban Dev. Corp. (15 NY3d 235 [2010]) have made plain that there is no longer any judicial oversight of eminent domain proceedings. Thus, I am compelled to concur with the majority.

NC AG Scores 13th Win Against Upfront Fee Loan Modification Rackets

From the Office of the North Carolina Attorney General:

  • A California foreclosure assistance company is the latest outfit to be banned from offering loan modification and foreclosure assistance services in North Carolina, Attorney General Roy Cooper said [].


  • This week, Wake County Superior Court Judge Abraham Penn Jones granted Cooper’s request for a default judgment against Peoples First Financial, Inc., which permanently bans the California company from performing or offering foreclosure assistance, loan modification and debt relief services in the state. The judgment also orders Peoples First Financial to pay $9,497.50 in refunds to consumers and $25,000 in civil penalties to local public schools.

  • This is the thirteenth case won by Cooper’s Consumer Protection Division against foreclosure assistance and loan modification scams in the past five years and the second such win so far in 2011.(1)

For the North Carolina AG press release, see Foreclosure assistance scheme banned from NC, announces AG Cooper.

(1) With all due respect to the North Carolina AG's Office, obtaining a default judgment for approximately $35K against a now-defunct company, where none of the individual operators behind this racket have any liability for payment thereof is not exactly something to declare victory over. Anything short of a criminal prosecution will only encourage the continuation of these ripoffs.

Fannie, Freddie Forked Over Nearly $50M In Legal Bills To Foreclosure Mills

Mother Jones reports:

  • This week Neugebauer got his response: according to data reviewed by HousingWire, the firms in question received nearly $50 million in legal fees from Fannie and Freddie.

For more, see Foreclosure Mills Pocketed $50 Mln From Fannie, Freddie.

Texas Man Cops Plea In "Contract For Deed" Racket; Pocketed Proceeds On Home Sales To Unwitting Buyers Without Making Payments On Pre-Existing Liens

In Midland, Texas, the Midland Reporter Telegram reports:

  • A former Midland firefighter has pleaded guilty to multiple counts of attempt to commit mail fraud as well as federal charges of failing to register as a sex offender. Jason Heath Morrison, 34, went before U.S. Magistrate Judge David Counts Friday morning to enter a guilty plea for the charges.

  • He and partner Marcus Jacob Rosenberger were described as "self-employed individuals working together in the field of real estate," according to an indictment. The two operated Vanguard Properties in Midland and would purchase residential properties to "flip," or resell at a profit.

  • The indictment alleges the two would obtain a list of foreclosed homes scheduled to be sold at auction and contact the home owner, persuade them to relinquish the property and then resell it to another individual.

  • Court records showed that Morrison and Rosenberger "consistently failed to pay off the mortgage" and "retained the monies from the new buyers for their own benefit." While the various homes were "still in arrears and proceeding towards foreclosure," court documents state that Morrison used the mortgage payments he was receiving to pay for his personal expenses [...].

  • Most of the money came from home buyers who had provided down payments and mortgage payments to Vanguard Properties. The scheme involved 10 homes around Midland, between February 2009 to March 2010, according to the indictment.

For the story, see Ex-firefighter pleads guilty to real estate fraud.

For background on this story, see Pair Held On $200K Bond For Allegedly Pocketing Proceeds On "Contract For Deed" Home Sales Without Making Payments On Existing Liens.

Thursday, February 3, 2011

Suspect Pinched In Home Hijacking Rental Racket Invokes 'Adverse Possession' Defense, Posts Bail, Then Continues Operating Business As Usual

In Hemet, California, KABC-TV Channel 7 reports:

  • A man has been arrested on suspicion of carrying out a rental scam in the Hemet area. For the resident who only wanted to give his first name, Lee, it all started about a month ago, when he saw a "for rent" sign in front of a Hemet home. Lee wanted to move in, so he called the man who he said he was the owner, 57-year-old Antonio Simon.

  • "Everything seemed to be fine, let him know that I'd like to get in the house, he came up, wrote me a legal rental agreement," said Lee. Lee says that's when he paid Antonio Simon $3,000, first and last month's rent. But a few weeks later, he got a knock on the door from law enforcement. "And he said, no, this house isn't supposed to be occupied, it would be owned by the bank, going up for auction," said Lee.

  • Police say Simon offered to rent out a home he didn't even own. And detectives say he's done it many times in the area, finding empty or foreclosed homes and renting them out, even though he's not the owner.

  • "We set up an operation where an undercover officer met with the suspect, requested to rent a house and signed a contract, and we then took the suspect into custody," said Riverside County Sheriff's Deputy Melissa Nieburger.

  • Simon is out on bail, and the district attorney continues to review the case. In the meantime, Simon operates business as usual. In a rental guide, he has another home for rent, this one in San Jacinto.

  • During a phone call Friday, Simon told Eyewitness News he doesn't think he's doing anything illegal, citing a part of law known as "adverse possession." Scott Altman, a vice dean at USC Law School, clarified adverse possession: "If you occupy property without the owner's consent for five years, and pay real estate taxes, adverse possession lets you become the owner. But up until those five years have passed, you're trespassing."

  • That applies not only to Antonio Simon, but Lee as well. "I don't know, he's either crazy and going to lose everything, or he has a loophole like nobody knows and they're going to close that up when it's done," said Lee. For now, Lee is staying put.

  • As for Simon, he's accused of burglary, grand theft and trespassing. He's free on bail. He has not been formally charged.

Source: Hemet man duped in foreclosure rental scam.

C. Florida Judge Rescinds $49K Contempt Fine On Foreclosure Mill; Says Firm's Purged Itself Of Citation With Substantial Compliance w/ Court Order

In Manatee, Florida, the Bradenton Herald reports:

  • A local judge has rescinded a widely publicized $49,000 fine against a foreclosure law firm for missing court hearings, court records show. Smith, Hiatt & Diaz P.A.” has substantially complied” with court requirements and “is not subject to any fine for failure to comply,” Manatee County Circuit Judge Janette Dunnigan said in lifting her contempt finding.


  • Dunnigan made national news in early September, when she fined the firm for “deliberate, willful and flagrant” civil contempt of court in a foreclosure case. She was upset with the firm, which represented the bank in the case, for setting court hearings and either missing them or not properly canceling them in a timely manner.

  • The firm, which blamed the missed hearings on a glitch in its internal case-management system while it was being updated, called the contempt finding and fine excessive and improper. But critics of so-called “foreclosure mills,” or law firms that handle large numbers of such cases, hailed Dunnigan’s reprimand as a blow against those firms’ practices.

