Saturday, February 19, 2011

Lawsuit: Daddy Duped Me Into Deeding Him My Home!

In New York City, the New York Post reports:

  • Maurice Cohn, who ran Cohmad Securities, a Bernie Madoff-linked investment firm, has been sued by his daughter for allegedly duping her into signing over her house to a trust he controlled, The Post has learned. "It's ironic," said Jersey lawyer Todd Conn, who represents Karen L. Cohn, "but this guy, to use a legal term, is one of the nastiest f---s I've ever met. He's a tyrant. He blames everyone else for everything, including Bernie Madoff."

Source: Madoff pal sued by kin.

Florida HOAs Pick Up Pace On Lien Foreclosures; Reach Workouts With Unit Owners Seeking Payment Plans While Booting The Deadbeats

In Broward County, Florida, The Miami Herald reports:

  • It’s not only lenders who are clogging the courts with foreclosures. Leaders at condo and homeowners associations say they have been forced to foreclose; many have then rented out the property. They need cash to pay for maintaining common areas and providing services.

  • For years, many community associations rarely foreclosed. But that changed when the real estate crisis swept throughout South Florida more than three years ago and the rate of unpaid maintenance fees grew dramatically.


  • Don Urquhart and other association leaders routinely start foreclosure proceedings if owners don’t arrange to pay delinquent dues. Urquhart and other association leaders, however, say they will work with owners who try to catch up. “We will extend them time. It’s been a win-win,” Urquhart says. “We have avoided legal costs and they got back on their feet.”

  • Association leaders, though, have to remain tough against those who won’t try to pay, he adds. The reason is simple: Someone has to pay to keep the lights on, the grass mowed. Urquhart’s association has already imposed a special assessment on the owners who have been paying – to cover for those who aren’t.

  • Now some associations are even trying to beat banks to the courthouse to foreclose first on properties owned by deadbeat owners. The upside: They can get months – if not a year or two – of rent before the banks formally foreclose.

For more, see Homeowner associations step up foreclosure filings (Strapped for money to pay for property maintenance, many associations are foreclosing on owners who don’t pay fees, then renting the units to bring in cash).

Lawsuit: Contractor Pocketed Cash & Failed To Complete Crappy Job; Homeowner: Forced To Pay Extra To Stiffed Subs To Avoid, Release Mechanics' Liens

In Galveston, Texas, The Southeast Texas Record reports:

  • A Harris County man claims that an incomplete construction project at his Galveston residence cost him $40,000 in economic and consequential damages, recent court documents say. Mark T. Adlam filed suit against contractor Michael Bomer, alleging Bomer failed to perform under and breached the contract both parties entered in December 2009.


  • Adlam faults the defendant for not finishing the task despite being fully paid for labor and materials. "The work was never completed, and much of the work that was performed was defective," the suit states. It insists that "the defendant failed to pay its vendors, and the plaintiff was forced to pay invoices to prevent or release liens on the property."

Source: Homeowner sues contractor for not finishing $40K project.

Houston Man Seeks TRO To Nix Demolition Order On Recently-Purchased Condemned House; Says He Sank Nearly All His Savings Into "Historic" Home

In Beaumont, Texas, The Southeast Texas Record reports:

  • Houston resident Aaron Conley has filed a request for a temporary restraining order to stop the city of Beaumont from demolishing a home "with historic roots" he recently acquired. [...] In his petition, Conley says he purchased the home, [...] in Beaumont, on Jan. 26 "to save it from demolition and to (restore) the home to its past historical roots."

  • The city had already condemned the structure and slated it for demolishment before Conley made the purchase. Conley says he's invested nearly all his savings into the home and will suffer immediate and irreparable injury unless the court issues an injunction against the city.

Source: Man seeks TRO to stop city from demolishing historic Beaumont home.

Sheriff's Deputies Make Meth Bust In Home Facing Foreclosure; Tenant, Two Others Face Multiple Charges

In Cornville, Arizona, The Daily Courier reports:

  • Yavapai County Sheriff's deputies arrested three people Sunday in Cornville on charges including possession of drug paraphernalia after they found methamphetamine, meth pipes and an improvised explosive device inside a home and a blue Chevy Blazer.

  • Deputies answered a call about a burglary in progress at a home [...] that neighbors knew was in foreclosure, and found Susan Quade, 48, of Cornville, Tana Elliott, 31, of Glendale, and Craig Gast, 49, of Phoenix getting ready to leave in the Blazer. Deputies then took them into custody, said Dwight D'Evelyn, spokesman for the Yavapai County Sheriff's Office.

  • When deputies called the homeowner, they learned that Quade was renting the home. Deputies found several meth pipes inside the home, and Quade told them she and her friends were getting ready to use meth when deputies arrived, D'Evelyn said.(1)

For the story, see Deputies arrest three after finding meth, explosive device.

See also The Arizona Republic: 3 arrested in Cornville after deputies find meth, explosive device.

(1) Hopefully for the current owner (or a new owner if the house is foreclosed), any property damage to the home that may have resulted by meth contamination is minimal, thereby possibly minimizing the cost of the necessary decontamination. See San Francisco Chronicle: Homes once used as meth labs can leave an invisible legacy.

Human Remains Found By Real Estate Investor In Recently-Purchased Foreclosed Home Believed To Be Former Owner Who Went Missing 15+ Years Ago

In Tate County, Mississippi, The Examiner reports:

  • Charlie Williams, 62, who lived in Senatobia, Mississippi disappeared over 15-years-ago, in August of 1995. His wife, children and grandchildren never knew what happened to him. Then two months ago, Charlie's wife passed away. The house went into foreclosure and was bought by an investor.

  • The investor hired construction workers to begin renovating the house and when the workers were tearing up the floor, they found remains in a hole in the floor at the front of the house. The Tate County Sheriff's Department was called.

  • "Right now we're in the process of trying to confirm the identity of this person," said Sheriff Brad Lance. Tamika Jackson believe that the bones are the remains of her uncle. The medical examiner will determine how Charlie died and will confirm the identity with DNA. Deputies talked with neighbors and they all remembered when Charlie went missing and have all came to the conclusion that the remains are of Charlie.

Source: Remains of man who went missing 15-years-ago found under his house.

Friday, February 18, 2011

Handyman Pinched For Allegedly Targeting Trusting 82-Year Old Woman In $490K Home Repair Ripoff

In Palm City, Florida, WTSP-TV Channel 10 reports:

  • Detectives with the Martin County Sheriff's Office arrested Harry B. Patterson [...] after an investigation revealed that between December 2007 and June 2009, Patterson was hired to perform work at the victim's home in Palm City, but ended up doing very little or none of the work, much of it having to be redone because it was deemed hazardous. Police say Patterson also billed the victim several times for the same invoices.

  • The victim told police that Patterson repeatedly came to her home suggesting work that her home needed done, and since she wasn't knowledgeable and he seemed to know what he was talking about, she trusted him to do the work and that it was needed. The victim said Patterson regularly brought over his wife and daughter to visit her and that she enjoyed the company and it made her feel more trusting of Patterson.

  • Investigators determined in one project to repair a seawall, replace insulation and remove mold, Patterson charged the victim more than $107,000 for $10 worth of cement patch and hour's work.

  • Patterson was charged with grand theft from a victim over the age of 65, which is a first-degree felony. If convicted, Patterson faces a possible 30 years in prison. Patterson was booked at the Martin County Jail and released on Thursday after posting $150,000 bond.

