Would-Be Buyers In Possession Under Unrecorded Purchase Agreements Say Their Land Was Mortgaged Out From Under Them By Seller

In Surry County, North Carolina, WXII-TV Channel 12 reports:

• Some Surry County residents are being forced to move after they said they bought property from a landowner. But the bank who owns the deed to the land said the properties are in foreclosure and is holding an auction for the land.

• The residents said they signed mortgage contracts with Nichols Land Company for lots in Dobson and Mount Airy. A notice of sale letter shows Nichols Land Company Holdings used the same lots as collateral on a $200,000 loan it took out in 2007. Nichols defaulted on the loan, so the bank that holds the loan now controls the land.

• "We've been there eight months and I've just been through a liver transplant. How can I move? I'm on Social Security now. How can I move? All our savings are gone," one of the residents, Debi Flannelly, said.

• Another resident, Denise Daniels, said she signed a contract with Nichols in 2001 for a 15-year loan that states she'll own the property outright in 2016. "Over the years, we've paid about $30,000 on our lot. As of yesterday, I owe $4,500," she said. A lawyer for Nichols said he hadn't investigated the legal issues and wasn't able to comment.(1) A lawyer who sent the notice of sale to the residents didn't return WXII's attempt to obtain a comment.

• The residents said they feel they've been duped. "It's just a fraud. He sold these properties to us and he used these deeds as collateral," one resident said.

Source: Residents Say They've Been Forced From Land (Bank Says Property Actually In Foreclosure).

See also, The Mount Airy News: Land company gets extension on foreclosures:

• A company accused of defaulting on a loan, which would potentially force several local residents from their homes, said Wednesday it has reached an agreement with its bank that will delay evictions.According to legal notices published in Wednesday’s edition of The Mount Airy News, 35 properties owned by Nichols Land Company would go up for public auction on March 30 at 3 p.m. at the Surry County Courthouse door.

• Nichols Land has sold hundreds of pieces of property throughout the years as a middle man between the purchaser and lending institutions, and has relied on those purchaser’s payments to meet its debt servicers. [...] Most of these individual land installment contracts in question now were drawn up more than 10 years ago, Nichols said. Nichols did at that time, and has continued to, have a note against the land, he said. The bank that holds the notes for these properties knew that land installment contracts existed when the note was procured.(2)

(1) To the extent the residents acquired their rights to the land pursuant to an unregistered or unrecorded contract for deed (a/k/a land contract, agreement for deed, conditional sales contract, installment sale contract, etc.), where that contract pre-dates the granting of a subsequently made, but earlier recorded mortgage, the residents' property rights under the unrecorded contract for deed may be superior to the recorded rights of the morgage holder. This could be the case if, at the time the mortgage was made, the residents were in possession of the land, said possession was open, notorious and exclusive, and the mortgagee failed to inquire into any legal rights or equities by which the residents held possession. In such a case, the mortgagee arguably would not qualify as a bona fide purchaser (a/k/a innocent purchaser, good faith purchaser), and consequently, would leave its rights under its later-acquired mortgage subject and subordinate to the rights of the residents, notwithstanding its earlier recording in the public record (this means that the bank has no right to foreclose on the buyers under the contracts for deed).

For support on this point from the North Carolina Supreme Court, see (bold text is my emphasis):

Morehead v. Harris, 262 N.C. 330; 137 S.E.2d 174 (1964):

• "A person is an 'innocent purchaser' when he purchases without notice, actual or constructive, of any infirmity, and pays valuable consideration and acts in good faith." Lockridge v. Smith, 206 N.C. 174, 173 S.E. 36.

***

• The burden of proof of the "innocent purchaser" issue is upon those claiming the benefit of this principle -- in this case the defendants Price. Hughes v. Fields, 168 N.C. 520, 84 S.E. 804; Lumber Co. v. Trading Co., 163 N.C. 314, 79 S.E. 627; Cox v. Wall, 132 N.C. 730, 44 S.E. 635.

Perkins v. Langdon, 237 N.C. 159; 74 S.E.2d 634 (1953):

• Actual possession is treated as the equivalent of notice to the purchaser and as a substitute for registration. Webber v. Taylor, 55 N.C. 9; Edwards v. Thompson, 71 N.C. 177; Tankard v. Tankard, 79 N.C. 54; Heyer v. Beatty, 83 N.C. 285; Bost v. Setzer, 87 N.C. 187; Johnson v. Hauser, 88 N.C. 388; Staton v. Davenport, 95 N.C. 11; Mayo v. Leggett, 96 N.C. 237, 1 S.E. 622. See also Allen v. Bolen, 114 N.C. 560, 18 S.E. 964; 51 C.J.S., Landlord and Tenant, Sec. 258; Raisin v. Shoemaker, supra; Eckman v. Beihl, 116 N.J. 308, 184 A. 430; Huddleston v. Ward (Ohio), 68 N.E. 2d 580; 39 Am. Jur., Notice and Notices, Sec. 18; Annotation, 74 A.L.R. 355.

Smith v. Fuller, 152 N.C. 7; 67 S.E. 48 (1910), in which the North Carolina high court [alteration added]:

• Conced[es] the soundness of the principle established by the decided weight of authority, that possession by a person other than the vendor, when such possession is open, notorious and exclusive, puts a purchaser upon inquiry and is notice of every fact which he could have learned by proper inquiry (as held by this Court in Edwards v. Thompson, 71 N.C. 177; Staton v. Davenport, 95 N.C. 11; Tankard v. Tankard, 79 N.C. 54; ibid., 84 N.C. 286; Bost v. Setzer, 87 N.C. 187; Johnson v. Hauser, 88 N.C. 388; Mfg. Co. v. Hendricks, 106 N.C. 485, 11 S.E. 568; Patterson v. Mills, 121 N.C. 258, 28 S.E. 368), [...]

Tankard v. Tankard, 79 N.C. 54 (1878):

• Open, notorious, and exclusive possession puts a purchaser upon inquiry, and is notice of every fact which he could have learned by inquiry.

For more on the bona fide purchaser doctrine in other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

(2) Ibid.

City Officials Have Hands Tied In Effort To Stem Tide Of 'Sober' Homes In Pompano Beach Neighborhood, Leaving Local Residents Rankled

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

• A new type of housing arrangement known as 'sober homes' are cropping up all over the Pompano Highlands neighborhood, according to members of the Pompano Highlands Civic Improvement Association. And there is little that can be done about it.

• "It's a phenomenon happening all over the country. The problem is they're hard to [regulate] because they are not halfway houses," said Sandra King, a spokeswoman for the city of Pompano Beach.

• Halfway homes are typically regulated by the state and are allowed in residential areas as long as they are inspected and operating within state laws, said Dennis Beach, the city manager. But the homes in the Highlands appear to be mostly what is known as 'sober homes,' where people coming out of halfway houses or rehabs live together to stay out of trouble. The only thing the homeowner needs to get from the city is a business tax receipt in order to operate legally, said King.

***

• The Highlands has been targeted mostly because rents are cheap due to a foreclosure crisis that has hit the neighborhood particularly hard, said Walter Syrek, secretary of the civic improvement association. "I can say that my experience over the past four years of working with the association, I'm amazed how often it gets mentioned," Syrek said. "Everyone I've talked to seems to know where one is."

• A simple Google search of "Pompano Beach" and "sober house" will yield dozens of advertisements for such places. Often, sober houses will hire a manager to run the place and can even receive government subsidies for renting out the rooms, said King.

• But the existence of these homes has caused a nuisance for some in the neighborhood. Syrek said he knows of one sober house on Northeast 43rd Court and 13th Avenue where on weeknights groups set up lawn chairs on the front lawn and hold AA meetings.

For more, see 'Sober homes' causing concern in Highlands neighborhood.

'Clean & Sober' Group Home Operator Scores $55K From Michigan Municipality In Settlement Of DOJ Fair Housing Lawsuit

From the U.S. Department of Justice:

• The Justice Department announced [] that Dalton Township, Mich., will pay $62,500 to settle a lawsuit alleging that the township discriminated against a group home for persons recovering from drug and alcohol addiction, in violation of the federal Fair Housing Act and Title II of the Americans with Disabilities Act.(1)

***

• "The Fair Housing Act and the Americans with Disabilities Act ensure that persons with disabilities, including those recovering from addiction, can live in a community of their choosing free from discrimination," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "The Justice Department will continue its vigorous enforcement of federal laws to protect the civil rights of persons with disabilities across the country."

• "Cities and towns have an obligation to make reasonable accommodations to their zoning policies when they are necessary to afford people with disabilities the same housing opportunities that others enjoy," said John Trasviña, Department of Housing and Urban Development (HUD) Assistant Secretary for Fair Housing and Equal Opportunity. "HUD will continue to work with the Justice Department to enforce the Fair Housing Act to ensure equal housing opportunities for people with disabilities."