  • Dunnigan later amended her order to give Smith, Hiatt & Diaz the chance to purge the contempt and fine if it met certain conditions. The firm did, but is appealing the original contempt order to the Second District Court of Appeals in Lakeland. The firm contends Dunnigan improperly referred to unrelated cases in holding it in contempt.

For the story, see Foreclosure firm’s fine lifted.

Suspects Arrested For Allegedly Hijacking Possession Of Vacant Foreclosure, Using Craigslist Ad To Pocket $2K From Unwitting Renter

In Albuquerque, New Mexico, KOB-TV Channel 4 reports:

  • Police say they have arrested some people who may have tricked a family into renting a house the suspects don't own. And now the victims are about to be out of a home.

  • Police say the whole thing started from a rental advertisement on Craigslist. A couple with eight small children saw the ad and contacted who they thought were the owners of the property.

  • After paying a deposit, the first and last month's rent and signing a contract, they got the keys to a house near Irving and Unser. Police say the people who posted the ad are scammers, and the home is a foreclosure owned by the bank.

  • The bank is giving the victims who rented the home a little time to find another place to live. Police tell KOB Eyewitness News 4 there could be other foreclosures involved in the scam.

Source: Scammers trick family into renting home they don't own.

See also, KRQE-TV Channel 13: Man behind home scam still on the loose:

  • Investigators say the scam began earlier this month when a family of 10 contacted a man about a rental listing posted on Craigslist. The family moved into the home around Jan. 11 after paying about $2,000 for the first and last months rent to a false landlord.

Complaints Alleging Upfront Fee Loan Modification Rackets Continue In Florida, Despite Recently Passed Prohibitions

The South Florida Sun Sentinel reports:

  • Some Florida foreclosure rescue companies and law firms that offer loan modifications continue to charge upfront fees and do little to help struggling homeowners, according to thousands of complaints filed with state regulators. New laws enacted over the last two years made such practices illegal.

  • The Florida Attorney General received 2,600 complaints about mortgage loan modifications last year and has 78 active investigations against companies offering them.

  • American Residential Law Group, based in Fort Lauderdale, was the target of complaints from 48 homeowners nationwide. Consumers said they paid up to $3,000 for the company to negotiate with their lenders but had received little or no help. One complainant said he got a 0.25 percent interest rate reduction, but had $12,000 added to his principle balance.

  • The Florida Attorney General has five active lawsuits in South Florida and four in the Orlando area involving companies offering mortgage or loan modifications. The Florida Bar, which monitors and disciplines attorneys, has 163 cases under investigation involving 49 lawyers, in regards to loan modifications. That's compared to 67 cases the Bar is reviewing for foreclosure fraud, 20 cases related to mortgage fraud and 30 cases involving foreclosure defense fraud. The bar closed 258 modification cases last year, and so far has issued sanctions in 84 cases involving seven lawyers.

  • Consumer advocates say that while foreclosure paperwork fraud and "robo-signing" may have taken over the mortgage crisis spotlight, questionable loan modifiers have not gone away.

For more, see Florida regulators receiving new complaints about mortgage modifications.

Wednesday, February 2, 2011

Dept. Of Justice Opens Probes Into Recent Servicemember Screwings By Banks In Violation Of SCRA

The Wall Street Journal reports:

  • The U.S. Attorney General has "several" ongoing investigations into violations of a law meant to protect active-duty members of the military from high interest rates and foreclosures. A spokeswoman for the Department of Justice said in an emailed statement that the investigations are looking into lenders who overcharged and foreclosed against the homes of servicemembers without court orders. The spokeswoman declined to identify which lenders were under investigation or how long the investigations had been ongoing.


  • The Servicemembers Civil Relief Act caps interest rates for loans to active-duty military members at a 6% annual rate and shields them from foreclosure. The law applies to "any debt incurred" by a servicemember, including credit cards and car loans, which typically carry much higher rates; the law makes some exceptions to its rules.

  • The law defines active-duty as "full-time" service, including tours and training, and says those who knowingly break the act face prison and fines.

For more, see DOJ Investigating Violations Of Military Lending Protections (requires paid subscription; if no subscription, TRY HERE, then click appropriate link for the story).

Wall Street, Mortgage Industry Seeks To Whitewash Foreclosure Mess

Joshua Holland writes on AlterNet:

  • And they shredded a bedrock principle of capitalism, throwing hundreds of years of settled property law into doubt and in turn creating a massive drag on Main Street's economic “recovery.”

  • They got rich in the process. The mortgage industry did all of that for a fat stream of profits while the going was good, but now that they face the prospect of being held accountable by the justice system -- as would you or I had we routinely broken the laws -- analysts expect the “banksters” to lobby hard for another bailout.

  • They won't be looking for the Fed to shower them with free money or buy up trillions worth of “toxic assets” weighing down their books – they already got that sort of bailout once, the voters detested it and with the Tea Party ascendant in the GOP, the political atmosphere precludes a repeat performance.

  • No, the mortgage industry – with the help of its political lackeys in Washington-- is reportedly looking for a judicial bailout that would retroactively allow loan servicers to foreclose on properties without running up the costs of getting their paperwork in order, and limit investors' – and possibly the states' – ability to sue them for the mess they created in the housing market.

For more, see Mortgage Lenders Committed Massive Fraud and Now Wall St. Wants to Escape the Law (Here they come looking for an out-clause and a way to keep their coffers full. We need to repeat a simple mantra: No more bailouts for Wall Street).

'Bear' E-Mails Describing Mortgage Securities Peddled To Institutional Investors As A "Sack Of Shi*" May Leave JP Morgan Chase Holding The Bag

Investigative reporter Terri Buhl writes in The Atlantic:

  • Former Bear Stearns mortgage executives who now run mortgage divisions of Goldman Sachs, Bank of America, and Ally Financial have been accused of cheating and defrauding investors through the mortgage securities they created and sold while at Bear. According to e-mails and internal audits, JPMorgan had known about this fraud since the spring of 2008, but hid it from the public eye through legal maneuvering.

  • Last week a lawsuit filed in 2008 by mortgage insurer Ambac Assurance Corp against Bear Stearns and JPMorgan was unsealed. The lawsuit's supporting e-mails, going back as far as 2005, highlight Bear traders telling their superiors they were selling investors like Ambac a "sack of shit."(1)

  • News of internal whistleblowers coming forward from Bear's mortgage servicing division, EMC, was first reported by The Atlantic in May of last year. Ex-EMC analysts admitted they were sometimes told to falsify loan-level performance data provided to the ratings agencies who blessed Bear's billion-dollar deals. But according to depositions and documents in the Ambac lawsuit, Bear's misdeeds went even deeper.