Source: POLICE: Contractor charged homeowner $107,000 for $10 seawall patch job.

Go here for the details of the allegations against Patterson in the police Complaint Affidavit.

Foreclosure Defense Grows As A 'Do-It-Yourself' Project

In Albuquerque, New Mexico, The New York Times reports:

  • In New Mexico, New York, Florida and the 20 other states where foreclosures require a judge’s approval, homeowners in default have traditionally surrendered their homes without ever coming to court to defend themselves. (In the 27 other states, including California, Nevada and Arizona, homeowners have a much harder time contesting a foreclosure even if they want to.)

  • That passivity has begun to recede. While many foreclosures are still unopposed, courts are seeing a sharp rise in cases where defendants show up representing themselves.


  • In New Mexico, this is where the hourlong workshops come in. [...] Young and old, solo and in couples, the homeowners in [director of the nonprofit Fair Lending Center Angelica] Anaya Allen’s class were all in breach, clutching special-delivery packages from their lenders announcing that the machinery was now engaged to evict them. They took notes, asked questions — is the courthouse the building on Fourth Street with the blue roof? — and were resolute if not quite eager for battle.


  • Louis McDonald, the chief judge for New Mexico’s 13th Judicial District, welcomes the influx of homeowners defending themselves, known as pro se defendants. “They really want to stay in their houses,” he said. “Some of them have fairly legitimate defenses.”

  • But the law grows more complex as the cases proceed, and foreclosure still looms for those who do not grasp its intricacies. “The system is failing those who can’t afford representation,” [Judge] McDonald said.

For the story, see Foreclosed Homeowners Go to Court on Their Own.

Foreclosed Home Buyers May Face Nasty Surprises

Attorney Richard Gaudreau writes in The Huffington Post:

  • Buyers of property at foreclosure are looking for a bargain, but that risk now must include the possibility that the title will be defective. One unsuspecting family purchased a home at foreclosure, intending to sell it to their daughter, only to have a title company question whether they acquired good title after they'd already invested $100,000 in renovations. (Nightmare in Land Court, Mass. L.J.)

  • In the wacky world of securitized mortgages, who owns the mortgage is a 'shell game' worthy of the most accomplished back-street hustler. How securitized mortgages caused the collapse of the American economy is an oft-told tale that needn't be repeated here. Suffice it to say that during the housing bubble lenders packaged thousands of mortgages together into each securitized trust, selling shares off to Wall Street investors much like selling shares of stock.

  • Since banks no longer intended to hold their own mortgages, the incentive to avoid 'bad mortgages' gave way to greed because these now would be someone else's problem.

For more, see Foreclosure Sale -- Buyer Beware!

(1) Richard Gaudreau is a consumer bankruptcy lawyer admitted to practice in New Hampshire and Massachusetts.

Beware Of Bank 'Steamrolling' Tactics When Buying REOs

Maine attorney Robert E. Danielson writes in The Portland Press Herald reports:

  • With a significant number of "repos" – or real estate being offered for sale by lenders who have recently foreclosed – potential buyers need to be aware of the risks inherent in purchasing such properties.

  • In addition to the typical due-diligence items, such as title, financing and inspection, repos are also subject to additional issues, such as whether the foreclosure was conducted properly; possession issues and third-party liens; warranty of title or lack thereof, and a seller-dictated process that is clearly one-sided.


  • Repo sellers who acquired title involuntarily (i.e., through foreclosure or by a deed in lieu of foreclosure) are usually unwilling to convey it by warranty deed since they do not wish to warrant title to a new buyer. Therefore, such a seller may make the sale conditional on the buyer's accepting a quitclaim or release deed.


  • In addition to the conveyance issues noted above, sellers frequently impose conditions in the purchase-and-sale agreement that severely limit the buyer's right to terminate the contract.

  • Repo sellers often require that the buyer use their form contract, which allows the seller to determine the type of title to be delivered (see above) and limits the scope of services the seller must perform.

  • Furthermore, many form contracts require that the buyer use the seller's title company to examine the title records and to accept the title insurance proffered by the company. It may seem obvious that this is not a good practice for the buyer, but with the pressure of the sale, the lure of a good price and the opportunity to close quickly, many buyers will be swayed to commit to a contract before realizing that they have few or no options if a title issue arises.

For the story, see Be prepared for the risks of 'repo' buy.

Cops Hunt Florida Man Facing Felonies For Allegedly Hijacking Possession Of Vacant Home In Foreclosure, Then Pocketing Rent From Unwitting Tenant

In Palm Bay, Florida, WFTV-TV Channel 9 reports:

  • A man is accused posing as a landlord and illegally renting properties that are in foreclosure, Palm Bay detectives said Monday. Detectives said they are searching for 50-year-old Dewey Moore, Jr. He faces felony charges involving burglary and grand theft. Judge David Silverman signed an arrest warrant last week that carries a $75,000 bond once served.

  • Investigators said that on January 25, the owner of a property on Yager Street called police to remove squatters living in the home, which is in foreclosure. When officers arrived at the home, they said the people inside produced a written contract, stating they have been renting the property since October 2010 from Moore, who said he was the landlord for the owners.

  • The residents also gave officers receipts, showing payments made directly to Moore every month since October. Investigators said the property owners did not know about Moore and did not authorize anyone to rent their vacant home.

  • "He basically broke into the home, changed the locks and posed as a landlord," District Detective Mark Fell said. "Fortunately, we have been able to work with the property owner and the victims who will be able to continue to rent the property pending the foreclosure."

  • Detectives believe Moore may have other properties in which he has illegally gained access to for the purpose of fraudulently renting. Anyone with information on Moore's location or with similar contact involving Moore should contact the Central Florida Crimeline at 1-800-423-TIPS.

Source: Cops: Fake Landlord Rented Out Foreclosed Homes.

Thursday, February 17, 2011

Pennsylvania Man Pinched In Alleged Foreclosure Rescue, Rent Skimming Ripoff; Home Seller Still Faces Loss Of Home, Unwitting Tenant/Family Faces Boot

In Jackson Township, Pennsylvania, WNEP-TV Channel 16 reports:

  • A businessman from the Stroudsburg area has been charged in a mortgage scheme. Investigators said he offered to help a couple who were losing their home to foreclosure but instead, he rented the property to someone else.
  • George Torres and his family came to the Poconos from New York for a better life. They moved into a home they were told they could rent then buy. Now the man who put them in the home is accused of scamming the family out of thousands of dollars. Torres, his wife, their children and extended family moved into the Jackson Township home last May.


  • [Torres said] Michael Price helped him find a place for him and his family to live. Now, Price has been arrested and accused of scamming Torres, the renter, and the couple who own the home.

  • Authorities said Price is the owner of "We All Win Real Estate Solution" in Stroudsburg. The business is not a licensed real estate agency or mortgage company. According to investigators, Price agreed to buy the home at 300 Pennbrook Road that was facing foreclosure. He offered to pay the owners $140,000.00, but the owners never got any money.

  • Instead, Price leased the house to the Torres family and promised to help them buy it. The Torres' moved in, paid rent and soon after, a strange visitor appeared on their doorstep. "A few months later, a lady winds up at the door asking us who we were. I asked her why she's asking that and she says, 'I'm the owner of this house'," said Torres.

