Saturday, February 26, 2011

'We're Ready To Move, Just Give Us A Fair Price' Say Homeowners Throwing In Towel After 30-Year Fight To Save Neighborhood From Airport Expansion

In Dania Beach, Florida, the South Florida Sun Sentinel reports:

  • Dania Beach homeowners who've fought for more than 30 years to protect their neighborhoods from airport expansion are sending a surprising signal to the county: They give up. They're ready to move out.

  • What had always been a discussion and a debate suddenly became a reality to them: a new runway will be built next to them. The small prop planes and little executive jets whose sounds they accepted would be replaced by roaring commercial jetliners.

  • Broward County's plans for Fort Lauderdale/Hollywood International Airport would finally come to pass. One by one they told the director of the airport at a meeting last week that the neighborhoods their tiny city spent more than $1 million defending cannot be saved.

  • They said they want Broward County to buy their homes at a fair price, and, some suggested, tear them down. Living next to a major runway that will rise six stories into the air is not an existence anyone will want, they said. "It's impossible to live there.'' "This was a formula for blight.'' "No one will buy my home.'' "It's going to be a slum area.''

  • "They want out,'' Dania City commissioner and runway foe Bob Anton said afterwards. "They're tired.''


  • Many of the affected residents enjoy the lifestyle of fancy Las Olas Isles' posh waterfront, but with Dania Beach prices. The canals give them ocean access, coveted in Broward. The sounds of the small general aviation runway next to them are bearable, they say. But homeowners said that with low-flying jets roaring directly over their homes, or close by, their time outdoors would be miserable.

For more, see Dania Beach homeowners ready to stop fighting airport expansion and move out.

Calif. Tenant Advocacy Group To Alert Stockton Renters w/ Landlords Who Have Recently Fallen Into F'closure In Effort To Avoid Blindsiding, Bullying

In Stockton, California, KXTV Channel 10 reports:

  • More than 1,000 Stockton tenants will get a letter in the mail this week warning them that their landlord is in trouble with the bank. The letters are coming from Tenants Together, a statewide organization for renters' rights, and are focused on Stockton because nearly half of the city's foreclosures are rentals.

  • Tenants Together scoured property records to generate a list of non-owner occupied homes that are in various stages of foreclosure. "Most tenants in foreclosure situations are blindsided by the foreclosure," program coordinator Gabe Treves said. "They pay their rent every month, and they think as a result they will continue to be able to live in their homes." [...] Treves said many real estate agents and attorneys representing banks try to bully tenants into moving out of their homes before they really have to.(1)

Source: 1,000 Stockton renters will get foreclosure warnings.

(1) Federal law requires a minimum 90 days notice following a foreclosure sale before tenants can be forced to move. Tenants with leases may continue living in a bank-owned home through the end of their lease unless the new owner intends to occupy it. See:

Any California renter is invited to call the Tenants Together hotline at 888-495-8020 to see if their landlord is facing foreclosure.

Couple Facing Foreclosure Dodges Prison Time, Walk Away With Four Years Probation After Torching Home For Insurance Cash

In South Beloit, Illinois, WREX-TV Channel 13 reports:

  • A husband and wife in South Beloit admit to starting their own house on fire and are sentenced for it. Dean and Jaclyn Jacobson each got four years probation for burning down their house in the 800 block of Winfield Drive. In 2007, they torched their house for the insurance money. They had a foreclosure, a tight budget and three kids. Both of them pleaded guilty to arson.

Source: South Beloit couple sentenced for burning their house down.

'Reverse' Condo Conversion Leaves Dozen Unit Buyers Living In Rental Complex, Unable To Refinance, Holding The Bag

In Polk County, Iowa, the Des Moines Register reports:

  • A bank foreclosure of a Johnston condominium development originally owned by Regency Homes has resulted in 12 condominium owners allegedly losing their ability to refinance and possibly even sell their homes, a lawsuit filed Monday says.

  • "This is the classic case of individuals buying property believing what they have been told and then through no fault of their own, they must deal with a completely different situation," said Jon Hoffman, the condominium owners' lawyer. "They needed to have their rights protected."

  • The 12 owners are residents of two condominium buildings in the Providence Pointe development in Johnston. They claim in the lawsuit that officials for Two Rivers Bank and Trust and Brent Haverkamp, owner of the Ames-based Haverkamp Properties, are guilty of breach of contract and breach of fiduciary duty in their handling of the development after the collapse of Regency Homes, the development's original owner.


  • Providence Pointe, established in 2007 originally as a condominium development, has been converted into an apartment complex by Haverkamp. He obtained the development from Two Rivers after Regency officials defaulted on a $6 million construction and development loan in 2008, according to the lawsuit.


  • Hoffman said Haverkamp's ownership of most of the property surrounding the condominium buildings has placed his clients in the nightmarish position of being unable to obtain refinancing for their homes from the Federal National Mortgage Association. Since January 2009, FNMA regulations have required that mortgages for condominiums can only be approved if 70 percent of the units are sold or under a sales contract.

  • Hoffman said three clients have attempted to refinance their mortgages only to be rejected by their banks because of Federal National Home Mortgage rules."That is what really started this lawsuit," Hoffman said. "All three got the same rejection letter, and it was a form letter."

  • The lawsuit also contends that the inability to obtain financing for their homes also raises the concern that "the only possibility for a sale would be to a cash purchaser as all lenders would be precluded from extending a loan for the same reasons they cannot obtain refinancing."

  • "My clients believe the bank simply should have known that by selling this property to one individual for the purpose of turning into rental property that it was going to affect a lot of people adversely," Hoffman said.

For more, see Johnston condo owners in a tough spot, lawsuit says.

Texas Couple Sues To Stop Exploration Firm From Running Roughshod Over Home, Drilling On Nearly-Expired Mineral Leasehold Giving Only 12-Hour Notice

In Jefferson County, Texas, The Southeast Texas Record reports:

  • A Jefferson County couple has filed suit against the exploration company they claim gave them limited notice of its intent to drill on their property.

  • Douglas and Tina Almond allege they purchased property on March 26, 1998, which is subject to a drill site and drill site easement.

  • Defendant Ballard Exploration Co. owns the easement, but its lease is set to expire on Feb. 4. It was not until Jan. 27 that the Almonds heard from Ballard, according to the complaint filed Jan. 28 in Jefferson County District Court.

  • "At 8:00 p.m. on the evening of January 27, 2011, Defendants contacted the Homeowners for the very first time and leave a voice message stating: 'We know this is unreasonably short notice, but the mineral lease runs out on February 4, 2011, so we will be there first thing in the morning to start drilling,'" the suit states.

  • At the time they received the message, the Almonds were coping with the hospitalization of Tina Almond's mother, who is in the Intensive Care Unit at the hospital with a serious illness, the complaint says. Still, the Almonds claim they had to deal with Ballard Exploration, which showed up at their home Jan. 28 at around 7 a.m.

  • At about 8:23 a.m., the Almonds received correspondence from Ballard and defendant Shorthorn Resources. In the communication, the defendants told the Almonds, "Here's your notice," and "We will knock your gate down if you do not let us in," according to the complaint.

  • The Almonds are protesting the defendants' desires to drill on their property, saying they were not provided with adequate notice. "Defendants want to drive heavy equipment across the Homeowners' paved driveway to their home, without giving the homeowners any opportunity to discuss alternative routes," the suit states. "Further, Homeowners have livestock on the property that the Homeowners must make arrangements for before Defendants can have access."

  • The Almonds claim the defendants should have drilled on their property earlier than less than a month before the expiration of their lease.

  • "The Defendants failure to exercise their rights in a timely manner should not be a basis for Defendants, without reasonable or proper notice, to threaten to destroy and damage the Homeowners' homestead or allow the Homeowners' livestock to run free on the streets and roads of Beaumont, Texas," the complaint says.

  • In their complaint, the Almonds seek a temporary restraining order against the defendants preventing them from drilling on the property. The Almonds will be represented by Greg M. Dykeman and Martha R. Campbell of Strong, Pipkin, Bissell and Ledyard in Beaumont.