For more, see E-mails Suggest Bear Stearns Cheated Clients Out of Billions (Lawsuit alleges the bank took extreme measures to defraud investors, and now JPMorgan may be on the hook).

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

(1) According to the story, Bear deal manager Nicolas Smith wrote an e-mail on August 11th, 2006 to Keith Lind, a Managing Director on the trading desk, referring to a particular bond, SACO 2006-8, as "SACK OF SHIT [2006-]8" and said, "I hope your [sic] making a lot of money off this trade."

S. California Duo To Get Hard Time In Mortgage Scam That Duped Homeowners Into Investing Proceeds From 'Cash-Out' Refinancings In Bogus R/E Program

In Southern California, The Press Enterprise reports:

  • The accused ringleader of a $142 million mortgage and securites fraud centered in Southwest Riverside County agreed Monday to spend nearly 20 years in state prison rather than go to trial. James B. Duncan, who prosecutors say masterminded the scheme, and Maurice McLeod, his alleged second in command, both agreed in court to negotiated guilty pleas.

  • The two men, both from Murrieta, were arrested with five other defendants more than a year ago for their roles in what authorities described as a series of complex investment scams that enabled the top organizers to live lavishly and defraud hundreds of investors in California and Arizona, pushing 201 Riverside County homes into foreclosure. After a day of negotiations at the Riverside County courthouse in Corona, the Riverside County district attorney's office reached settlements with lawyers for the two men.

  • Duncan, 40, pleaded guilty to six counts of securities fraud and one count of corporate identity theft. Superior Court Judge Patrick F. Magers said if Duncan abides by the terms of a memorandum of understanding with the district attorney, he will receive a sentence of 19 years, eight months in state prison. If he fails to comply, the sentence will be increased to 22 years.

  • McLeod, 38, pleaded guilty to five counts of securities fraud, and agreed to a memorandum of understanding under which he will receive a prison sentence of six years, with credits for time already served if he complies and 12 years if he does not.

  • Deputy District Attorney Cormac Kehoe had the court seal the terms of the memorandum, until the state's case against the five remaining defendants is resolved. Formal sentencing could occur as early as May 5.


  • Victims allegedly were recruited on the promise that they would become wealthy and achieve their dreams in three years. They were prone to believe the pitch because they were referred by friends, relatives or co-workers, investigators said.

  • The investors said they were persuaded to refinance their homes to buy multiple investment properties, primarily in southwest Riverside County, with the guarantee that mortgage payments would be covered. However, ultimately the mortgage payments stopped and the houses fell into foreclosure.

For the story, see Murrieta men agree to prison in fraud case.

(1) In all, the seven defendants were accused of 249 felony counts that included securities fraud, grand theft, elder abuse and corporate identity theft, the story states. In previous testimony, an investigator described an elaborate scheme to shield Duncan and associates from the law, including bank accounts in Malta and the Cayman Islands, according to the story.

Tuesday, February 1, 2011

Failure To Properly Authenticate Paperwork Sinks Bank In Attempt To Establish Standing To Sue In NJ Foreclosure Action

A recent ruling by the New Jersey intermediate appellate court concluded that Wells Fargo Bank failed to properly authenticate paperwork submitted in an attempt to carry out a home foreclosure and accordingly, said that it failed to establish standing to maintain a foreclosure action.

The court found that the paperwork produced by the bank were enough to indicate that it could have standing, if properly authenticated, and then went on to say:

  • However, the documents that Wells Fargo relied upon in support of its motion for summary judgment to establish its status as a holder were not properly authenticated.(1) A certification will support the grant of summary judgment only if the material facts alleged therein are based, as required by Rule 1:6-6, on "personal knowledge." See Claypotch v. Heller, Inc., 360 N.J. Super. 472, 489 (App. Div. 2003). Baxley's certification does not allege that he has personal knowledge that Wells Fargo is the holder and owner of the note. In fact, the certification does not give any indication how Baxley obtained this alleged knowledge. The certification also does not indicate the source of Baxley's alleged knowledge that the attached mortgage and note are "true copies."

    Furthermore, the purported assignment of the mortgage, which an assignee must produce to maintain a foreclosure action, see N.J.S.A. 46:9-9, was not authenticated in any manner; it was simply attached to a reply brief. The trial court should not have considered this document unless it was authenticated by an affidavit or certification based on personal knowledge. See Celino v. Gen. Accident Ins., 211 N.J. Super. 538, 544 (App. Div. 1986).

    For these reasons, the summary judgment granted to Wells Fargo must be reversed and the case remanded to the trial court because Wells Fargo did not establish its standing to pursue this foreclosure action by competent evidence. On the remand, defendant may conduct appropriate discovery, including taking the deposition of Baxley and the person who purported to assign the mortgage and note to Wells Fargo on behalf of Argent

For the ruling, see Wells Fargo Bank, N.A. v. Ford, ___N.J. Super.___ (App. Div. January 28, 2011) (approved for publication) (when link expires, GO HERE).

For a discussion of a number of relevant issues to be addressed in this case, see New Jersey Appeals Court Shoots Down Foreclosure Over Bad Documents.

Representing the homeowner in this case were Margaret Lambe Jurow (arguing) and Rebecca Schore (on brief) for Legal Services of New Jersey, Inc.(2)

Thanks to Robert Napolitano for the heads-up on this ruling.

(1) The appeals court described the documents submitted to the court in this excerpt:

  • This motion was supported by a certification of Josh Baxley, who identified himself as "Supervisor of Fidelity National as an attorney in fact for HomEq Servicing Corporation as attorney in fact for [Wells Fargo]." Baxley's certification stated: "I have knowledge of the amount due Plaintiff for principal, interest and/or other charges pursuant to the mortgage due upon the mortgage made by Sandra A. Ford dated March 6, 2005, given to Argent Mortgage Company, LLC, to secure the sum of $403,750.00." Baxley did not indicate the source of this purported knowledge. Baxley's certification also alleged that Wells Fargo is "the holder and owner of the said Note/Bond and Mortgage" executed by defendant and that the exhibits attached to his certification, which appear to be a mortgage and note signed by defendant, were "true copies." Again, the source of this purported knowledge was not indicated. The exhibits attached to the Baxley certification did not include the purported assignment of the mortgage.

(2) Legal Services of New Jersey, Inc. is an independent, non-profit organization that coordinates the statewide Legal Services system that provides free legal assistance to low-income people in civil matters in New Jersey.