  • Now, the Torres have 10 days to move out of the house. "We wanted something great. We wanted a nice home. We put all our money into it, now we have nothing," said Torres.(1)

  • Newswatch 16 contacted the homeowner, but she has no comment. The home in Monroe County is still in foreclosure and scheduled for a Sheriff's sale in November. Investigators now say they are expecting more possible victims to step forward.

For the story, see Man Accused in Real Estate Scam in Poconos.

(1) See Pocono Record: Stroudsburg businessman charged in mortgage solution scam:

  • Torres gave [real estate agent Gayle] Dimas a total of $5,250 in prepayments, which he was told were a deposit plus the first and last months' rent and which was then deposited into Price's personal PNC Bank accounts. After moving into the house, Torres and [Ivonne] Davila spent $26,000 of their own money in property repairs with the understanding that We All Win would help them gain property ownership.

Pair Pays "Significant" Restitution To 'Buy Out' Of Prison Time For Using Fraudulently Obtained Mortgage Loan To Steal Senior Couple's Home Equity

From the Office of the Nevada Attorney General:

  • District Court Judge Linda Bell sentenced Thomas F. Gentile, age 56, to six months in the Clark County Detention Center in connection with an equity skimming case. Gentile, who conspired with Justin Sabo to defraud a local couple of the equity in their home, pled guilty to one count of Theft –Obtaining Money in Excess of $2500.

  • The charges stemmed from the group’s involvement in a scheme to fraudulently obtain a mortgage loan against a property owned by Gentile’s former employer without his knowledge or consent. The victims are both over the age of 60.

  • Gentile was sentenced to serve a term of 24 to 120 months in the Nevada State Prison for his part in the scheme. The sentence was suspended but Gentile was ordered to spend the first six months in county jail.(1) "It is appropriate that an individual who took advantage of an elderly couple in such a egregious fashion is being brought to justice," said Attorney General Masto.

  • Gentile’s co-defendant was given probation for his part in the crime as well. He avoided jail by paying a significant amount of restitution to the victims which included the homeowners and the hard money lenders who provided the money for the loan. The restitution order mandates that the defendants repay the costs and attorney fees incurred by the victims in their civil case filed to clear the title to the property.

For the Nevada AG press release, see Local Man Incarcerated In Connection With Mortgage Scam Against Senior Citizens.

(1) Compared to spending time in state prison, being sentenced to county jail instead is not that much worse than a kid being kept after school for detention (unless it's at Rikers' Island).

Chase Coughs Up The Cash, Dodges Possible Asset Seizure After Paying Homeowner's Legal Fees In Illegal Foreclosure Case

A recent Bloomberg story reported that JP Morgan Chase may have been facing an asset seizure for court-ordered legal fees owed to El Paso, Texas attorney Richard Roman for work he did in successfully representing a local homeowner who had her home foreclosed out from under her despite having a temporary restraining order in effect (see JPMorgan Faces Texas Sheriff in Showdown Over Eviction Case Fees).

In a follow-up to that story, El Paso Inc. reports:

  • On Friday, Roman was notified by the Sheriff’s Department that Chase – or someone – had paid his $5,000 fee by cashier’s check. “They sent it to the Sheriff’s Department, but we won’t get it for another three weeks,” he said.

For the El Paso Inc. story, which also reports on the background story that led to the local court ordering payment of the attorney fee, see Foreclosure nightmare (Homeowner fights big banks and eviction).

AJC Shines More Light On Fulton County Tax Lien Inflating Rackets; Investors Who May Not Be Responsible Players An Important Public Policy Concern

In Fulton County, Georgia, The Atlanta Journal Constitution reports:

  • Companies that buy Fulton County liens for unpaid property taxes themselves owe hundreds of thousands of dollars in overdue property taxes, calling into question the county’s justification for selling the liens: that it saves taxpayers’ money.

  • Fulton County government’s practice of allowing private companies to collect delinquent taxes is controversial and barred by almost every other Georgia county and by 30 states, largely because of its potential to victimize property owners.

  • But a closer look at the industry by The Atlanta Journal-Constitution raises questions about the lien purchasing companies and about Fulton’s defense of the practice. Fulton tax officials declined to be interviewed for this story, but have said in the past that selling liens to private companies helps them collect a higher percentage of overdue tax bills.

  • Experts such as Frank Alexander, a law professor at Emory University who specializes in real estate and foreclosure law, question the practice. “The important public policy point is that the purchaser of the tax liens and properties at tax sale are not necessarily responsible players, and they may actually contribute to the problem,” Alexander said. “We are selling to these [companies] governmental power to collect tax liens and the question is, are these players who we want exercising this power?” Alexander said.

  • Fulton County routinely sells tax liens to private third parties who can pump up the lien value by tacking on monthly interest charges and use foreclosure to collect the debt.


  • [F]or an article published in December, the AJC talked to Fulton property owners who, because of failings of the system, didn’t discover they owed overdue taxes until their homes were in foreclosure and they owed thousands of dollars to settle relatively small tax bills.(1)

  • There’s a built-in incentive for the private lien purchasers to draw out the already complex process, because they make more money: The companies can continue adding fees and interest to the costs a property owner will have to pay to settle the debt.(2)

For more, see Private firms collecting back Fulton taxes fall behind (Controversial practice not allowed in most places).

(1) See Private Investors Score Big Profits In Tax Lien Ripoffs As County Process Allows For One Homeowner's $291 Delinquent Tax Bill To Grow To $8,200.

(2) For similar "tax lien-inflating" rackets reportedly going on elsewhere, see:

Wednesday, February 16, 2011

Sacramento Feds Squeeze Guilty Plea In Upfront Fee 'Rescue' Ripoff That Peddled Phony Foreclosure Defense Legal Services

In Fresno, California, Central Valley Business Times reports:

  • George Eggleston has pleaded guilty Friday in Fresno federal court to running a mortgage foreclosure rescue scheme, says U.S. Attorney Benjamin Wagner. Mr. Eggleston also agreed to the forfeiture of property and proceeds obtained as a result of such violations, including a personal money judgment in the amount of $364,899. He entered the guilty pleas to three counts of wire fraud and one count of mail fraud.

  • According to court documents, Mr. Eggleston, a Las Vegas, Nev., resident, targeted property owners who were facing foreclosure and offered to rescue them. Using the business names of Nexxus and Global Legal Associates, he advertised on his website and also got referrals from others individuals who marketed his services.

  • Mr. Eggleston induced property owners to enter into a contract called the “Nexxus Engagement,” the terms of which required property owners to sign an “Offer and Agreement” and pay Nexxus a monthly fee of $1,000 for 60 months. The terms of this agreement also required the clients to sign a power of attorney giving Nexxus authority to negotiate with lenders and file lawsuits on their behalf.

  • He admitted that he told his clients that by using and managing attorneys, Nexxus and Global Legal Associates could negotiate with lenders and file lawsuits against lenders thereby stopping the foreclosure action. But he did not provide the services, did not manage attorneys, and did not stop foreclosure actions. Instead, he used the money from the clients for his personal expenses.

For the story, see Guilty plea in foreclosure rescue scheme (Promised legal help to stop foreclosures, but used clients’ money for his own expenses).

San Diego Prosecutions Of Local Foreclosure Rescue Ripoff Group Concludes As Mastermind Gets Six Years In Sale Leaseback, Rent Skimming Scam

In San Diego, California, KFMB Radio 760 AM reports:

  • The ringleader of a scheme in which Filipino homeowners struggling to make mortgage payments were urged to transfer property titles into a bogus trust was ordered Thursday to spend six years in prison and make restitution of $71,000.