For the DOJ press release, see Justice Department Settles Housing Discrimination Lawsuit Against Dalton Township, Michigan.

(1) According to the press release, Dalton Township will fork over $55,000 to the owner of the group home, and permit him to operate the group home for up to nine men recovering from alcohol and drug dependency at its current location; and cough up $7,500 to the United States as a civil penalty.

Non-Profit Sponsor Of 'Clean & Sober' Group Homes Scores $105K In Damages From NC Town In Settlement Of Fair Housing Suit

From the U.S. Department of Justice:

• The Justice Department announced [] that it has settled its suit against the town of Garner, N.C., and the town’s Board of Adjustment alleging that they violated the Fair Housing Act when refused to allow up to eight men recovering from drug and alcohol addictions to live together as a reasonable accommodation.

• Oxford House Inc., the non-profit organization that chartered the home, sponsors the development of self-governing houses in which recovering addicts support each other’s determination to remain sober. The case began when Garner refused to consider requests by Oxford House to increase the number of residents in the home from six to eight.

***

• Under the terms of the settlement, which must still be approved by the U.S. District Court in Raleigh, N.C., the defendants will pay $105,000 in monetary damages to Oxford House and $9,000 to the government as a civil penalty.(1)

For the DOJ press release, see Justice Department Settles Fair Housing Lawsuit Against Town of Garner, North Carolina.

(1) According to the press release, the settlement also requires the town to grant the reasonable accommodation requested by Oxford House, to submit periodic reports to the government, and to train town officials on the requirements of the Fair Housing Act. In December 2010, in connection with the parties’ proposed settlement, the town amended its zoning code to establish a procedure for addressing future requests for reasonable accommodations.

Town Passes 45-Day Moratorium On Unlicensed Group Homes; Now Faces Fair Housing Lawsuit Threat By 'Sober Living' Facilities Operator

In San Rafael, California, the San Rafael Patch reports:

• City council members unanimously approved a 45-day moratorium on all unlicensed group homes despite threats of a legal challenge from an attorney representing two sober living facilities.

• Since the beginning of February, residents in the Forbes and Gerstle Park neighborhoods have been concerned about possible parking problems and traffic congestion caused by two sober living facilities on 1 Culloden Park Rd. and 201 Marin St. Both of these facilities provide no treatment for the recovering alcoholics or addicts who would be living there and could house between seven and 15 people, although it is unclear how many people are currently living in these locations.

***

• Attorney Matthew Gorman, representing the operators of both sober houses, wrote a letter to the city a few hours before the March 7 city council meeting saying a moratorium would be “highly problematic and would expose the city to legal challenges if the city council proceeds.” Instead, he volunteered his cooperation with the city to find a solution.On top of being vague and rushed, the moratorium violates privacy laws, equal protection rights, uniform housing code, zoning regulations and the Federal Fair Housing Act, Gorman said.

• “Both the Federal Act and the State Act (of the Fair Housing Act) treat persons recovering from drug and alcohol addictions as individuals with a disability,” Gorman said. Discrimination in housing based on this disability is prohibited.

***

• Cities all over the state and country are struggling with how to regulate sober living facilities. Garner, N.C., Columbus, Ind. and Dalton Township, Mich. have all been sued by the United States Department of Justice for attempts at regulation, according to [City Attorney Rob] Epstein.(1) Los Angeles is currently revising its zoning to address the problem and West Hollywood was recently involved in a lawsuit involving rent control and clean and sober living homes.

For more, see Moratorium on Group Homes Violates Fair Housing Act, Lawyer Says (City may face "legal challenges" after unanimously approving a moratorium on all group homes).

(1) For the U.S. Department of Justice press releases on these legal actions, see:

• Justice Department Settles Fair Housing Lawsuit Against Town of Garner, North Carolina (Garner pays $114,000 to settle Fair Housing lawsuit brought by Justice Department),
• Justice Department Resolves Housing Discrimination Lawsuit with the City of Columbus, Indiana (Columbus pays $24,000 to settle Fair Housing lawsuit brought by Justice Department),
• Justice Department Settles Housing Discrimination Lawsuit Against Dalton Township, Michigan (Dalton Township pays $62,500 to settle Fair Housing lawsuit brought by Justice Department).

Feds Indict One, File Six Civil Suits In Various States In Crack Down On Alleged 1st Time Homebuyer Tax Credit Scams

From the U.S. Department Of Justice:

• The United States has filed six lawsuits in five states to stop tax return preparers from fraudulently claiming the first-time homebuyer tax credit and the earned-income tax credit, the Justice Department announced [].

• The filings of those civil injunction complaints coincided with the indictment of a Philadelphia man on criminal charges of fraudulently claiming the first-time homebuyer credit.(1) All of these actions are part of the Justice Department’s continuing efforts to halt tax scams involving false claims for tax credits and to prosecute those who fraudulently file tax returns containing those claims.

***

For the DOJ press release, see Justice Department Announces Indictment and Six Lawsuits Targeting False Claims for First-time Homebuyer and Earned-income Tax Credits (Actions Highlight Continuing Nationwide Effort to Halt Tax Scams And Prosecute Fraudulent Tax-Return Preparers).

(1) From the press release:

• According to the indictment, Jonathan Brownlee of Philadelphia was charged with 16 counts of filing false federal income tax returns that contained fraudulent claims for the first-time-homebuyer credit. He allegedly obtained personal information about several individuals through false pretenses and used that information to make false claims for the credit to the Internal Revenue Service (IRS), along with requests that refunds be deposited into bank accounts that he controlled or could access. Brownlee allegedly knew the individuals whose names he used were not entitled to the credit because they had neither purchased a home nor signed a contract to do so. If convicted, he faces a maximum prison sentence of 80 years and a maximum fine of $4 million.

Federal Court Slams Landlord For Allowing Rental Agent To Sexually Harrass Female Tenants; Conduct To Cost Defendants $197K

From the U.S. Department of Justice:

• A federal court in Detroit has ordered Ypsilanti, Mich., property owner and Washtenaw County Commissioner Ronnie Peterson, and his former manager Glen E. Johnson to pay a total of $82,500 in civil penalties in a sexual harassment case, the Justice Department announced []. The civil penalty is in addition to the $115,000 jury verdict obtained by the department on behalf of six victims of the sexual harassment in August 2010.

• “This decision makes clear that property owners can be held accountable for sexual harassment carried out by their rental agents,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division “It is disturbing that some landlords will take advantage of vulnerable women and force them to choose between a roof over their heads or being sexually harassed. It is even more troubling when the harasser is enabled by a property owner who hands him the keys and looks the other way. Rental property owners must establish clear policies against sexual harassment, provide an avenue for tenants to make complaints directly to them, and take those complaints seriously.”

***

• In its decision, the court noted that Johnson repeatedly sexually harassed six women tenants and that his behavior “was egregious and interfered with the women’s peaceful enjoyment of their homes, which should have been the one place where they could turn for refuge.” The court also noted that Peterson had not taken any corrective action after two of his tenants complained to him about Johnson’s contact. The court noted that Peterson’s conduct was “troubling inasmuch as he was willfully impervious to the complaints from two of his tenants. At the very least, their troubling comments should have put him on notice that he should have given closer attention to Johnson’s supervisory control over his tenants.”

For the DOJ press release, see Michigan Property Owner and Manager Ordered to Pay $82,500 in Civil Penalties in Sexual Harassment Case.

Cincinnati Landlord To Tussle With DOJ In Fair Housing Suit Over Charges Of Sexual Harrasment Of Female Tenants

From the U.S. Department of Justice:

• The Justice Department [] filed a lawsuit against Cincinnati landlord Henry E. Bailey alleging that Bailey sexually harassed female tenants at residential properties he has owned and managed in the Cincinnati metropolitan area.

• The complaint, filed in the U.S. District Court for the Southern District of Ohio, alleges that Bailey violated the Fair Housing Act by subjecting female tenants and prospective tenants to unwanted verbal sexual advances and unwanted sexual touching; entering the apartments of female tenants without permission and notice; granting and denying tangible housing benefits based on sex; and taking adverse actions against female tenants when they refused his sexual advances.

• "Every individual has the right under federal law to rent housing without being subjected to sexual harassment," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "Landlords who abuse their power and authority in this way should be on notice that the Justice Department steadfastly enforces the Fair Housing Act throughout the United States."

• "A person’s home should provide a place of comfort and safety," said U.S. Attorney for the Southern District of Ohio Carter M. Stewart. "We must safeguard those values by investigating and prosecuting any person or group that seeks to interfere with them." The suit seeks monetary damages for victims of the alleged harassment, civil penalties and a court order barring future discrimination and requiring additional preventive measures.