Concerns Over Deutsche's Dubious Documents, Foreclosure Process Spur U.S. Trustee Probe In Connecticut Homeowner's Bankruptcy Case

Reuters reports:

  • A branch of the U.S. Department of Justice is investigating whether Deutsche Bank filed false documents and attempted to mislead a bankruptcy judge in a foreclosure action. Although the investigation involves the case of only one homeowner in Connecticut, a court document filed on January 26 by the United States Trustee's Office said it wants to elicit information about Deutsche Bank's practices in general in foreclosure cases.(1)


  • In recent months, the office has stepped up efforts around the United States to block banks and law firms from using false or fabricated documents in home foreclosure actions. The effort follows disclosures in October 2010 of large-scale "robo-signing", the mass signing of foreclosure affidavits containing "facts" that had never been checked, and wide production of false mortgage assignments.

  • The January 26 court motion stated that "The United States Trustee has reviewed the documents filed by Deutsche in this case and has concerns about the integrity of those documents and the process utilized by Deutsche in" filing to foreclose.(2)

For more, see U.S. investigates Deutsche Bank in foreclosure case.

(1) According to Reuters, the inquiry involves Deutsche Bank National Trust Co, the Deutsche Bank unit that acts as trustee for thousands of trusts that invested in mortgage-backed securities. The U.S. Trustees' Office is a division of the Department of Justice responsible for overseeing administration of bankruptcy cases.

(2) The U.S. Trustee cited evidence that Deutsche had filed a false mortgage assignment in the case in an attempt to persuade the bankruptcy court that it owns the mortgage, the story states.

Dated June 11, 2010, the assignment was by Sand Canyon Corp. to Deutsche. Sand Canyon purportedly had acted as an intermediary between the loan originator, MAC, and Deutsche. But the motion noted that Sand Canyon had completely exited the mortgage business in 2008, and so in 2010 had no mortgages that it could assign, the story states.

F'closure Mill Lawyer Invokes "Pure Heart, Empty Head" Defense, Describes Signing Practices As "Stupid" As 18 Notaries Hide Behind 5th Amendment Right

In Baltimore, Maryland, The Daily Record reports:

  • Attorney Thomas P. Dore on Tuesday conceded that five pending foreclosure proceedings should be dismissed because he could not vouch for his signature on documents filed with the Baltimore City Circuit Court. Judge W. Michel Pierson must still determine what action to take, if any, with regard to at least 15 other foreclosures involving notarized documents not actually signed by Dore, who represents lenders.

  • Eighteen current and former notaries public invoked their Fifth Amendment rights and refused to testify regarding their certification of Dore’s signature on the documents. "Truthful answers to questions posed might tend to incriminate them,” the notaries’ attorney, David B. Irwin, of Irwin Green & Dexter LLP in Towson, told Pierson. “I have no doubt that they have a good-faith invocation right.”

  • Notaries who knowingly certify false signatures face possible criminal sanctions for misconduct in office or fraud.(1)


  • Dore came under heavy questioning from the judge and a special master appointed to review his foreclosure documents for irregularities. At the end of his testimony, Dore expressed regret to the court for failing to sign the documents himself but said he always acted in good faith.

  • I apologize for having put you through this,” Dore told Pierson from the stand. “I made a terrible mistake,” he added. “It was never my intent to deceive the court. It was frankly stupid, your honor.”


  • [D]ore’s system of authorizing others to sign for himhad gotten out of hand” and he discovered that staff members whom he had not authorized to sign his name had, in fact, signed foreclosure documents, he said.

  • Ethically, I should have signed those affidavits myself,” Dore said. “I realized I made a stupid mistake and we changed our practice.” Dore insisted that at no time did documents leave his office without being carefully reviewed for accuracy.

For more, see Notaries invoke Fifth Amendment in foreclosure hearings (if link expires, TRY HERE).

(1) The recent foreclosure robosigner disaster has revealed that the role of the Notary Public and the fundamentals of notarization are not fully understood either by the public at large or by many of the notaries themselves.

In light of this disaster, the National Notary Association has stepped up and released a whitepaper entitled, “Why Notarization Is More Relevant And Vital Than Ever.”

According to their recent press release, this whitepaper addresses why notarization remains essential to protecting the integrity of today’s transactions, what specifically occurs in a notarial act, and the three primary types of official notarizations. It also details how America’s Notaries Public are supposed to help deter fraud and forgery by serving as trusted, impartial witnesses to millions of business transactions every day, an obligation that these robosigners obviously need to be periodically reminded of. According to the white paper:

  • Impartiality [] means that Notaries must operate independently and resist improper or illegal requests or demands of supervisors, customers, friends or family members. There may be times when signers, employers or other third parties request that a Notary take "shortcuts" — like not requiring the personal appearance of a signer — for the sake of expedience. But, such improprieties are a violation of state law and can carry severe criminal and civil penalties.

Lenders Begin Reviewing Foreclosure Procedures Involving Active Duty Servicemembers After Major JP Morgan Chase Screw-Up In Violating SCRA

The Wall Street Journal reports:

  • Some of the nation's biggest lenders are double-checking that their home-lending operations haven't broken a law meant to shield military personnel in active service from foreclosure. So far, the lenders say they haven't uncovered any problems like those J.P. Morgan Chase & Co. acknowledged last week.

  • But after Chase found it overcharged more than 4,000 active-duty service members and took the homes of 14, in possible violation of the act that caps interest rates and stops foreclosure, lenders say they are making sure they are in compliance. They are also making sure members of the military know to alert them of their status.


  • At issue is the Servicemembers Civil Relief Act, which says loans for active-duty service members can't exceed a 6% annualized interest rate. The law also halts all foreclosure proceedings up until nine months after the service member returns from active duty. The law defines active duty as "full-time" service, including tours and training, and says those who knowingly break the act face prison and fines.

  • The issue began to surface when a U.S. Marine Corps captain filed a civil lawsuit in federal court in South Carolina last year, alleging he was overcharged by Chase, and seeking punitive damages.(1) Last week, Chase said it discovered its problems in its own review and is mailing about $2 million to victims; it said it had already moved to correct the foreclosures.


  • Richard Harpootlian, the lawyer for South Carolina Marine Capt. Jonathan Rowles, said more potential victims from all over the country, including some who aren't customers of Chase, have contacted him since last week. The suit is seeking class-action status.

For more, see Lenders Step Up Reviews of Military Foreclosure Practices (requires paid subscription; if no subscription, GO HERE, then click appropriate link for the story).

Go here for more on the rights under the Servicemembers Civil Relief Act.

(1) See Marine shows willingness to fight for what's right.

Sale Leaseback Peddler Guilty In Rent Skimming Racket; Tried To Use $50M+ In Phony Notes To Pay Off Liens As 250+ Victims Signed Over Home Titles

In Los Angeles, California, The Associated Press reports:

  • A Washington state man is facing up to 180 years in federal prison for defrauding people who lost their homes to foreclosure. Jeff McGrue of Tacoma man was convicted last Friday in Los Angeles.