  • Edmundo Rubi, 53, pleaded guilty last month to five felony counts, including grand theft and perjury, stemming from the Ponzi scheme. The defendant also pleaded guilty to attempted foreclosure consultant fraud and using a scheme to defraud with the offer of the sale of a security. Another 49 counts were dismissed.

  • Deputy District Attorney William La Fond told Judge Louis Hanoian last month that Rubi convinced more than 20 people to "quitclaim" more than 30 properties into his fraudulent trust, telling them that he would maximize their investment through his expertise, which he didn't have.


  • Co-defendant Joseph Mariano Encarnacion pleaded guilty to helping Rubi in the scheme and was sentenced to four years behind bars. Husband-and-wife real estate agents Ben and Gloria Hebron also admitted their roles and were sentenced to probation and ordered to give up their real estate licenses.(1)

For the story, see Ringleader of mortgage Ponzi scheme sentenced to six years behind bars.

(1) See Pair Dodges Jail, Get Probation For Participation In San Diego-Area Foreclosure Rescue Scam That Conned 22 Homeowners To Sign Over 34 Home Titles for an earlier post on the convictions of Rubi's confederates.

Bay Area Grand Jury Indicts Four In Alleged Foreclosure Rescue Racket; Filed Fraudulent Documents In Bogus Attempts To Stall Legal Process: DA

In Oakland, California, KGO-TV Channel 7 reports:

  • A Las Vegas man has been arrested on a 29-count indictment of defrauding residents of Alameda County in a mortgage rescue scheme. 7 On Your Side has been conducting an investigation of its own into the accusations for two months.


  • "The allegations are they conspired to commit a real estate fraud scheme in which they offered to save the victim's homes from foreclosure, in fact were not doing that, but in fact, they were just filing false documents under the false promise of saving the homes," said Alameda County Deputy District Attorney David Lim.

  • The Alameda County grand jury has handed down a 29-count indictment against Alan David Tikal, who is doing business as KATN Trust. Tikal alone faces all 29 counts and is under arrest in a Las Vegas jail. If convicted, he could get nearly 22 years in prison for real estate fraud, mortgage security fraud, and filing false documents.

  • Three other individuals face similar charges, but far fewer counts. Those three are Bruce Blankenhorn, who faces seven felony counts, Luis De Leon, who faces three felony counts, and Linda Voss, who faces one felony count.


  • The Oregon Department of Justice confirms that this summer it ordered Tikal to repay $5,000 to four victims. The department has since referred the matter to its criminal division. Also last year, the Office of the Comptroller of the Currency warned that Tikal was inaccurately trying to present himself as a private banker.

For the story, see Mortgage fraud suspect indicted on 29 counts.

For an in-depth story on this alleged racket, see The Modesto Bee: Man jailed in Stanislaus realty scam (He awaits extradition; officials say he peddled phony foreclosure):

  • "If there's a way for the bleeping banks to put me in jail, I would already be there," Al Tikal boasted in a recent Webinar, trying to land more clients anxious to keep their homes.


  • In his Webinar, Tikal referred to 1930s events resulting in banks relying on "vague promises from the government" backing transactions, as opposed to gold. A similar "vapor money theory" three years ago brought prison terms of more than 20 years each to two Bay Area businessmen.(1) In the Webinar, Tikal said he issues "bankers' acceptances" and said he is a private banker with "access to enormous lines of credit in the banking industry."

(1) For examples of court rulings nixing the "vapor money theory" defense in foreclosure actions (the rulings do a good job of collecting cases from around the country that have kiboshed this defense), see:

  • Wells Fargo Bank, NA v. Ward, 2006-Ohio-6744 (Ohio App. 10th Dist. 2006),
  • Barnes v. Citigroup, Inc., Case No. 4:10CV620 JCH (E.D. Mo. Eastern Div. 2010),
  • Jo El Nero: Ali v. Vericrest Finance, No. 10 C 4613 (N.D. Ill. Eastern. Div. 2010): In this case, the homeowner also asserted the "Moor" defense; that he “is an Ancient one of the Indigenous Aboriginal, Muurs/Moors with Ancestral Ties to these lands with all beneficial interest as Titulus . . . .

By the way, before anyone begins bashing the attorneys who represented the homeowners in these cases, note that each homeowner was self-represented (ie. pro se).

Trial Begins For "Sovereign Citizen" Accused In F'closure Rescue, Loan Reduction Scam; Judge Rejects "Diplomatic Immunity/Moor Defense" As "Gibberish"

In Memphis, Tennessee, WMC-TV Channel 5 reports:

  • "Heartache, pain & trouble" -- one pastor's description of what's floating in the wake of Charles McKuhn. Testimony in the Bartlett man's federal fraud trial began in earnest Tuesday as he faced charges of running a debt-reduction/foreclosure rescue scheme that spanned nine states.

  • Last March, a federal grand jury indictment charged McKuhn and his company, Taurian Worldwide, Inc. (TWI) with bilking more than $500,000 from churches and individuals in the wire-transfer lending scheme. The indictment said between June 2007 and June 2009, McKuhn schemed to defraud "...various individuals and institutions, by representing himself as a legitimate debt reduction service, and international private banker, able for a front-end fee to reduce the debt owed by individuals and institutions and establish lines of credit and secured loans for building projects."

  • In testimony Tuesday, pastors from churches in Alabama, Tennessee and Virginia said McKuhn, who holds no credentials in banking or finance, claimed TWI held a federal bond that could be used to underwrite pay-offs of their churches' delinquent mortgages. "He said he had a 'blanket bond' through the Federal Reserve that could be used to pay down the debt," said Bishop James W. Johnson of Birmingham, AL. Johnson testified his home church is Christ Temple Holiness Church of the Apostolic Faith in Opelika, AL.

  • Johnson and two other pastors testified they paid McKuhn and TWI cash installments -- one as much as $85,000 -- to either secure a line of credit to pay off their mortgages or to have TWI assume the loans and "discharge" the debt. Johnson testified he even signed on to be a representative of TWI and recruit other pastors. Each testified McKuhn took their money, did nothing -- and the banks foreclosed on their properties.

  • McKuhn is representing himself, often asking witnesses meandering and confusing questions on cross-examination. U.S. District Court Judge Jon P. McCalla appointed Memphis attorney Sam Perkins to be McKuhn's "elbow" counsel, but McKuhn has ignored Perkins throughout testimony. "He wouldn't talk to me," said Perkins. "I have no indication at all on where he's going or how I can assist him."

  • In previous court appearances, McKuhn argued the federal courts can't prosecute him because he's a sovereign American Moor whose allegiance is to his Moroccan-African heritage, not to the United States. "I'm demanding common law jurisdiction as a Native American Moor," McKuhn said in court last summer. "I do not consent to this proceeding. I'm not a 14th Amendment citizen. This court does not have jurisdiction in this case."

  • The U.S. Constitution's 14th Amendment provides that "All persons born or naturalized in the United States and subject to the jurisdiction thereof, are citizens of the United States." According to investigators' case records, McKuhn is a naturalized American citizen. A certificate of birth abroad indicated he was born in 1977 to his American parents at a U.S. Army hospital in Germany. A 2007 state department document confirmed McKuhn is a U.S. citizen.

