Saturday, February 12, 2011

City Steps In, Coughs Up $250K To Rebuild Seven Backyards Gobbled Up By 'Rogue' Canal As Evacuated Townhouse Residents Get Green Light To Return Home

In Sunrise, Florida, WFOR-TV Channel 4 reports:

  • A handful of residents in a Sunrise community are rejoicing tonight. Nearly 8 weeks after being evacuated from their homes when part of their backyards collapsed into a canal, repairs are completed at Spring Tree Cove West and residents are able to return home.


  • A total of seven townhouses were evacuated and declared unsafe. For weeks, residents didn’t know if the homes sustained significant damage and when or if they’d be able to return home.


  • There is debate over who owns the land — Broward County or the Spring Tree Cove West homeowner’s association. While that is sorted out, the city of Sunrise spent $250,000 to repair the canal bank with rock, sand, dirt and soil. The city plans to put up fencing in the backyard. Each home had to be certified as safe by a structural engineer before the city would allow residents to move back in.


  • I’m ecstatic that the city responded in such a forceful way,” said Mayor Mike Ryan. “Our entire effort is getting in touch with the residents and celebrating getting them back in their homes. It proves that government can do things right occasionally.”

For the story, see Evacuated Sunrise Residents Allowed Back Home.

Indiana Man Dies During Foreclosure Eviction; Six Hour Police Standoff Begins With Gunshots, Ends In Flames

In Winchester, Indiana, The Star Press reports:

  • Authorities have identified the man who died in a police standoff Monday night that ended in fire. The man was William T. Stein, 54, 2251 N. Randolph County Road 350-E, according to Randolph County Coroner Duane Petry. Authorities, however, aren’t yet certain exactly how Stein died and are awaiting an autopsy report from forensic pathologist Paul Mellen at Ball Memorial Hospital.

  • Sheriff’s deputies were called to Stein’s home Monday afternoon to stand by while a bank representative changed the locks on the house, which was in foreclosure proceedings. When deputies knocked on the front door, two gunshots were fired through the door from the inside, missing the deputies.

  • The resulting standoff lasted six hours, until police heard two more gunshots from inside the house; the house then caught fire. Police believe Stein started the fire.

Source: Fatal Randolph County standoff suspect ID'd.

76-Year Old Woman Slams Sheriff's Office With $500K Claim After Botched Foreclosure Eviction Targeted Wrong Home

In Hillside, New Jersey, reports:

  • A 76-year-old Hillside woman has filed a claim for damages against Union County, alleging that officers of the county sheriff’s department illegally entered her home and removed the entire contents because they had the wrong address of a foreclosure.

  • In the document, obtained by Tina Renna of The County Watchers, Ozzie Leak claims that Union County Sheriff Ralph Froelich’s officers entered her home on Nov. 3, 2010 and removed the household contents. Leak is seeking $500,000. She charges that the sheriff’s officers destroyed property, including items of sentimental value, caused emotional distress and mental anguish and left her unable to provide housing for family.

For more, see Sheriff’s Officers Accused Of Emptying Wrong Home In Botched Foreclosure.

Group Cops Guilty Pleas In Debt Collection Racket; Used Phony Law Enforcement Claims To Strong-Arm $6.7M+ From 1000+ Victims Around The Country

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

  • U.S. Attorney William J. Hochul, Jr. announced [] that Timothy E. Arent, 38, of Buffalo, New York, pleaded guilty [...] to mail fraud and tax evasion charges. The charges carry a maximum penalty 25 years in prison and a $500,000 fine.

  • Assistant U.S. Attorney MaryEllen Kresse, who is handling the case, stated that from October 2006 through October 2009, Arent and his partner, Neil G. Wieczkowski, engaged in a fraudulent debt collection scheme. The two illegally purchased debtor information from two former employees of Capital Management Services, a Buffalo debt collection business, and thereafter used the information to coerce the victims into paying fictitious debt.

  • These former employees, Thomas Rice and Andrew Jon Pytlewski, have pleaded guilty to stealing the debtor information and are awaiting sentencing in February 2011. Neil Wieczkowski, meanwhile, pleaded guilty to mail fraud and tax evasion on January 7, 2011 and will be sentenced in April 2011.

  • Regarding defendant Arent, the Government’s evidence revealed that Arent claimed to be a law enforcement officer with the ability to arrest the victims if they did not immediately make a substantial payment on the alleged debt owed.

  • During a three year period, Arent and Wieczkowski received approximately $6.8 million in checks written by over 1,000 victims from across the country. The scheme netted Arent almost $5.7 million which he used to pay the mortgage and remodeling costs on a $500,000 West Ferry mansion, pay the salaries of co-defendant Wieczkowski, a full time handy man, and a full time housekeeper, and to purchase such luxury items as antiques, furniture, jewelry, furs, artwork, high end vehicles, vacations and an in-ground pool.

For the U.S Attorney press release, see Fourth Person Convicted In Illegal Debt Collection Scheme.

For an earlier press release on this racket, see Debt Collector Pleads Guilty To Mail Fraud And Tax Evasion.

Low Income Tenants Find Themselves Stuck In Legal Cracks Of Mess Left By Private Equity Slumlords; Clueless Investors Wash Their Hands Of Bad Bets

In The Bronx, New York, The Huffington Post reports:

  • First, a heating pipe broke in the adjacent apartment, sending a powerful blast of steam into his home along with an unrelenting stench. Then, chunks of the ceiling started falling into his bathroom, and black mold began creeping up the walls. Cockroaches thrived in the suddenly tropical apartment. In December, mice popped up from the gaps between the walls and the baseboards.

  • But each time Sergio Cuevas sought the attention of the landlord, hoping to arrest the deterioration of his apartment in the Bronx, he got nowhere. It was like the management company had ceased to exist.

  • This was not the result of another derelict slumlord, but rather an example of a lesser-explored aspect of the national foreclosure epidemic: Cuevas and some 400 other tenants living in ten apartment buildings in a working poor stretch of the Bronx have found themselves stuck in the legal cracks of the American real estate reckoning, their homes claimed by no one. When trouble arises, there is effectively no landlord to call.

  • The investors who bought their buildings at the height of the real estate bubble, hoping to flip them for quick profit or jack up stabilized rents, have washed their hands of a bad bet.

  • The bank that has initiated foreclosure says it does not yet have legal title, meaning it lacks responsibility. The court-appointed receiver who controls the property says he doesn't have enough money to attend to the burgeoning problems.

  • The scene here in the Bronx is emblematic of a growing national problem. In apartment buildings scattered in low-income neighborhoods from New York to Phoenix to San Francisco, families with scant resources and uncertain legal rights are literally watching their ceilings crumble and their floors collapse as they wait and hope for a resolution.

For more, see The Latest Victims Of The Foreclosure Crisis: Low-Income Apartment Renters.

Friday, February 11, 2011

Bank Rejects Full Price Short Sale Offer, Prefers To F'close Instead; Fannie, Loan Servicer Mum, Despite Homeowner-Signed Waiver Allowing Comment

In Vancouver, Washington, KATU-TV Channel 2 reports:

  • Stacy Baker fought for two years to sell her father’s house and to keep it from being auctioned off, but lost the fight even after her real estate agent said an offer was made to the bank that met its own conditions.


  • Baker’s real estate agent, Aaron Signor, first tried to sell the house for about what was owed, but at $179,000 it didn’t sell. Over the following months, they lowered the price and got an offer at $134,000. But Flagstar Bank, which services the mortgage on the house, rejected the offer, saying the house was worth $150,000.


  • But then just days before the Baker house was set to be auctioned off, Signore said he brought Flagstar a viable $150,000 non-FHA offer, which is just what Flagstar asked for. “Even the processor at the lender – Flagstar Bank – she thought, ‘Hey, you got an offer full price, we’ll get the foreclosure stopped; we’ll make it go away; we’ll have a sale.’ She calls me back and says, ‘sorry.’”

  • Signor was so confused, he began digging deeper and found the loan on the Baker house was held not by Flagstar but by Fannie Mae, which is another government-sponsored organization. It buys loans from banks with the goal of adding “stability to the housing and mortgage markets.” It’s that quasi-governmental enterprise that, along with Flagstar Bank, said, “No,” to allowing Stacy Baker to sell her father’s house. “Why would they foreclose on a home when they have exactly what they just said, “Yes,” to in their hand and opt to foreclose instead?” Signor asked.