  • Federal prosecutors say McGrue's company, Gateway International, promised to delay or prevent foreclosures by having at least 250 victims sign over title to their homes.(1)

  • In return, McGrue sent the lenders more than $50 million in phony promissory notes that he claimed were backed by the U.S. Treasury.

  • Authorities say McGrue didn't save a single home but he collected at least $800,000 in fees and rent from victims. He also got titles so he could resell the properties.(2) Three other men pleaded guilty last year to taking part in the scheme and are facing prison terms.

Source: Man convicted in LA of foreclosure scam (A Washington state man is facing up to 180 years in federal prison for defrauding people who lost their homes to foreclosure).

For the FBI press release, see Washington State Man Found Guilty of Orchestrating Foreclosure Rescue Scheme that Falsely Promised to Help Distressed Homeowners Keep Their Homes.

(1) According to the FBI press release, McGrue worked with two others – Gerald Guidry, who owned a company called My Debt Solutions, and Ronald Morgan, who owned a company called Omnipoint – to defraud homeowners by promising to delay or prevent foreclosures and to pay-off delinquent mortgages in exchange for the homeowners making payments and transferring title to Gateway International.

Through the Gateway Program, McGrue and the others falsely told homeowners that, if they paid an enrollment fee and monthly rent and signed over title of their homes to Gateway, McGrue would use "bonded promissory notes" purportedly drawn on a U.S. Treasury Department account to pay off their mortgages, thereby stopping foreclosure proceedings, according to the FBI. The homeowners were falsely told that lenders were legally required to accept the notes, that they would be able to buy their homes back from Gateway at a discount, and that they would receive up to $25,000, even if they chose not to re-purchase their houses, the FBI said.

(2) While sale leaseback ripoffs are typically associated with equity stripping scams (where a victimized homeowner has a high level of home equity ripped off from out from under), this story illustrates how the sale leaseback deal can be equally applied to a situation where the homeowner has little or no home equity, when used in conjunction with an upfont fee, rent skimming racket. The scammers' profits come from the rent they collect from the victim on the leaseback arrangement (while failing to pay the existing mortgage payments, thereby subjecting the home to foreclosure), as well as any upfront fees the scammer can squeeze out of the unwitting victim for the 'privilege' of being ripped off.

Monday, January 31, 2011

Bank F'closes After Double-Cross Dupes Homeowner Into Abandoning Bkptcy Filing; Court Nixes Voiding Sale, But Says Estoppel, Fraud Claims Can Proceed

The following facts, as alleged in a lawsuit by a foreclosed homeowner, are taken from a recent court ruling from a California Appeals Court:

  • Homeowner, a married woman, obtained an adjustable rate loan from a bank to purchase real property secured by a deed of trust on her residence.

  • About two years into the loan, she could not afford the monthly payments and filed for bankruptcy under chapter 7 of the Bankruptcy Code.

  • She intended to convert the chapter 7 proceeding to a chapter 13 proceeding and to enlist the financial assistance of her husband to reinstate the loan, pay the arrearages, and resume the regular loan payments.

  • Homeowner contacted the bank, which promised to work with her on a loan reinstatement and modification if she would forgo further bankruptcy proceedings. She alleged that she was told that, once her loan was out of bankruptcy, the bank "would work with her on a mortgage reinstatement and loan modification." She was asked to submit documents to U.S. Bank for its consideration.

  • In reliance on that promise, homeowner did not convert her bankruptcy case to a chapter 13 proceeding or oppose the bank's motion to lift the bankruptcy stay.

  • While the bank was promising to work with homeowner, it was simultaneously complying with the notice requirements to conduct a sale under the power of sale in the deed of trust, commonly referred to as a nonjudicial foreclosure or foreclosure.

  • The bankruptcy court lifted the stay. But the bank did not work with homeowner in an attempt to reinstate and modify the loan. Rather, it completed the foreclosure.

  • The bank then served the homeowner with a three-day notice to vacate the premises and, a month later, filed an unlawful detainer action against her and her husband. Apparently, Aceves and her husband vacated the premises during the eviction proceedings.

  • Homeowner subsequently filed a lawsuit against the bank, alleging a cause of action for promissory estoppel, as well as causes of action for quiet title, slander of title, fraud, and declaratory relief.

  • It also sought to set aside the trustee's sale and to void the trustee's deed upon the sale of the home.

  • She argued the bank's promise to work with her in reinstating and modifying the loan was enforceable, she had relied on the promise by forgoing bankruptcy protection under chapter 13, and the bank subsequently breached its promise by foreclosing.

  • The lower court dismissed the case.

On appeal, the California appeals court reinstated the homeowner's lawsuit with regard to the claims of promissory estoppel(1) and fraud.(2) However, it affirmed the trial court's dismissal with regard to the claims of quiet title, slander of title, and declaratory relief, and refused to set aside the foreclosure sale or void the trustee's deed.(3)

For the ruling, see Aceves v. U.S. Bank, (2011) ___Cal.App.4th____ (Cal. App. 2nd Dist., Div 1, January 27, 2011) (Certified for Publication) (when link expires, TRY HERE or TRY HERE).

See also, San Francisco Chronicle: Bank legally bound by loan-modification promise.

See Court: "Promissory Estoppel" Could Make Lender’s Verbal Agreement To Halt F'closure Sale Enforceable, Even Absent Consideration For Promise To Stall for an earlier post on the application of this doctrine when a loan servicer dupes a desperate homeowner into doing something she/he wouldn't have otherwise done by making phony loan modification promises.

Thanks to Deontos for the heads-up on this court ruling.

(1) With regard to the promissory estoppel claim, the court stated:

  • We conclude (1) plaintiff could have reasonably relied on the bank's promise to work on a loan reinstatement and modification if she did not seek relief under chapter 13, (2) the promise was sufficiently concrete to be enforceable, and (3) plaintiff's decision to forgo chapter 13 relief was detrimental because it allowed the bank to foreclose on the property. Contrary to the bank's contention that plaintiff's use of the Bankruptcy Code was ipso facto bad faith, chapter 13 is "`uniquely tailored to protect homeowners' primary residences [from foreclosure].'" (In re Willette (Bankr. D.Vt. 2008) 395 B.R. 308, 322.)

(2) With regard to the fraud claim, the court stated:

  • The elements of fraud are similar to the elements of promissory estoppel, with the additional requirements that a false promise be made and that the promisor know of the falsity when making the promise. (See McClain v. Octagon Plaza, LLC (2008) 159 Cal.App.4th 784, 792-794 [discussing elements of fraud].) Aceves has adequately alleged those facts.