  • McCalla told McKuhn his "Moor defense" is a tired, misguided strategy tried by countless defendants in district courts nationwide. "What (McKuhn's) talking about is gibberish," said McCalla from the bench in the July proceeding. "I don't think I have any choice but to take him into custody. Since he has no respect for the law of this country, I can't be certain that he won't (flee the country)." McKuhn has been in the custody of U.S. marshals ever since.

  • Blake Ballin, McKuhn's former attorney, said the diplomatic immunity/Moor defense is a sign McKuhn is under tremendous pressure.

For more, see Pastors testify at debt/foreclosure fraud trial.

For a story update, see Debt/foreclosure scam artist found guilty:

  • [A] federal jury found Charles McKuhn guilty on seven counts: two counts of mail fraud, four counts of wire fraud and one count of money-laundering.

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

For the details of the criminal charges, see U.S. v. McKuhn.

Disappearing Mortgage Payoff Proceeds From Home Refinancing Leaves Another Another Family In Trouble As Sticky-Fingered Closing Attorney Sits In Jail

A recent story in the Milwaukee Journal Sentinel described the financial wreckage created by Peter Elliott, a now-disbarred Wisconsin attorney currently serving a 10-year federal prison sentence for embezzling more than $3.6 million from clients. The following excerpt describes one of Elliott's dirty deeds when acting in the capacity of a closing attorney handling a refinance:

  • When Nicole and Robert Wagner refinanced their home the previous year, Elliott - the closing attorney hired by National City Lenders - failed to use the new loan proceeds to pay off Wells Fargo, which wrote the original mortgage for their Hubertus home.

  • Elliott even made monthly payments to Wells Fargo for more than a year while the Wagners were making their monthly payments to National City, according to Nicole Wagner and court records. Today the Wagners have paid several thousand dollars to a new lawyer as they try to clean up the mess and fight off attempts by Wells Fargo to foreclose on their home.

  • Wells Fargo filed for foreclosure in 2009, a bid that was dismissed. In December, Washington County Circuit Judge Andrew Gonring rejected a motion to reopen the foreclosure.

  • Wagner said the case is on her mind each day and has emotionally drained all members of the family. Selling the home would be difficult, if not impossible, because two lenders may argue they have open mortgages on the property. "Nobody knows who owns it," Wagner said. "I don't know who owns it."

  • The problem has even affected her children, ages 7 and 9, who have wondered whether the family would have to move. "I keep thinking that this can't be true - there has to be something wrong, there is no way this is happening to us," Wagner said. "I never thought we would be sued or be in foreclosure  . . . I'm so depressed it's ridiculous."(1)

Source: Lawyers' clients kept in dark on past issues (Wisconsin keeps complaints about lawyers secret, sometimes at a high cost).

(1) In an associated report from the Milwaukee Journal Sentinel, see Convicted attorneys are still practicing (At least 135 attorneys with criminal convictions are practicing law today in Wisconsin - including some who kept their licenses while serving time and others who got them back before they were off probation, a Journal Sentinel investigation has found).

Tuesday, February 15, 2011

Foreclosure Document Mill Faces Scrutiny For Allegedly Committing Perjury In Consumer Bankruptcy Case

AOL's Daily Finance reports:

  • It's a Louisiana bankruptcy case involving a single foreclosure that best illustrates the problems with the banks' outsourcing their mortgage default work to LPS or similar entities. [...] In that Lousiana case, involving the bankruptcy of Ron and La Rhonda Wilson, LPS is facing sanctions for allegedly committing perjury during a hearing held to find out why the bank -- Option One -- twice asked the bankruptcy court for permission to foreclose when the debtors were current on their mortgage. LPS insists it did not intend to mislead the court.

For the rest of the story, see When Banks Outsource Foreclosures, Nothing Good Happens.

Head Of Florida Foreclosure Mill Ordered Into Court To Explain Dubious Document Filings In Recently-Dismissed Suit

The Palm Beach Post reports:

  • On Thursday, Fannie Mae cited document "execution issues" as the reason it terminated the law firm. Ben-Ezra & Katz becomes the second south Florida law firm making a mass exodus from the foreclosure business. The Plantation law firm of David J. Stern began dumping thousands of its Fannie Mae cases late last year after evidence of robo-signing and other faulty documents became known.


  • Miami-Dade Circuit Judge Maxine Cohen Lando expressed her displeasure Friday in a case that involved a property in Homestead with a $265,134 foreclosure judgment issued in July. Lando said the so-called original note and original mortgage were filed months after the bank said those documents were lost.

  • "That in itself is a fraud upon the court," Lando wrote in an order to show cause as to why she should not hold Ben-Ezra & Katz attorneys in contempt. But, she added, the action "pales in comparison" to the fact that the mortgage and note are to a different property in Lehigh Acres, and that the documents are improperly signed and notarized. Lando said her verbal contempt finding on Friday would be followed by a written order.

  • Although Marc Ben-Ezra, 44, was not the direct attorney handling the case, the homeowner's attorney Maria Mussari said the judge ordered the owner or head of the firm to appear. Ben-Ezra has no disciplinary history with the Florida Bar . The judge dismissed the foreclosure case and banned the lender from refiling it.(1)


  • Fannie Mae set a deadline of Tuesday for servicers to find new firms to handle the Ben-Ezra & Katz cases. But finding replacement lawyers has proven to be frustrating. Statewide, Ben-Ezra & Katz has handled at least 18,000 cases, according to Legalprise, a West Palm Beach data analysis firm.

For the story, see Lawyer held in contempt over 'fraud' in foreclosure filing.

For Judge Lando's ruling, see Central Mortgage Co. v. Gonzalez Del Real.

Thanks to Brian Davies for the ruling.

(1) No doubt Ben-Ezra is preparing to invoke what some judges have facetiously referred to as the "pure heart and empty head defense" in an attempt to minimize any possible sanctions.

See, e.g.:

  • In re Rivera, 342 B.R. 435, 460 (Bankr. D. N.J. 2006), stating that the "pure heart and empty head defense" was unavailable to a law firm facing Rule 11 sanctions in a bankruptcy case that resulted in the imposition of a $125,000 fine on the firm in connection with the chronic filing of unreviewed paperwork in foreclosure actions.

  • Warner v. Hillcrest Medical Center, 914 P.2d 1060 (Okla. Ct. Civ. App. 1995), stating:

    "Whether or not the acts of an attorney are done in good faith is no longer the test. "`[T]he new test represents an intentional abandonment of the subjective focus of [§ 2011] in favor of an objective one.' `Simply put, subjective good faith no longer provides the safe harbor it once did.' `There is no room for a pure heart, empty head defense under [§ 2011].'" First National Bank and Trust Company of Vinita v. Kissee,
    859 P.2d 502, 512 (Okla. 1993) (footnotes omitted). "Rule 11 requires lawyers to think first and file later, on pain of personal liability." Stewart v. RCA Corp., 790 F.2d 624, 633 (7th Cir. 1986).

Fannie Gives Florida Foreclosure Mill The Boot Over Faulty Paperwork Issues

The Palm Beach Post reports:

  • Federal mortgage giant Fannie Mae has cut ties with a second South Florida law firm handling its foreclosure cases, requiring an immediate transfer of those files to other attorneys and likely causing more turmoil in the state's foreclosure courts.

  • The termination of its relationship with the Fort Lauderdale firm of Ben-Ezra & Katz, P.A. was announced today in a notice to loan servicers. The notice says payments to the firm should be stopped immediately and gives servicers a Feb. 15 deadline to find new firms to handle the Ben-Ezra & Katz files.