Source: Couple wants exploration company to stop drilling on property.

Broward Deputies Storm Local KFCs Facing Foreclosure; Serve Seizure Notices, Give Employees The Boot; South Florida Chickens Rejoice!

In South Florida, WTVJ-TV Channel 6 reports:

  • Several local KFC chains are in finger-licking foreclosure. Broward Sheriff's deputies invaded nine local franchises of the chicken-serving national chain Wednesday, serving orders that the stores must cease and desist.

  • Who knew the double-down monstrosity would cause this much harm? About 18 civilian deputies simultaneously served Writ of Replevin notices, which we gather didn't contain the Colonel's secret recipe. It's the first step in a foreclosure.

  • The shut down order was not from KFC, officials from the chain said. "KFC Corporation is not involved in this litigation which we believe is between the franchisee and one of its lenders," KFC Spokesperson Laurie Schalow said.

  • Employees were ordered to put down their chicken breasts, deep fryers and biscuit pans and leave the premises. Five franchises in Miami-Dade and others in Monroe County were also served with the foreclosure prerequisites. While chickens across South Florida rejoice, it's unclear how the Chik-fil-A cows feel about the recent development.

Source: What the Cluck! Court Forecloses on South Florida KFCs (KFC restaurants in Miami-Dade, Broward and Monroe counties set to be deep-fried).

Friday, February 25, 2011

Ex-Mortgage Broker Faces 39 Counts For Allegedly Ripping Off Clients Of $1.3M Cash, Property

In Santa Cruz, California, the Santa Cruz Sentinel reports:

  • Louisa Katrina Dubinsky, the 54-year-old former real estate broker who allegedly stole more than $500,000 from clients in 2007, turned herself in to Santa Cruz police [...]. Dubinsky was wanted on 39 counts of embezzlement, financial elder abuse and writing hundreds of thousands of dollars in bad checks, according to a 2009 criminal complaint filed by the District Attorney's Office.


  • Dubinsky was president of Vision Lending & Investment with offices on 41st Avenue in Capitola and at the Sash Mill in Santa Cruz, authorities said. She had been a mortgage broker, and her license was revoked by state officials in 2008.

  • Among other charges, the complaint alleges that she wrote two checks she knew were fraudulent that totaled $726,564 to one person and two that totaled $375,000 to another person. Dubinsky showed a pattern of criminal conduct and stole more than $500,000, prosecutors said, and she also allegedly took property valued at more than $200,000.

For the story, see Local 'Most Wanted' broker, Louisa Dubinsky, turns herself in to Santa Cruz police.

Homeowner Loses Home To Foreclosure After Mortgage Servicer Employs "Force-Placed Escrow" Squeeze; Firm Refuses Comment, Despite Customer OK

In Dallas, Texas, Fox 4 News reports:

  • FOX 4 has been covering the mortgage mess for years. We’ve told you about angry homeowners having problems with loan modifications, endless calls to lenders with no answers, unregulated mortgage servicers, and now force-placed escrow accounts. Texas homeowners have the option of paying their own property taxes but some who selected that route are finding themselves in a tangled mess that is difficult to undo.


  • Bertha Andrews said she has never gotten behind on her mortgage payments. Last summer when we first met Andrews, the widow was struggling to save her home while caring for her 95-year-old mother. Andrews had a tax deferral from Dallas County because she is over 65, which means her taxes wouldn’t have to be paid until her house is sold. But her mortgage lender, Ocwen Financial Services, paid the back taxes of around $3,500 and tacked it on to her mortgage payment due.
    I didn’t understand it,” said Andrews. “I didn’t understand it.”

  • Andrews couldn’t fight anymore. She goes down as a foreclosure casualty in 2011, now living in an apartment complex for seniors. Andrews walked away from her home after paying eight years on her mortgage. “The final straw was when I had sent in all my receipts and they didn't respond to them,” said Andrews.

  • Ocwen didn’t respond to FOX 4 either, even after Andrews gave the company permission to talk to us about her mortgage. Ocwen auctioned off her house on Feb. 1.

For the story, see Forced Escrow Accounts Frustrate Homeowners.

Pennsylvania Court Gives Zombie Bill Collector The Boot Over Use Of Crappy Paperwork To Collect Dubious Debt

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

  • A Pennsylvania appeals court has affirmed the dismissal of a debt buyer lawsuit on an old credit card account, because the debt buyer could not prove the debt. The credit card agreement and account history could not be admitted under the business records exception to the heresay rule. The debt buyer could not testify that the credit card account records were made contemporaneously and in the regular course of the issuing bank's business.

  • More importantly, the contract itself was not proven. The debt buyer offered a standard form cardholder agreement dated seven years after the consumer's account was allegedly opened. In addition, the interest rate charged by the debt buyer was higher than the "agreement" called for, and the "agreement" did not provide for the attorney's fees being sought.

  • As many consumer attorneys know, the lack of evidence is endemic to the debt buying industry. Pools of delinquent accounts are often sold with "media not readily available", i.e. with no account histories or signed contracts. Given that signed cardholder agreements no longer exist, collection attorneys are often hard-pressed to produce anything that could be called a contract to support their claim.

  • The Federal Trade Commission issued a report on related debt buyer practices last July, but offered only recommendations directed to state courts to discourage these practices.(1) It remains to be seen whether the CFPB will take regulatory and enforcement action under the Fair Debt Collection Practices Act, which after all, prohibits false representations of the validity or amount of a debt, including false statements that are reckless or negligent, i.e. debt buyers alleging amounts owed based on little more than a spreadsheet they purchased for 0.6 cents on the dollar.

Source: Debt Buyer Dismissed.

For the court ruling, see Commonwealth Financial Systems, Inc. v. Smith, 2011 PA Super 30 (Pa. Super. February 14, 2011).

(1) For the FTC report, see Repairing A Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration. zombie debt buyer

C. Florida Man Charged For Allegedly Hijacking Title, Possession Of Vacant Homes In Foreclosure, Then Ripping Off $30K By Renting To Unwitting Tenants

In Pasco County, Florida, The Tampa Tribune reports:

  • Pasco County deputies arrested a 43-year-old man Friday and accused him of collecting $30,000 in rent money on properties he didn't own. George Allen Ola Jr., of 8831 Garden Party St., is charged with scheme to defraud. He posted a $10,000 bail and was released shortly after his arrest last week. Ola couldn't be reached for comment on Monday.

  • Investigators said Ola entered a contract with Bay Vista Realty in May to lease the properties he said he owned. Ola provided Bay Vista with notarized copies of quit claim deeds that were filed with the Pasco County clerk of court.


  • Neither the homeowners nor lien holders authorized the homes to be leased, according to an arrest report. The renters were told to mail their rent in the form of money orders or cashier's checks to a P.O. Box in Tampa owned by Ola, the report states.

  • The issue was first reported to the Pasco County Sheriff's Office in August, an incident report states. A Pinellas County attorney representing one of the homeowners called the office and told a deputy that a family was living in his client's home while his client was living in Brazil.

For more, see Land O' Lakes man charged with renting out homes he didn't own.

Thursday, February 24, 2011

Texas Man Cops Guilty Plea To Real Estate Ponzi Scheme Using Bogus Liens, Deeds Of Trust To Purportedly Secure Investors' Cash

From the Office of the U.S. Attorney (Dallas, Texas):

  • David Boles, 52, of Colleyville, Texas, who owned Metro Buy Homes, LLC., pleaded guilty [...] to one count of mail fraud, announced U.S. Attorney James T. Jacks of the Northern District of Texas.


  • According to documents filed in the case, from January 2008 through August 2010, Boles ran a scheme to defraud a number of investors by making materially false representations to them. For instance, he advised that invested money would be used to buy real estate and that investments would be secured by real estate.

  • To further the scheme, Boles sent Deeds of Trust and Real Estate Liens that purportedly gave investors liens against specific properties in exchange for their investment. However, Boles did not own a number of the properties that were supposedly used to secure the investments, and some of the Deeds of Trust and Real Estate Lien Notes that he sent investors were fraudulent.