For the DOJ press release, see Justice Department Sues Cincinnati Landlord for Sexual Harassment.

Mississippi Mobile Home Park Owner To Cough Up $50K To Settle Race-Based Discrimination Fair Housing Lawsuit

From the U.S. Department of Justice:

• The Justice Department [] announced that Mississippi property owner Indigo Investments LLC, has agreed to pay $50,000 in monetary damages and civil penalties to settle the government’s Fair Housing Act lawsuit. The government alleged that Indigo and its former employees, Barbara A. Hamilton and Edward L. Hamilton, discriminated against African-American residents and members of interracial households at Homestead Mobile Home Village in Gulfport, Miss., which Indigo formerly owned and the Hamiltons formerly managed.

• The lawsuit originated as a result of a complaint filed with the Department of Housing and Urban Development (HUD) by an African-American couple who moved to the mobile home park after being displaced by Hurricane Katrina. After investigating the complaint, HUD issued a charge of discrimination, and the case was referred to the Justice Department, which filed the lawsuit in June 2009.

***

• "Losing one’s home to any disaster is disruptive enough without facing housing discrimination when trying to find a new home to restart your life," said John Trasviña, Assistant Secretary for Fair Housing and Equal Opportunity. "HUD and the Department of Justice continue our joint enforcement actions to eliminate illegal housing discrimination in all forms."

• Under the settlement, which was approved by the U.S. District Court for the Southern District of Mississippi, Indigo Investments LLC, will pay $45,000 to 12 individuals and $5,000 to the United States as a civil penalty.

For the DOJ press release, see Justice Department Settles Housing Discrimination Lawsuit Against Mississippi Mobile Home Park Owner and Managers.

Use Of "No Blacks" Selling Point To Cost Alabama Landlord, Two Employees $15K+ To Settle DOJ Fair Housing Discrimination Lawsuit

From the U.S. Department of Justice:

• The Justice Department [] announced a settlement of its lawsuit alleging that Chandi Biswas, Kenneth R. Scott and Frankie L. Roberson violated the Fair Housing Act by making discriminatory statements against African-American renters at Rolling Oaks Apartments in Clanton, Ala. The settlement, in the form of a consent decree, was approved by a federal district judge in Montgomery, Ala.

• The case originated based on evidence generated by the Civil Rights Division’s Fair Housing Testing Program, in which individuals pose as renters to gather information about possible discriminatory practices. The testing uncovered evidence that Scott and Roberson, employees at Rolling Oaks Apartments, told white testers that a selling point of the apartment complex was the lack of African-American tenants, and that Rolling Oaks Apartments had adopted rental policies intended to discourage African-American rental applicants. Biswas owns Rolling Oaks Apartments and employed Scott and Roberson.

• "When housing providers make race a part of their sales pitch, they create an atmosphere of intolerance and they violate the law," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "This settlement will make clear that race is never an appropriate selling point for housing."

• Under the settlement, the defendants must pay $15,500 to the government as a civil penalty.

For the DOJ press release, see Justice Department Resolves Lawsuit Alleging Discrimination on Basis of Race in Clanton, Alabama.

Tenant, Non-Profit To Split $30K For Settlement Of DOJ Fair Housing Racial Discrimination Suit; Feds Pocket $5K In Penalties

From the U.S. Department of Justice:

• The Justice Department announced [] that Orland Park, Ill., property owner Terence Flanagan has agreed to pay $35,000 in monetary damages and civil penalties to settle consolidated Fair Housing Act lawsuits against him. The lawsuits alleged that Flanagan discriminated against a family that tried to rent a single-family home from him, and that Flanagan made repeated statements to fair housing testers expressing a preference not to rent the home to African-Americans.

• [The] settlement, which has been approved by the U.S. District Court for the Northern District of Illinois in Chicago, resolves a lawsuit filed by the department and one filed by Kemal Majied and the South Suburban Housing Center, a private fair housing organization, against Flanagan in late 2009.

• Mr. Majied, who is African-American, and his family unsuccessfully sought to rent a single-family home that Flanagan had advertised for rent and contacted the South Suburban Housing Center for assistance. Both the Housing Center and the department later sent fair housing testers to the property, where Flanagan stated he would rent the house to a white tester for $100 less than the advertised rate, and further stated “you’re not black, that’s the reason you’re getting that.”

For the DOJ press release, see Justice Department Obtains $35,000 Discrimination Settlement Against Chicago-area Landlord.

W. Pennsylvania Feds Score Guilty Plea From Teen In Cross-Burning Conspiracy; Conduct Constitutes An Illegal Interference w/ Housing Rights Of Another

From the U.S. Department of Justice:

• Michael Francis Bealonis, of Robinson, Penn., pleaded guilty [to] a charge related to the burning of a cross in the yard of an African-American juvenile in November 2009, the Justice Department announced []. Bealonis, 19, pleaded guilty to conspiracy to interfere with the housing rights of another in federal court in Pittsburgh before Senior U.S. District Judge Maurice B. Cohill.

• Information presented during the plea hearing established that a cross burning occurred on Nov. 14, 2009, at a residence in Robinson that was home to a family with three minor children, one of whom is African-American and an adopted son of the family.(1)

***

• "This teen used an unmistakable symbol of bigotry and hate to threaten a family with violence simply because the race of a child. These incidents have no place in our country, and they are a reminder of the civil rights challenges we still face today," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "We will continue to aggressively prosecute hate crimes of this kind."

For the DOJ press release, see Pennsylvania Teen Pleads Guilty for Cross Burning.

Go here for other posts on cross-burning prosecutions.

(1) According to the DOJ press release, the investigation determined that Bealonis and his co-conspirators agreed to burn a cross in the backyard of the home, and used boards to construct a 6-foot wooden cross with athletic socks attached that had been soaked in accelerant. Bealonis and one of his co-conspirators transported the cross to the garage of another co-conspirator, where they poured gasoline on the cross before Bealonis took it, jumped over a fence and carried it to the back yard of the victim’s house, where he pushed the cross into the ground and lit it. He also used racial slurs and expressed racial animus during the cross burning.

Three Guilty Pleas, One Conviction After Louisiana Federal Court Trial In Cross-Burning Conspiracy

From the U.S. Department of Justice:

• The Justice Department announced that U.S. District Judge Donald E. Walter accepted the guilty plea of Jeremy Matthew Moro, 33, for conspiring to burn a cross near the home of an interracial couple in Athens, La., in October 2008. [In February], Judge Walter accepted the guilty plea of Joshua James Moro, 25, on the same charge.

• Another defendant, Sonya Marie Hart, 31, pleaded guilty on Jan. 31, 2011, to misprision of a felony because she withheld information from the FBI regarding the defendants’ attempt to cover up the cross burning. The Moros’ cousin, Daniel Danforth, was previously convicted by a federal jury for organizing, carrying out and attempting to cover up the same cross burning.

***

• “Cross burning, unfortunately, remains a terrible symbol of hatred and intolerance. Every citizen has a right to feel safe and secure in their homes and neighborhoods. Intimidation of citizens in this district will not be tolerated. This office will continue to prosecute individuals who participate or facilitate crimes which violate the civil rights laws,” said U.S. Attorney for the Western District of Louisiana Stephanie Finley.

For the DOJ press release, see Three Plead Guilty to Civil Rights Conspiracy in Connection with Cross Burning in Athens, Louisiana.

Go here for other posts on cross-burning prosecutions.

Bronx Tenants Sue Lender To Cough Up Cash For Urgent Repairs To 8 Buildings Abandoned By Landlord As Bank Scrambles To Unload Unwanted Promissory Note

In The Bronx, New York, Crain's New York Business reports:

• A group of Bronx tenants filed a lawsuit Thursday seeking to force New York Community Bank to hand over money to repair eight foreclosed buildings riddled with code violations.

• The suit is similar to one filed last year by tenants in foreclosed buildings that had been bought by Los Angeles-based Milbank Real Estate. In that case, a Bronx judge ordered owner LNR Property Corp. to put up $2.5 million to cover repairs on the 10 rundown properties.

• “The Milbank tenants have established a new tool and now tenants no longer have to endure horrible conditions,” said Jonathan Levy, deputy director of the housing unit at Legal Services NYC-Bronx, which represents the tenants. “They have a way to go to court and seek relief.”

• Meanwhile, a nonprofit housing group has made a bid of more than $8 million to buy the mortgage on the properties, which fell into foreclosure in October 2009. But New York Community Bank has rejected the offer by Mutual Housing Association of New York Management and is believed to be negotiating with a buyer willing to pay closer to the note's face value, which is more than $16 million.

***

• The eight buildings were purchased in 2006 by New York Affordable Housing Association, a collection of some of the city's most notorious landlords and several private equity players, with a $14.7 million mortgage from New York Community Bank. In June of 2008, the group refinanced the portfolio, taking on an additional $4.5 million in debt.