  • The move by Fannie Mae follows its November firing of David J. Stern's Plantation-based law firm, which is one of four so-called "foreclosure mills" under investigation by the Florida attorney general's office.

For more, see Fannie Mae fires second South Florida law firm.

For a recent hammering administered by a Miami judge on Mr. Ben-Ezra's firm in a recent case, see Central Mortgage Co. v. Gonzalez Del Real.

Florida Appeals Court Nixes Use Of "John Doe" Defendants In Lawsuit Absent Statute Authorizing Otherwise; More Hot Water For Foreclosure Mills?

A Florida appeals court recently affirmed a lower court ruling disallowing the practice of filing "John Doe" complaints by a plaintiff when the names of certain potential defendants are unknown. From the ruling:

  • We affirm the order granting the motion to quash service of process as to defendant Krieger-Martin (one of the “unknown John Does”). Krieger-Martin was not named in the style of the complaint, nor was she referenced in any allegation contained in the body of the complaint.

    In the absence of a statute authorizing such a procedure, the filing of a “John Doe” complaint is not sufficient to commence an action against a real party in interest. Grantham v. Blount, Inc., 683 So. 2d 538 (Fla. 2d DCA 1996).(1) The complaint failed to give this ostensible defendant actual notice that a lawsuit was being commenced against her. Liebman’s attempted service of process upon this individual (in which the summons described the person to be served as “unknown John Doe #5”) cannot serve to satisfy this notice requirement. Gilliam v. Smart, 809 So. 2d 905, 909 (Fla. 1st DCA 2002) (“The service of process on an individual cannot be used to broaden the scope of the pleadings to add a defendant who is not named as a party in the complaint.”)
Unless there is a statute authorizing this "John Doe" procedure in a foreclosure action, does this mean more hot water for the foreclosure mills who may have improperly loaded up their lawsuits against homeowners with "John Doe" defendants (possibly in an attempt to inflate the process server fees these cases generate)? How about an additional cause of action in a countersuit against them for a possible violation of the Federal Fair Debt Collection Practices Act?

For the ruling, see Liebman v. Miami-Dade County Code Compliance Office, No. 3D10-43 (Fla. App. 3d DCA, February 9, 2011).

(1) From Grantham v. Blount, Inc., 683 So. 2d 538 (Fla. 2d DCA 1996) (bold text is my emphasis):
  • Some states have statutes or rules of civil procedure that permit a plaintiff to file a fictitious or "John Doe" pleading if the true name of the defendant is not known. Once the true identity of the defendant is ascertained, the plaintiff then files an amendment naming the defendant. This amendment relates back to the date the original complaint was filed. See Mass. Gen. Laws Ann. ch. 223, § 19 (West 1995); Ala. R. Civ. P. 9(h) and 15(c)(4). See generally Joel E. Smith, Annotation, Relation Back of Amended Pleadings Substituting True Name of Defendant for Fictitious Name Used in Earlier Pleading So as to Avoid Bar of Limitations, 85 A.L.R.3d 130 (1978); Note, Designation of Defendants by Fictitious Names—Use of John Doe Complaints, 46 Iowa L.Rev. 773, 776 n.15 (1961) [hereinafter 46 Iowa L.Rev.]. Florida is not one of these states.

    In the absence of a substantive or remedial statute permitting John Doe actions as a method to extend the limitations period, the legislature requires this court to consider whether the English common law permitted such actions on July 4, 1776. § 2.01, Fla. Stat. (1995). We have found no English common law authorizing John Doe pleading in this fashion.
(2) From Gilliam v. Smart, 809 So. 2d 905 (Fla. 1st DCA 2002) (bold text is my emphasis):
  • In Florida, the filing of a "John Doe" complaint, without more, does not commence an action against a real party. See Grantham, 683 So.2d at 538.

Mortgage Bond Insurer's Suit Suggests Bank Secretly Pocketed Payments On Sour Loans Prior To Default

The New York Times reports:

  • Banks have been fighting with disgruntled bond investors and insurers for months, arguing that they do not need to buy back soured mortgages they placed inside securities before the financial crisis. Now, it turns out, some of those banks may have secretly collected partial payments on those same mortgages several years ago and pocketed that money.

  • At least that is a theory being pursued by plaintiffs’ lawyers in some of the largest mortgage bond lawsuits, in which banks are accused of filling mortgage bonds with loans that did not belong there. The theory surfaced in a recently unsealed lawsuit against a mortgage unit at Bear Stearns, the failed investment bank that is now part of JPMorgan Chase.

  • In the suit, the Ambac Assurance Corporation, which insured some mortgage bonds created by Bear Stearns, contends that the bank was partly compensated by loan originators for mortgages that became delinquent shortly after they were packaged into securities. Bear Stearns’s mortgage desk kept the payments, according to the suit, rather than apply them to the bonds that contained the delinquent loans.


  • At Bear Stearns, there seems to have been some knowledge of the failing loans, according to the Ambac case. Ambac says there is evidence of more than 100 early-default settlements for batches of loans that soured quickly. An example in that case describes an $11 million payment for one batch of loans. For another batch of “at least 12 loans,” there was a $2.6 million payment.

  • Ambac’s case was filed in federal court, but a judge there ruled this week that the case belonged in a different jurisdiction. Erik Haas, a lawyer for Ambac, said the company planned to refile in state court.

  • JPMorgan Chase, which bought Bear Stearns three years ago, said Ambac was a sophisticated investor that knowingly took risks in its deals.


  • Tracing such payments is tricky because of the large number of players in the mortgage machine: mortgage originators sold loans to banks, and then the banks packaged them into mortgage bonds to sell to mortgage investors. The originators did not generally communicate with mortgage investors, so neither side knows exactly what Wall Street’s middlemen did with the money or side agreements.(1)

For more, see New Questions Raised in Mortgage Financing.

(1) According to the story, Ambac’s lawyers at first did not know the extent of the payments at issue, but the company filed an amended complaint describing them after learning some new information from the producer of a coming documentary about Bear Stearns, "Confidence Game" (go here to watch the movie trailer).

Texas Appeals Ct: Trial Judge's Refusal To Grant Continuance To Hospital-Bound, MS-Suffering, Pro-Se Renter In Eviction Action An Abuse Of Discretion

In Beaumont, Texas, The Southeast Texas Record reports:

  • Last Thursday, the Ninth Court of Appeals in Beaumont set aside an order evicting Sheila Barnes, who suffers from multiple sclerosis, from her Jefferson County apartment.

  • In July 2009, Barnes appealed a default judgment in a forcible detainer action sought by Stone Way L.P., court papers say. Court records show Barnes signed a lease for an apartment unit owned by Stone Way. During her occupancy, Barnes and management had various disagreements. Eventually, Stone Way filed a forcible detainer action, claiming Barnes violated the terms of her lease.

  • Judge Alfred Gerson [...] set the trial date for June 22, 2009. Barnes filed motions for continuance on health grounds. "There is evidence in the record that she suffers from multiple sclerosis and was experiencing health problems related to that condition prior to the June and July trial settings," states the Ninth Court's Jan. 27 opinion, authored by Justice David Gaultney.

  • "Barnes was hospitalized in June 2009 and again in July 2009. The record contains a June 1, 2009, letter from her neurologist indicating that Barnes was incapacitated by an 'exacerbation' of multiple sclerosis, that she was undergoing treatment, and that she was 'unable to attend any hearing at this time.'"