  • Boles also sent checks to investors, and advised them that the checks represented profits from their investments. However, in many cases the checks were simply drawn from the principal investments made by the investor. On other occasions, Boles funded checks written to one investor with money received from other investors.(1) Boles believed that telling the investors that the checks represented earnings on their investments would encourage them to invest more money.

For the U.S. Attorney press release, see Colleyville, Texas Businessman, Who Owned Metro Buys Homes, Pleads Guilty To Federal Mail Fraud Charge (Defendant Faces Up to 20 Years in Federal Prison).

(1) A classic "Ponzi Scheme."

Probe Into Title Escrow Money Ripoff Yields Guilty Plea; Suspect To Cough Up $25K In Restitution Within One Month To 'Buy Out' Of Prison Sentence

In Allen County, Indiana, The Journal Gazette reports:

  • A mortgage company manager pleaded guilty Thursday in Allen Superior Court to two Class D felony charges of loan broker fraud. Robin W. Hunt, 40, of [...] New Haven, was arrested and charged last July with six counts of loan broker fraud, two of which were Class C felonies. He and an associate, Lane Miller, were charged in connection with the investigation into title escrow scheme run by Joseph Garretson. Miller worked for Garretson, currently serving an 11-year prison sentence for misappropriating title escrow money.

  • According to the plea agreement, Hunt’s prison sentence of one year will be suspended and he will be placed on probation when he is sentenced late next month. However, he will have to pay $25,000 in restitution to Flagstar Bank before he is sentenced, according to court documents.

Source: Broker pleads guilty.

Ohio Appeals Court Nixes "Strict" Foreclosure; Says Lower Court's Failure To Order Judicial Sale An Improper Procedure Lacking Legal Authority

Lexology reports:

  • In the case of Wells Fargo Bank v. Young (Drake Cty.), 2011-Ohio-122, 2011 Ohio App. LEXIS 102 (Froelich, J.), the Second District Court of Appeals held that the trial court erred by ordering a conveyance of the property via a Commissioner’s Deed, rather than ordering a judicial sale as requested by the bank.

  • In Young, the plaintiff-bank and the defendant-debtor entered into a loan modification agreement of the prior home loan. The defendant-debtor defaulted on the loan modification less than a year later and the plaintiff-bank filed a complaint asserting that the note was secured by the mortgage. The plaintiff-bank sought foreclosure and money damages. Specifically, the plaintiff-bank requested that the mortgage be foreclosed, that the property be sold, and that the bank be paid from the proceeds of the sale. Copies of the original note, loan modification agreement and mortgage were filed, which were all attached as exhibits to the complaint. The defendant-debtor was served with the summons, but he did not file an answer.

  • About 45 days after the filing of the foreclosure complaint, the trial court issued a Notice to Show Cause stating that the defendant-debtor had been properly served, that it had not “indicated any opposition to the transfer of the realty to the Plaintiff without judicial sale,” and that the plaintiff-bank had orally moved for a default judgment.

  • Less than a month later, the trial court ordered the conveyance of the defendant-debtor’s property to the plaintiff-bank by way of a Commissioner’s Deed. The trial court found that foreclosure proceedings were equitable proceedings and that the authority to convey by Commissioner’s Deed was within the court’s equitable powers, based on common law and R.C. 2239.34. The plaintiff-bank objected to this type of transfer, but its objections were overruled by the trial court. The plaintiff-bank appealed.

  • In reversing the trial court, the court of appeals concluded that the order conveying the real property by Commissioner’s Deed, in lieu of a judicial sale of the foreclosed property, is contrary to Ohio law. This is true even though the conveyance was not objected to and would have saved costs and time.

  • The appeals court stated that “strict foreclosurewas eliminated in Ohio, and there was no authority that permitted the trial court to employ a foreclosure procedure that excluded a judicial sale from its order.

Source: A trial court cannot use R.C. Section 2329.34(b), conveyance by commissioner's deed, to circumvent sale of the foreclosed property (requires subscription; if no subscription, GO HERE, then click appropriate link for the story).

Would-Be Buyers Screwed Over In Rent-To-Own Racket Involving Homes In F'closure Complain To Local Prosecutor; Ripoff Is Treated As A Civil Matter

In Umatilla, Florida, WFTV-TV Channel 9 reports:

  • Several families claim a Central Florida company offering rent-to-own homes, never told them the properties were in foreclosure. After moving in, they say, serious repairs were ignored and they lost all their money. Dozens of signs dot Central Florida front yards reading 'Rent to own homes by Otto Beyer Enterprises' and many families who called lived to regret it.

  • "Termites came right through the walls and right into our furniture." Stephanie Hayes claims the Leesburg home fell down around her family. According to Stephanie she invested 3 thousand dollars in down payment and repairs when a bank foreclosure forced them out. Stephanie called Otto Beyer Enterprises. "We told her we put all this money into the house and never once did you tell us its in foreclosure and she said that's just too bad."

  • Courthouse records show Beyer Enterprises owns at least 70 homes but it's in bankruptcy and many of the homes are in foreclosure. Tisha Liptart invested in a home then was forced out because of a foreclosure. "You don't think people would do that to you."

  • The families told us serious repair issues were neglected. That seems minor compared to what happened at a home the company owned near Silver Springs that burned to the ground.

  • Five children died in the house last November. The state fire marshal is investigating. The agency listed a space heater, cigarettes, and the home's wiring as possible causes. Published reports quote a former tenant who claimed he had electrical problems when he lived there.

  • At it's office near Leesburg we attempted to ask company managers about it's rent to own history. The company said because of the fatal fire its been advised not to answer any questions. But later its attorney said tenants could have stayed longer, and did not pay their rent.

  • "If we didn't like it we could walk out and we lost the money," said Stephanie Hayes. Some families say they complained to the state attorney claiming the company knew they could be forced out when it took their cash. But so far it's remained a civil matter.

Source: Families Claim To Lose Thousands In Foreclosure Rental Homes.

Wednesday, February 23, 2011

Pressure On "Absurd" MERS' Business Model Continues In Metro NYC Cases; CEO Abandons Sinking Ship; Members Told To Stop Foreclosing In Company Name

The New York Post reports:

  • The feds are raising their scrutiny of foreclosure cases in the Metro area. The US Trustee's office, which is a division of the Justice Department, is filing briefs in individual cases asking for judges to disallow motions made by the bank or servicer, and for lenders to cough up supporting data for their filings.

  • In a recent Brooklyn case, the US Trustee asked Judge Shelley C. Chapman of the US Bankruptcy Court to disallow a motion by the alleged mortgage holder for confidentiality on the paperwork required to show the servicer had standing to bring the foreclosure action.

  • Earlier this month, US Bankruptcy Judge Robert E. Grossman of New York's Eastern District on Long Island laid a new, homeowner-friendly legal foundation for upcoming battles over the 65 million home loans -- half the consumer mortgages in the US -- the Mortgage Electronic Registration Systems, or MERS, claims it holds.


  • MERS tried to throw its weight around in court in the case of Westbury resident Ferrel Agard. It failed. In a 37-page decision, the judge shredded MERS' arguments, noting the court isn't going to turn a blind eye to failure to comply with the law just because MERS is an industry titan.(1)

  • Judge Grossman questioned the very core of MERS' business model, calling it "absurd at best" that MERS claims to be both a mortgagee and an agent of the mortgagee, and saying MERS has no right to transfer mortgages.

  • This legal challenge adds to a growing list of problems for MERS. R.K. Arnold, CEO, departed late last month, and MERS now plans to change its rules to require "Members to not foreclose in MERS' name," according a Feb. 16 announcement obtained by The Post.

Source: Feds step up bank probes on foreclosure.

(1) In re Agard, Case 8-10-77338-reg (Bankr. E.D.N.Y. February 10, 2011).

Maine Class Action Accusing Bank Of Manufacturing Foreclosure Documents Gets The Boot; Judge Says Each Homeowner Must Pursue Claims Individually

In Portland, Maine, Bloomberg reports:

  • Ally Financial Inc.’s GMAC mortgage unit won’t have to face much of a lawsuit by Maine homeowners seeking damages over what they said were the company’s wrongful foreclosure practices.