(3) With regard to the the balance of the claims, the court stated ([alterations] added; bold text is my emphasis, not in the original text):

  • [A] promissory estoppel claim generally entitles a plaintiff to the damages available on a breach of contract claim. (See Toscano v. Greene Music (2004) 124 Cal.App.4th 685, 692-693.) Because this is not a case where the homeowner paid the funds needed to reinstate the loan before the foreclosure, promissory estoppel does not provide a basis for voiding the deed of sale or otherwise invalidating the foreclosure. (See Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at p. 1047, distinguishing Bank of America v. La Jolla Group II (2005) 129 Cal.App.4th 706, 711-714.)


  • Aceves's other claims and requests for relief lack merit as a matter of law. All of them are based on alleged irregularities in the foreclosure process. We see no irregularities that would justify relief. [...]

Appeals Court Affirms Conviction Of Sale Leaseback Peddler; Objection To Restitution Liability For Entire Proceeds Of Ripoff Falls On Deaf Ears

In Sacramento, California, a recent ruling by a California appeals court affirmed the conviction of Defendant Timothy Hogue, Jr., an equity stripping, sale leaseback peddler on one count of engaging in prohibited actions as a foreclosure consultant (Civ. Code, §2945.4). The conviction was entered pursuant to a negotiated plea agreement of no contest to one count in exchange for the dismissal of the remaining counts in the complaint.

Hogue agreed that the trial court could consider the conduct underlying the dismissed counts in determining restitution. The trial court issued a nine-page order determining that restitution for the two sets of victims was $26,476.38 and $30,000, which the appeals court subsequently affirmed.

Among the notable points was that, in the case involving the $30,000 restitution order, Hogue apparently only acted as a "bird dog," merely introducing the homeowner/victims to another scammer, one William Henley, who allegedly was the one who actually carried out the sale leaseback ripoff of the 2nd set of victims. According to the ruling, Hogue only received $2,234, the balance being kept by Henley and another.

Inasmuch as Hogue claimed to have played only a minor role in the second ripoff and only received $2,234, he objected to being held responsible for the entire $30,000. In finding that Hogue should be left holding the bag on the entire $30,000 restitution order, the California appeals court made this observation ([alterations] in the original; (bold text is my emphasis, not in the original text:

  • In awarding the full amount of diverted escrow proceeds as restitution from defendant, the court noted his significant participation with Mr. Henley in the transaction. This made his joint and several liability for the total amount of proceeds proper, even though defendant actually received only a much smaller share of them. (The court cited People v. Campbell (1994) 21 Cal.App.4th 825, 834 [where two or more act in concert, well settled in both civil and criminal law that each is liable for entire result] (Campbell).)(1)

For the ruling, and all of the details of each sale leaseback ripoff, see People v. Hogue, No. C063637 (Cal. App. 3rd Dist., January 27, 2011) (non-published) (when link expires, TRY HERE).

(1) The appeals court then gave this elaboration ("The Luceros" is a reference to one set of victims in this prosecution; bold text is my added emphasis):

  • As for the Luceros, defendant argues the evidence shows only that he introduced them to Mr. Henley, and accepted a share of the diverted proceeds afterward. He claims the order improperly compels him to pay restitution for the crimes of another.

    He cites People v. Leon (2004)
    124 Cal.App.4th 620, but the case is factually inapposite. In People v. Leon, supra, the defendant and his codefendant both forged signatures on stolen checks payable to each of them, but the record did not contain any evidence that the defendant had aided and abetted the codefendant in the taking or the forgery, therefore it was an abuse of discretion to make him jointly and severally liable for funds that the codefendant had appropriated to himself. (Id. at p. 622.)

    In the present case, the facts indicate defendant was an integral part of getting the scheme underway, and then shared in the proceeds. A trial court may properly order a defendant responsible even in part for a loss to pay restitution for the whole amount without making allowance for culpability. (People v. Madrana (1997)
    55 Cal.App.4th 1044, 1051; Campbell, supra, 21 Cal.App.4th at p. 834; cf. People v. Zito (1992) 8 Cal.App.4th 736, 746 [restitution when probation denied].)

Cops: Toll Could Reach 80 Victims As Woman Faces Embezzlement, Grand Theft Charges In Alleged Upfront Fee, Loan Modification Ripoff

In Salinas, California, The Monterey Herald reports:

  • A Salinas woman accused of stealing several thousand dollars by posing as a real estate agent and mortgage broker may have victimized people beyond Monterey County, according to Salinas police. A review of documents seized from Blanca Maciel Sanchez, 37, has revealed that there are possibly as many as 80 potential victims, [...] police spokesman Lalo Villegas said. The documents, held in 24 boxes, were seized as evidence after Sanchez was arrested Dec. 6.

  • Police say a fraud investigation was launched after two people reported their home was foreclosed on despite having paid Sanchez to help with a mortgage loan modification for lower monthly payments. State law prohibits charging or collecting fees in advance for loan modification services. The victims were led on for several months and only discovered Sanchez was a fraud after their homes were foreclosed on and they were evicted, according to police.

  • To lure her victims, Sanchez allegedly represented herself as a real estate agent, mortgage broker and certified public accountant, which police say she is not. Most of Sanchez's business deals took place at her home in the 1900 block of Arcadia Court using the business names Maciel Financial Services and First Continental Mortgage, Villegas said. Some documents seized from her date back to 2007, he said.

  • Investigators have not contacted all of the people identified in the documents to learn what dealings they had with Sanchez because some of the files have limited information. In some instances officers have found just a name and Social Security, number, Villegas said.

  • Sanchez is charged with two counts of embezzlement, two counts of grand theft, possession of a fraudulent check and possession of methamphetamine, all felonies. She has pleaded not guilty and was released on bail. Her next court appearance is scheduled for Tuesday.

  • Deputy District Attorney Todd Hornik said Thursday he plans to ask the judge to review Sanchez's release and require her to disclose the source of the bail money. Police say they have, so far, identified eight people who accuse Sanchez of fraud. Hornik said Sanchez is suspected of stealing about $50,000 but the investigation is continuing.

  • The preliminary figure doesn't include secondary losses that victims suffered as a result of the fraud, including costs for rent or ruined credit because of foreclosure. "There is a lot of collateral damage," he said.

  • Prosecutors are in negotiations with Sanchez's attorney, Brian Worthington of Salinas, in hopes of reaching a resolution that will include restitution for the victims, Hornik said. Worthington could not be reached for comment Thursday. Police ask anyone who went to Sanchez for help with a mortgage loan modification to call 758-7226.