• If the group, which never responded to foreclosure notices, used the extra financing to make building repairs, it isn't evident, tenant advocates say. Mold, collapsed ceilings, missing tiles, outdated wiring and broken boilers abound, they say. The elevator in the one building hasn't worked for several years.

For more, see Bronx tenants sue bank for urgent repairs (Move by residents of eight buildings against NY Community Bank follows similar, precedent-setting suit won by tenants group in the borough last year, in which a judge ordered $2.5 million for repairs).

For story update, see The Wall Street Journal: Bank Sells Bronx Mortgage:

• New York Community Bank has sold the mortgage on eight dilapidated buildings in the Bronx, bank officials said Thursday, disposing of its interests in properties that have attracted tenant protests. The purchaser bought the mortgage, which had a $16 million balance, at a discount. The bank declined to identify the buyer or to say how much the buyer paid. [...] Jonathan Levy, an attorney with Legal Services NYC-Bronx, which is representing the tenants, said he was "stunned" by the news of the sale.

Clueless Out-Of-Town Landlord Abandons Mismanaged Units After Overpaying For 19 Buildings; Leaves Living Hell For Poor, Displacement-Fearing Renters

In Cincinnati, Ohio, The Enquirer reports:

• In Avondale, Tawana Riley battles daily with roaches, bed bugs and faulty electrical outlets. In Over-the-Rhine, residents at The Senate Apartments on 12th Street have been plagued by a rat infestation and broken plumbing that backs up sewage.

• And in Walnut Hills, Alexander Bailey has struggled for three years to keep water from leaking into his apartment when it rains. "Something has to be done," says Bailey. "We're paying the rent every month and the government is paying, but nothing is getting done. Where is all the money going?"

• Their homes are among nearly 700 units of low-income housing across Cincinnati left to crumble after their owners, Brooklyn-based NY Group, bought them three years ago and then fell into foreclosure in July 2010. Purchased at the peak of the housing market for $21.5 million, the 19-building portfolio of affordable rental housing spans nine Cincinnati neighborhoods and includes apartment communities in Evanston, Mount Auburn, Paddock Hills, East Price Hill and Sedamsville.

• The case illustrates how the impact of nation's foreclosure crisis is spreading beyond over-leveraged homeowners and into the country's most fragile housing stock: low-income rental communities that were purchased at peak of the market by speculators and investors.

• Residents say major problems began at their homes after NY Group took over in 2007. Since the foreclosure filing, repairs to the buildings have become the responsibility of lending giant Fannie Mae, the mortgage holder for the financially ailing properties. The lender says it has spent hundreds of thousands of dollars to address outstanding code violations and city work orders that went unattended to under the NY Group's watch. But residents and others say the buildings remain in unacceptably poor condition.

• "The NY Group was not interested in making repairs and neither is Fannie Mae, it appears," said Marcheta Gillam, a lawyer at the Legal Aid Society of Greater Cincinnati. For Riley, Bailey and the 653 other Cincinnati families renting from the NY Group, foreclosure means an uncertain future; there's no guarantee they can stay in their homes once they are sold.

***

• In Cincinnati, NY Group bought its 19 buildings in 2007 from downtown-based Downtown Property Management Inc. Soon after, work orders for roof repairs, leaky kitchen faucets and litter control began to pile up, said Ed Cunningham, manager of Cincinnati's property maintenance code enforcement division. Since the July foreclosure filing in Hamilton County Common Pleas Court, Cunningham's department has received calls for collapsed ceilings, electrical fires, and mold.

***

• "These residents and buildings are being abandoned, and it's the communities that get stuck holding the bag," Gillam said. "We get stuck with the blight. We get stuck with the unhappy, desperate families that are left wondering if they're going to be displaced."

• Gillam is representing the tenants who are fighting to be heard in the foreclosure case pending against their homes. Currently, the tenants are not considered a party in the foreclosure case.

For more, see Upkeep neglect bedevils tenants (Renters suffer in foreclosures).

Manhattan Jury Slams Phony Rental Agent For Clipping $77K+ In Upfront Deposits From Desperate NYC Tenants Seeking 'Section 8' Housing Placement

From the Office of the New York County District Attorney:

• Manhattan District Attorney Cyrus R. Vance, Jr., [] announced the conviction of JOSIE ALMONTE, 33, for perpetrating a large-scale real estate fraud scheme that targeted sixteen victims. On March 9, 2011, a jury in New York State Supreme Court found the defendant guilty of 28 counts of Grand Larceny, Scheme to Defraud, and Criminal Impersonation.

• “The defendant launched her scheme to defraud vulnerable, low-income families in the middle of a nationwide economic and housing crisis,” said District Attorney Vance. "JOSIE ALMONTE preyed upon individuals who obtained or were seeking federal housing assistance, gained their trust and then stole their money. I would like to commend the jury for recognizing the depth of her deception in pursuit of her personal financial gain.”

• As proven at trial, ALMONTE falsely represented herself as a real estate agent to sixteen victims. In some cases, she handed out business cards that stated she was a real estate representative for “Empire Home Sales.” In 2008, ALMONTE briefly worked as a Spanish translator for an agent who worked with Empire Home Sales, but she was never issued a business card by that company.

• ALMONTE also accepted cash deposits ranging from $2,000 to $10,000 from some of her victims, and promised them placement in the Section 8 federal housing program, which provides rent subsidies for eligible low-income families. Nearly all of these victims had Section 8 housing vouchers that were close to their expiration date, so they were in desperate need of housing. [...] ALMONTE’S victims were primarily from the Dominican community in Northern Manhattan.

For the Manhattan DA press release, see District Attorney Vance Announces Conviction In Real Estate Fraud Case (JOSIE ALMONTE Convicted of Scamming Victims Out of More Than $77,000).

'Single Mom' Straw Buyer w/ Few Assets Who Bought Ten Homes That Ended In Foreclosure Cops Quick Plea, Blows Whistle On Alleged Mortgage Fraud Racket

In Tampa, Florida, the St. Petersburg Times reports:

• Three Tampa Bay men have been indicted in a $1.84 million mortgage fraud involving 10 properties purchased without a penny down. The indictment unsealed Tuesday stems from a 2006 St. Petersburg Times story detailing a mysterious real estate spending spree by a single mother with few assets.(1)

• But federal prosecutors say the single mother was a "straw buyer" and that William Ondra Joel II, 31, of Wesley Chapel was actually behind the purchases. Joel, president of Investor's Outlet Inc. in Tampa, is charged with mail fraud, conspiracy and making false statements to a financial institution.

• Also indicted on identical charges are the company's vice president, Maurice Vernon, 32, of Tampa, and Elton Lassiter, 44, of Odessa, a loan processor for an unidentified lender. All could get 30 years in prison if convicted. Family members of the three men declined comment at the first appearance in court Tuesday.

• The straw buyer, Jill Taylor, 35, of St. Petersburg, is cooperating with prosecutors. Known as Jill Jackson at the time she signed to buy the 10 properties, Taylor pleaded guilty in November 2009 to conspiracy to commit wire fraud and faces up to five years in prison.

***

• By 2007, all 10 of the properties were in foreclosure. Taylor told the Times she had been foolish to fall for the get-rich-quick scheme pitched by Joel, a church acquaintance. Taylor also said she simply followed instructions to buy 10 Tampa properties she had never seen. She paid $700,000 more than the county property appraiser said they were worth. "They arranged everything," Taylor told the Times. "They picked out the properties. They selected the lenders. I was just told to go to closings, and that's what I did." But Taylor said, "I didn't know what I was doing. I don't have any background in real estate."

For more, see Feds indict men in mortgage fraud scheme.

(1) See Home buying spree snaps (A year after a woman bought 10 overpriced properties, she's not the only one hurting):

• Jill Jackson, a single mom and apartment renter with an annual take-home pay of about $24,000, managed to go on an incredible real estate buying binge last year.

Mortgage Servicer Took Loan Modification Payments, Then Foreclosed On Her Anyway & Now Admits Screw-Up, Says Tucson Homeowner

In Tucson, Arizona, KOLD-TV Channel 13 reports:

• So many Tucson area homeowners are behind in their mortgage payments, and risking foreclosure, but an Oro Valley woman says her foreclosure was a shock. Up until the day her home was foreclosed on and sold, she thought everything was fine, and says she was even assured it would not happen. When it did, Tracy Wood says, "I felt like I was going to vomit and pass out."

***

• Wood says she was paying nearly 3,000 dollars a month on her Oro Valley home, never missing a payment as her mortgage company told her it was modifying her loan, and she would not be foreclosed on. Woods, says, less than two weeks after her Texas-based mortgage company, Saxon Mortgage assured her everything was fine, she got a phone call from an investor, telling her he was going to buy her foreclosed home that very day. And he did.