  • U.S. District Judge D. Brock Hornby in Portland, Maine, granted GMAC’s request to dismiss two claims in the complaint, according to a decision yesterday. He will probably throw out the remaining claim, Thomas Cox, a lawyer for the homeowners, said in an interview.


  • If false documents are used in foreclosure cases, homeowners can seek to vacate the judgment in their particular cases, Hornby wrote. They can’t file new lawsuits, according to the decision. “A contrary ruling would mean that the outcome of every lawsuit could produce a later lawsuit by the unhappy loser, seeking damages on account of the outcome of the former lawsuit and claiming that it resulted from false testimony or false affidavits,” Hornby wrote.

  • Cox called that a “hollow remedy” because most homeowners can’t afford defense attorneys. [...] The Maine homeowners, who filed the lawsuit last year seeking class-action status, accused GMAC of filing false documents in foreclosure cases. They said a GMAC employee signed sworn affidavits without verifying the accuracy of the information. The homeowners sought damages and in December unsuccessfully tried to stop GMAC foreclosure sales in Maine.

For the story, see GMAC Won’t Face Much of Maine False Foreclosure Documents Suit.

FTC Rule Banning Upfront Fees For Loan Modification Services Goes Into Effect

The Federal Trade Commission recently announced:

  • As of January 31, 2011, companies that offer to help homeowners get their loans modified or sell them other types of mortgage assistance relief services are no longer allowed to charge up-front fees. Under the rule, a mortgage assistance relief company may not collect a fee until the consumer has signed a written agreement with the lender that includes the relief obtained by the company.


  • Attorneys are generally exempt from the rule if they provide mortgage assistance relief services as part of the practice of law, are licensed in the state where the consumer or dwelling is located, and comply with state laws and regulations governing attorney conduct related to the rule. To be exempt from the advance fee ban, attorneys must also place any advance fees they collect in a client trust account and abide by state laws and regulations covering such accounts.

For more, see FTC's Mortgage Assistance Relief Services Advance Fee Ban Takes Effect.

NH Feds Charge Real Estate Agent In Alleged Scam That Targeted Homeowners Facing Foreclosure With Sale Leaseback, Equity Stripping Ripoffs

In Concord, New Hampshire, the Nashua Telegraph reports:

  • A Nashua real estate agent is charged with swindling distressed homeowners and mortgage lenders with a home refinancing scam. Assistant U.S. Attorney Michael Gunnison filed a charge of aiding and abetting mail fraud against Richard Winefield, 32, of 6 Short Ave., Nashua, on Feb. 8.

  • The charge states that Winefield joined in the scheme "already in progress" in 2006, but doesn't name any alleged co-conspirators, and Gunnison could not be reached for comment this week. Winefield's lawyer, Peter McGrath of Concord, did not return a call from the Telegraph Monday, and Winefield himself declined to comment on the case. A waiver of indictment and plea hearing has been set for March 1, suggesting that Winefield has already struck a plea deal.


  • The scam involved finding distressed homeowners, and offering to help them avoid foreclosure by having the homeowners sign over their properties to one of Winefield's companies, which would then rent the house to the homeowner for two years. The homeowner would then have the option to buy back the property, at a pre-arranged price, typically around 30 percent over what it would cost to pay off the homeowner's mortgage, the charge states.

  • "In reality, after taking title to the homes of the distressed homeowners, the scheme participants paid off the existing mortgages by obtaining new, usually significantly larger, mortgage loans on the properties, and they immediately converted the additional borrowed money to their own use," Gunnison wrote. "This stripped most or all of the available equity from the properties and left the properties encumbered with larger mortgages."

  • The homeowner's rental payments went toward payments on the new, bigger loans, the charge states. To get those larger loans, Winefield and his partners arranged "sham transactions" and straw buyers, who included relatives, friends and strangers, who posed as buyers of the properties, the charge states.

  • The straw buyers purported to pay princely sums for the properties, and Winefield arranged appraisals to match the inflated prices, the charge states. "The scheme participants falsely and fraudulently prepared mortgage applications identifying the straws as borrowers, and submitted the applications to lenders chosen by the scheme participants," the charge states.

  • The straw buyers were assured they would never need to pay off the mortgages, despite being named as the borrower, the charge states, and the loan applications were replete with false information. Gunnison charges that Winefield personally solicited homeowners, determined sales prices for the sham sales, attended closings and at times acted himself as a straw buyer.(1)

For the story, see Nashua man charged in foreclosure finance scam.

For the criminal complaint, see U.S. v. Winefield.

(1) 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.

California Man Gets 22 Year After Copping Guilty Plea For Running Ponzi Scheme, Fraudulent Sale Leaseback Equity Stripping Ripoffs

In Los Angeles, California, the Contra Costa Times reports:

  • A Downey man whose financial fraud schemes preyed on blue-collar Latinos throughout the Southland was sentenced Monday to 22 years in federal prison for what a federal judge said was a case "close to my heart."(1)

  • Juan Rangel, 47, who is already behind bars awaiting sentencing for a 2009 conviction for bribing a Bank of America branch manager, pleaded guilty last October before U.S. District Judge S. James Otero to one count each of mail fraud and money laundering.

  • In a three-hour hearing in Los Angeles federal court, about a dozen of Rangel's victims tearfully told Otero of losing their homes, their savings, and their health to a Ponzi scheme that took in nearly $30 million as well as a scam that preyed on homeowners facing foreclosure. [...] Otero recommended Rangel be deported back to Mexico after he is released from prison. A restitution hearing was set for May 6.

  • According to a signed plea agreement with prosecutors, Rangel was expected to be sentenced to 15 years in prison, but Otero departed from the deal and added another seven years to the sentence. Outside court, Bowman told the crowd it was the victims' statements that made the difference.

  • In the mortgage fraud scheme, Rangel and others targeted Spanish- speaking homeowners who were at risk of losing their homes and offered to help them avoid foreclosure, Bowman said. Rather than assist them, however, Rangel took titles to their homes and drained the remaining equity out of the properties, the prosecutor said.

  • As part of that scheme, Rangel arranged to sell the homeowners' properties, usually without their knowledge, to third-party straw buyers, according to Bowman. He then applied for loans in the straw buyers' names and, using a variety of falsified documents, duped mortgage lenders into approving more than $10 million in bogus loans, the prosecutor said.(2)

  • The indictment also charges Javier Juanchi, 42, of Sherman Oaks, a vice president at Financial Plus, and Pablo Araque, 40, who owns Downey-based tax preparation and bookkeeping company A-One Tax Pros. Juanchi and Araque, who were charged in the mortgage fraud only, are scheduled to face trial in March before Otero.(3)

For the story, see Downey man gets 22 years in $30M Ponzi scheme.

(1) According to the story, Judge Otero said the Rangel case "comes close to my heart," since he grew up in the blue-collar Hollenbeck neighborhood, just blocks from the downtown courthouse. "I'm familiar with the hard work that most of you put forward to achieve the American Dream," the judge reportedly told the victims after they presented their impact statements to the court. "He has stolen your dreams, your futures (and) your health, both emotional and physical," the judge reportedly said.

(2) 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.

(3) By 'rolling' first and copping a guilty plea, Rangel beat Juanchi and Araque in the "race to the prosecutor's office" to snag the best plea deal. See United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) for one Federal judge's observation (made in the context of drug conspiracy cases) on the so-called "race to the courthouse/prosecutor's office" that frequently takes place during the early stages of these "multi-target" criminal probes and prosecutions:

  • In practical terms, drug conspiracy cases have become a race to the courthouse. When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed.

Don't be surprised if Rangel's plea deal requires him to 'throw his buddies under the bus' if they refuse to cop plea deals and insist on going to trial. And if it doesn't, don't be surprised if Rangel "bellies up" to the prosecutor and tells what he knows about his former colleagues in an attempt to shave a few years off his 22-year prison sentence.