Source: Woman may have defrauded 80 people in mortgage scam (Homeowners were unaware of deception until evictions).

Lenders Continue Dragging Out Lawsuit Despite Ruling That They Violated SCRA By Illegally Foreclosing On Active Duty Servicemember

The New York Times reports:

  • While Sgt. James B. Hurley was away at war, he lost a heartbreaking battle at home. In violation of a law intended to protect active military personnel from creditors, agents of Deutsche Bank foreclosed on his small Michigan house, forcing Sergeant Hurley’s wife, Brandie, and her two young children to move out and find shelter elsewhere.


  • Since then, Sergeant Hurley has been on an odyssey through the legal system, with little hope of a happy ending — indeed, the foreclosure that cost him his home may also cost him his marriage. “Brandie took this very badly,” said Sergeant Hurley, 45, a plainspoken man who was disabled in Iraq and is now unemployed. “We’re trying to piece it together.”

  • In March 2009, a federal judge ruled that the bank’s foreclosure in 2004 violated federal law but the battle did not end there for Sergeant Hurley.

  • Typically, banks respond quickly to public reports of errors affecting military families. But today, more than six years after the illegal foreclosure, Deutsche Bank Trust Company and its primary co-defendant, a Morgan Stanley subsidiary called Saxon Mortgage Services, are still in court disputing whether Sergeant Hurley is owed significant damages. Exhibits show that at least 100 other military mortgages are being serviced for Deutsche Bank, but it is not clear whether other service members have been affected by the policy that resulted in the Hurley foreclosure.


  • In court papers, lawyers for Saxon and the bank assert the sergeant is entitled to recover no more than the fair market value of his lost home. His lawyers argue that the defendants should pay much more than that — including an award of punitive damages to deter big lenders from future violations of the law. The law is called the Servicemembers Civil Relief Act, and it protects service members on active duty from many of the legal consequences of their forced absence.

  • Even though some of the nation’s military families have been sending their breadwinners into war zones for almost a decade, some of the nation’s biggest lenders are still fumbling one the basic elements of this law — its foreclosure protections.

  • Under the law, only a judge can authorize a foreclosure on a protected service member’s home, even in states where court orders are not required for civilian foreclosures, and the judge can act only after a hearing where the military homeowner is represented. The law also caps a protected service member’s mortgage rate at 6 percent.

For more, see A Reservist in a New War, Against Foreclosure.

For original lawsuit filed in Detroit Federal Court, see Hurley vs. Deutsche Bank National Trust, et al.

Go here for more on the rights under the Servicemembers Civil Relief Act.

Countrywide, BofA Targeted Again By Investors In Lawsuit For Allegedly Peddling Crappy Mortgage Backed Securities

A number of insurance companies and retirement funds have recently filed suit against Countrywide Financial Corporation, Bank of America, and some of their officers and affiliates alleging that, between 2005 and 2007, the latter unloaded hundreds of millions of dollars in crappy Countrywide mortgage-backed securities in 148 Offerings.

The plaintiffs summary of their legal action begins with this excerpt:

  • 1. This action concerns a massive fraud perpetrated by Defendant Countrywide Financial and certain of its officers and affiliates against the Plaintiffs, which are investors in mortgage-backed securities (“MBS”) issued by Countrywide’s subsidiaries. The Plaintiffs are institutional investors that wanted conservative, low-risk investments and thus bought Countrywide MBS (the “Certificates”) that were represented to be backed by mortgages issued pursuant to specific underwriting guidelines and rated investment-grade (primarily AAA). In purchasing the Certificates, the Plaintiffs and their investment managers relied on term sheets, prospectuses and other materials prepared by and provided to them by the Defendants, which made representations about the Countrywide Defendants’ purportedly conservative mortgage underwriting standards, the appraisals of the mortgaged properties, the mortgages’ loan-to-value (“LTV”) ratios, and other facts that were material to Plaintiffs’ investment decisions. Plaintiffs and their investment managers also relied on Defendants’ public statements concerning the Countrywide Defendants’ adherence to prudent underwriting guidelines and careful credit analysis. These representations by Defendants were recklessly or knowingly false when made. In reality, Countrywide was an enterprise driven by only one purpose – to originate and securitize as many mortgage loans as possible into MBS to generate profits for the Countrywide Defendants, without regard to the investors that relied on the critical, false information provided to them with respect to the related Certificates.

    2. The scope of the Countrywide Defendants’ fraud is reflected by, among other things: (i) a securities fraud action brought by the United States Securities and Exchange Commission (“SEC”) against three former senior executives of Countrywide Financial, in which the Court denied those Defendants’ motion for summary judgment and which then culminated in an historic settlement (the “SEC Action”); (ii) regulatory actions initiated by multiple state attorneys general which resulted in settlements worth over eight billion dollars; (iii) other fraud actions brought against the Countrywide Defendants by other MBS investors and insurers related to the same wrongdoing alleged herein, along with federal securities fraud claims brought against Countrywide for its misstatements to the investing public regarding the company’s mortgage loan underwriting standards; and (iv) the enormous number of defaults and foreclosures in the underlying mortgages supporting the MBS resulting in substantial damages to investors in Countrywide’s MBS.

For the entire lawsuit, see Dexia Holdings, Inc., et al. v. Countrywide Financial Corporation, et al.

Thanks to Harold for the heads-up on this lawsuit.

Sunday, January 30, 2011

Nevada State Court Halts BofA Unit's Statewide Foreclosures; Defect In Appointing Trustee May Lead To Wrongful Sale Process

In Nye County, Nevada, the Las Vegas Review Journal reports:

  • A Nye County district judge has ordered ReconTrust Co., a unit of Bank of America Corp., to stop most of its foreclosures in Nevada, based on allegations made by a Pahrump woman. The order signed by Nye County District Judge Robert Lane on Jan. 20 restrains ReconTrust from foreclosing on "any real or personal property situated in the State of Nevada." The bank holding company is also named in the lawsuit.

  • Suzanne North, who operates a children's day care center out of her home, originally alleged that ReconTrust was operating without a state business license. In an amended complaint, she claimed that ReconTrust served her with a foreclosure notice before Bank of America appointed ReconTrust as trustee. The Las Vegas Review-Journal was unable to obtain a copy of the amended complaint.


  • In the order, however, the judge said there is a "substantial likelihood that (North) will establish that ReconTrust does not have any contractual privities with respect to the contract between (North) and the other defendants regarding the promissory note and deed of trust." If the allegations are proven, an attorney could argue that ReconTrust improperly foreclosed on properties, Las Vegas attorney Tisha Black-Chernine said. "It could give rise to lawsuits for wrongful foreclosure," she said.