  • Baker signed a waiver so Fannie Mae could speak to a reporter, but the organization still declined to do so, leaving the taxpayer wondering what is going on; instead, Amy Bonitatibus, spokeswoman for Fannie Mae, said in a statement: “Fannie Mae’s top priority is to keep borrowers in their homes. … Unfortunately, foreclosure is the only option when all other foreclosure alternatives have been considered and exhausted.”

  • Fannie Mae told a reporter to speak to Flagstar. The bank’s senior manager, John Matthews, said, “We as a bank would have no comment on a specific file with you. I appreciate your investigative efforts, but this matter would not be for public discussion.”

For the story, see Realtor, home seller baffled when bank rejects its own offer.

Novice Online Foreclosure Auction Buyer Wins Bid, Gets Soaked On Underwater Home Subject To Existing $220K Mortgage Lien

In Orange County, Florida, the Orlando Sentinel reports:

  • OK, maybe it was too easy. With just a few clicks of the mouse, Orlando accountant John Dey bought a Lake Nona-area house that was auctioned off during one of Orange County's new, online foreclosure auctions. And get this: In the kind of deal espoused by get-rich-quick authors, he paid just $20,000 for a house worth close to $200,000.

  • But as more than two dozen Florida counties have opened their foreclosure auctions in the past year to bidders from around the world via the Internet, inexperienced auction bidders such as Dey are learning the hard way that these troubled properties can be, well, troubled.

  • The houses may be embroiled in property-line disputes, riddled with ownership complications or saddled with outstanding debt. For Dey, it was a lesson that cost him $20,000 for a house he'll never really own.

  • The website, which Dey used to pursue the 6-year-old house, included warnings about the risks associated with foreclosure-auction properties. He noticed that only one other bidder was competing against him. But he and his wife, a real-estate agent, had researched the house and carefully read the legal documents that would grant them ownership should they win the auction.

  • "I said, 'This is great deal,' " said Dey, emphasizing that he is a certified public accountant. "They make it nice and easy to put a deposit down. They have the foreclosure judgment. I said, 'This is better than being at the courthouse steps, because you've got everything at your fingertips.' "

  • And, as he said, there was Clerk of the Court Lydia Gardner's smiling face planted on the auction website, in a way that seemed to sanction the online-bidding process. Still, Dey became increasingly nervous about the deal during the bidding. He weighed his lack of experience and decided to back out of the bidding as soon as the price hit $20,000. But by then it was too late. The other bidder opted out.

  • Immediately after the purchase, he went to the courthouse and plowed through the foreclosure case file for his new acquisition — only to learn that the house came with a $220,000 mortgage lien from Wells Fargo.

  • It was actually the North Shore at Lake Hart Homeowners Association that had foreclosed on the property, for more than $7,000 in legal and delinquency fees.


  • Dey said it was nice that the court system wanted to speed up and expand access to the auction process by moving it from a room inside the Orange County Courthouse to the Internet, but the site should be more bold about warning of the problems online investors may encounter.(1)

For the story, see Online foreclosure auctions: Proceed with care.

(1) While I'm all for protecting consumers in consumer transactions, there's a limit to how much protection you can smother people with. The incident described in this story illustrates, in my view, where the line of protection should be drawn. Buying a house at a foreclosure sale auction is not a consumer transaction. It's not even an investment transaction. It's a business transaction, and if one doesn't know anything about the business of buying property at a foreclosure sale auction, one should do himself/herself a favor and either pay the price and get an education on this business, or simply stay away. The title problem reported in this story with the existence of a prior lien is merely one of the myriad of nasty surprises that might await. If a screwed-over novice in this type of deal is searching for someone at whom the finger of blame can be pointed, looking into the nearest mirror will promptly conclude that search.

Illegal "Overthrow" Of "Hawaiian Kingdom" At Center Of Foreclosure Rescue 'Program' Peddled To State Homeowners; 300 'Believers' Take The Bait

In Honolulu, Hawaii, KITV-TV Channel 4 reports:

  • A legal argument based on the overthrow of the Hawaiian Kingdom, used unsuccessfully to fight foreclosures in the 1990s, is now being used once again, even though the man who promoted the theory 15 years ago was convicted of a felony.

  • David Keanu Sai is back in the public eye 11 years after being put on probation after telling people that they could walk away from mortgages because of the way the Kingdom of Hawaii was overthrown. Hundreds of people fighting foreclosure have invested in that claim again -- partly because Sai now has a University of Hawaii doctoral degree to back his argument.

  • Kale Gumapac, founder of Laulima LLC and Hawaiian Alliance LLC, advertises on Craigslist that he has a way to stop the foreclosure process. “It doesn't put the banks in trouble and it doesn't put the borrower in trouble,” Gumapac said. “And it's worked. That's what I am trying to tell the Legislature.”

  • Gumapac said he has about 300 paying customers he is helping attack the title of their properties. “They can only foreclose if the title is clear,” he said. The title attack is based on research by Windward Community College lecturer David Keanu Sai. He argues that the overthrow of Queen Liliuokalani and the violation of executive agreements between the Queen and the U.S. government mean that all land title issued in Hawaii since 1893 are illegal and mortgages null and void.

For more, see Foreclosures Face Sovereignty Claim (Company Using Title Challenge To Stop Foreclosures).

Sovereign Citizen Movement & "Paper Terrorism"

In Talledega County, Alabama, a recent story in The Daily Home contained this excerpt describing how those who subscribe to the Sovereign Citizen movement have been known to engage in "paper terrorism" and create chaos in the real estate title recording system:

  • According to Southern Poverty Law Center spokesman Mark Potok, sovereign citizens organizations [...] began proliferating in the 1990s. They are closely related to the common law courts movement, Potok said.

  • These people believe that the government controls them through the way they write their names and things along those lines,” he said. “They often practice what is referred to as ‘paper terrorism’ by filing liens on their enemies’ property, bizarre tax documents and Uniform Commercial Code forms that don’t really mean anything. The beliefs of the different sovereign groups vary, but a lot of them buy into the ‘redemption scam.’ They believe that if you file the correct documents, in the right order, with the right words you can redeem your ‘government account,’ which could be worth anywhere from $60,000 to $20 million. They believe government is inherently wicked, and that they have been enslaved, but if they spell their names with colons and dashes and file the right paperwork they can be set free. Of course, all of that is nonsense. Their beliefs have no foundation in any law at all, let alone the laws of the United States.”

  • In addition to harassing their enemies with bogus liens and fake court documents, some sovereign citizens also have been involved in stealing houses by filing pseudo-legal documents on foreclosed houses. Copies of these fake documents are frequently pasted onto the windows of these houses, Potok said.

For the story, see 2 arrested on felony warrants from South Carolina.

Go here for other posts on rackets involving so-called sovereign claims.

Thursday, February 10, 2011

Employee At Alleged Loan Servicing Racket Says She Was Duped Into Helping Duo Hijack House Payments From Unwitting Borrowers

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:

  • Two men accused of scamming homeowners out of thousands of dollars are under arrest. Now, a co-worker who says she helped bring down the fraudulent scheme also says she had no idea she was helping rip people off.

  • The woman, who asked to be called "Stephanie", says she helped investigators arrest the two men accused of running Great Western Business Services. Authorities arrested 49-year-old Joseph Yorkus and 48-year-old James Bartczak for allegedly running the scam. "I feel the worst for these people that got scammed, and I feel bad that I was a part of it, even though I didn't know about it. I feel bad, because I was the one who actually did it," Stephanie said. "I feel really bad for the homeowners, because now the ones who did have their checks cashed, they're late on their mortgages." "I honestly have nothing to do with any kind of scam, except that I fell for their B.S.," she said.

  • Great Western Business Services is accused of crafting transfer-of-service letters and sending them to an unknown number of valley residents. The letter instructed homeowners to stop making mortgage payments to Bank of America and start sending payments to Great Western.

For more, see Two People Arrested for Alleged Mortgage Scam.

Sacramento Feds Score Another Guilty Plea In Ongoing Probe Into Foreclosure Sale Bid-Rigging Rackets

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

  • A real estate executive pleaded guilty [Friday] in U.S. District Court in Sacramento, California, to conspiring to rig bids and commit mail fraud at public real estate foreclosure auctions held in San Joaquin County, California, [...].

  • Richard W. Northcutt pleaded guilty to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County. The primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at non-competitive prices, the department said in court papers.

  • According to the court documents, after the conspirators' designated bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay. The conspirator who bid the highest amount at the end of the private auction won the property. The 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. According to his plea agreement, Northcutt participated in the scheme from September 2008 until October 2009.