Tuesday, February 22, 2011

"Revolving Door" Between Wall Street & Government Regulators; Are Suit Settlements Management's Way Of Buying Its Way Off Cheap From Victims' Pockets?

Columnist Matt Taibbi writes in Rolling Stone:

  • Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer. "Everything's [*]ucked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."

  • I put down my notebook. "Just that?" "That's right," he said, signaling to the waitress for the check. "Everything's [*]ucked up, and nobody goes to jail. You can end the piece right there."

  • Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.


  • [F]ederal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing.

  • To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. "If the allegations in these settlements are true," says Jed Rakoff, a federal judge in the Southern District of New York, "it's management buying its way off cheap, from the pockets of their victims."(1)

For more, see Why Isn't Wall Street in Jail? (Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them) (go here for the entire story on one web page).

Go here for a recent MSNBC interview with Matt Taibbi about his recent column.

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

(1) One notable excerpt from the column:

  • "You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bull[*]hit would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once." But that hasn't happened. Because the entire system set up to monitor and regulate Wall Street is [*]ucked up.

Pro Se Kentucky Homeowner Scores Appeals Court Reversal Of Rubber-Stamped Foreclosure Judgment As Trial Judge Proves Unable To Apply Basic State Law

In a seemingly simple case that a lower court inexplicably screwed up, the Kentucky Court of Appeals found it necessary to vacate and remand Henry County Circuit Court Judge Karen Conrad's ruling allowing for the entry of a judgment in a foreclosure action, despite the obvious fact that the foreclosing plaintiff, by failing to acquire an interest in the loan (by assignment) until after the action was filed, did not have standing to bring the action under Kentucky law. Along with the remand, Judge Conrad has been given instructions to remove this case from her docket.

The fact that the appeals court's legal analysis of the case before it was only three paragraphs long(1) and was issued by the 3-judge panel as an unpublished ruling only highlights the fact that there is apparently nothing particularly precedent-setting in this ruling. However, the ruling does merit attention in that it shines some light on another trial judge getting snagged screwing over a pro se homeowner battling to save his home from foreclosure, apparently without regard by the judge to the existing case law and procedural rules in the state.

For the ruling, see Augenstein v. Deutsche National Trust Co., No. 2009-CA-000058-MR (Ky. App. February 18, 2011) (unpublished).

Thanks to Glenn Augenstein for the heads-up on his successful appeal.

(1) The court's 'short & sweet' analysis follows (bold text is my emphasis, not in the original text):

  • Glenn argues that the court erred by exercising particular case jurisdiction over this claim because Deutsche Bank did not have standing. He contends that the assignment of mortgage was not executed in favor of Deutsche Bank until after the complaint was filed. Thus, Glenn argues, that Deutsche Bank failed to show that it was the real party in interest at the time the action was commenced.

    CR 17.01 provides that “every action shall be prosecuted in the name of the real party in interest, but…an assignee for the benefit of creditors… may bring an action…” It follows that, where a cause of action has been assigned, the assignee becomes the real party in interest. See CR 17.01. However, “[i]n no event may an assignee maintain an action for any part of a claim which has not been assigned to him.” Works v. Winkle, 234 S.W.2d 312, 315 (Ky. App. 1950). A mere expectancy is not enough to establish standing, a party must prove apresent or substantial interest.” Plaza B.V. v. Stephens, 913 S.W.2d 319, 322 (Ky. 1996) (quoting Ashland v. Ashland F.O.P. No.3, Inc., 888 S.W.2d 667 (Ky. 1994)).

    In this case, the complaint was filed on December 17, 2007, but the assignment of mortgage was not executed until January 3, 2008. Thus, Deutsche Bank had no present interest when it filed its complaint and failed to take any steps to correct this. Allowing Deutsche Bank to commence this action at a time when it lacked standing impermissibly allowed litigation to commence based upon mere expectancy of an interest. See Plaza B.V., 913 S.W.2d at 322. Accordingly, the trial court erred when it did so; thus, it should not have entered summary judgment for Deutsche Bank. This issue being dispositive of the appeal, we decline to review the remainder of Glenn’s arguments.

    In light of our analysis, we vacate the entry of summary judgment because Deutsche Bank did not have standing to commence this action when it did. This matter is therefore remanded to the circuit court for the purpose of entering an order consistent with this opinion removing this case from its docket.


Editor's Note: While it may be acceptable for the foreclosing entity to obtain the assignment after the case commences in some states, this apparently is not the case in Kentucky, based on this ruling.

Confusion Caused By Suspicious Deed Conveying Fractional Interests To Bankrupt People Recorded Day Before F'closure Enough To Void Subsequent Sale

In Fresno, California, The Fresno Bee reports:

  • A bankruptcy judge on Wednesday reversed the foreclosure of the landmark Security Bank building on Fresno's Fulton Mall, giving its owners more time to find a buyer or settle its debts. Judge Whitney Rimel agreed with the building's owners, Fresno Pacific Towers Inc., that the foreclosure by East West Bank was tainted by a forged deed of trust and proceedings in another bankruptcy case in Los Angeles.

  • Fresno Pacific Towers owes $5.2 million to East West Bank, and filed for bankruptcy on Jan. 18 to try to prevent the bank from foreclosing. But the bank held a foreclosure auction later that day for the 16-story, 86-year-old building. The bank was the only bidder, with an offer of $1.9 million. Within hours, the bank recorded a title change with the county.

  • Rimel's ruling will force East West Bank to reconvey the title back to the ownership group. In a statement Wednesday evening, building co-owner and manager Saundra King said she was grateful for the ruling.


  • Ravi Jain, an attorney for Fresno Pacific Towers Inc., said East West Bank received approval for the foreclosure from another bankruptcy court based on a forged second deed. That deed -- recorded in Fresno County -- assigned interest in the building to several parties who had filed for bankruptcy in Los Angeles last summer.

  • Fresno Pacific Towers president John E. King testified Wednesday that the signature on the deed was not his. He and his sister, Saundra King, both said they knew nothing about the Los Angeles bankruptcy case until after the building was foreclosed.

  • But there were earlier signs of trouble. East West Bank declared the building in default last summer, and a foreclosure sale was initially set for Nov. 18.

  • Saundra King testified that on Nov. 16, she hired a Southern California firm, ASND Inc., to try to delay the sale. She said she and her brother sought more time to find a buyer and settle their debt to East West Bank before the bank foreclosed. King said she paid ASND about $5,000 in advance.

  • On Nov. 17, a day after King hired ASND and a day before the auction, the forged deed was filed with the Fresno County Recorder's Office. The Nov. 18 auction was postponed, and an auctioneer said the delay was because of a bankruptcy filing. According to Jain, the auctioneer was referring to the Los Angeles bankruptcy case.

  • Saundra King said she didn't learn about the forged deed until later in November. But she said "it didn't click that there would be a connection" between the document and ASND. She said she soon reported the forged deed to federal law-enforcement investigators.

  • A second auction date in December was also canceled, again because of a bankruptcy which King said she knew nothing about. The Kings said it wasn't until January, after the bank took back the building, that they learned that there was a bankruptcy case in Los Angeles and a court order allowing East West Bank to foreclose.

  • East West Bank's attorney, Thomas Geher, told the court it was obvious that ASND acted as an agent for the Kings and filed the fraudulent deed as a stalling tactic. "To believe ASND is not behind this is naive," Geher said. "The deed of trust was filed when the contract was signed," he added. "That's no coincidence. ... The debtor put all this in motion."

  • Rimel, however, gave the benefit of the doubt to the Kings and said she "cannot conclude fraudulent intent by Mr. or Ms. King." She said the Kings' contract with ASND, resembles "foreclosure prevention schemes ... that have taken advantage of hundreds of thousands of people."(1) Because Fresno Pacific Towers Inc. was never notified of the Los Angeles proceedings, Rimel added, the owners were deprived of an opportunity to argue against the foreclosure order in that case.

For the story, see Fresno landmark's foreclosure reversed (Owners of Security Bank get time to find buyer or settle debt).