• "I thought he was joking. I go, well, that's not...I just talked to my mortgage company. There's no way that's going to happen," Woods says. "It was unexpected and hit me completely out of nowhere," She says.

For more, see Oro Valley woman says mortgage co. admits foreclosure was mistake.

Hidden Cost Of Buying 'Cheap' Foreclosed Home Becomes Selling Point For Builders Peddling Their Inventory

The Associated Press reports:

• Homebuilders trying to fight off customers' attraction to cheap foreclosures are doing more to show buyers that the good deals can come with pitfalls. [...] Many national builders are using some form of marketing to try to make that point and beat back the quiet competition from lower-priced foreclosures and short sales.

***

• Lennar Corp.'s website is fighting back with a "Buying a New Home vs. a Foreclosed Home" page that lays out the benefits of new construction — like home warranties, energy efficiency, and customization options — while highlighting the potential risks of buying a foreclosed home.

• PulteGroup Inc. uses similar tactics in its advertising, as does Shea Homes and Phoenix-area builder Fulton Homes. Fulton and Shea both promote new homes with a "foreclosure cost calculator" on their websites that lets customers calculate potential costs.

***

• Home builders say they're hopeful that as more customers turn to them instead of the overloaded foreclosure market, they'll be able to show the value in new construction.

For more, see Homebuilder Ads Highlight Pitfalls of Foreclosures (Homebuilders try to draw in buyers by pointing out pitfalls and risks of buying foreclosures).

Feds Start Probe Into Saxon For Possible SCRA Violations As Mortgage Servicer Settles With Screwed Over, Foreclosed Sevicemember During Damages Trial

The New York Times reports:

• The Justice Department is investigating allegations that a mortgage subsidiary of Morgan Stanley foreclosed on almost two dozen military families from 2006 to 2008 in violation of a longstanding law aimed at preventing such action.

• A department spokeswoman confirmed on Friday that the Morgan Stanley unit, Saxon Mortgage Services, is one of several mortgage and lending companies being investigated by its civil rights division. The inquiry is focused on possible violations of a federal law that bars lenders from foreclosing on active-duty service members without a court hearing.

• Mark Lake, a Morgan Stanley spokesman, declined on Friday to comment on the investigation. However, in the fine print of a recent regulatory filing, Morgan Stanley disclosed that it was “responding to subpoenas and requests for information” from various government and regulatory agencies concerning, among other issues, its “compliance with the Servicemembers Civil Relief Act,” [SCRA] the law that governs the actions creditors can take against service members on active duty.

• The investigation came to light in a document that Saxon’s lawyers filed on Tuesday in federal court in Grand Rapids, Mich., during a trial to assess damages against Saxon and two co-defendants after a federal judge ruled late last year that they had illegally seized and sold the home of Sgt. James B. Hurley, a Michigan National Guard member who lost his home while he was serving in Iraq in 2005. That case was ultimately settled on Thursday.

***

• Sergeant Hurley was one of the service members affected by a violation of the act. He returned from duty as a power generator mechanic in Iraq in December 2005 to find that Saxon had foreclosed on his riverside home outside Hartford, Mich., and sold it to someone else. He sued Saxon and two co-defendants, Orlans Associates, the law firm in Troy, Mich., that handled the foreclosure paperwork, and Deutsche Bank Trust Company Americas, the trustee for the mortgage involved in the foreclosure.

• The case dragged on until late last year, when Judge Gordon J. Quist of United States District Court ruled that the foreclosure and sale of the Hurley home had violated the civil relief act and ordered a jury trial to determine damages.

• On Thursday, the fifth day of that trial, Sergeant Hurley settled with all the defendants in the case for an undisclosed sum, according to Col. John S. Odom, a retired Air Force lawyer who represented the Hurley family. The terms of the settlement are confidential, Colonel Odom said. “But the Hurleys are well pleased,” he added.

***

• The settlement came two days after the brief courtroom drama on Tuesday that led to the disclosure of the Justice Department investigation. It began when Colonel Odom unexpectedly served a subpoena on Saxon’s general counsel, Gregory Smallwood, who was present in the courtroom.

For more, see U.S. Inquiry on Military Family Foreclosures.

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

Media Report Triggers Calls From F'closed Ex-Homeowners About Surplus Money From Public Sales, Forcing County Officials To Begin Cutting Refund Checks

In Denver, Colorado, The Denver Post reports:

• Dozens of former homeowners who lost their houses to foreclosure have been calling public trustee offices across Colorado to see whether they have any money coming to them. "We had no idea until we saw it in the newspaper," said Anthony Michaels of Denver, whose mother, 92-year-old Fayetta Curry, and his younger sister, Sharon Parker, were among a list of individuals due funds from a foreclosure auction.

• The Denver Post on Tuesday highlighted how county public trustees and treasurers have hundreds of thousands of dollars in unclaimed funds that belong to homeowners whose houses were sold at auction. Michaels' family members were among those eligible to collect more than $635,000 in unclaimed money but never knew it.

• Known as "overbid funds," the money comes from auction bids that exceeded the amount owed on the house at the time of the foreclosure. Counties are required by law to pay the homeowners after all eligible liens have been paid — but are not required to search for the homeowners, instead sending notices to their last known address, typically the foreclosed house they were forced to leave.

• Other times, the homeowners have died, and county officials have no next of kin listed in foreclosure papers. Counties get to keep the money if it remains unclaimed for five years from the date of the foreclosure sale.

• The Post published a shortened list of those owed at least $10,000, prompting a slew of telephone calls to trustee offices, according to interviews. "We have had numerous calls and e-mails about the overbid funds," Arapahoe County Public Trustee Ana Maria Peters-Ruddick said, noting the treasurer has issued checks as high as $50,000 as a result. Arapahoe Treasurer Sue Sandstrom's office has issued checks totaling more than $100,000 to three families due foreclosure funds as of Friday.

• Denver County is expecting to issue checks totaling more than $85,000 to three families over the next week or so, and Adams County officials said they expect to issue more than $100,000 in checks to at least four families due funds.

• Michaels' mother is a resident of a state veterans home near Denver, and his sister is convalescing at a medical-care facility. Neither knew they were entitled to the $33,212 held by the Denver County public trustee from the auction of the family's Park Hill home. That's probably because the city was mailing the notices to the wrong address — three blocks away, records show.

• "We looked up one day, and the house was gone, foreclosed," said Michaels, 62. "My sister got behind on it and didn't say anything, and things just happened." The money will help settle some pressing family bills, Michaels said. Homeowners should check with the county public trustee who auctioned their house to see whether they are entitled to any funds.

Source: Foreclosed homeowners get unexpected windfalls.

Loan Servicers' Force-Placed Insurance Racket Targeted By State AG Settlement Offer

Insurance Networking News reports:

• Few of the restrictions in the proposed attorneys generals' settlement of mortgage servicing practices are as absolute as the prohibition of profiting from force-placed insurance.

• Under the settlement's terms, banks and other mortgage servicers are forbidden from placing policies with an affiliate or accepting "commissions," "referral fees," "kickbacks" or "anything of value" in relation to force-placed policies. Moreover, it would require servicers to attempt to maintain delinquent borrowers' existing policies, rather than replacing them with more expensive ones.

***

• Though banks do not report how much they collect from such payments, a cursory review of force-placed insurers' financials suggests that the business brings servicers hundreds of millions of dollars every year. Combined with the servicing settlement's more general restrictions on marking up default- and foreclosure-related services, the proposal threatens a high-margin source of servicing income.

For more, see Attorneys General Draw a Bead on Banks' Force-Placed Insurance Practices (Last year, Assurant collected roughly $2.7 billion of premiums through its specialty insurance division, making force-placed insurance the company's most profitable segment).

Cops: Fake R/E Agent Conned Elderly Couple Facing F'closure Into Signing Over Deed, Then Pockets $45K Deposit From Would-Be Buyer In Failed Sale

In Orlando, Florida, WESH-TV Channel 2 reports:

• One man was arrested Friday and accused of real estate fraud. Authorities with the Orange County Sheriff's Office said they believe there could be more victims. Investigators said Dave Howell, 31, had a real estate office and was taking the clients' money, but he doesn't have a real estate license.

• Deputies said Howell contacted an elderly couple who was in foreclosure and promised he could sell their home in a short sale. Investigators said Howell had the couple sign what ended up being fake documents and also signed over the title over their house to him.

• Authorities said Howell then contacted a buyer and said he could sell the house for $85,000, but first the buyer paid what she thought was a $45,000 escrow deposit. "The transaction never closed," Orange County Sheriff's Office spokesman William Cruz said.

• "The bank account where the suspect deposited this escrow of $45,000 was completely depleted, misappropriated, ultimately stolen." Investigators said Howell had an office off of South Hiawassee Road called Nationwide Consultants LLC and has being doing business for about one year. He has been charged with practicing real estate without a license and grand theft.

Source: 1 Arrested In Real Estate Fraud Case (Howell Accused Of Grand Theft, Practicing Real Estate Without License).

Defendants In Mortgage Payment Hijacking Scam Face New Charges Of Running Fraudulent Upfront Fee Loan Modification Ripoffs

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

• Two men were arrested Friday in connection with an alleged scheme designed to steal mortgage payments from Southern Nevada homeowners, Nevada Attorney General Catherine Cortez Masto said.

• Joseph Yorkus, who was out on bail from a February arrest in connection with a similar scheme, and James Bartczak, who was still in custody, were booked on new charges in connection with an investigation by the attorney general's Mortgage Fraud Task Force.

• Both men had been arrested in February for setting up the business “Great Western Business Services,” which is alleged to have embezzled homeowners’ mortgage payments by sending letters to homeowners falsely stating that their loans had been transferred from Bank of America to Great Western. The letters instructed the homeowners to make their mortgage payments to Great Western rather than to Bank of America, which actually owned the loan.

• Numerous victims missed mortgage payments that could potentially result in foreclosure, despite the fact they had actually made their payments -- albeit to the alleged scammers instead of their true loan servicer.

• The latest arrest is based on new allegations that, in addition to fraudulently operating Great Western Business Services, Yorkus and Bartczak also ran three other fraudulent companies, BAC Collections, Fresh Start Consultants and Learn Your Rights, for the purpose of convincing homeowners to pay their mortgage through those businesses.

• Yorkus and Bartczak allegedly misrepresented that the companies would assist homeowners in obtaining credit repair and loan modifications, as well as principal reductions. Instead of obtaining the loan modifications, the homeowners' payments were allegedly diverted by Yorkus and Bartczak for their own personal use.

• One of the alleged victims is a senior citizen who lost more than $10,000, officials said.

Source: 2 men arrested in alleged mortgage payment scam.

BofA's Force-Placed Insurance Unit Hid Foreclosure Information, Say E-Mails Released By Hacker Group

The New York Times reports:

• A hacker organization known as Anonymous released a series of e-mails on Monday provided by a former Bank of America employee who claims they show how a division of the bank sought to hide information on foreclosures.

• The bank unit, Balboa Insurance, was acquired by Bank of America when it bought the mortgage lender Countrywide Financial in 2008. Balboa deals in so-called force-placed insurance coverage on mortgages. The e-mail messages concern the removal of information linking loans to other documentation.

***

• The e-mails dating from November 2010 concern correspondence among Balboa employees in which they discuss taking steps to alter the record about certain documents “that went out in error.” The documents were related to loans by GMAC, a Bank of America client, according to the e-mails.

***

• A member of Anonymous told DealBook on Monday that the purpose of his Web site was to bring attention to the wrongdoing of banks. “The way the system is, it’s made to cheat the average person,” he said.

For more, see Bank of America Unit Tried to Hide Foreclosure Information, Hackers Say.

Go here for the Balboa e-mails.

See also Zerohedge.com: Hacker Collective Anonymous To Release Documents Proving Bank Of America Committed Fraud This Monday.

Thanks to Mike Dillon at GetDShirtz.com for the heads-up on the story.

According to Dillon, he attempted to bring the loan servicer racket revolving around force-placed insurance and kickbacks to the attention of 45+ Senators and Congresspeople almost two years ago through a GAO Review request of the FTC in connection with the USA v. Fairbanks litigation. No one was interested. Exhibit T (see page 2), Exhibit U, and Exhibit V may be of interest. They will show that HUD-OIG and, therefore, the FTC, US Attorney General's Office, etc. knew about force placed insurance, alleged kickbacks, etc. at least as far back as 2003. And have apparently done nothing about it. According to Dillon, HUD-OIG, the FTC and who knows who else knew about this as part of a USA/Curry v. Fairbanks criminal investigation that was killed per the civil settlement.

State AGs Playing Into The Hand Of The Banksters???

The New York Times reports:

• ONE crucial reason the nation’s mortgage industry ran itself — and the entire nation — off the rails was its obsession with speed. Mortgages had to be approved chop-chop, loans pooled instantly. When it came to foreclosure, well, the quicker the better.

• So it is disturbing that the same need for speed is at work in the bank settlement being devised by state attorneys general relating to improper loan-servicing and foreclosure practices. When Tom Miller, the Iowa attorney general who leads the talks, announced initial terms of a deal on Monday, he said, “We’re going to move as fast as we can.”

• While some might argue that a rapid approach will help borrowers, it is apt to benefit the banks far more. Hurrying to strike a deal means less time to devote to understanding how pernicious the foreclosure practices were at the nation’s largest institutions. How can you determine appropriate penalties for troubling practices when you haven’t conducted a full-fledged investigation?

For more, see A Swift Deal May Not Be a Sound One.

Non Profit Law Firm Teams w/ Private Attorneys To Chase Long Island Outfit Allegedly Targeting Homeowners In Foreclosure w/ Loan Modification Ripoffs

In Nassau County, New York, The Wall Street Journal reports:

• Lawyers working pro bono for borrowers facing foreclosures say loan-modification "specialists" are pretending they can convince banks to accept lower monthly mortgage payments in return for fees from the borrowers. Foreclosed homeowners, whose cases are entered into public records, have become a prime target for loan modification cons, they say.

• On Wednesday, the Lawyers' Committee for Civil Rights Under Law, along with Manhattan law firm Davis Polk & Wardwell LLP filed a lawsuit in state Supreme Court in Nassau County seeking to thwart people they claim are loan-modification scammers.

***

• The complaint names as defendants several companies it said operated out of the same cluster of offices in a building on Stewart Avenue in Garden City, N.Y. None of the companies could be reached to comment.

***

• In New York, it is illegal under a 2008 statute for "distressed property consultants" to charge an up-front fee for help in getting a loan modification. Since February 2010, when the Lawyer's Committee began keeping track of modification fraud complaints, more than 10,000 homeowners nationwide have claimed they were victims of similar scams resulting in more than $27 million in losses. About 500 of those complaints are from New York, which the claimants said resulted in more than $2 million in losses.

• The New York attorney general's office has been investigating loan modification scams since 2009. In March 2010, the office obtained an $8.8 million judgment against Infinity Mitigation Services, a loan consultant, and obtained a court order to shut down the company.

For more, see Suits Claim Loan Scams.

AARP Sues HUD Over "Middle-Of-The-Game" Changes In Reverse Mortgage Rules

The New York Times reports:

• Reverse mortgages, which pay older homeowners a regular sum against the equity in their house, are supposed to shield borrowers from economic upheaval. But the popular loans have become tangled up in the real estate collapse.

• AARP, the seniors’ organization, filed suit Tuesday against the Department of Housing and Urban Development, which regulates reverse mortgages. The suit asserts that policy changes by HUD are pushing older homeowners into foreclosure. The case was filed in Federal District Court for the District of Columbia by the AARP Foundation, the organization’s charitable arm, and the law firm of Mehri & Skalet on behalf of the surviving spouses of three homeowners who had bought reverse mortgages. All three are facing eviction, the suit says.

• “HUD has illegally and without notice changed the rules in the middle of the game at the expense of vulnerable older people,” said Jean Constantine-Davis, a senior lawyer at the AARP Foundation.

• The lawsuit focuses on reverse mortgages where only one spouse signed the loan document. It argues that HUD shifted course in late 2008, making changes in its procedures so that surviving spouses who are not named on the mortgage must pay the full loan balance to keep the home, even if the property is worth less.

For more, see AARP Sues U.S. Over Effects of Reverse Mortgages.

Foreclosure Mill Shutdown Leaves Mess Behind For Tampa-Area Court System

In Tampa, Florida, the St. Petersburg Times reports:

• As many as 20,000 foreclosure cases in the Tampa Bay area have been left in limbo by the virtual collapse of the David J. Stern Law Firm, once Florida's most prolific foreclosure "mill.'' The firm's implosion gives many borrowers at least a temporary reprieve from foreclosure and means that thousands of cases could be dismissed unless lenders quickly hire other attorneys.

• "It's a mess,'' Pinellas-Pasco Chief Judge Thomas McGrady said Tuesday. In a letter dated March 4, Stern notified McGrady and other chief judges that as of March 31 the firm will end its involvement in all 100,000 foreclosure cases statewide in which it is still listed as attorney of record. Bank of America and other Stern clients jettisoned the firm last year because of its allegedly sloppy, fraudulent practices, but in many cases have yet to hire anyone to replace him.

***

• Attached to each letter was a list of Stern cases in that particular judicial circuit. In Pinellas-Pasco, the list is 251 pages with a total of about 10,000 cases — a third of all pending foreclosures.

• McGrady said his staff is working on orders requiring banks to show cause why their foreclosure suits should not be dismissed if they fail to get timely substitute counsel. In some cases, McGrady said, a new attorney has appeared but without proper legal authority. In other cases, more than one law firm has claimed to represent the same bank. "Then what do we do?'' he asked.

• In Hillsborough County, Stern is still attorney of record in just under 10,000 cases, of a total of 25,000 pending foreclosure suits. Chief Judge Manuel Menendez Jr. said he doubts that Stern's letter frees him from the responsibility of legally withdrawing from the cases. "You can't just walk away,'' Menendez said. "I think he's written the letter in attempt to circumvent the rules of judicial administration.''

For more, see Collapse of David J. Stern law firm throws foreclosure courts into disarray.

"The Eleventh Judicial Circuit Does Not Have A Rocket Docket!" Says Judge As She Dismisses Foreclosure Action, Cancels Debt Over Sloppy Paperwork

The Palm Beach Post last week obtained a copy of the 57-page transcript of a February 11, 2011 hearing in which Miami-Dade Circuit Court Judge Maxine Cohen Lando rips into attorney Marc A. Ben-Ezra, of the Ft. Lauderdale-based foreclosure mill Ben-Ezra & Katz, P.A. for the crappy paperwork filed in a foreclosure action that was apparently improperly brought.

After placing the world on notice that:

• ... the Eleventh Judicial Circuit does not have a rocket docket. We take every case seriously. We believe that every case deserves the Court's full attention and we expect the lawyers on those cases to do the same[,]

Judge Lando proceeds to:

• dismiss the foreclosure action with prejudice,
• cancel the promissory note and dismiss it with prejudice based on an IRS Form 1099-A, Acquisition or Abandonment of Secured Property, that was apparently filed and sent to the homeowner in this case,
• invite homeowner's attorney to "go for some other form of judgment" for any other remedy that might be available,
• announce that an order will be drafted finding both Ben-Ezra and a former associate in contempt of court,
• announce that she will send the contempt of court order to The Florida Bar for its review and consideration of any disciplinary action,
• order Ben-Ezra to pay the legal fees and costs incurred by the homeowner for his attorney fees incurred in defending this foreclosure action.

Ben-Ezra makes a valiant but ultimately futile attempt to throw himself on the mercy of the court in order to dodge being found in contempt of court, but Judge Lando refused to yield to his 'pure heart and empty head' defense.(1)

The transcript should serve as required reading for the rubber-stamping, "rocket docket" judges in Ft. Myers, Jacksonville, and anywhere else in Florida who are intent on bulldozing foreclosure cases through the court system based on faulty documents.

For the transcript, see Central Mortgage Company v. Gonzalez Del Real.

Go here for Judge Lando's earlier ruling in this case granting homeowner's motion to vacate the foreclosure judgment.

(1) For an earlier post on this story and more on the "pure heart and empty head defense," see Head Of Florida Foreclosure Mill Ordered Into Court To Explain Dubious Document Filings In Recently-Dismissed Suit.

Colorado Law Incentivizes Foot Dragging By County Officials When Returning Surplus Sale Proceeds To Foreclosed Homeowners After Public Auctions

In Arapahoe County, Colorado, The Denver Post reports:

• What [Barry] Gragert didn't know was that a defining traumatic event for him — the loss of his Aurora home to foreclosure not long after the death of his wife two years ago — actually had a bittersweet outcome. Arapahoe County officials had quietly been holding more than $50,000 for him — funds left over from the foreclosure sale of the house where he had lived and raised a family for 19 years. Trouble is, no one had told him about it.

***

• State law requires counties to hand over any proceeds from foreclosure sales after all the debtors on a property have been paid. Usually there's little or nothing left. But when money is owed, counties put almost no effort into locating former homeowners. They're only required to send a notice to the homeowner's last-known address at the time the foreclosure began — usually the very house the homeowner was forced to leave — and to publish an ad in a local newspaper, often one the homeowner has never heard of.

• In a search of just three Front Range counties — Denver, Arapahoe and Adams — The Denver Post found that dozens of former homeowners were owed more than $653,300 since 2008.(1) Kenneth Aragon, who lost his Aurora home to foreclosure in 2009 and is owed money, was dumbstruck when told by The Post he had money coming. "They sent it to my old address?" said Aragon, who lives in Aurora. "How dumb is that?"

***

• In July 2008, the law changed, allowing counties to keep funds unclaimed after five years from the date of foreclosure. Previously the money was held in perpetuity. The three counties say their search efforts are minimal because of limited resources and small staffs.

For more, see Money owed to victims of foreclosure rarely gets to them.

(1) Here's a list of people in three metro-area counties due at least $10,000 from the county treasurer for property sold at foreclosure:

• Adams County: Efrain Ruiz ($14,203), Mike L. Zamora ($48,325), Richard A. Wasilkow ($37,026), Anthony J. Peters ($11,625), Arthur Schilling ($32,653), Rosa E. Martinez ($15,895), Barbara L. Brinkley ($11,792);
• Arapahoe County: Clarita Fritz ($10,536), Shirley Shellenbaum ($12,995), Patricia Rasmussen ($19,037), Thomas Allman ($42,156), Bernard and Margaret Krueger ($14,158), Barry Gragert ($50,641), Kenneth and Beatrice Aragon ($27,456), Clinton and Christine Rivard ($15,426), David and Jami Childress ($12,717), Laura Van Norden ($45,875);
• Denver County: Jesse and Theresia Morrison ($18,572), Marie Duran and Olan Gulley ($21,658), LeRoy Green ($31,730), Ruth Dewey ($39,412), Fayetta Curry and Sharon Davis ($33,212).

Laid Off Robosigner Blows Whistle On Foreclosure Mill; Describes Boiler Room Operation Allegedly Set Up To Crank Out Docs w/ Falsified Signatures

In Baltimore, Maryland, The Baltimore Sun reports:

• Prosecutors have launched an investigation into a complaint that more than 1,000 deeds for homes foreclosed upon in Maryland were improperly executed — the latest development suggesting widespread problems in the way foreclosures have been handled in the state.

• The complaint, filed last week by a paralegal formerly employed by the Shapiro & Burson law firm, lays out allegations that attorneys who were supposed to be signing deeds and key foreclosure paperwork for Maryland properties instead instructed others to falsify their signatures on the documents.

• "We're looking at this case very closely," said Ramon V. Korionoff, chief of staff to the Prince George's County state's attorney, whose office is investigating. "It's very troubling."

***

• State regulators said this week that they also have received complaints about alleged foreclosure-documentation problems at the Baltimore law firm of Friedman & MacFadyen. Four notaries employed there resigned their commissions earlier this year after inquiries from the Maryland secretary of state's office, according to the agency.

***

• Charlene Perry, who specializes in foreclosure title work as vice president of Preferred Title Group Inc. in Baltimore, calls a deed with a false signature "a huge problem" that could come back to haunt a later homeowner if it is challenged. Most homebuyers purchase title insurance, so it would be up to the insurer to pay for their legal defense, she said.

• "I don't think the consumer at the end of the day is going to lose. But they're going to lose sleep," said Perry, who has worked in the title industry for more than 25 years. "They're going to be on pins and needles: 'Do I own my home?' "

***

• The complaint against Shapiro & Burson was filed by Fairfax resident Jose Portillo, 42, a notary who worked for the firm as a paralegal for nearly three years. He said he decided to file a complaint against his former employer after he and about 10 co-workers were laid off in February. He met with Civil Justice to offer information he thought would be helpful in the group's foreclosure litigation work and then prepared the affidavit last week.

***

• He described a boiler-room atmosphere, much like that at mortgage companies during the housing bubble, in which employees were overwhelmed with work. He said his shift regularly stretched into 12- and 13-hour days. Employees in another department handling foreclosure sales sometimes stayed until 4 a.m., he said.

• Portillo said he knows he is putting his Virginia-issued notary commission at risk by acknowledging that he improperly notarized documents. He said he decided to complain because it upset him that the firm laid off employees who followed instructions, while those who gave those instructions are still on staff. He said he hopes regulators see mitigating reasons to excuse his own notary violations.

• "It was implied that my job was at stake," said Portillo, who had already gone through a five-month stretch of unemployment in 2007 after settlement work dried up. "I know what I saw, and I have no qualms testifying and reaffirming my affidavit."

For more, see More foreclosure irregularities alleged in Maryland (Former law firm employee says over 1,000 deeds were recorded with false signatures).

State Lawmaker To Push Legislation Requiring Banks To Record Chain Of Title Before Filing Connecticut Mortgage Foreclosure Actions

From the Office of Connecticut State Senator Anthony Musto:

• Amidst national reports of shoddy paperwork processing that led to suspended foreclosure proceedings at many major lenders, state Senator Anthony Musto (D-Trumbull) is pushing legislation that would require banks to perfect their legal right to property before they can file a foreclosure action.

• Under current state law, banks and other lenders are exempt from recording their mortgage assignments, and thus securing their rights to the mortgage, before foreclosing on property—in contrast to individuals, who must properly record such things as deeds, liens and easements in public land records to make them effective.

• “Our law treats banks, mortgage holders and other lending institutions different from everyone else,” said Senator Musto, who testified in support of the bill before the General Assembly’s Judiciary Committee this past Friday. “With recent fraudulent document scandals involving some of the countries biggest mortgage lenders, and with a foreclosure crisis planted at the root of our continuing economic troubles, it makes no sense to allow banks to skip a step required by everyone else to secure an interest in the land. This bill will remove an unreasonable exemption and provide an additional layer of security for homeowners. Banks simply need to play by the same set of rules everyone else uses.”

For the press release, see Musto Seeks to Change Title Rules in Foreclosure Cases (Proposal would level playing field between banks and homeowners).

Demands Continue For MERS To Cough Up The Cash For Unpaid Recording Fees

In New York City, WNBC-TV Channel 4 reports on some of the calls demanding that Mortgage Electronic Registration System begin coughing up the cash for the millions it may owe for fees it has avoided by failing to record assignments of mortgages when loans are sold between its members:

• [Southern Essex, Massachusetts Register of Deeds John] O’Brien has officially requested that Massachusetts Attorney General Martha Coakley file suit against MERS, seeking $22 million in unpaid recording fees associated with home loans that were bought, sold, and securitized since 1998. “I have challenged them to open their books and show me how many times they have moved people’s mortgages around,” O’Brien said.

• In [New York State's] Suffolk County, former county clerk Ed Romaine is making a similar request. Now serving as a county legislator, Romaine has asked the Suffolk County attorney explore a lawsuit against MERS that he says would claw back more than $100 million for taxpayers. Romaine unsuccessfully tried to block MERS from doing business in Suffolk County back in 2001. “I saw a problem because we would not know who would be the owner of these mortgage notes because they would be sold in a private system and not recorded in a public system,” Romaine said.

• The prediction wasn’t far off. Mortgage industry insiders say a major reason many of the nation’s foreclosures are stalled or progressing at a slow pace is the inability of MERS to identify what parties actually hold title to distressed mortgage loans. The problem has led housing advocates to begin demanding foreclosure agents show proof of which investors actually hold legal claim on properties.

For the story, see Counties Seek Millions From Mortgage Giant (MERS under fire for unpaid fees).

Utah Federal Judge Grants TRO, Trial Request Stalling Foreclosure For Pro Se Homeowner

In Salt Lake City, Utah, the Deseret News reports:

• A Pleasant View man is taking one of the biggest banks in the world to federal court over a failed loan modification that resulted in a foreclosure on his home. And he's doing it without an attorney.

• “I went to several attorneys and every attorney told me the same thing: ‘You are never going to go anywhere. Banks have bottomless pockets, and you are not going to win,’” recalled Michael Waters, who repairs computers by trade.

• In what is shaping up to be a "David vs. Goliath" legal fight, Waters appears to be putting up a decent battle. He has already won a restraining order preventing the foreclosure of his home while the case is in court. And U.S. District Judge Bruce Jenkins appears to be sympathetic to Waters’ plight and has granted him a trial.

• Waters’ legal troubles began last year after he lost his job and called Bank of America to see what he could do to keep up with his mortgage payments. The bank offered a forbearance that drastically reduced Waters’ mortgage payment and told Waters he was eligible for a trial loan modification. "I thought, 'This is like a blessing. This is wonderful,'” Waters said.

• But before Waters had the chance to make his first payment, Bank of America sent a letter canceling the forbearance. The bank told him it was because his payment was late, but the letter was sent before the payment was due. When Waters contacted the bank, he was told a different story. The bank said it could not offer a forbearance because they did not have the note to the loan.

• “Well I said, 'Who does own the note? Maybe we could work something out' and they said, 'We can't give you that information,'” Waters said. Bank of America told Waters his February mortgage payment was due immediately and he had seven days before the March payment was due. Waters said he did not have the money because Bank of America advised him to use his savings to pay off all debt to qualify for the forbearance. The bank foreclosed three months later.

• Instead of giving up, Waters started doing research online to see if he could find any options that may give him a fighting chance. "It probably took me 64 hours of legal research," he said. "I just went to the Internet and found copies of lawsuits that were filed, and I just typed in something similar."

• Waters stumbled across two Supreme Court rulings (Haines v. Kerer and Platsky v. CIA) that have aided him in court. “(The rulings) said that if somebody is in court pro se, which is me — no attorney — that their case can't be rejected or thrown out on technical grounds” and the judge has to help, explained Waters.(1)

For more, see Pleasant View man takes banking Goliath to court sans attorney.

For the transcript of the hearing granting the homeowner a trial in this case, see Waters v. Bank of America.

(1) For a couple of the many Federal court rulings mandating that trial judges cut pro se homeowners a considerable amount of slack when hearing their cases, see:

Haines v. Kerner, 404 U.S. 519 (1972), in which the U.S. Supreme Court reversed the rulings of two lower courts, the court stated:

• The only issue now before us is petitioner's contention that the District Court erred in dismissing his pro se complaint without allowing him to present evidence on his claims.
  
  Whatever may be the limits on the scope of inquiry of courts into the internal administration of prisons, allegations such as those asserted by petitioner, however inartfully pleaded, are sufficient to call for the opportunity to offer supporting evidence. We cannot say with assurance that under the allegations of the pro se complaint, which we hold to less stringent standards than formal pleadings drafted by lawyers, it appears 'beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' Conley v. Gibson, 355 U.S. 41, 45—46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). See Dioguardi v. Durning, 139 F.2d 774 (CA2 1944).
  
  Accordingly, although we intimate no view whatever on the merits of petitioner's allegations, we conclude that he is entitled to an opportunity to offer proof. The judgment is reversed and the case is remanded for further proceedings consistent herewith.

Platsky v. Central Intelligence Agency, 953 F.2d 26 (2d Cir. 1991), in which a Federal Appeals Court ruled:

• Pro se plaintiffs are often unfamiliar with the formalities of pleading requirements. Recognizing this, the Supreme Court has instructed the district courts to construe pro se complaints liberally and to apply a more flexible standard in determining the sufficiency of a pro se complaint than they would in reviewing a pleading submitted by counsel. See e.g., Hughes v. Rowe, 449 U.S. 5, 9-10, 101 S.Ct. 173, 175-76, 66 L.Ed.2d 163 (1980) (per curiam); Haines v. Kerner, 404 U.S. 519, 520-21, 92 S.Ct. 594, 595-96, 30 L.Ed.2d 652 (1972) (per curiam); see also Elliott v. Bronson, 872 F.2d 20, 21 (2d Cir.1989) (per curiam). In order to justify the dismissal of a pro se complaint, it must be " 'beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' " Haines v. Kerner, 404 U.S. at 521, 92 S.Ct. at 594 (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957)).
  
  In light of these principles, we think that the district court should not have dismissed Platsky's complaints without affording him leave to replead.

***

• The district court also dismissed the complaints for their failure to plead facts that were sufficiently specific. The district judge held that Platsky failed to allege the concrete and particularized injury required to establish standing and to state a claim upon which relief could be granted.

***

• We think that Platsky should have a chance to state his claim more clearly. It is not "'beyond doubt that the plaintiff can prove no set of facts in support of his claim[s],' " Haines v. Kerner, 404 U.S. at 521, 92 S.Ct. at 595, and therefore we hold that the better course would have been for the district court, in dismissing Platsky's pro se complaints, to grant him leave to file amended pleadings. See Elliott v. Bronson, 872 F.2d at 22. We have instructed Platsky that his complaint must set out, with particularity and specificity, the actual harms he suffered as a result of the defendants' clearly defined acts.
  
  Accordingly, we vacate the judgment and order below, and remand the case to the district court with instructions to allow the plaintiff to replead.

See also Estelle v. Gamble, 429 U.S. 97 (1976), which supports the mandate that trial judges cut pro se homeowners slack when bringing their cases:

• The handwritten pro se document is to be liberally construed. As the Court unanimously held in Haines v. Kerner, 404 U.S. 519 (1972), a pro se complaint, "however inartfully pleaded," must be held to "less stringent standards than formal pleadings drafted by lawyers" and can only be dismissed for failure to state a claim if it appears "`beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Id., at 520-521, quoting Conley v. Gibson, 355 U.S. 41, 45 -46 (1957). [429 U.S. 97, 107]