  • Court records show she spent most of June and July in hospitals in Beaumont and Houston. On July 16, 2009, Barnes, who was without counsel at the time, attended a hearing on her continuance motion, explaining she was ill.

  • However, Judge Gerson denied the motion, allowing the trial to proceed on July 22, 2009, which Barnes could not attend, court records show. "The trial court was informed that Barnes was in the hospital, and the trial judge indicated he was aware of that fact," the opinion states.

  • "Stone Way presented its case, and the trial court rendered a default judgment in Stone Way's favor. Barnes was evicted from her apartment."

  • However, now the Ninth Court contends Stone Way did not meet its burden of proving undue delay and that the trial court abused its discretion by denying Barnes' motion for new trial, which was filed immediately following the judgment. "We reverse the default judgment and remand the case to the trial court for a new trial," the opinion states.(1)

  • Attorneys Jeffery T. Nobles and Polly B. Graham of the Houston law firm Haynes and Boone represent Barnes [in the appellate proceedings].(2)

Source: Appeals court sets aside order evicting sick woman from apartment.

(1) For the ruling, see Barnes v. Stone Way Limited Partnership, No. 09-09-00328-CV, 2011 Tex. App. LEXIS 553 (Tex. App. 9th Dist. Beaumont, January 27, 2011).

(2) Haynes and Boone is an international corporate law firm with more than 550 lawyers in 12 global offices and 30 major legal practice areas, according to its website.

Monday, February 14, 2011

Listing R/E Agent Conceals Purchase Offer To Client/Owner Of Bldg In F'closure, Then Buys Property At Auction, Flips It To Original Prospective Buyer

In Denver, Colorado, KUSA-TV Channel 9 reports:

  • The Colorado Division of Real Estate is investigating a Jefferson County real estate agent following a 9Wants to Know investigation into a transaction where a Realtor didn't bring an offer to the seller and then turned around and bought the building at a foreclosure auction.

  • 9Wants to Know discovered Realtor Mark Dyson bought a property he listed at foreclosure, turned around quickly and sold it to a buyer who had made two previous offers before the building went to foreclosure.

  • One of those offers was not presented to the seller even though state law requires a seller's agent to present all offers. "I should have presented the offer, that was my mistake," Dyson told 9Wants to Know. "My mistake."

  • Dyson signed a real estate contract to sell Carol Price's building which housed her dance clothing store at 1825 Youngfield St. in Golden. Her property, which also included 1819 and 1821 Youngfield St. was headed toward foreclosure. [...] Dyson agreed to be Price's real estate agent on Sept. 21, 2010.

  • Weeks went by with no offers until Nov. 23, 2010 when Dustin Jansson made an offer for $250,000 though his Keller Williams real estate agent A.J. Stiffler. Dyson presented the offer to Price and she countered with $289,000, according to Price. Price said she never heard anything more about the deal and figured it was dead.

  • A 9Wants to Know investigation discovered there was another offer Price didn't know about. Jansson made a second offer the day before Price's property went to the foreclosure auction for $268,000, but Price said her Realtor didn't tell her about that offer.

  • Dyson admitted to 9NEWS he didn't present the offer because he didn't believe there was enough time to stop the property from going to the foreclosure auction. "It doesn't make any difference. It makes absolutely no difference at all in anything," Dyson said. "There was no way. She was losing her property the next morning."


  • Dyson said he tried his best to sell Price's property, but it went to the foreclosure auction on Dec. 1, 2010. He said there was not enough time to stop the foreclosure. [...] Price said she learned later in the day that Dyson, the Realtor who she hired to sell her property before it went into foreclosure, had bought the property at the auction.


  • The day Price's property went on the foreclosure auction block, Dustin Jansson - the same man who made the other two offers -- made an offer to buy the property from Dyson, according to Jansson's Realtor. The two eventually struck a deal and Dyson sold the property to Jansson for $265,000. "It just doesn't seem right," Price told 9Wants to Know about the whole deal.(1)

For the story, see State investigation looks into real estate agent's deal with himself.

(1) An attempt to undo these transactions by the foreclosed homeowner may be viable if she can prove that there was a fiduciary relationship between her and the real estate broker. In such a case, she may have a strong basis for bringing a lawsuit against him and the subsequent purchaser for, among other things, the imposition of a constructive trust. The purpose here would be to have a court declare that, because of the real estate broker's fiduciary duty to his client (the property owner), the real estate broker took title to the foreclosed property as trustee for her benefit, and not for himself in his individual capacity. If this attempt to undo the deals are successful, the real estate broker would probably be entitled to a lien on the property (ie. an equitable lien / equitable mortgage,) for the amount he shelled out at the foreclosure sale.

With regard to the rights of the subsequent purchaser of the property, such a purchaser could defeat the finding of a constructive trust and equitable mortgage or lien as it applies to him, but only if he qualifies for status as a bona fide purchaser (ie. he lacked both: (a) actual knowledge of the prior dealings between the broker and the foreclosed homeowner, and (b) notice - either actual, constructive, or implied - of those earlier dealings or of any legal or equitable right the foreclosed owner may have in the property).

Since the foreclosed homeowner remained in possession of the property throughout the relevant period (go here for Colorado case law on the effect of persons in possession of real estate on the rights of bona fide purchasers), and because the subsequent purchaser would be hard-pressed to establish that he didn't know that the real estate broker had some existing business relationship with the foreclosed property owner prior to the foreclosure sale (he made purchase offers through the broker, then acting as listing broker for the subsequently-foreclosed owner, prior to the public auction), the subsequent purchaser may not be able to qualify as a bona fide purchaser, in which case he would be rendered unable to defeat the claims of constructive trust and equitable mortgage. In this event, his purchase from the real estate broker would be treated, not as a conveyance of title to the subject real estate, but rather, it could be recharacterized as an assignment of the equitable mortgage / lien.

Obviously, the foregoing is much easier said than done, and would probably require the services of an attorney experienced in litigation and real estate law, and be well-acquainted with the common law doctrines / equitable remedies under the law of:

Seeking legal assistance from the local, neighborhood attorney whose experience in real estate law may be limited to doing simple, single family home real estate closings would probably not be someone to seek counsel from on the above situation, other than to get a referral to someone who knows what she/he is doing by going into court to file a lawsuit challenging these transactions.

Chase Appears At Congressional Hearing, Apologizes For Screwing Over 4,000+ Active Duty Servicemembers In Foreclosure, Admits Finding More Problems

The Wall Street Journal reports:

  • A J.P. Morgan Chase & Co. executive, at a U.S. House hearing Wednesday, apologized for wrongly foreclosing on military families and overcharging thousands for mortgages, as lawmakers weigh whether new legislation is needed to help prevent military personnel from losing their homes and getting hit with high interest rates.


  • Chase initially found it overcharged at least 4,000 military personnel in active service and took the homes of 14. [...] In January, after conducting an internal audit, Chase acknowledged its mortgage errors. However, Chase's testimony Wednesday shows the firm has now found more problems--it said it overcharged 4,500 active-duty military members and wrongly foreclosed on 18.

For more, see J.P. Morgan Apologizes for Military Foreclosures (requires paid subscription; if no subscription, GO HERE, then click appropriate link for the story).

Foreclosure Mills, Attorneys Face Hot Water In Alleged Illegal Fee-Splitting Operation

AOL's DailyFinance reports:

  • An awful lot of attorneys are in deep trouble, two companies will be destroyed, two more will be deeply damaged and a venture capital firm faces big losses, if the allegations in a lawsuit updated Monday are true.