(1) The hiring of a foreclosure rescue operator on the eve of a foreclosure sale to stall the sale in exchange for a payment of $5,000, coupled with the almost immediate recording of a suspicious deed of trust to multiple people who are already involved in ongoing bankruptcy proceedings in another jurisdiction certainly points to a possible fractional interest deed transfer, foreclosure rescue bankruptcy scam, as Judge Rimel correctly points out.

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

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

MERS To Members: Don’t Foreclose In Our Name!

Housing Wire reports:

  • Mortgage Electronic Registration Systems, or MERS, told its members Wednesday not to foreclose on residential mortgages in its name. The electronic registry of mortgage records built by Fannie Mae, Freddie Mac and the nation’s major lenders more than a decade ago has been under increasing fire by homeowners, prosecutors, politicians and others.

  • The drumbeat against MERS became louder last fall as robo-signing — the signing of foreclosure affidavits of indebtedness en masse, without proper review — surfaced. The robo-signing scandal caused several large servicers to temporarily halt foreclosures as they reviewed their procedures, and prompted an investigation of lenders and their servicing shops by all 50 attorneys general. A proposed settlement could involve some of the nation's biggest servicers.


For more, see MERS to members: Don’t foreclose in our name.

(1) In re Agard, Case No. 810-77338-reg (Bankr. E.D.N.Y. February 10, 2010). For a discussion on Judge Grossman's ruling, see Another Way Banks Make Everyone Pay: The MERS Mortgage Mess.

Subtle 'Under The Radar' Foreclosure Sale Bid Rigging Racket, Or Mere Familiarity With Competitors' Business Models?

In Denver, Colorado, The Denver Post reports:

  • Though fewer and fewer properties are left to be picked over at weekly county foreclosure sales — most are kept by banks — the leftovers aren't generating the rabid bidding wars one might expect. Instead, the handful of private investors who regularly attend the weekly public-trustee sales are landing properties for just $1 over a bank's minimum bid to keep them — and without any competing bids.

  • And even though six or seven investors will have registered to bid on a single property, more often than not, just one will make the $1 offer and win the auction, according to bidding records.

  • Some investors say it's because the properties simply aren't worth more than that, while others say they're just not interested in a buying battle that can needlessly run up the auction price — ultimately eating away any profits.


  • Yet not once in the past several months of sales has a private individual — someone not in the foreclosure-buying business — been able to land the same deal, foreclosure sales records in several counties show.

  • Despite appearances, several investors said there's no mystery in how the sales have worked out — and public trustees agree — that it's merely the result of familiarity. They've done it so often against the same opponents that when they walk into a sale, they have a fair picture of who's likely to bid on which properties and how much they're willing to pay.


  • To prevent any rigging of bids, buyers are prohibited from using body signals that could be deemed collusive in nature during the auction — winks, nods or any other motion to convey a message.

  • "Anything that would compromise the fairness of the system is simply not allowed," Adams County Public Trustee Carol Snyder said. "We'd like to believe it doesn't happen, but there's nothing we can say about what happens outside our doors."


  • "We see each other at the sales week after week, and you get to know what each other buys," said John Veno, owner of Colorado Res Works LLC. "I might not know their names, but I know their companies." The key, Veno said, is knowing the business model of his competitors, something that becomes evident over time.

For more, see Mysterious lack of bidding wars plagues foreclosure auctions (Among the few bidders at county foreclosure auctions, some nab houses for a dollar more than the minimum bid).

Go here for other posts & links on bid rigging at foreclosure and other real estate-related auctions.

Monday, February 21, 2011

Utah AG To Federal Appeals Court: BofA Sub Legally "Unqualified To Carry Out Trustee Foreclosures"

Bloomberg reports:

  • A Bank of America Corp. unit is breaking the law by foreclosing on homeowners in Utah because it doesn’t meet state requirements, the state attorney general’s office said in a federal appeals court case.

  • ReconTrust Co., a subsidiary of Bank of America, the biggest U.S. lender by assets, isn’t a member of the state bar or a title insurance company and is unqualified to carry out trustee foreclosures, Utah Attorney General Mark Shurtleff wrote in court papers filed yesterday with the U.S. Court of Appeals in Denver. “ReconTrust Co. N.A. is a non-depository national bank initiating approximately 4,000 home foreclosures in Utah each year in violation of Utah law,” the attorney general’s office said.

  • The court filing was made in a homeowner’s lawsuit against ReconTrust and Bank of America. “National banks must abide by state law,” said John Christian Barlow, an attorney for the homeowner, Peni Cox. “ReconTrust just wants to foreclose, period,” he said.

  • A Utah state judge issued an injunction last year blocking ReconTrust from trustee foreclosure sales in the state, Barlow said. A federal judge later lifted the injunction.

For more, see BofA Unit’s Utah Foreclosures Violate Law, State Says.

Homeowner Scores Judgment Against Loan Servicer In RESPA Suit, Forcing Bank Into Foreclosure

In Philadelphia, Pennsylvania, The Philadelphia Inquirer reports:

  • It's not clear how this story will turn out, but right now Patrick Rodgers is living a pay-back fantasy probably shared by millions of struggling U.S. homeowners. Frustrated by a dispute with Wells Fargo Home Mortgage and by his inability to get answers to questions, the West Philadelphia homeowner took the mortgage company to court last fall.

  • When Wells Fargo still didn't respond, Rodgers got a $1,000 default judgment against it for failing to answer his formal questions, as required by a federal law called the Real Estate Settlement Procedures Act. And when the mortgage company didn't pay - does something sound familiar? - Rodgers turned to Philadelphia's sheriff.

  • The result: At least for the moment, the contents of Wells Fargo Home Mortgage, 1341 N. Delaware Ave., are scheduled for sheriff's sale on March 4 to satisfy the judgment and pay about $200 for court and sheriff's costs.

For more, see Phila. homeowner wins judgment against Wells Fargo over mortgage fees.

Florida Couple To Pursue Foreclosure Mill For Alleged Inflated Fee Squeeze

In Central Florida, the Sarasota Herald Tribune reports:

  • A North Port couple says a Florida law firm charged them unwarranted and excessive fees as they tried to save their home from foreclosure, and their attorneys believe the firm did it to hundreds of other troubled homeowners, too.

  • Last week, David and Kayleen Keyser filed a complaint in their foreclosure case against Kahane and Associates law firm in Plantation, the latest in a string of class actions from Gulfcoast Legal Services(1) in Sarasota that target unfair collection practices in foreclosures.

  • On Wednesday, Kahane abruptly dropped the foreclosure case against the Keysers, which cancelled out the Keysers complaint. Gulfcoast attorneys say it was on the eve of the lender having to produce the underlying invoices for the fees.

  • That means the truck driver and grocery store manager can remain in their house where they raise three children without paying the mortgage, for now. The lender or firm would have to pay court costs to file foreclosure again. "I don't expect the foreclosure suit to be refiled anytime soon," Gulfcoast attorney Elizabeth Boyle said.

  • But it does not mean the Keysers will stop pursuing their class-action suit. Gulfcoast plans to refile the lawsuit as early as today in a new case, trying to discover if hundreds of other homeowners faced the same inflated and unsubstantiated fees from Kahane since 2006.

For more, see North Port pair fights fees in foreclosure skirmish.

(1) Gulfcoast Legal Services is a non-profit corporation providing free legal aid to income eligible residents of the greater Tampa Bay area. We have offices in Pinellas, Manatee, Sarasota and Hillsborough Counties.

Long Island Bankruptcy Judge Gives MERS A Hammering In Ruling Explaining That It Lacks Standing To Foreclose

In Central Islip, New York, The Wall Street Journal reports:

  • A federal bankruptcy court judge issued an opinion on Thursday offering a scathing critique of the Mortgage Electronic Registration Systems, or MERS, the electronic-lien registry system built by the housing-finance industry to facilitate the bundling and selling of pools of mortgages.