For the story, see BofA unit ordered to halt foreclosures.

Robosigning Scandal Just As Bad (If Not Worse) In Non-Judicual Foreclosure States

CNBC reports:

  • It's the next big shoe to drop in the robo-signing foreclosure scandal. Call it part two. We already know some banks halted foreclosure sales nationwide in October when it was discovered that servicers took short cuts, so-called "robo-signing" in the foreclosure sale process in judicial foreclosure states - about half the country.

  • Now it appears they may have done the same thing in a different part of the process, the Notice of Default, which takes place in the other half - i.e. the non-judicial states - this happens before the foreclosure sale.


  • Last week an article from American Banker titled, "New Point of Foreclosure Contention: Default Notice" circulated widely among the folks who follow the mortgage mess. It talked about how several lawsuits are now being filed contending that the Notice of Default process was flawed and the foreclosure therefore invalid.(1)

For more, see The Next Robo-Signing Crisis?

(1) From the American Banker story:

  • In a deposition on Jan. 4, Stanley Silva, a title officer at Ticor Title of Nevada Inc., said he "technically signed" default notices for clients, which were often acting as agents of other parties, which in turn worked for others.

    "The person at the bottom of the chain, by executing the document, has taken an action on behalf of all of them through their various agency agreements," Silva said. In one case, for example, he said he had signed "on behalf of Ticor Title of Nevada, who is agent for LPS Title, who is agent for National Default Servicing."

    "Who is agent for Fidelity National?" [Reno, Nevada attorney Robert] Hager asked. "Apparently, yes," Silva replied. "Which is a servicer for Wilshire?" "Apparently."

    Silva said under oath that he never reviewed any documents or knew what company was the holder of the original note at the time he signed the notice of default. He said he signed about 200 default notices over a four-year period.

    When asked by Hager if he signed notices of default "without verifying the accuracy of the information," Silva replied: "Correct."


Homeowners In Non-Judicial States Face Tough Battle Fighting Foreclosures Tainted By Rogue Robosigning Trustees Conducting Public Sales

The following excerpt from a recent story in The Huffington Post highlights the difficulty faced by homeowners in non-judicial foreclosure states to fight back against foreclosures tainted by rogue robosigners:

  • Notice of Default Robo-Signing. About half the states are "nonjudicial states" (including California, Nevada, and Arizona -- important states so far as the foreclosure crisis goes). As Kate Berry writing for the American Banker argues, the foreclosure process in these states begins with a formal "notice of default" (NOD) letter sent to the delinquent homeowner; this is followed up by a notice published in a local newspaper.(1)

  • The NOD is supposed to be signed by an agent of the "party of interest"--the company with legal standing to foreclosed. By signing the letter, that agent certifies that she has reviewed the relevant documents to determine, most importantly, that the homeowner had defaulted on payments and that the company for which she is acting as agent really does have standing to foreclose. But in practice, these letters are Robo-signed by people who never look at documents. They do not even seem to know for whom they are acting as agent!

  • For example, in the Nevada case studied by Berry, Stanley Silva (a title officer at a title firm) gave a deposition asserting that he never reviewed documents before signing NOD letters. Further, he said he was acting "on behalf of Ticor Title of Nevada, who is agent for LPS title, who is agent for National Default Servicing" who is "apparently" agent for Fidelity National, which is "apparently" a servicer for Wilshire, which acted as agent for Wells Fargo, which claimed to have standing to foreclose!

  • Now that is a nice "daisy chain" that successfully hides the party of interest from the homeowner trying to avoid foreclosure! Lawyer Walter Hackett, [with Inland Counties Legal Services, in San Bernardino, Calif.,](2) who is handling a number of such cases, says "A huge percentage of notices of default and notices of trustee sales are legally questionable and probably void."

  • Since foreclosures in these nonjudicial states do not have to go through the courts, it is probable that abuses are common -- and hard to expose because homeowners have to file a lawsuit to get to a judge. Heck, the homeowner would need a sleuth better than Sherlock Holmes to find out who holds the interest in the mortgage.

Source: Requiem for MERS (and the Banks That Created the Frankenstein Monster).

(1) See American Banker: New Point of Foreclosure Contention: Default Notice.

(2) Inland Counties Legal Services provides free legal assistance for eligible low-income clients in case priority areas adopted by the firm's Boards of Directors.

Failure To Produce The Note No Problem, Says New Jersey Trial Court

In Bergen County, New Jersey, Mondaq News Alerts reports ("footnote 1" appears in the original text of the story):

  • In contrast to other recent well-publicized decisions, a New Jersey state court has held that, in order to seek foreclosure of a mortgage that has been securitized, a lender need not demonstrate actual physical possession of the note memorializing the underlying debt. In Bank of America, NA v. Alvarado, BER-F-47941-08 (N.J. Super. Ct. Ch. Div. Jan. 7, 2011), the court held that the plaintiff was entitled to summary judgment striking the borrower's answer, dismissing her counterclaim and entering default, even though the plaintiff's predecessor, which was the original lender, had lost the note before transferring its interests to the plaintiff. The court found that this result was compelled by the doctrines of equitable/common law assignment and unjust enrichment.

  • The Alvarado decision marks a departure from prior holdings over the past year in which courts throughout the nation have been unwilling to allow lenders to enforce their security interests absent a demonstration of actual physical possession of the note.(1)

For more, see New Jersey Court Rules That Lost Note Does Not Preclude Foreclosure (if link requires subscription, TRY HERE, then click appropriate link for the story).

See also Lexology: New Jersey court rules that lost note does not preclude foreclosure (requires paid subscription; if no subscription, TRY HERE, then click appropriate link for the story).

For the ruling see Bank of America, NA v. Alvarado, BER-F-47941-08 (N.J. Super. Ct. Ch. Div. Jan. 7, 2011) (when this link expires, TRY HERE).

(1) Bank of New York v. Raftogianis, ____ N.J. Super. _____, ATL-F-7356-09, 2010 N.J. Super. LEXIS 221 (N.J. Super. Ct. Ch. Div. Jun. 29, 2010), the court dismissed the plaintiff's complaint, without prejudice, upon a determination after trial that the plaintiff could not prove it had possession of the note at the time the complaint was filed. In In re Kemp, Case No. 08-18700-JHW, Adversary No. 08-2448, 2010 Bankr. LEXIS 4085 (Bankr. D.N.J. Nov. 16, 2010), the court expunged the creditor's proof of claim in a bankruptcy adversary proceeding where the creditor never received possession of the original note from the originating lender.