  • Jonathan and Darlene Thorne accuse the companies, LPS Default Solutions and Prommis Solutions, and their attorneys of having an illegal and fraudulent business model through which non-attorneys secretly practice law and illegally share legal fees.

  • Because many of these fees are for bankruptcy work and are ultimately paid by the debtor, the suit explains, the business model isn't just illegal -- it's also a fraud on the bankruptcy court system in violation of the bankruptcy code, rules and processes.


  • If the Thornes win their case, the business model of LPS Default Solutions and Prommis Solutions will be illegal, driving them out of business. [...] In addition, all of the thousands of attorneys that have contracted with the companies -- and thus shared fees with them -- could face discipline, including disbarment.

  • Finally, the owners of each, Lender Processing Services for Default Solutions and Prommis Solutions Holdings plus Great Hill Partners, could take massive financial hits. That's because, as the blog Naked Capitalism explained when the suit was originally filed, disgorgement is the typical remedy for illegal fee-sharing. Since every dollar of revenue both foreclosure subsidiaries have ever earned comes from allegedly illegally shared attorney's fees, the companies and their parents could have to pay it all back. It's hard to see how the highly leveraged LPS could repay the billions it has earned from its foreclosure subsidiary.


  • The root of the alleged business model is to do have non-lawyers perform lawyers' work for much less money, and then have real lawyers nominally sign off on the documents to disguise the fact that the lawyers aren't doing the work.

  • As little respect as the general public may have for lawyers, the legal profession does involve skill and a deep base of knowledge: Even legal tasks that look like empty-headed blank filling -- completing an assignment of mortgage, for example -- are not. Properly transferring the ownership of real property is crucially important, and the failure to do so in possibly millions of cases across the country could trigger yet another stage of the housing meltdown as clouded titles thwart sales or force down prices to account for the attendant risks.

For more, see Are Foreclosure Attorneys Illegally Outsourcing Legal Work to Non-Lawyers?

Ohio Appeals Court Snags Another Rubber-Stamping Trial Judge Screwing Over Pro Se Homeowners In F'closure; Reverses Lower Court Over Faulty Affidavit

From an entry on the website of Cleveland, Ohio-area foreclosure defense attorney Marc Dann:

  • Building on the landmark Wells Fargo v. Jordan Decision,(1) Ohio’s 8th District Court of Appeals (Cuyahoga County) ruled this week that an affidavit alleging that a foreclosure plaintiff held the note prior to filing of a complaint for foreclosure is not sufficient evidence to support a foreclosure judgment.

  • In Deutche Bank v. Triplett,(1) the court of appeals held:

    … Deutsche Bank’s affidavit of ownership, sworn out more than a year after the foreclosure complaint was filed, is insufficient to vest the bank with standing to file and maintain the action. Thus, if Deutsche Bank had offered no evidence that it owned the note and mortgage when the complaint was filed, it would not be entitled to judgment as a matter of law. Jordan, ¶¶ 22-23.(3)

Source: Affidavits Not Enough to Prove Ownership of a Mortgage Note.

(1) Wells Fargo Bank, N.A. v. Jordan, 2009-Ohio-1092 (Ohio App. 8th Dist., 2009).

(2) Deutsche Bank Natl. Trust Co. v. Triplett, 2011-Ohio-478 (Ohio App. 8th Dist. February 3, 2011).

(3) It should be noted that the recent 8th District (Cuyahoga County) appeals court ruling in Triplett was a reversal of a lower court screw-up allowing for the foreclosure judgment to be entered, a screw-up committed without regard to the binding precedent existing in this case to the contrary. Ohio appeals court Judge Patricia Ann Blackmon makes this observation in writing for the three-judge panel:

  • The case law in the 8th District is simple and clear; the putative mortgagee must own the mortgage at the time of the filing of the complaint, otherwise it lacks standing. Wells Fargo Bank, N.A. v. Jordan, Cuyahoga App. No. 91675, 2009-Ohio-1092.

It should also be noted that both this ruling and the court's 2009 ruling in Jordan were unanimous (3-0) reversals involving homeowners facing foreclosure who represented themselves (pro se) in court (although it's certainly possible that they may have had some anonymous, behind-the-scenes attorney assistance with procedural issues, crafting briefs, etc.). Kudos to the homeowners for recognizing the seemingly never-ending screw-ups by rubber stamping trial judges, and for doing something about it. Unlike the vast majority of homeowners who get screwed over in court, the homeowners here exercised their right to have an appellate court review, a right that most facing foreclosure are either unaware of, or lack the wherewithal to pursue.

Parade Of HAMP Lawsuits Seeking Class Action Status Continues; Banks Accused Of Stiffing Homeowners On Loan Modifications, Despite Pocketing TARP Ca$h

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

  • On behalf of homeowners in Cleveland and Parma, attorneys filed two similar class-action lawsuits -- one against US Bank Home Mortgage and the other against Bank of America and BAC Home Loan Servicing, LP [Monday].

  • The lawsuits allege that both have failed to offer permanent loan modifications to eligible homeowners participating in good faith in the Home Affordable Modification Program.(1)

  • In statements [Monday], attorneys Marc Dann and James Douglass said the banks failed to offer permanent home loan modifications, despite both banks' entering into agreements with these homeowners and accepting federal funds to participate the program.

  • The class-action lawsuits allege that both banks failed to fulfill obligations under the federal Home Affordable Modification Program. [...] Both Bank of America and US Bank agreed to participate in the HAMP program when they accepted funds from the Federal government as part of the Troubled Asset Relief Program (TARP).(2)

For more, see Attorneys file class-action lawsuits against US Bank, Bank of America.

(1) According to a complaint filed in an unrelated lawsuit (at paragraph 5), "Though Bank of America accepted $25 billion in TARP funds and entered into a contract obligating itself to comply with the HAMP directives and to extend loan modifications for the benefit of distressed homeowners, Bank of America has systematically failed to comply with the terms of the HAMP directives and has regularly and repeatedly violated several of its prohibitions."

(2) For a sampling of other similar HAMP-related lawsuits brought against lenders & loan servicers for allegedly stringing borrowers along with empty loan modification promises, see:

Sunday, February 13, 2011

Florida AG Target List In Foreclosure Mill Probe Expands To Seven

The Palm Beach Post reports:

  • The Florida attorney general's office has confirmed the names of three law firms added to its foreclosure investigation, including Kahane & Associates, which handles hundreds of home repossessions in Palm Beach County. The Plantation-based company, as well as the Tampa firms of Daniel C. Consuegra, and Albertelli Legal received letters of inquiry in December from the Economic Crimes Division of the attorney general's office.

  • All of the firms are part of mortgage giant Fannie Mae's retained attorney network in Florida. Consuegra was just added to the list in November following Fannie Mae's decision to stop using the Law Offices of David J. Stern, which is also under investigation.

  • The Dec. 2 letter to the three firms says the attorney general has opened a preliminary investigation regarding complaints the state has received of "unfair, deceptive and unconscionable practices" in how defaulted mortgages have been handled.


  • The letters appear to be an extension of the original foreclosure investigation, which began with subpoenas sent over the summer to four large law firms including Shapiro & Fishman, which is based in Boca Raton, Stern's office, the Law Offices of Marshall C. Watson in Fort Lauderdale and the Tampa-based Florida Default Law Group.

For more, see Fla. investigating 3 law firms after consumer complaints about defaulted mortgages.