  • The decision by U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, N.Y., didn’t change the outcome of the borrower’s foreclosure proceeding. The foreclosure had been approved earlier by a state court, and the judge ruled that he didn’t have the authority to stop it.(1)

  • But that didn’t stop [Judge] Grossman from offering an opinion that he said would have a “significant impact” on the industry by calling into question the rules and procedures that MERS uses to transfer mortgages and handle foreclosures on behalf of the largest U.S. banks.


  • The opinion [] rejected any argument that MERS’s reach was so broad and deep that it should receive favorable treatment from the judiciary:

    The Court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States. However, the Court must resolve the instant matter by applying the laws as they exist today. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law.

For more, see U.S. Bankruptcy Judge Questions Legal Claims of MERS.

See also Bloomberg: Merscorp Lacks Right to Transfer Mortgages, Judge Says.

For the court ruling, see In re Agard, Case 8-10-77338-reg (Bankr. E.D.N.Y. February 10, 2011).

Thanks to Mike Dillon at for the heads-up on the story and a copy of the court ruling.

(1) Judge Grossman indicates that his hands were tied to undo the foreclosure in this particular case, and then proceeds to explain why he felt compelled to give an analysis as to why MERS lacks standing to foreclose anyway, in the following excerpt (bold text is my emphasis):

  • The Debtor’s objection is overruled by application of either the Rooker-Feldman doctrine, or res judicata. Under those doctrines, this Court must accept the state court judgment of foreclosure as evidence of U.S. Bank’s status as a creditor secured by the Property. Such status is sufficient to establish the Movant’s standing to seek relief from the automatic stay.


  • Although the Court is constrained in this case to give full force and effect to the state court judgment of foreclosure, there are numerous other cases before this Court which present identical issues with respect to MERS and in which there have been no prior dispositive state court decisions. This Court has deferred rulings on dozens of other motions for relief from stay pending the resolution of the issue of whether an entity which acquires its interests in a mortgage by way of assignment from MERS, as nominee, is a valid secured creditor with standing to seek relief from the automatic stay. It is for this reason that the Court’s decision in this matter will address the issue of whether the Movant has established standing in this case notwithstanding the existence of the foreclosure judgment. The Court believes this analysis is necessary for the precedential effect it will have on other cases pending before this Court.

In concluding his ruling, he makes this observation:

  • This Court finds that MERS’s theory that it can act as a “common agent” for undisclosed principals is not support by the law. The relationship between MERS and its lenders and its distortion of its alleged “nominee” status was appropriately described by the Supreme Court of Kansas as follows: “The parties appear to have defined the word [nominee] in much the same way that the blind men of Indian legend described an elephant – their description depended on which part they were touching at any given time.” Landmark Nat'l Bank v. Kesler, 216 P.3d 158, 166-67 (Kan. 2010).


One of the constraints Judge Grossman cited for upholding the foreclosure judgment in this case, notwithstanding MERS' lack of standing to foreclose, was the application of the Rooker-Feldman doctrine, which is described in Wikipedia as follows:

  • The Rooker-Feldman doctrine is a rule of civil procedure enunciated by the United States Supreme Court in two cases, Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983). The doctrine holds that lower United States federal courts other than the Supreme Court should not sit in direct review of state court decisions unless Congress has specifically authorized such relief. In short, a federal court must not become a court of appeals for a state court decision.

'Leagle eagles' who don't find Wikipedia a satisfactory resource on this point and who have some time on their hands can check out Duke Law Journal: Allison B. Jones, The Rooker-Feldman Doctrine: What Does It Mean To Be Inextricably Intertwined?, 56 Duke L. J. 643 (2006).

See also Martin J. Bishop, Eleventh Circuit: Rooker-Feldman Doctrine Bars Post-Foreclosure TILA Recission Claim.

U.S. Trustee To Federal Judge: "Fidelity Operated An Affidavit-Execution Process That Systematically Caused The Execution Of False Affidavits!"

The U.S. Trustee's Office has recently filed a Post-Trial Brief in ongoing bankruptcy litigation in a U.S. Bankruptcy Court in New Orleans, Louisiana in which it asks Judge Elizabeth W. Magner to hammer the alleged foreclosure document manufacturing racket management firm Lender Processing Services, Inc., f/k/a Fidelity National Information Services, Inc. (“Fidelity”) with sanctions for allegedly:

  • [p]ermitt[ing] its officer, Dory Goebel, to give materially misleading testimony to the Court on August 21, 2008, and should be sanctioned. It is undisputed that important parts of Goebel’s testimony were untrue; the crux of the matter now is determining Fidelity’s level of culpability. The evidence proves that, at a minimum, Fidelity acted with indifference to the truth in permitting Goebel to give the misleading testimony. (See U.S. Trustee's Post-Trial Brief In Lieu Of Closing Argument, at page 1.)

In the following excerpt, U.S. Trustee describes to Judge Magner what it thinks of Fidelity (bold text is my emphasis) (Post-trial brief, at p. 21-22):

  • Fidelity operated an affidavit-execution process that systematically caused the execution of false affidavits. That Fidelity considered this a valuable service to its clients is made manifest in an article co-authored by Ms. Goebel appearing in Fidelity’s corporate newsletter The Summit. In the article, published in September, 2006, Fidelity trumpeted the efficiency and benefits that its “document execution” process offered to servicer clients. Trial Ex. 17.

    The Fidelity affidavits were false because, per Fidelity’s procedures, its affiant-employees: 1) did not sign in the presence of notaries; 2) did not take any steps to obtain personal knowledge of the averments contained in the affidavits; and 3) falsely represented the contrary, within the affidavits themselves, as to possession of requisite personal knowledge. Fidelity officers Scott Walter and Ms. Goebel testified in complete agreement that Ms. Goebel would not have executed her affidavit in the presence of a notary, and that Ms. Goebel would have obeyed Fidelity’s procedures in that respect. December 1 Tr. 246:6-12, 337:5-22, 332:3-4.

    Mr. Walter and Ms. Goebel also testified in complete agreement that Goebel would not have gained personal knowledge about the averments in her affidavit and, again, that Goebel’s execution of the affidavit without gaining personal knowledge would have been in compliance with Fidelity’s procedures in that respect. December 1 Tr. 248:1-8, 342:21-343:3. Logically, thus, Fidelity expected its affiants to swear, falsely, that they had gained that personal knowledge.

The U.S. Trustee's brief then goes on to give a damning example of this alleged misconduct.(1)

For more, see In re Wilson - U.S. Trustee's Post-Trial Brief (filed February 1, 2011).

(1) In bankruptcy litigation unconnected to this case, the following excerpt from a December, 2010 Reuters story (see Special report: Legal woes mount for a foreclosure kingpin) reports on Lender Processing Services (f/k/a Fidelity National Information Services) getting into a Pennsylvania bankruptcy judge's cross-hairs because of its business practices in connection with foreclosure actions:

  • In an April 2009 court decision, Diane Weiss Sigmund, a federal bankruptcy judge in Philadelphia, specifically faulted lawyers whose firm filed LPS-transmitted documents in court using clerical workers to sign the name of a lawyer who hadn't looked at them. In that case, it turned out that, contrary to the documents supplied via the LPS system, the homeowners weren't in default on their mortgage.

    Referring to the LPS computer system, the judge stated, "the flaws in this automated process become apparent." She added: "An attorney must cease processing files and act like a lawyer."

Judge Sigmund, in In re Taylor, Case No. 07-15385-DWS (Bankr. E.D. Pa., April 15, 2009), had to deal with numerous document and communications screwups because of the business model used by LPS, and which led her to make the observation that the case before her was "a textbook example of why the [LPS] procedures used by HSBC and its counsel in the name of minimizing collection costs is so problematic."

Judge Sigmund concluded her 58-page opinion in her 2009 ruling with this parting shot at Lender Processing Services, Inc., f/k/a Fidelity National Information Services, Inc. and the foreclosure mill law firms they hop into bed with:

  • At issue in these cases are the homes of poor and unfortunate debtors, more and more of whom are threatened with foreclosure due to the historic job loss and housing crisis in this country. Congress, in its wisdom, has fashioned a bankruptcy law which balances the rights and duties of debtors and creditors. Chapter 13 is a rehabilitative process with a goal of saving the family home. The thoughtless mechanical employment of computer·driven models and communications to inexpensively traverse the path to foreclosure offends the integrity of our American bankruptcy system. It is for those involved in the process to step back and assess how they can fulfill their professional obligations and responsibly reap the benefits of technology. Nothing less should be tolerated.