  • To date, including Northcutt, four individuals have pleaded guilty in U.S. District Court for the Eastern District of California in connection with this investigation. On April 16, 2010, Anthony B. Ghio pleaded guilty to participating in a conspiracy to rig bids at public foreclosure auctions held in San Joaquin County. On June 24, 2010, John R. Vanzetti and Theodore B. Hutz also pleaded guilty in Sacramento to participating in the conspiracy.(1)

For the U.S. Attorney press release, see California Real Estate Executive Pleads Guilty to Bid Rigging at Public Foreclosure Auctions.

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

(1) Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division's San Francisco Office at 415-436-6660 or visit, the U.S. Attorney's Office for the Eastern District of California at 916-554-2700, or the FBI's Sacramento Division at 916-481-9110.

BofA Backpeddles On Post-Foreclosure Eviction Threat After Being Hit By Local Media Spotlight

In Stone Mountain, Georgia, WXIA-TV Channel 11 reports:

  • [Homeowner Paulette] Davenport says she got a call from Bank of America saying that the foreclosure was a mistake -- then just a few days another call saying it wasn't an error and the bank had already foreclosed. It wasn't long before the Sheriff showed up. She tried to get some answers.

  • "I have called and spoken to many different people at Bank of America. They all tell me it's too late, 'Call me back in two weeks.' I would spend hours on the phone. They keep transferring me to different places, different numbers, continuously. No help, nothing," Davenport said.

  • What was Paulette Davenport to do? Her 16-year-old son, Travis Davenport, took over and sent the 11Alive Help Desk an e-mail. [...] After 11Alive's Bill Liss contacted Bank of America, the bank withdrew the eviction order. They said that Davenport and her family will stay in the house as the bank sorts through months of paperwork. "I just want to keep my home for me and my family," she said.

  • That's the next goal for 11Alive's Help Desk on behalf of Davenport -- getting Bank of America to rescind the foreclosure once and for all, and modify the loan.(1)

For the story, see Getting an Eviction Lifted for an Army Vet in Foreclosure.

(1) What we apparently have here is the operation of what columnist Joe Nocera referred to in a recent New York Times' story (see Shamed Into Altering a Mortgage) as the Heisenberg Journalism Principle: the process of reporting a story can sometimes affect the behavior of those being reported on (a 'parallel' of the Heisenberg Uncertainty Principle in physics).

Defaults On Reverse Mortgages Spike As Elderly Fail to Keep Up With Property Tax, Homeowner's Insurance Payments

The Orlando Sentinel reports:

  • Thousands of older homeowners in Florida who tapped the equity in their paid-off homes to boost their income now face the possibility of foreclosure as the number of defaults on such "reverse mortgages" skyrockets.

  • More than 30,000 U.S. homeowners are in "technical default" on their reverse mortgages and could lose their homes because they have failed to pay their property taxes or property-insurance premiums, according to a new research report based on the latest government data.

For more, see Seniors find dark side to reverse mortgages (Growing reverse-mortgage defaults put homeowners at risk of foreclosure).

Fed Reverses Course On Proposal That Would Have Pulled Rug Out From Under Homeowners Invoking TILA To Undo Bad Mortgage Loans

Reuters reports:

  • The Federal Reserve said on Tuesday it is backing away from a final rule impacting home foreclosures after consumer advocates said the reform would remove incentives to modify troubled loans. The Fed said it will instead leave the issue for the new Consumer Financial Protection Bureau.

  • The Fed proposal would have made changes to the process where a borrower can seek to cancel a mortgage that violates disclosure requirements under a truth-in-lending law [Federal Truth in Lending Act, or "TILA"]. Under the current system, a borrower has up to three years to take a lender to court seeking to cancel a loan, through a process known as rescission, by showing that required disclosures about the terms of a loan were not provided when it was signed.

  • Once the loan is canceled, a borrower then has to pay off the principal, but can deduct from the total the amount that would have been paid in interest and other fees.

  • Lawmakers and consumer advocates charge the Fed proposal would make a key timing change requiring the borrower to pay off the loan before it is canceled.

  • In practice, groups opposing the rule change argue, struggling homeowners would lose leverage to renegotiate their loans because they would have to pay off the principal before a lender relinquishes their interest in the property.

For the story, see Fed leaves truth-in-lending rule to consumer agency.

Wednesday, February 9, 2011

Wisconsin Appeals Court: Affidavits Not Based On "Personal Knowledge" Sink Lender's Attempt To Score Summary Judgment In Foreclosure Action

A Wisconsin intermediate appeals court recently reached the relatively unremarkable, predictable, and certainly non-ground-breaking conclusion that affidavits filed by a foreclosing lender that are not based on the "personal knowledge" of the affiant are insufficient to establish a basis for summary judgment.

What does merit note is that, in reaching its ruling, it reversed the decision of Jefferson County Circuit Court Judge Jacqueline R. Erwin, the lower court judge who apparently didn't have a problem with these obviously flawed affidavits in deciding to allow the foreclosure to go forward. Unlike the vast majority of cases, the homeowner/couple here exercised their right to have an appellate court review, a right that most homeowners in foreclosure are either unaware of, or lack the wherewithal to pursue.

From the ruling (footnotes contained in the original text, bold text is my emphasis):

  • ¶ 13 The Bank submitted two affidavits to support its motion for summary judgment: one by an attorney for the Bank, and one by an agent for BAC Home Loans Servicing, L.P., f/k/a Countrywide Home Loans Servicing, L.P.

    ¶ 14 The attorney averred that Diane Cano executed a note secured by a mortgage on her property in July 2006; that an assignment of the mortgage to the Bank was recorded in June 2007; and that the Canos had failed to make the January 2007 and subsequent mortgage payments, leading the Bank to file this foreclosure action in April 2007. The attorney attached the following documents to his affidavit: the mortgage assignment; a statement of the Canos' mortgage payment history for September 2006 to May 2009 generated by Bank of America Home Loans on June 2, 2009, and indicating that the Canos' last mortgage payment was for December 2006; and a notice of default and acceleration Countrywide sent to Diane Cano in February 2007.

    ¶ 15 The BAC agent averred that he had access to the financial records for the Canos' mortgage; that Diane Cano executed a mortgage to Mortgage Electronic Registration Systems, Inc., acting as nominee for S&L Investment Lending, Inc.; and that the Canos had failed to make their January 2007 and subsequent mortgage payments. The agent did not attach any documents to his affidavit.

    ¶ 16 We conclude that the Bank's affidavits do not establish a prima facie case for summary judgment. Affidavits supporting a summary judgment motion must be based on personal knowledge and "set forth such evidentiary facts as would be admissible in evidence."
    [4] WIS. STAT. § 802.08(3). Nothing in the attorney's affidavit indicates that the attorney's averments as to the Canos' payment history are based on personal knowledge. To the extent that the affidavit relies on the attached payment history with Bank of America, we conclude that the affidavit does not set forth the facts necessary to establish a prima facie case that the bank's purported payment history would be admissible at trial.

    ¶ 17 As we explained in Palisades, an affidavit must establish a prima facie case that attached payment statements are admissible evidence under an exception to the hearsay rule to support a motion for summary judgment. See
    Palisades, 324 Wis. 2d 180, ¶ 11 & n.3; WIS. STAT. § 908.01(3) (defining "hearsay" as "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted") and § 908.02 (hearsay generally inadmissible). Here, the only arguably applicable exception to the hearsay rule is the exception for business records under WIS. STAT. § 908.03(6) (records "made at or near the time by, or from information transmitted by, a person with knowledge, all in the course of a regularly conducted activity, as shown by the testimony of the custodian or other qualified witness" are not excluded by hearsay rule). Thus, for the statement of the Canos' payments to support a motion for summary judgment, the affidavit must establish that the affiant "is qualified to testify that: (1) the records were made at or near the time by, or from information transmitted by, a person with knowledge; and (2) this was done in the course of a regularly conducted activity." Palisades, 324 Wis. 2d 180, ¶ 15. The attorney's affidavit contains no such averments.

    ¶ 18 The BAC agent's affidavit is similarly flawed. The agent avers that his knowledge of the Canos' default on their mortgage is based on his access to the financial records for the Canos' mortgage, yet no financial documents are attached to the affidavit. Even if we assume the BAC agent is referring to the statement attached to the attorney's affidavit, the agent's affidavit fails to set forth the necessary facts to establish a prima facie case for the admissibility of the statement. The agent's affidavit does not contain any facts to show that the agent is qualified to testify that the statement generated by Bank of America on June 2, 2009, was "made at or near the time by, or from information transmitted by, a person with knowledge," or that "this was done in the course of a regularly conducted activity."
    [5] Id. We conclude that the Bank has not established a prima facie case for summary judgment.[6] Accordingly, we reverse and remand for further proceedings.

For the ruling, see Bank of New York v. Cano, No. 2010AP477 (Ct. of App. Dist. 4, January 20, 2011) (unpublished) (go here for the "Google Scholar" version).

Tanking R/E Market, Fla Appeals Court Leave Ex-Hubby Holding The Bag On Marital Split-Up Deal After Failing To Complete Buyout Of Wife's Share Of Home

The following facts are taken from a recent ruling from a Florida appeals court:

  • For reasons unspecified in the ruling, Husband (hereinafter referred to as "Hubby") & Wife are desirous of terminating a presumably unsatisfactory, unfulfilling marriage.

  • The couple own a home with an approximate fair market value set at $950K, with an approximate mortgage balance of $603K.

  • On August 8, 2008, the couple enter into a split-up agreement where, among other things, Hubby agrees to cough up $185K (with minor adjustments) to pay Wife in exchange for her entire share of the marital home, and further agrees to refinance the existing mortgage.

  • Wife agrees to deed her share of the marital home to Hubby, and escrows a deed to him for that purpose, subject to Hubby following through with his end of the bargain.

  • The object of the deal, according to the court, was "(1) to bring about an unconditional payment of $185,000 to the former wife; (2) achieve an ownership transfer of the property to the former husband; and (3) relieve the former wife of any further financial responsibility for the property contemporaneously with the transfer."

So far, so good. Pretty standard stuff. Buy her out and send her on her way. Then:

  • Shortly after August 8, 2008, according to the court, "the Florida real estate market entered into one of its periodic downward adjustments, for which it has become famous since the time of the Great Depression."

  • Because of this apparently forseen "downward adjustment" in the real estate market, Hubby decides to stiff Wife out of the entire $185K pile of cash he promised to fork over and 'forgets' to refinance the home to take her off the hook on the existing mortgage as promised.

  • Instead, Hubby unilaterally tries to list the house for sale with a Realtor, but Wife, who still lived in the home with the couple's minor child, refused to cooperate, according to Hubby.

  • Rather than amicably cooperate with Hubby, Wife opted to file a motion for contempt and enforcement of the buyout deal, specifically for the coughing-up of the $185,000 pile of cash she was expecting to pocket (and, at least psychologically, possibly may have already spent, maybe with a new boyfriend) and the refinancing of the house.

  • Hubby then attempts to wiggle his way out of the deal, telling the trial judge that, because of the recent "downward adjustment" in the real estate market, he has not been able to refinance the marital home solely under his name and thus has not been able to pay the cash owed Wife pursuant to his deal with her.

  • An apparently sympathetic trial judge essentially tells Hubby "'OK, my friend, you're off the hook & out of the deal!" - finding that there was (in these exact words) "an impossibility of performance due to changes in the economy" in declaring the deal void.

  • Possibly in view of Wife's alleged lack of coperation with Hubby, the trial judge turns to Wife, who is still in the home with the couple's minor child, and proceeds to hammer her by giving her the boot, ordering the property be appraised and that it immediately be listed for sale with the net proceeds split between her & Hubby.

  • Wife then responds, possibly by telling the judge, "No Way, Honey! - I got a binding contract with that miserable, good-for-nothing 'snake' and I won't let him slither out of it - I Shall Appeal!!!"

  • If, in fact, she responded in this manner, she was certainly true to her word - she proceeded to file a timely appeal.

In short, the Florida appeals court agreed with Wife, reversing the first-class shtupping-over the trial judge imposed upon her. The three-judge panel possibly may have then turned to Hubby, smiled at him, and said (although not necessarily in these exact words), "Not so fast, Buster. That was a nice try, but guess what? You're back on the hook!"

For the appeals court's ruling, and its reasoning, see Ferguson v. Ferguson, No. 3D10-479 (Fla. App. 3d DCA, February 2, 2011).

State Regulator Seeks $50K Fine Against Suspected Las Vegas Loan Modification Racket For Allegedly Playing Fast & Loose With Clients' Trust Funds

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

  • The state is seeking to levy a $50,000 fine against a Las Vegas couple in the foreclosure and loan modification business, accusing them of mishandling their clients’ money. The state Division of Mortgage Lending has filed a complaint to revoke the license of Jeff and Gail Strum, operators of US Loan Modification Services, [...].


  • Under a 2009 law, [foreclosure] consultants are allowed to collect their fees up front and install them in a trust account. They were authorized to take the money out as they performed the service. An examination of the business found the money the Strums collected wasn't placed in a trust fund in a licensed bank or credit union as required by law. They also failed to keep records for each homeowner. The couple is accused of co-mingling these funds and using the money for their personal affairs without an explanation of how it was spent.(1)

For the story, see State seeks $50,000 fine against Las Vegas couple in loan business.

(1) If the allegations are true, this duo should consider themselves lucky that criminal prosecutors aren't breathing down their necks, charging them with the crime of misapplication of entrusted funds/theft by misapplication (or some similar-sounding charge), which happens to be a felony in many places. See, e.g., Former Laywer is Sentenced for Forgery, Contempt of Court and Misapplication of Entrusted Funds, where, among other things, two settlement checks ($24,998.17; $7,500.00) belonging to clients of a now-disbarred New Jersey attorney (who practiced law for 30+ years) somehow found their way into the latter's personal bank account, as opposed to his trust account (in violation of New Jersey Supreme Court Rules) which resulted in the exposure of those funds to a substantial risk of loss.

Buffalo Feds: Rogue Housing Counselor For Local Non-Profit Agency Ripped Off $200K From Dozens Needing Help Fighting Foreclosure

In Buffalo, New York, The Buffalo News reports:

  • A woman hired to help struggling Western New Yorkers save their homes from foreclosure has been accused of lying and stealing their money so she could gamble at local casinos. Lori J. Macakanja, 35, of Dunkirk, was fired last year as a housing counselor for HomeFront Inc., a not-for-profit agency on Delaware Avenue in Buffalo.

  • The U.S. Attorney's Office claims Macakanja stole about $200,000 from about 100 clients who went to the agency for help in fighting foreclosures. She was charged Friday with felony counts of mail fraud and falsifying documents.


  • Officials at HomeFront dismissed Macakanja and cooperated with the investigation after learning of the crimes, and none of the agency's other employees have been accused of wrongdoing, authorities said. Brian M. Cacciotti, CEO of HomeFront, told The Buffalo News on Friday that Macakanja's actions were totally out of step with the agency's procedures and its mission. "These were the willful acts of a rogue employee," Cacciotti said. "Our mission is to help people."

For more, see Fired housing counselor charged in scam (Accused of diverting funds meant for averting foreclosure to own uses, including gambling).

Foreclosure Mills Resist Franklin County Court Orders To Personally Certify Authenticity, Accuracy Of Filed Documents

In Franklin County, Ohio, The Columbus Dispatch reports:

  • In response to a national outcry over fraudulent foreclosure filings, three Franklin County judges are requiring lawyers to verify that all of the documents in residential-foreclosure actions are valid.

  • Six of the lawyers affected by the order are fighting back. They have asked the Ohio Supreme Court to prohibit the judges from requiring them to sign "certifications" on behalf of their clients. The dispute could slow the processing of some foreclosure cases.


  • [County Pleas Judge Guy] Reece said there are alternatives for lawyers who don't want to sign the certification. "They have the option of showing up in court, having a hearing and producing the evidence," he said.


  • The controversy was driven in part by the revelation that some law firms and major lenders were using so-called "robo-signers" to complete affidavits on foreclosures without reading the documents or verifying ownership of the mortgages' notes.


  • In October, The Dispatch examined the files of more than 130 people whose houses were slated for auction and identified at least 55 whose foreclosure cases contained mistakes, omissions of crucial evidence or questionable affidavits.


  • The judges told the lawyers that they must "personally certify the authenticity and accuracy of all documents" in support of a residential-foreclosure filing. If a lawyer doesn't comply, the judge will not grant a motion for default or summary judgment, but will instead schedule the case for trial. That could delay a case for as long as a year.

For more, see Local judges get tough on foreclosure documents.

Tuesday, February 8, 2011

Foreclosure Mill Sleaze Continues; Bank Lawyers Look To Dodge Dubious Document Problem By Duping Trial Judges w/ Legal Maneuver That Doesn't Exist

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

  • Scores of Palm Beach County homes were foreclosed on with faulty paperwork that banks are now trying to sidestep with a legal maneuver experts say doesn't even exist.

  • A Palm Beach Post review of court documents filed after last fall's robo-signing scandal found 116 Palm Beach County cases in which attorneys for banks have asked a judge to ratify a final foreclosure judgment even though flawed documents "may" have been used to foreclose on the property.

  • Nearly half of the homes - 48 percent - have been sold at foreclosure auction. Tampa-based Florida Default Law Group, being investigated by the state attorney general, filed all of those foreclosures. All but three of the homes auctioned were seized based on documents signed by Jeffrey Stephan, a renowned robo-signer.

  • They were spotted because lawyers filed "motions to ratify" the final foreclosure judgment - an unheard-of request apparently aimed at getting judges to uphold the original case, the amounts owed to the bank, and attorney fees. A judge's blessing on the back end could discourage challenges to ownership and title down the road.

  • Also, the motions could be intended to stave off complaints that the attorneys knew about robo-signed and forged documents but proceeded with foreclosures anyway. "They are trying to avoid a lot of big problems with those ratifications, including suits for malpractice, but it should not work," said Sarasota attorney Henry Trawick, an expert on Florida's judicial rules and author of Trawick's Florida Practice & Procedure.(1) "You can't ratify a final judgment that was based on fraud."


  • Palm Beach County Chief Judge Peter Blanc agreed there is no such thing in law as ratifying a foreclosure judgment. But an Orange County judge in September granted a motion to ratify a judgment and the sale of the home, which occurred at auction nearly a year earlier.

For more, see Lenders compound court errors.

(1) Henry P. Trawick, Jr. has been an attorney for more than 50 years, whose respected treatises cover Florida practice and procedure and the law of wills and estates. Trawick’s books are widely used by Florida lawyers and judges, and over the years he has become known in the state as “the dean of rules.”

Two Pinched In Real Estate Ripoff Targeting Haitian Immigrants Who Unwittingly Signed Over Title To Homes In Equity Stripping Refinancing Scam

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

  • Police allege two Delray Beach-based real estate brokers swindled unknowing Haitian immigrants, many of whom were financially naive or with language barriers, and some even illiterate. The two men are alleged to have created fake property transactions and mortgages in the homeowners' names, then let the properties fall into foreclosure, costing legitimate lending institutions millions of dollars, police said.

  • Alex Byron Little, 36, of suburban West Palm Beach, and Jean Pedro Jean Baptiste, 50, of Port St. Lucie, were booked into the Palm Beach County Jail Tuesday. Each is charged with four counts of fraud of at least $50,000, and one count of white collar crime against the elderly of at least $50,000.


  • According to the Delray Beach Police report, the two, along with Boca Raton title attorney Stephen Beyer, ripped off at least six separate individuals or couples in 16 fraudulent mortgage transactions on nine properties in the Delray Beach, Boynton Beach and Royal Palm Beach areas.(1)

  • The fake mortgages total $3.58 million. "All the properties purchased (or) refinanced by the duped clients fell into foreclosure," [Delray Beach detective Casey] Thume wrote in the report.


  • In case after case, the report alleged, Little and Jean Baptiste forged signatures of homeowners, some of whom couldn't read or write, or rushed owners into signing documents without reading them, and then notarized them. In one case, Baptiste signed a man's name eight months after he died, the report said.

  • People who believed they were getting new mortgages actually were unknowingly selling their homes to others, some of them relatives and friends of Jean Baptiste and Little. In one case, a woman had to bring a check to a closing to cover shortfalls, the report said.

For the story, see 2 Delray Beach-based real estate brokers accused of swindling Haitian immigrants.

(1) According to the story, Beyer, the closing attorney, has at least temporarily dodged a bullet as the Palm Beach County State Attorney has opted not to charge him, founder and president of First National Title Co. in Boca Raton and a licensed attorney in Florida since 1971. According to the police report, Beyer told police he closed about 100 real estate deals for Jean Baptiste between 2003 and 2007 but that most were conducted in Creole and he had believed all of them were legitimate, the story states. "There's insufficient evidence to proceed against him at this time," Assistant State Attorney Angela Miller, head of the office's white collar crime division, reportedly said. Beyer reportedly is still licensed and in good standing, and the bar is not investigating him, Florida Bar spokeswoman Karen Kirksey said.

Don't be surprised if one or both of the suspects, in an attempt to save their own asses, decide to belly up to the prosecutor's office, throw Beyer 'under the bus', and implicate him in this alleged racket in an obvious and not uncommon attempt by suspects to shave some time off any possible prison sentence by dragging everyone else involved down into the mud with them.

Further, don't be surprised if the victims of the alleged scam look to The Florida Bar's Clients' Security Fund, Florida's attorney ripoff reimbursement fund, in an attempt to recoup reimbursement for some of their losses, to the extent it is determined that Beyer either new or should have known what was going on, regardless of whether criminal charges are brought against him.

For similar funds established to reimburse clients who have suffered a loss due to the dishonest conduct of attorneys in other states and Canada, see:

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

While the alleged victims are at it, they should also seek possible recovery resulting from the conduct of the two Florida real estate brokers as well from the Florida Real Estate Recovery Fund, which provides reimbursement for eligible claims for losses up to $50,000 per claim due to the escapades of Florida real estate licensees. However, a victim has to first sue the broker in court, obtain a money judgment, and then, to the extent the victim can't satisfy the money judgment from the broker's assets, a claim can be made to the recovery fund for the unrecovered portion of the judgment (the preferred practice is to file a claim with the recovery fund within the 2-year time limitation for such claims, pending the obtaining of a money judgment in court). Further, "Payments for claims based upon judgments against any one broker or sales associate may not exceed, in the aggregate, $150,000." F.S. 475.484(4). For more information on the Florida Real Estate Recovery Fund, see:

Maryland Foreclosure Rescue Operator Gets 27 Months In Sale Leaseback Equity Stripping Ripoff; Feds Estimate Losses At Between $1M To $2.5M

From the Office of the U.S. Attorney (Baltimore, Maryland):

  • U.S. District Judge J. Frederick Motz sentenced James William Fox II, age 40, of Crofton, Maryland [last week] to 27 months in prison, followed by three years of supervised release, for conspiracy to commit wire fraud in connection with a mortgage fraud scheme which he promised to help homeowners facing foreclosure keep their homes, but left them with no equity and no longer holding the title to their properties.

  • At [last week]’s sentencing hearing Judge Motz also ordered that Fox pay restitution in the full amount of the loss, which the government contends is between $1 million and $2.5 million.

For the U.S. Attorney press release, see Crofton Loan Officer Sentenced to 27 Months in Prison in Mortgage Fraud Scheme.

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

Requiring Borrower To Escrow Deed In Lieu Of Foreclosure As Precondition To Getting Mortgage Loan An Illegal Title Clogging, Says Maryland High Court

In a recent court ruling, the Maryland Court of Appeals, the state's highest court, concluded that:

  • A deed in lieu of foreclosure executed as a precondition to originating a loan, before any default on the loan occurs, is not valid under Maryland law, because it clogs a borrower’s equity of redemption.(1)

In reaching this conclusion, the Maryland high court vacated an earlier decision from a Montgomery County Circuit Court judge who, despite the fact that this type of scam has been found to be illegal going back centuries, didn't seem to think there was anything wrong with this ripoff.

For the 28-page ruling (which may provide some insight to those attorneys using civil lawsuits to fight equity stripping, foreclosure rescue rackets), see C. Phillip Johnson Full Gospel Ministries, Inc. v. Investors Financial Services, LLC, No. 115, ___ Md. ___ (January 28, 2011).

(1) The court, in footnote 8 of the ruling, provides a handy description and background on the anti-clogging/clogging of the equities doctrine, which begins as follows (bold text is my emphasis, not in the original text):

  • The term “clogging” is widely used to describe various schemes to strip a mortgagor’s right to redeem her equity in the event of a foreclosure. The doctrine against “clogging” the so-called equity of redemption arose in the English Courts of Chancery, as an attempt to ameliorate the harsh result that obtained in the law courts in medieval England, before the concept of a mortgage had evolved. Before the adoption of the “anti-clogging” doctrine, a landowner wishing to borrow while pledging his land as security would deed the land outright to his creditor, in exchange for a stated sum of money, subject to the condition that if the landowner (borrower) repaid the creditor on a future specified day (called “law day”), title would revert to the borrower. If for any reason (even if he could not find the creditor) the borrower failed to pay on “law day,” he forfeited his title, regardless of whether the debt owed bore any reasonable relation to the value of the land.

(Editor's Note: While this case did not involve a sale leaseback, equity stripping foreclosure rescue ripoff, attorneys using civil lawsuits to fight these rackets on behalf of victimized homeowners may be well-advised to at least consider asserting a claim that this type of scam is void in that it is nothing more than a prohibited scheme/clog employed to circumvent the centuries-old "anti-clogging" rule.)

For a discussion on the clogging of the equities doctrine, see John C. Murray:

No Rescue For Philly Couple After Dealings With Local Foreclosure Rescue, Sale Leaseback Peddler End In $180K Home Equity Fleecing

In Philadelphia, Pennsylvania, The Philadelphia Inquirer recently ran a story of the plight of a local couple who, finding themselves in a financial pinch, made the ill-advised decision to turn to local foreclosure rescue operator Anthony J. DeMarco III and his outfit, DeMarco REI, to refinance their home through what allegedly ended up being a sale leaseback ripoff that took the couple for $180,000. DeMarco's alleged racket is described in this excerpt:

  • [T]he U.S. attorney in Philadelphia alleged in an indictment last month, DeMarco kept that money [$180K], as well as proceeds from the sales of at least 113 additional houses in a foreclosure-rescue scheme that netted him $11 million.

  • The scheme operated from mid-2006 into 2009, but most of the $31 million in new, fraudulent mortgages from 19 banks, including three that were subsequently closed by the Federal Deposit Insurance Corp. (FDIC), were obtained in 2007 and 2008, when banks were in the jaws of a fierce financial crisis sparked by sloppy mortgage lending.

  • The U.S. Attorney's Office, as part of its civil lawsuit against DeMarco REI, plans to set up a mediation program between the original homeowners and the new lenders to help as many of DeMarco's victims as possible regain ownership, though some may have lost their houses anyway. A federal court hearing on the matter is scheduled for Wednesday in Philadelphia.

For the story, see Rescue scheme called a fraud (U.S.: DeMarco REI took $11 million from homeowners).

For the U.S. Attorney (Philadelphia) press release announcing their actions against DeMarco and others, see Charges & Civil Complaint Filed In Foreclosure Rescue Scheme (Civil Complaint Seeks Help For Scam Victims Facing Foreclosure).

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

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

Monday, February 7, 2011

Washington State Foreclosure Trustee Slammed For $98K+ Damages For "Extreme & Outrageous" Conduct In Jerking Around Financially Strapped Homeowner

A Federal Court of Appeals recently affirmed two lower court rulings slamming foreclosure trustee Jeff E. Jared for over $98,000 in damages for committing the tort of outrage in connection with his conduct in jerking around delinquent borrower/homeowner John P. Keahey when carrying his duties related to the Washington State public sale process.

From the ruling (footnotes appearing in the original text omitted; bold text is my emphasis; other emphasis and alterations are contained in the original text):

I. “Extreme and OutrageousConduct

  • The tort of outrage requires the proof of three elements: (1) extreme and outrageous conduct, (2) intentional or reckless infliction of emotional distress, and (3) actual result to the plaintiff of severe emotional distress. See Kloepfel v. Bokor, 66 P.3d 630, 632 (Wash. 2003) (en banc).

    Jared contends that the first element was not established. He does not contest the underlying factual findings of the bankruptcy court, but argues that those facts do not support the court’s finding that Jared’s conduct was “extreme and outrageous.” We reject his contention.

    The bankruptcy court based its finding of outrageousness on numerous misdeeds committed by Jared in the attempted foreclosure proceedings, including the following:

    Jared “had no idea how to conduct a non-judicial foreclosure sale[,] . . . did just about everything wrong,” and “signaled to Mr. Keahey with each and every communication that Mr. Keahey would never be able to keep his house.”

    Jared stipulated to having breached his fiduciary duty to Keahey as a trustee under Washington’s Deed of Trust Act (the “DOTA”). See Wash. Rev. Code Ann. §§ 61.24.010(4).

    Although “there was no . . . interest due under the note,” Jared demanded a 10 percent interest charge, amounting at first to $36,000—a “huge amount[] to people like Keahey.” He likewise demanded payment for incorrect and excessive property tax, insurance, and utility charges.

    Jared arranged for the foreclosure sale to take place in the parking lot of his condominium, rather than a public place, as required by the DOTA. Jared later testified that he opted for the parking lot because he “was going to personalize it, make it nice for the bidders, . . . [to] boutiquify it.”

    Even “[w]hen the claimed defaults were cured, Mr. Jared immediately claimed new defaults entitling him to restart the foreclosure process and charge additional fees and costs for his own benefit.” By continually and unjustifiably varying the amount of debt owed, he unjustly prevented Keahey from exercising the right to cure for a period of three years

    On this record, we conclude that “reasonable minds (such as the one exercised by the trial judge) could conclude that, in light of the severity and context of the conduct, [the defendant’s conduct] was beyond all possible bounds of decency, . . . atrocious and utterly intolerable in a civilized community.” Robel v. Roundup Corp., 59 P.3d 611, 620 (Wash. 2002) (emphasis original) (internal quotation marks and citations omitted). We therefore affirm the finding of outrageousness.

For the ruling, see Jared v. Keahey (in re Keahey), No. 09-60000 (9th Cir., Jan. 31, 2011) (unpublished).

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

Federal Judge OKs Trial For MD Man Seeking Damages After Being Victimized By Rogue Refinancing Leading To Foreclosure Despite Never Missing A Payment

In Baltimore, Maryland, The Baltimore Sun reports:

  • After years of crushing defeats and frustration, a Baltimore federal judge's ruling is giving new hope to a Columbia taxi owner who lost his house to foreclosure despite never missing a mortgage payment.

  • U.S. District Judge Richard D. Bennett ruled Monday that Kwaku Atta Poku, a Ghanian immigrant who lost his Columbia home to foreclosure in 2005 and was evicted the next year, is entitled to a trial on his allegations that his 2001 refinancing loan was mishandled because his first mortgage was never paid off by the bank that gave him a new loan.

  • "Thank God. Finally, somebody …" Atta Poku said when a reporter told him Tuesday about the judge's ruling. "I'm hoping something good will come out of that." A win in court later this year could help him recover financially; Atta Poku is seeking up to $34 million in damages and compensation.

For more, see Man who never missed a mortgage payment but lost home gets a trial (Atta Poku's first mortgage wasn't properly paid off after refinancing).

Illinois Appeals Court Disregards Real Estate Deal Structured As Sale Leaseback w/ Repurchase Option; Says Arrangement Constitutes Equitable Mortgage

An Illinois appeals court recently upheld a Cook County trial court ruling that, given the facts of the case, a sale of a home, coupled with a contemporaneous leaseback and option to repurchase was not to be treated as an absolute sale, but rather, the transactions taken together were recharacterized by the court as an equitable mortgage.(1)

In addition to the 'standard' characteristics of these types of deals where a homeowner gets screwed over, one notable point was that the lack of a formal written leaseback agreement or option to repurchase was not fatal to the court's finding that the deal constituted an equitable mortgage under Illinois law. The homeowner gave uncontradicted testimony that the leaseback and repurchase option concepts were discussed by the two operators structuring the deal, and that it was proposed that one of them would draw up papers for those purposes, but no document was executed at closing for those purposes.

In determining that an equitable mortgage existed, the court made reference to the existing case law that it applied in the following excerpt:

  • In determining whether a constructive, or equitable mortgage exists our courts consider several factors, including:

    ‘ the existence of an indebtedness, the close relationship of the parties, prior unsuccessful attempts for loans, the circumstances surrounding the transaction, the disparity of the situations of the parties, the lack of legal assistance, the unusual type of sale, the inadequacy of consideration, the way the consideration was paid, the retention of written evidence of the debt, the belief that the debt remains unpaid, an agreement to repurchase, and the continued exercise of ownership privileges and responsibilities by the seller [Citations.]’

    Robinson v. Builders Supply & Lumber Co., 223 Ill. App. 3d 1007, 1014 (1991), quoting McGill v. Biggs, 105 Ill. App. 3d 706, 708 (1982).

    The parties’ intentions are the key consideration and proof of these factors “must be clear, satisfactory and convincing” if they are to overcome a written instrument. Robinson v. Builders Supply & Lumber Co., 223 Ill. App. 3d at 1014. However, “it is not necessary that there be no conflict in the evidence presented.” Silas v. Robinson, 131 Ill. App. 3d 1058, 1062 (1985).

Among the factors that swayed the court in finding that the deal constituted an equitable mortgage was the disparity between the sale price and the value of the property. The deal, as structured, provided for a sale by the homeowner to the first purchaser for a price of $90,000 with a contemporaneous leaseback. Shortly therafter, the first purchaser sold the premises, subject to the homeowner's continued occupancy, to a subsequent purchaser for a contract price of $170,000.

As a result of the court's ruling, the deed to the first purchaser was deemed to be an equitable mortgage. Further, the deed by the first purchaser conveying title to the subsequent purchaser (the home remained occupied by the screwed-over homeowner throughout the entire relevant period - and who was still in occupancy as of the date of this ruling), and the mortgage obtained by the subsequent purchaser were both voided by reason of the fact that the subsequent purchaser was not entitled to bona fide purchaser protection.(2)

For the ruling, see Gandy v. Kimbrough, No. 1-10-0424 (Ill. Ct. App. 1st Dist. 3d Div., December 22, 2010) (when link expires, TRY HERE).

Representing the screwed-over homeowner was attorney Gilbert Liss, Chicago, IL.

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

(1) See generally:

(2) According to the ruling, the subsequent purchaser simply made a brief conclusory argument that she conducted a diligent inquiry and was a bona fide purchaser, which the court found insufficient and constituted a waiver of this argument, and which it briefly addressed in this excerpt:

  • As noted above, Kimbrough has failed to provide adequate citation to the record or analysis of case law to provide any cogent argument with respect to her claim that she was a bona fide purchaser. “ ‘[A] reviewing court is entitled to have the issues on appeal clearly defined with pertinent authority cited and a cohesive legal argument presented. The appellate court is not a depository in which the appellant may dump the burden of argument and research.’ ” In re Marriage of Auriemma, 271 Ill. App. 3d 68, 72 (1995), quoting Thrall Manufacturing Co. v. Lindquist, 145 Ill. App. 3d 712, 719 (1986). Supreme Court Rule 341(h)(7) requires a clear statement of contentions with supporting citation of authorities and pages of the record relied on. 210 Ill. 2d R. 341(h)(7). Ill-defined and insufficiently presented issues that do not satisfy the rule are considered waived. Express Valet, Inc. v. City of Chicago, 373 Ill. App. 3d 838, 855 (2007). We will not sift through the record or complete legal research to find support for this issue.

(The foregoing should serve as a reminder that it's not enough to go into court and simply raise issues without the appropriate support, leaving it to the judge to figure out.)

It should be noted that, even though the court threw out the bona fide purchaser claim/defense on the grounds that issue was deemed waived by the subsequent purchaser, the weight of authority in Illinois case law appears to support the proposition that the open and visible possession of the home by the homeowner in this case places the subsequent purchaser, as well as any lender financing the purchase, on notice of any rights or equities she (the homeowner) may be able to establish, and upon said establishment, those rights or equities would have priority over any subsequently-acquired interests of others. See:

Life Savings & Loan Association v. Bryant, 125 Ill. App. 3d 1012, 467 N.E.2d 277 (1st Dist. 1984) [bold text is my emphasis; not in original text]:

  • Illinois courts have uniformly held that the actual occupation of land is equivalent to the recording of the instrument under which the occupant claims interest in the property. (Bullard v. Turner (1934), 357 Ill. 279, 192 N.E. 223; Beals v. Cryer (1981), 99 Ill. App. 3d 842, 426 N.E.2d 253). The open and visible possession of land by the equitable owner is sufficient to charge a mortgagee with notice of the rights of such owner, and the mortgagee will take subject to the rights of the person in possession. Williams v. Spitzer (1903), 203 Ill. 505, 68 N.E. 49.

Fidelity Trust & Savings Bank v. Williams (1936), 285 Ill. App. 131, 1 N.E.2d 739 (addressing the issue of whether the retention of possession by the grantor of property after it is conveyed constitutes notice of the grantor of his or her interest in the property, and to those claiming under the grantee, under Illinois law) [bold text is my emphasis; not in original text]:

  • The rule of law which seems to control in a like situation is that the retention of possession by the grantor of the property conveyed is notice of his or her interest in the property, and to those claiming under the grantee, and such rule is laid down in the case of Ford v. Marcall, 107 Ill. 136, wherein the court said: "The law is, as this court has declared in White v. White, 89 Ill. 460, that when the grantor of real estate remains in possession, all persons acquiring title from the grantee are chargeable with notice of all the claims of the grantor."

    This rule was followed and approved in the case of Ronan v. Bluhm, 173 Ill. 277, where the court said: "It is proper we should remark, in answer to the discussion upon the point, that as it is conceded by all parties that the said Thomas Ronan did not deliver possession of the premises in question to the grantee, Carbine, but remained in the open and exclusive occupancy thereof, appellee, Bluhm, is deemed, as matter of law, to have taken the conveyance from Carbine with full notice of all the rights and equities of said Ronan in the premises. Illinois Central Railroad Co. v. McCullough, 59 Ill. 166; White v. White, 89 id. 460; Ford v. Marcall, 107 id. 136." It is to be noted from what the court said in this opinion that Bluhm was deemed as a matter of law to have taken the conveyance from Carbine, the grantee of Ronan, with full notice as to all the rights and equities of Ronan in the premises.

    This rule has been passed upon by the courts of this State, and the law is again discussed and approved in the case of Rock Island & Peoria Ry. Co. v. Dimick, 144 Ill. 628. The court in this opinion said: "The law is well settled in this State, as generally elsewhere, when not changed by the recording acts, that open and exclusive possession of lands, under an apparent claim of ownership, is notice to those subsequently dealing with the title of whatever interest the possessor has in the premises, whether the interest be legal or equitable in its nature. Wade on Notice, sec. 273; Davis v. Hopkins, 15 Ill. 519; Truesdale v. Ford, 37 Ill. 210; Smith v. Jackson's Heirs, 76 Ill. 254; Partridge v. Chapman, 81 Ill. 137. It has been held also in this State, that if the grantor remains in possession after conveyance, purchasers from the grantee are affected with notice of the grantor's rights in the land. White v. White, 89 Ill. 460; Ford v. Marcall, 107 id. 136."

    In the case of Porter v. Clark, 23 Ill. App. 567, this rule was also approved, and in discussing the subject matter of the litigation, the court there stated what we regard as pertinent in its application to the instant case. This statement is: "If Porter, knowing as he did that Clark was in possession, had gone to him and inquired as to his rights, he would undoubtedly have been told that the purchase money had not been paid, and that he, Clark, claimed a vendor's lien on the land."

For more on the applicability of the bona fide purchaser doctrine in Illinois in similar situations, see:

For other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Use Of Voluntary Dismissal To Dodge Scrutiny After Failed Attempt To Dupe Court By Producing, Filing Dubious Docs At Issue In Recent Foreclosure Suit

In West Palm Beach, Florida, the South Florida Sun Sentinel reports:

  • A South Florida homeowner who is fighting a mortgage foreclosure could end up reshaping state law. An appeals court on Wednesday asked the Florida Supreme Court to consider Roman Pino's case as a matter of "great public importance," a move legal experts say could result in reforms in foreclosure cases where there is evidence of fraud in the way documents were handled by lenders, mortgage servicers and law firms.(1)


  • If the case is taken up by the Supreme Court and results in a decision in favor of the homeowner, legal experts who specialize in foreclosure law say the case has the potential to affect thousands of foreclosures across the state where there are allegations of document fraud.


  • Pino hired Royal Palm Beach attorney Thomas Ice, whose law firm has been at the forefront of uncovering forged and fraudulent foreclosure documents. The bank alleged in its foreclosure complaint that it was the owner of the mortgage note through an assignment from another lender, but didn't include the assignment as part of the foreclosure complaint, according to the appellate decision. Ice's attorneys moved to dismiss the complaint, arguing that the bank needed the assignment in order to foreclose.

  • Then the bank's attorney, from the law offices of David J. Stern in Plantation, filed an amended complaint and attached an assignment that had not been recorded in land records and "which happened to be dated just before the original pleading was filed," the appeals court wrote.

  • Ice wanted to try to prove Pino was the victim of fraud, but the judge would not allow him to go forward because the bank voluntarily dropped the foreclosure action. The appeals court agreed with the judge, but because of the importance of the issue, sent the case to the state's highest court in Tallahassee. One appellate judge, Gary Farmer, disagreed, saying he thought the trial judge could have kept the case open so Ice could pursue his claim of fraud.(2)

  • Ice said Wednesday that the bank dismissed the foreclosure just as his attorneys were set to take depositions of Stern employees to discover how the assignment was created. Stern's firm is one of four foreclosure law firms in the state under investigation by the Florida Attorney General's Office for document fabrication.

  • The case illustrates a problem that is playing out in cases around the state, where problematic documents are discovered, and the foreclosure is dismissed only to be later refiled with different documents, Ice said.

  • That is what happened to Pino. The bank refiled the foreclosure in August 2009, and that case is now going forward. "This seems to be a prevalent problem in foreclosures," Ice said. "That is why [the appellate judges] want the Florida Supreme Court to rule on it. This is going to be significant to thousands of cases across the state."

For the story, see Case involving alleged foreclosure fraud headed to Florida Supreme Court.

For the Florida appeals court ruling, see Pino v. The Bank of New York Mellon, 4D10-378 (Fla. App. 4th DCA, February 2, 2011) (en banc).

(1) Although the 12-member appeals court, in a 9-1 ruling (with one recusal and one retirement (Judge Farmer) subsequent to the hearing and prior to the issuance of the ruling) affirmed a lower court ruling in favor of the foreclosure mill, it obviously felt that it should be the state Supreme Court that should take a long, hard look at this issue and make the ultimate decision as to how to proceed when dealing with the dubious practices engaged in by foreclosure mills. In this regard, the court majority observed:

  • We conclude that this is a question of great public importance, as many, many mortgage foreclosures appear tainted with suspect documents. The defendant has requested a denial of the equitable right to foreclose the mortgage at all. If this is an available remedy as a sanction after a voluntary dismissal, it may dramatically affect the mortgage foreclosure crisis in this State.

(2) In support of the homeowner's position in this case, the following excerpt gives a taste of the vigorous, six-page dissent originally authored by the since-retired Judge Gary Farmer (concurred with and formally filed by Judge Mark E. Polen) (bold text is my emphasis):

  • This issue is one of unusual prominence and importance. Recently, the Supreme Court promulgated changes to a rule of procedure made necessary by the current wave of mortgage foreclosure litigation. See In re Amendments to Rules of Civil Procedure, 44 So. 3d 555 (Fla. 2010). In approving one amendment, the court pointedly explained:

    [R]ule 1.110(b) is amended to require verification of mortgage foreclosure complaints involving residential real property. The primary purposes of this amendment are (1) to provide incentive for the plaintiff to appropriately investigate and verify its ownership of the note or right to enforce the note and ensure that the allegations in the complaint are accurate; (2) to conserve judicial resources that are currently being wasted on inappropriately pleaded ‘lost note’ counts and inconsistent allegations; (3) to prevent the wasting of judicial resources and harm to defendants resulting from suits brought by plaintiffs not entitled to enforce the note; and (4) to give trial courts greater authority to sanction plaintiffs who make false allegations.” [e.s.]

    44 So. 3d at 556. I think this rule change adds significant authority for the court system to take appropriate action when there has been, as here, a colorable showing of false or fraudulent evidence. We read this rule change as an important refutation of BNY Mellon’s lack of jurisdiction argument to avoid dealing with the issue founded on inapt procedural arcana.

    Decision-making in our courts depends on genuine, reliable evidence. The system cannot tolerate even an attempted use of fraudulent documents and false evidence in our courts. The judicial branch long ago recognized its responsibility to deal with, and punish, the attempted use of false and fraudulent evidence. When such an attempt has been colorably raised by a party, courts must be most vigilant to address the issue and pursue it to a resolution.

I suspect that this dissent may be the now-retired Judge Farmer's 'going-away' present to the citizens of Florida (usually, it's the guy going away who gets, not gives, the 'going-away' presents); it was his way to prod the state Supreme Court into hearing this case and help kick-start their analysis of the issues. If the Florida Supreme Court takes this case and ultimately reverses, don't be surprised if this Judge Farmer-authored, Judge Polen-filed dissent is incorporated, either in whole or in part, into the state high court's analysis. (Kudos to Judge Polen for going on the record and acknowledging the fine work of his now-retired colleague when filing the dissent).

NJ Appeals Court Boots Rubber Stamped Foreclosure Judgment; Says Bank "Failed To Meet Burden To Establish Bona Fides Of Alleged Assignment"

The following facts are taken from a recent ruling by the New Jersey intermediate appeals court (footnote 1 below is a footnote appearing in the court ruling):

  1. Bank filed a foreclosure action against homeowners.
  2. Homeowners filed a response, which was accepted as an answer and challenged, among other things, the bona fides of a later assignment of the mortgage.
  3. In response, Bank filed a motion for summary judgment, but the judge denied relief pending further information regarding the assignment.
  4. Thereafter, Bank filed a supplemental affidavit, executed by Janine Timmons, a manager of Washington Mutual Bank, attesting to the accuracy of facts "based on our computerized business records maintained in the ordinary course."
  5. She claimed that the note and mortgage had been executed by homeowner on December 14, 2006, and the note and mortgage had been sold to Bank on January 16, 2007; moreover, an assignment of mortgage was executed on October 31, 2007, two weeks after the filing of the foreclosure complaint on October 18, 2007.(1)
  6. After receiving the supplemental affidavit, the motion judge struck homeowners' answer and permitted the foreclosure matter to proceed by default.
  7. Thereafter, a judgment was entered, and this appeal followed.

In reversing the ruling of the motion judge and booting the case back to the trial court for further proceedings, the New Jersey appellate court expressed these concerns (bold text is my emphasis):

  • The affidavit makes reference to unidentified computerized business records supporting the verification of the facts attested to, but nothing more is set forth regarding the records other than that conclusory statement.

    Recently, the Supreme Court reiterated the relevant factors that must be established by a proponent of documents pursuant to N.J.R.E. 803(c)(6). In New Jersey Div. of Youth and Fam. Servs. v. M.C. III, 201 N.J. 328 (2010), Justice Wallace, speaking for the Court, observed:

    Under the business records exception to the hearsay rule, a party seeking to admit a hearsay statement pursuant to this rule must demonstrate that "the writing [was] made in the regular course of business," the writing was "prepared within a short time of the act, condition or event being described," and "the source of the information and the method and circumstances of the preparation of the writing must justify allowing it into evidence." State v. Matulewicz, 101 N.J. 27, 29 (1985) (citation omitted). [(Id. at 347).]

    The affidavit submitted by Timmons falls far short of meeting this threshold showing. Nothing in her affidavit indicates any of the elements identified in either the rule or M.C.

    Additional considerations are cause for concern. N.J.R.E. 1002 mandates that, "To prove the content of a writing or photograph, the original writing or photograph is required except as otherwise provided in these rules or by statute." Here, reference is made to computerized records, yet the record before the trial court or on appeal is devoid of any copies of such records to support the attestations of Timmons. See N.J.R.E. 1001(c) and Fed. Ev. Rule 1001(c) (requiring "original" computer data in the form of printouts or other readable output). Most important, no discovery was permitted to defendants. In such instance, plaintiff should not be allowed to "cut corners" to avoid meeting its burden.

    We are satisfied that plaintiff failed to meet its burden to establish the bona fides of the alleged assignment to permit plaintiff to proceed on its foreclosure complaint. We take particular note of the fact that plaintiff has not responded to the appeal so that we are unable to have the benefit of its position on the issues raised by defendants.

For the ruling, see Deutsche Bank National Trust Co. v. Wilson, Docket No. A-1384-09T1 (App. Div., January 19, 2011).

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

(1) The assignment was executed by an individual identified as Laura Hescott who signed the assignment as an assistant vice-president of Washington Mutual Bank. Ms. Hescott has been identified as an employee of Lender Processing Services, Inc. ("LPS"), a servicer of default mortgages. The bona fides of the practices of this service provider have been the subject of increased judicial scrutiny. See, e.g., In re Taylor, 407 B.R. 618, 623 (Bankr. E.D. Pa. 2009).

The Supreme Court has recognized that "[s]erious questions have surfaced about the accuracy of documents submitted to courts by lenders and service-providers in support of foreclosure requests." Administrative order 01-2010, 202 N.J.L.J. 1110 (December 27, 2010). The practice of signing and filing documents without any personal knowledge of the information, also known as "robo-signing," implicates the "overriding concern about the integrity of the judicial process." Id. at 1111. The order provides that "lenders and service providers who have filed more than 200 residential foreclosure actions in 2010 are required, within 45 days, to demonstrate the reliability and accuracy of documents and other submissions to the court in foreclosure proceedings." Ibid. On remand, to the extent the order is applicable to plaintiff, plaintiff shall comply with its terms.