In the current case, I am interested to see how far Judge Magner goes beyond the level of excoriation Judge Sigmund dished out when hammering LPS/Fidelity.

Sunday, February 20, 2011

Stern 'Dispersal Sale Dump' About To Begin As Battered Foreclosure Mill Head Looks To Unload Pricey, High-End Assets Worth Tens Of Million$

In Plantation, Florida, the South Florida Sun Sentinel reports:

  • In yet another sign that times are tougher for Plantation foreclosure attorney David Stern, he is looking to unload luxury assets worth tens of millions, including two estate properties on Hillsboro Beach that stretch from the Intracoastal to the blue waters of the Atlantic and what is believed to be his Italian-built superyacht.

  • Stern, 50, made a fortune by building Florida's largest foreclosure legal practice, with an army of attorneys and more than 1,000 employees processing paperwork for repossessions throughout the state.

  • He received a $58.5-million payout last January when he took his paperwork operation public and the new company, DJSP Enterprises, began trading on the Nasdaq stock exchange. He collected expensive properties, Ferraris and other luxury cars, and two jets.

  • But his law firm and DJSP have been battered in recent months by reports that his firm relied on fraudulent documents generated by the paperwork processors, and the firm is one of seven currently under investigation by the Florida Attorney General's Office for alleged document irregularities.

  • Major banks stopped doing business with him, lawyers quit his firm and DJSP laid off its workers by the hundreds. The company had only approximately 50 employees remaining as of last notice.

For more, see Foreclosure attorney Stern selling Hillsboro Beach estate properties - and perhaps a superyacht.

OCC Chief To Senate Banking Committee: Most Mortgage Servicers Have Proper Documentation, Legal Standing To Foreclose

Firedoglake reports:

  • In a Senate Banking Committee hearing just now, Acting OCC head John Walsh gave an update on the investigation into servicer practices, which was the subject of several news reports today. Here, in essence, was what he said:

    • “Federal banking agencies have concluded investigations on servicers found critical deficiencies and shortcomings that violate state and local foreclosure laws.”

    • However, they found that in most cases, loans were seriously delinquent and that the servicers had the proper documentation and the legal standing to foreclose.

  • Let’s stop right there. This investigation started at the end of 2010. It would be impossible for them to look at every single delinquent loan, which number in the millions, assess the situation for all of them, assess all the documentation, and conclude that most of the cases were operating on a generally legal basis. The courts certainly haven’t found that, and they had many more months to make the assessment.

  • This is a ridiculous statement that cannot possibly be backed up with comprehensive evidence. In fact, the Wall Street Journal says that the review sample was 2,800 foreclosures. Out of millions. And bank regulators who may not be well-versed in specific real estate law in every state made the investigation.

For more, see OCC’s John Walsh Attempts Whitewash of Servicer Abuse.

New York Moves To Provide Attorneys For All State Homeowners In Foreclosure By Year End

The New York Times reports:

  • New York court officials outlined procedures Tuesday aimed at assuring that all homeowners facing foreclosure were represented by a lawyer, a shift that could give tens of thousands of families a better chance to save their homes.

  • Criminal defendants are guaranteed a lawyer but New York will be the first state to try and extend that pledge to foreclosures, which are civil matters. There are about 80,000 active foreclosure cases in New York courts. In more than half the cases, only the banks have lawyers.

  • It’s such an uneven playing field,” the state’s chief judge, Jonathan Lippman, said. “Banks wind up with the property and the homeowner winds up over the cliff, on the street. It doesn’t serve anyone’s interest, including the banks’.” A lawyer for every defendant will also serve the courts’ interests, the judge said, by making proceedings more efficient.

  • Under the procedures, which will be put in place in Queens and Orange counties in the next few weeks and across the state by the end of the year, any homeowner in foreclosure who does not have a lawyer will be supplied one by legal aid groups or other pro bono groups. Legal aid groups are expected to have foreclosure offices in the courts to handle the influx.

For more, see New York to Assure Legal Aid in Foreclosure Cases.

South Florida Foreclosure Mill Takes Another Staff Hit; Can 96 More Employees

In Plantation, Florida, the South Florida Sun Sentinel reports:

  • Another 96 people who work for a company that provides paperwork services to the operations of mortgage foreclosure attorney David J. Stern in Plantation were laid off Tuesday, a company spokesman said.

  • That was about two-thirds of the remaining work force at DJSP Enterprises, a publicly traded company that serves Stern's law firm, said DJSP spokesman Chris Simmons. A notice of the layoffs filed with the state indicates that about 50 company employees remain.

For more, see 96 more layoffs at Plantation office of Stern affiliate.

Florida Foreclosure Mill Makes Major Payroll Dump After Fannie Pulled Its Cases From Firm Over Faulty Paperwork

In Broward County, Florida, the South Florida Sun Sentinel reports:

  • A Hollywood law firm that processes thousands of foreclosures for major lenders laid off almost half of its 568 employees Monday, days after the government-owned mortgage giant Fannie Mae pulled its files from the practice.

  • Ben-Ezra & Katz, in a memo released by a company spokesman, said the firm was "forced to take this action after Fannie Mae surprisingly terminated its relationship with the firm." In a notice sent five days ago, Fannie Mae officials said all exisiting foreclosures, mediations and bankruptcies needed to be transferred to other loan servicers by Tuesday, citing "document execution" issues.


  • Monday's layoffs echoed the massive job cuts that the law office of David J. Stern and public-traded affiliate DJSP Enterprises instituted after Fannie Mae and Freddie Mac, the other federal mortgage guarantor, dumped them. Fannie and Freddie comprised the bulk of Stern's business. About 700 Stern employees lost their jobs, according to regulatory filings.

  • Former staffers later sued, saying Stern's operations did not give them the 60-day notice required under the Worker Adjustment and Retraining Notification Act, or WARN, Act. A Ben-Ezra spokesman said WARN notices were sent on Monday to all employees.

For the story, see Foreclosure law firm lays off nearly half of its staff, after losing Fannie Mae.

Florida Homeowner Sues Over Bank's Illegal Break-In; Use Of Paperwork By Lender's "Jack-Booted Thugs" To Intimidate Cops Into Inaction A Major Concern

In Orange County, Florida, WOFL-TV Channel 35 reports:

  • Nancy Jacobini is a homeowner and has been for awhile. For two decades, she has been in the same house, which makes what happened on September 28th, 2010 so bizarre.

  • "It was about 5:30 p.m. It was a very rainy, dark, dreary day. I was in the front bedroom lying down on the bed with the light on. All of a sudden I heard someone trying to put their hand on the door handle. At that point I knew I was in trouble. I immediately grabbed my cell phone, went to the bathroom, locked my door and called 911. I was scared. Very scared. Cause I could hear the aggressiveness at the door. I panicked. Maybe he followed me. Maybe he's a sex offender. I had no idea," remembers Jacobini.

  • Orange County deputies showed up at the house. They found a locksmith changing the hardware on Nancy's front door. He was sent by Nancy's bank: JP Morgan Chase.
    "The bank broke into my home for no darn good reason," says Jacobini.

  • "Americans need to wake up, because if we don't stop them from doing this now, what's to stop them from kicking everybody's doors down?" asks Matthew Weidner, Nancy's attorney.

  • Weidner filed a federal lawsuit on Friday against the bank. He says he receives, on average, six calls a week from people complaining about these so-called "real estate repo men." [...] These jack-booted thugs can intimidate police who come out to the scene and often times, all that's required to make the police go away is for the jack-booted thugs to show a piece of paper from the bank," says Weidner.(1)

For more, see Lawsuit filed in local bank break-in case.

(1) For examples of other filed lawsuits involving illegal "trash-out" / lockout cases, see:

For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see: