Saturday, March 26, 2011

"Human Intervention" Triggers Vacant Home Going Up In Flames, Says State Fire Marshal As Homeowner In Foreclosure Gets Pinched w/ Felony Arson Charge

In Escambia County, Florida, reports:

  • A Molino man has been charged with setting fire to his home that was in foreclosure last fall. George Thomas Alexander, 49, is facing a felony arson charge in connection with the fire in the 3500 block of Molino Road on October 6, 2010. He was arrested Monday night by the Florida State Fire Marshal’s Office and released from the Escambia County Jail on $10,000 bond.

  • According to Lt. Kevin Fiedor with the State Fire Marshal’s Office, the unoccupied home was in foreclosure and had no power and no gas. He said the fire appeared to have started in the rear of the home.

  • The fire obviously started with human intervention,” Fiedor said. Damage to the brick home was estimated at about $65,000. The Molino, Cantonment, McDavid, Century, Walnut Hill and Beulah stations of Escambia Fire Rescue worked for hours to fully extinguish the blaze.

Source: Molino Man Charged With Arson For Burning Foreclosed Home.

Baltimore Non-Profits To Launch Education Campaign To Help Keep Tenants From Getting Steamrolled Out Of Their Homes Due To Landlord's Foreclosure

In Baltimore, Maryland, The Baltimore Sun reports:

  • If you're renting a home, don't assume foreclosure won't affect you. As tenants across the country have discovered the last few years, you can end up with a bank wanting to throw you out if your landlord doesn't keep up with the mortgage payments. Some residents who never missed a rent payment have been caught completely by surprise.

  • About 40 percent of Baltimore homes in the foreclosure process are investor-owned, so that does happen all the time. Some landlords get behind because their renters aren't paying, but others simply overextended themselves. "Tenants are often the forgotten and unintended victims of foreclosure," Maryland Attorney General Douglas F. Gansler said in a statement about the campaign.

  • The key things to remember: Renters generally have the right to remain in the home for the remainder of their lease, or at least 90 days after receiving a valid notice to vacate if the lease term is shorter. Campaign organizers recommend that renters get legal help -- Public Justice offers it for free -- before accepting any deals to move out early in exchange for cash.

  • How can you know if your landlord is in trouble? Open all mail, even if it's just addressed to "occupant," so you don't miss official notices. You can also find out if a foreclosure case is pending in a Maryland court by putting the landlord's name into the court system's look-up site. (In Baltimore, you can also search by the property address.) The public awareness campaign, funded with $30,000 from the Open Society Institute, will include television and radio spots as well as MTA bus ads.

Source: What renters need to know about foreclosure.

Corrupt Mortgage Company Head Cops Plea In Flipping Racket; Agrees To Finger Title Insurance/Closing Agent In Ongoing Prosecution

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

  • Cuyahoga County Prosecutor Bill Mason said a grand jury has brought down a 46-count indictment against owner Donna Sherman and her title company, Sherman Title Agency, of Northfield. Sherman, 33, of Middleburg Heights, fraudulently closed $1.4 million in loans from People's Choice Home Loans that enabled others engaged in fraud to purchase 21 houses in Cuyahoga County. Seventeen of the 21 homes fell into either tax or mortgage foreclosure.


  • This scheme was orchestrated by Fred Loewinger, 62, of Strongsville, who was a licensed loan officer and owner of Fast Mortgage, and the owner of MJL Processing, Ltd., Inc. In a recent case, Loewinger and others were charged and sentenced for their involvement in this enterprise. On February 15, Loewinger was sentenced to six years in prison after pleading guilty to engaging in a pattern of corrupt activity along with 25 additional felonies. As part of the plea, Loewinger will testify against Sherman.

For more, see Middleburg Hts woman indicted for theft, mortgage fraud.

Friday, March 25, 2011

BofA Breaks Contract For Sale Of REO; Stiffs Homebuyer On Earnest Money Refund Until Media Makes Inquiries

In Port Charlotte, Florida, WINK-TV News reports:

  • A Port Charlotte woman signed a contract to buy a foreclosed home but the bank backed out of the deal. The bank also kept her money. That's when she called for action.

  • Ellie Serra's move stopped before it started. The recent divorcee put an offer on a foreclosure in North Port and Bank of America accepted her offer. "I was ready to go. I've got boxes packed. I had movers all set up. I had friends that were ready to help me move," Ellie recalled. But the day she was supposed to close, she received a call from the title company. "There was a lien on the property from the prior owners, prior to the foreclosures, of a water system to the tune of $8,000 and the bank did not want to clear it up," she told us.

  • Her contract says in big bold print that the seller will settle all outstanding liens on the property before closing; but without a clear title, Ellie couldn't buy the home. "My closing date came and went. I lost my lock rate for my mortgage which was a great 4.5% mortgage rate. And I'm told that they decided they were going to take the house off the market, broke the contract and I wasn't really sure whether I was going to get any of my money back," she explained.

  • The bank wouldn't return the $2,000 Ellie had spent on earnest money and inspections. Adding insult to injury, Ellie saw the home re-listed for $5,000 less than her contract price. "Was I mad? I couldn't understand it! It was now $5,000 dollars less. Why don't they just clean the lien up? I can't understand why they just wouldn't clean the lien instead of losing the sale on the property. It just makes no sense to me at all. None."

  • We contacted Bank of America numerous times to ask them what happened to Ellie's money. They never got back to us, but Ellie did. She said after our inquiries, a vice president of Bank of America contacted her and let her know they are refunding all of her money. We still don't know why the bank decided to break the deal and re-list the home.

Source: CALL FOR ACTION: Bank keeps earnest money.

Freddie Dumps Another Fort Lauderdale-Area Foreclosure Mill; Cases To Be Transferred To New Counsel

Housing Wire reports:

  • Freddie Mac pulled its cases from a Florida law firm that is under investigation by the Florida attorney general. Freddie Mac spokesman Brad German confirmed Tuesday that Freddie has pulled its cases from the Law Offices of Marshall C. Watson, which represents lenders in foreclosure cases, but said he could not discuss why.



  • Last fall, McCollum released several sworn statements from former employees at law firms under investigation, detailing alleged improprieties in the way foreclosure cases were being handled, including one from a former lawyer at the Watson firm.

  • Attorneys at the Watson firm allegedly signed affidavits without a notary present, according to a September 2010 sworn statement from Jessica Cabrera, a lawyer there from December 2007 to July 2010. Attorneys at the firm would allegedly sign the documents and send stacks to notaries afterward.

  • This process changed about eight months prior to the sworn statement, according Cabrera, when the firm realized there was a problem and employed roughly 50 notaries to work in-house.


For more, see Freddie Mac and Florida foreclosure law firm part ways.

"Legitimacy Of Our Justice System" At Stake, Says NY Chief Judge As He Refuses To Back Down On Call For $25M Funding Boost For Civil Legal Services

From a recent editorial in The New York Times:

  • Acknowledging New York’s deep fiscal crisis, Judge Jonathan Lippman, the state’s chief judge, has reluctantly agreed to make cuts in his $2.7 billion budget request, including a reduction in the number of people working for the court system. But he is refusing to back down on his call for a $25 million increase, to $40 million, in support for civil legal service programs that help low-income New Yorkers faced with foreclosures, evictions, domestic violence and other serious legal problems.


  • Judge Lippman knows what he is up against politically but is undaunted. In a recent talk at Benjamin N. Cardozo School of Law in Manhattan, he described the shocking need for help out there — and the cost to justice and the judicial system if it continues to go unmet.

  • He told of state courtrooms that are “standing room only, filled with frightened, unrepresented litigants — many of them newly indigent — who are fighting to keep a roof over their heads, fighting to keep their children, fighting to keep their sources of income and health care.” And he cited the astonishing fact that in New York City 99 percent of tenants in eviction cases and 99 percent of borrowers in consumer credit cases have no lawyers.

  • What is at stake,” he said, “is nothing less than the legitimacy of our justice system,” adding that the rule of law “loses its meaning when the protection of our laws is available only to those who can afford it.”

For more, see Listen to Judge Lippman.

Thanks to Lisa E. of Foreclosure Hamlet for the heads-up on the editorial.

Attorney Who Advised Clients To Break Into Their Foreclosed Homes Targeted By State Bar For Immediate Removal From Active Practice

The ABA Journal reports:

  • The complaint against Michael T. Pines, filed in the State Bar Court, seeks to lift his law license. According to a press release the state bar issued, Pines in February was arrested for threatening the occupants of a house that used to belong to his clients, and the following day was cited for trespassing on the property. Four days later, according to the release, he was cited for violating a temporary restraining order at the site. According to the state bar, Pines told his clients that he may break into the property again. And in October, according to the release, Pines notified Newport Beach, Calif., police that he and a client were going to take possession of a house that the client lost in foreclosure.

  • To remove a lawyer from active practice on an interim basis before formal charges are filed is a drastic remedy,” James Towery, the state bar’s chief trial counsel, stated in today’s release. “That remedy is justified by the established misconduct of Michael T. Pines. He has shown complete disrespect for the law, the courts and especially the best interests of his clients. Removing Mr. Pines from active practice is an important step in our mission of public protection.”

For more, see Discipline Case Filed Against Lawyer Who Advised Clients to Break Into Their Foreclosed Homes.

For The State Bar of California press release, see State Bar Seeks To Stop Practice Of Carlsbad Foreclosure Attorney Michael T. Pines:

  • For five hours, Pines “kept approximately seven police officers and an assistant city attorney wrapped up in his media circus” until Pines and his client were arrested, [Deputy Trial Counsel Brooke] Schafer wrote in the petition.

Thursday, March 24, 2011

Minnesota AG: Out-Of-State Outfit Masqueraded As Homeowners' Current Lender To Perpetrate Upfront Fee Refinance Ripoff

In Minneapolis, Minnesota, the Star Tribune reports:

  • An out-of-state mortgage company is being accused of cheating Minnesota homeowners out of thousands of dollars by masquerading as their current lender. A lawsuit filed Monday in Hennepin County District Court by Attorney General Lori Swanson alleges that Meredian Financial Corp. of Costa, Mesa., Calif., pretended to be homeowners' current mortgage company in order to gain their trust, then collected fees for refinancing services that were not delivered.

For more, see Minn. A.G.: Homeowners were swindled (Mortgage company allegedly told lies to Minnesotans in order to get bogus "rate-lock" fees for refinancings).

For the Minnesota AG press release, see Attorney General Swanson Sues Mortgage Lender For Charging Thousands For Refinancing Services That Were Never Provided.

Mass AG Settles Suit With Ex-BofA Loan Officer For Allegedly Exploiting Status As Bank Employee To Run Loan Mod Ripoffs Targeting Strapped Homeowners

In Boston, Massachusetts, the Boston Business Journal reports:

  • A former Bank of America Corp. mortgage loan officer accused of tricking distressed homeowners into thinking he was a lawyer will pay $6,250 in restitution as part of a settlement with Massachusetts Attorney General Martha Coakley. Christian Hayes of Danvers entered into the settlement to resolve allegations with the AG’s office.

  • Homeowners who were seeking to save their homes from foreclosure were scammed by a bank employee who used his bank affiliation to gain their trust in seeking to avoid foreclosure,” said Attorney General Martha Coakley. “It is particularly egregious when individuals who are legitimate bank employees exploit this status to take advantage of unsuspecting homeowners.”

  • The Attorney General’s complaint alleged that Hayes, through his company Foreclosure Alternatives, demanded up to $1,500 in up-front fees, before negotiating loan modifications to help homeowners avoid foreclosure.

Source: Ex-Bank of America loan officer to pay penalty.

For the Massachusetts AG press release, see Former Bank of America Employee to Pay Restitution for Soliciting Illegal Fees From Distressed Homeowners During Foreclosure Crisis (Loan Officer From Danvers Misrepresented Himself as Attorney; Demanded Illegal Fees in Violation of the Attorney General’s Foreclosure Rescue Regulations).

Connecticut Orders California Loan Modification Peddler To Cease & Desist; Outfit Accused Of Making Offers That Falsely Suggest Affiliation With Bank

From the Office of the Connecticut Attorney General:

  • Attorney General George Jepsen is warning consumers that the California companies, Novation Marketing Center and Novation Law Center, are not licensed in Connecticut to provide mortgage loan modification services and are not affiliated with Webster Bank. Jepsen received reports that the companies contacted Webster Bank customers in Connecticut with mortgage modification offers, falsely suggesting an affiliation with the bank.

  • Jepsen sent a letter to the Newport Beach companies Wednesday demanding they cease and desist from doing business in Connecticut until they are licensed. He also demanded that the companies provide copies of their advertisements, solicitations and consumer disclosures; to identify and describe all affiliations with Connecticut and national lenders and loan servicers; and to identify all the Connecticut consumers for whom Novation provided any debt negotiation services and whether they had obtained a loan modification for the customer.

For the Connecticut AG press release, see Attorney General Demands Unlicensed Company Stop Debt Negotiation Services In Connecticut.

Indiana Real Estate Agent Accused Of Running Foreclosure Rescue, Loan Modification Ripoffs Tagged With Emergency License Suspension

In Chesterton, Indiana, the Chesterton Tribune reports:

  • Local real estate agent Don Johnson’s license has been suspended, on an emergency basis and for 90 days, by the Indiana Real Estate Commission (IREC), in response to complaints received after Nov. 19, 2010, when the Attorney General’s Office filed a civil suit against him.


  • On Nov. 19 the Attorney General’s Office filed a 33-count suit against Johnson which accused him of multiple improprieties, among them:

    •Engaging in material deception in the course of professional activities.

    Violating the Mortgage Rescue Protection Act and the Credit Services Organization Act by failing to obtain a surety bond, by failing to provide a written statement prior to contracting services, and by failing to provide homeowners written notice of their rights.

    •Continuing to practice although “unfit to practice due to professional incompetence,” by failing “to account for and remit funds belonging to (a client) once the loan modification process was unsuccessful.”

    •Engaging in material deception, by failing to notify a client, the owner of a property, that the property had been sold at a sheriff’s sale and continuing to collect rental payments from the tenants of the property.

    •Engaging in material deception, by “forging a Fifth Third Bank letter.”

    •Engaging in material deception, by hiring “contractors to clean out properties to reduce their value, only to have the same contractors re-install the items to make it appear that (Johnson) has made extensive improvements to the property to raise the selling price.”

For the story, see Local man's real estate license suspended for 90 days.

Wednesday, March 23, 2011

Group Accused Of Using Stolen IDs To Sell Homes Out From Under Unwitting Long Island Owners To Straw Buyers Impersonating Others In Mtg Fraud Ripoff

In Nassau County, New York, WNYW-TV Channel 5 reports:

  • After a two-year investigation, authorities have charged 17 people of the largest mortgage fraud and identity theft scheme in Nassau County history, according to Nassau County District Attorney Kathleen Rice. [...] Rice said that her office's investigation, dubbed "Operation: Sweet Deal," uncovered more than 45 independent acts of fraud. Her office filed four indictments charging 17 people with more than 108 crimes for their roles in mortgage fraud and identity theft schemes that stole more than $20 million from homeowners, banks, and the County government.

  • James Robert Sweet, 43, of Westbury, and Dwayne Benjamin, 44, of Westbury, and 15 others(1) face charges ranging from enterprise corruption and first-degree grand larceny to money laundering, identity theft and conspiracy. Among those arrested were lawyers, mortgage brokers, real estate brokers, bank employees, an appraiser, a financial consultant and one United States Postal worker. Rice said that Sweet Deal has operated in Nassau County for nearly six years under the leadership of Sweet and Benjamin.


  • The Nassau County DA said members accused in the group began to branch out into more lucrative thefts by recruiting friends, family members, and co-workers to steal the identities of home buyers and property owners and to impersonate them at the closings.

  • Rice said that using these stolen identities, real estate members could impersonate both the home buyer and seller, and keep all of the proceeds of the phony home sale. In using the stolen identity, the real estate group impersonators would secure a real mortgage and then at the closing, another group member would act as the home owner, using a stolen identity of the real home owner.

For more, see Huge Mortgage Fraud and ID Theft Scheme Busted in Nassau County (Real Estate Unit Takes Down Fraud Scheme).

For the Nassau County DA press release, see DA Rice's Real Estate Unit Takes Down Largest Mortgage Fraud & I.D. Theft Scheme in Nassau County History ('Sweet Deal' real estate group stole more than $20M from banks, individuals, and the Nassau County government).

See also, Malverne-West Hempstead Patch: 'Sweet Deal' Costs Homeowners, Banks and County Millions (The Nassau County DA charged 17 people in a scheme that involved mortgage fraud and indentity theft).

(1) The rest of the hit parade follows:

  • Stephanie Watkins, 36, Amityville (real estate broker),
  • Sophia Welsh, 43, West Babylon (mortgage originator),
  • Alfred Gary, 44, Englewood, N.J. (high-end car dealer - allegedly laundered funds),
  • Vertus Vielot, 35, Baldwin (allegedly impersonated seller at ID thefts),
  • Yves Mathieu, 45, Elmont (allegedly provided fake docs for ID thefts),
  • John DiCanio, 37, of Islip Terrace (mortgage originator),
  • Carlos Irizarry, 34, of Long Beach (mortgage originator),
  • Larinzo Clayton, 45, of Westbury (attorney),
  • Ethan Serlin, 40, of Dix Hills (attorney),
  • Radamex Velasquez, 34, of Valley Stream (appraiser),
  • James Gant, 35, of Brooklyn (alleged straw buyer),
  • Allen Woods, 35, of Hempstead (alleged straw buyer),
  • Lyshaan Hall, 33, of Brooklyn (tax preparer – allegedly provided fake docs),
  • Sonia Panameno, 29, of Mineola (bank employee – allegedly provided fake docs),
  • Roxanna Calero, 33, of Brooklyn (bank employee – allegedly provided fake docs).

Uptick In Suspect 'Quit Claim' Filings Moves Court Clerk To Issue Deed Theft Warning To County Homeowners

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

  • People filing false deeds to take over vacant homes has Palm Beach County's clerk of courts warning owners to keep an eye on their property records the same way they do their credit reports.

  • With hundreds of vacant houses countywide - fallout from the real estate boom and bust - Clerk Sharon Bock said her office is investigating an increase in suspect "quit claim" deeds filed on homes which are then rented to unsuspecting tenants or occupied by the scammers themselves.

  • A quit claim deed transfers interest in a property to a new recipient, but offers no guarantee of clear title. Although owner signatures are required on the deed, as well as notarization, Bock said advanced computer and copier technology has made forging documents easier. "It's terrible when someone steals your identity, but imagine what it's like when someone steals your home," Bock said. "Some of this isn't just isolated incidents, it's literally criminals with the intent to defraud."

  • It can be an expensive muddle for the true home­owner who may have to spend thousands of dollars and months in court to confirm ownership of the property and obtain an eviction.

For more, see Vacant houses open the door to deed scams in Palm Beach County.

Police: Phony Cop Sold Cars He Didn't Own, Hijacked Possession Of Vacant Foreclosed Homes, Clipping Cash From Unwitting Tenants On Subsequent Rentals

In Louisville, Kentucky, WHAS-TV Channel 11 reports:

  • June Perry found an ad on Craig’s List back in August that looked promising. Perry needed a car so she went to test drive it, that's when she met Gary Hammond. “I believed every word he said,” Perry said. Perry said she believed Hammond because he told her he was an LMPD homicide detective.

  • She gave him close to $2,000 in cash and took the car. Perry says Hammond promised to deliver the title a week later. “That’s what made me trust him,” Perry said. “I thought he was homicide detective and said he would never put his job on the line for $1,750.”

  • But that title never came and Perry says Hammond sent her something else instead that sent her straight to the police to file a report. “He sends me a picture of himself full blown naked,” Perry said. Perry says police told her Hammond was never in law enforcement and he didn't even own the car he sold to her.

  • Police say just last month Hammond moved from selling cars to renting out houses. Problem is police say he didn't own the houses he was renting out the bank does because the houses are in foreclosure. Police say Hammond broke into two south Louisville homes and told people he was the owner and wanted to rent them out.

  • Police say he got $1200 from one couple and $1100 from another. The couples thought they were paying security deposits and for rent. Police say Hammond took off and the couples figured out the houses were foreclosures and call Hammond a con artist.

  • Hammond is facing impersonating a peace officer, terroristic threatening, burglary, and theft by deception.

Source: Man arrested after allegedly selling cars, renting homes he doesn’t own.

'Straw Buyer' Recruiter In Northern New Jersey Sale Leaseback, Equity Stripping Racket Gets 12 Months, 3 Years Probation, $275K Restitution Order

From the Office of the U.S. Attorney (Newark, New Jersey):

  • A Bloomfield, N.J., man was sentenced [] to a year and a day in prison for his role in a mortgage fraud scheme carried out by the owner and employees of Elite Financial Solutions, a company based in Scotch Plains, N.J., which claimed to be a home foreclosure rescue company, U.S. Attorney Paul J. Fishman announced.

  • Michael Martino, 47, who as an employee of Elite was responsible for recruiting straw buyers for properties in foreclosure, previously pleaded guilty before U.S. District Judge William J. Martini to one count of wire fraud conspiracy. Judge Martini also imposed the sentence [] in Newark federal court.

  • According to documents filed in this and related cases and statements made in court:

    Beginning in February 2005, Elite’s owner and operator Stephen French devised a scheme to fraudulently induce financial institutions to provide mortgage loans to unqualified borrowers, enabling French, Martino, and their co-conspirators to earn consulting fees from the sales of properties financed by the fraudulently induced loans.

    French, Martino, and others at Elite targeted New Jersey homeowners who couldn’t make mortgage payments and were facing foreclosure. They would promise the homeowners that Elite would help them keep their homes and repair their damaged credit. The homeowners would be instructed to permit title to their homes to be put in the names of straw buyers for one or two years. French promised to improve their credit ratings during that time, help them obtain more favorable mortgages, and ultimately return title to their homes.

    French, Martino, and others at Elite told the homeowners that equity withdrawn from their homes would be kept in escrow and used to pay the mortgages and expenses and to repair their credit. Instead, Elite took a “consulting fee” of $25,000 per property, and the remaining equity was deposited into bank accounts French controlled.

    Martino admitted that he recruited straw buyers for the scheme. French, Martino, and others at Elite paid the straw buyers $10,000 for use of their names and credit histories in the transactions, and submitted fraudulent loan applications to mortgage lenders in the straw buyers’ names in order to ensure the loans would be approved.

    In addition to the prison term, Judge Martini sentenced Martino to three years of supervised release and ordered him to pay $275,000 in restitution

For the U.S. Attorney press release, see Former Employee Of Phony Mortgage Rescue Company Sentenced To Prison For Role In Fraud Scheme.

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

(1) According to the press release, French, 53, of Scotch Plains, N.J., previously pleaded guilty before Judge Martini to one count of wire fraud conspiracy, admitting he caused more than $1 million in losses through the scheme. He is currently scheduled to be sentenced on April 21, 2011. Tameka Broadhurst, 27, of Plainfield, N.J., a secretary and loan processor at Elite, previously pleaded guilty before Judge Martini to one count of wire fraud conspiracy and was sentenced on November 4, 2010, to a day in prison followed by 18 months of supervised release. Martini also ordered Broadhurst to pay $355,000 in restitution. During her guilty plea, Broadhurst admitted that she recruited straw buyers for the scheme and submitted fraudulent loan applications to mortgage lenders in straw buyers’ names.

Citimortgage Tagged With NJ Suit As HAMP Class Action Parade Continues; Loan Servicer Allegedly Grabbed TARP Cash, Stiffed Loan Mod-Seeking Homeowners

From the Office of Berger & Montague, P.C.:

  • The law firm of Berger & Montague, P.C. has filed a class action complaint in the United States District Court for the District of New Jersey on behalf of all New Jersey homeowners whose mortgage loans have been serviced by CitiMortgage, Inc., and who, since April 13, 2009, (1) have entered into a Trial Period Plan (“TPP”) contract with CitiMortgage and made all payments required by their TPP contract, but (2) have been denied a permanent loan modification agreement that complied with the U.S. Department of the Treasury’s Home Affordable Modification Program (“HAMP”) rules.


  • The Complaint alleges that CitiMortgage accepted billions in government bailout money under the Troubled Asset Relief Program ("TARP") earmarked to help struggling homeowners avoid foreclosure. CitiMortgage, like other TARP-funded financial institutions, is contractually obligated to modify mortgage loans it services for homeowners who qualify under HAMP, a federal program designed to abate the foreclosure crisis by providing mortgage loan modifications to eligible homeowners.

  • According to the lawsuit, CitiMortgage systematically slows or thwarts homeowners' requests to modify mortgages, depriving borrowers of federal bailout funds that could save them from foreclosure. The bank ends up reaping the financial benefits provided by TARP-funds and also collects higher fees and interest rates associated with stressed home loans.

For the press release, see Berger & Montague, P.C. Files Class Action Lawsuit Against CitiMortgage, Inc.

For the lawsuit, see Silva v. Citimortgage, Inc.

Tuesday, March 22, 2011

Six Mortgage Servicers Agree To Special Master Oversight In New Jersey Foreclosure Actions

Bloomberg reports:

  • Bank of America Corp. and five other mortgage servicers agreed to the appointment of a special master to examine foreclosure procedures in New Jersey, a court- appointed lawyer said [].

  • A blanket suspension of foreclosures in New Jersey isn’t necessary in light of the settlement, which subjects the banks to a performance review for a year, the lawyer, Edward Dauber, said in a letter to Superior Court Judge Mary Jacobson, posted on the court’s website. Dauber’s law firm, Newark, New Jersey- based Greenberg Dauber Epstein & Tucker, was appointed to present arguments supporting a foreclosure suspension.

For more, see BofA, Other Banks Agree to Special Master for Foreclosures in New Jersey.

See also The Star Ledger: Court appointee to review tens of thousands of N.J. home foreclosures:

  • The settlement comes four months after Chief Justice Stuart Rabner issued a three-part order to combat rogue foreclosure filings, citing a staggering increase in foreclosure cases and concerns judges had inadvertently "rubber stamped" foreclosures that had inadequate or incorrect paperwork.

BofA Tagged w/ Racketeering Suit For Allegedly Screwing Over Hoosier Homeowners In Foreclosure Using Robosigner Docs; Action Seeks Class Action Status

In Indianapolis, Indiana, WRTV-TV Channel 6 reports:

  • Bank of America is in the bull's-eye of a proposed class-action lawsuit filed in Marion County. The complaint accused the bank of racketeering mortgage documents in order to crank out mass foreclosures, 6News' Rafael Sanchez reported.

  • Judy Canada of Indianapolis said she's a victim and a plaintiff named in the lawsuit. Canada lived in a condo at 5506 Greenview Drive for more than 15 years. When the economy took a downturn, her finances changed and she fell behind on her payments for several months.
    "I spent a year trying to save my condo not knowing they were working on a foreclosure," said Canada.

  • Canada said that she was working on a deal with the bank when she agreed to give up her deed, move and get $3,000 to relocate. Despite those plans, she said her home was put up for a sheriff's sale last year. Canada said she believes filing the lawsuit will get the bank's attention. "Treat us like we are human beings, not numbers and pieces of paper," Canada said. A Bank of America spokeswoman declined to comment on the lawsuit. "It is our policy not to comment on pending litigation," the spokeswoman said.

  • Irwin Levin, a lawyer with Cohen & Malad, filed the complaint in Indianapolis on Thursday. "The legal system was used to abuse the very people who allowed them to make the money," Levin said. Levin explained that these kinds of cases are complex because they involve a tangled web of banks, investors and service providers. "They had to suck homeowners into the system: food for their machine that would get them money. In the end, they cast these homeowners aside," Levin said.

For more, see Lawsuit Accuses Bank Of Foreclosure Fraud (Lawsuit: Fraud, 'Robo-Signers' Used To Process Foreclosures).

State AG Settlement Proposal Won't Fix Crappy, Uninsurable Real Estate Titles Created By Mtg. Servicing Racket When Fraudulently Processing F'closures

In a recent story on AOL's Daily Finance, attorney Abigail Field discusses how the foreclosure settlement proposed by the state attorneys general won't come close to rectifying the problems relating to the clouded real estate titles that were created by the mortgage loan servicing racket through their use of fraudulent practices when processing foreclosure actions:

The Enormous Clouded Title Problem:

  • But the settlement doesn't go nearly far enough to save the housing market. In fact, it can't go far enough, because it can't address one of the most confounding problems the banks have created: the millions of properties nationwide that now have "clouded" titles.

    To put it plainly: Because of these bad titles, property owners can't prove they own the properties they think they bought, and banks can't prove the had the right to sell them.

    Even though it's impossible to know how many properties are affected, I have confidence in saying millions nationally for the following reasons:
    • More than 1 million foreclosures have been completed since 2005; nearly 200,000 were completed in the third quarter of 2010 alone.

    • Foreclosures involving securitized mortgages seem to be flawed as a rule, not the exception.

    • Even when foreclosures may have been otherwise valid, the practices of foreclosure attorneys have clouded titles.

    • The problems are ongoing. More flawed foreclosures are completed every day.

    • The clouded title problem extends well beyond foreclosures. Both MERS, the electronic database that holds more than half the mortgages nationally, and possible securitization failures could have damaged the titles of the properties even though the borrowers are current on their mortgages.

The Solid Effects of Clouded Titles:

  • You can't sell real estate when you can't establish that you own it -- banks won't loan money for purchasers to buy the property. That's because the bank wants to be sure that if it forecloses, it will get good title to the property. (Yes, this issue practically oozes irony.) That's why banks won't approve a mortgage for a property if a title insurance company won't insure its title. And title insurance companies won't do that if they know the title is clouded.

    A few months ago, the Massachusetts Supreme Judicial Court issued its
    Ibanez decision, which made it clear that the banks' foreclosure practices -- and indeed, the standard securitization deal -- violated longstanding basic Massachusetts real estate law, and thus, many completed Massachusetts foreclosures were invalid. The foreclosing banks, which had either since sold the properties or still "owned" them, had no right to foreclose, and therefore had never owned those properties. So who owns them now? Well, the fact that it's a question is the very definition of "clouded title."

    Since it has been a couple of months since the Ibanez decision, I called a couple of large title insurance companies in the Boston area to see how title insurance for improperly foreclosed properties is being handled. To bypass talking points and smooth-talking spokespeople, I called insurance sales agents, representing myself as someone contemplating purchasing a Massachusetts foreclosure. Because I didn't say I was a member of the media, I'm not going to name the companies. But the conversations confirmed my thesis.

    One agent called improperly foreclosed homes in Massachusetts "uninsurable." Another explained that the problem underscored in the Ibanez case has been around for years, and that any title company would need to look at foreclosures dating at least until the late 1970s, when securitization became more common, to make sure no improper foreclosure had happened in all those years. And some properties, she noted, had been foreclosed on multiple times.

    That agent did note that the problem was worst for properties improperly foreclosed on in recent years that were still bank-owned. Those properties were truly uninsurable. That's because the bank couldn't make a claim on the title insurance policy it had purchased when making the original loan, since it was the entity that clouded the title. Indeed, honoring that policy would be like letting a arsonist collect on fire insurance. Thus much of the current bank-owned inventory in Massachusetts is largely uninsurable and thus unsellable. No settlement with the servicers is going to solve that problem. And it's a national problem, not a Massachusetts one

For more, see Why the Foreclosure Mess Settlement Proposal Can't Fix the Damage.

Wisconsin Appeals Court: Legal Notice Published In Wrong Newspaper Sinks Foreclosure Judgment

The following facts are taken from a recent ruling by a Wisconsin state appeals court:

  • Mortgage lender files a foreclosure action against homeowner;

  • The home subject to the foreclosure action is located in Waukesha County, Wisconsin;

  • Process server can't find homeowners to serve lawsuit, so lender serves the lawsuit by publication of a legal notice in a local newspaper;

  • For reasons not explained, lender publishes the notice of the foreclosure action in a newspaper of general circulation in neighboring Milwaukee County, and not in Waukesha County (the home's location which was the homeowners' last known address);

  • Trial court ultimately enters an order for judgment and judgment of foreclosure and sale in the amount of $373,068.12 against homeowners;

  • Homeowners file a motion to vacate the judgment of foreclosure, arguing that the judgment was void due to the court's lack of jurisdiction resulting from the failure of service of process;

  • Trial court denies motion, and the foreclosing mortgage lender ultimately takes title to the home at the subsequent foreclosure sale;

  • Homeowner files an appeal.

On appeal, District II of the Wisconsin Court of Appeals reversed the trial court's order denying the homeowners motion and remanded the case back to the lower court with direction to vacate the default judgment. The court stated that the legal notice is to be published in a newspaper "likely to give notice in the area or to the person affected," as required by WISCONSIN STAT. §985.02. The court found that, based on the evidence presented, publishing the notice in the Milwaukee County newspaper when the property being foreclosed and homeowners' last known address was in Waukesha County did not comply with the requirements of the statute.(1)

For the ruling, see PHH Mortgage Corporation v. Mattfeld, No. 2010AP612 (Wis. App, Dist. II, March 16, 2011).

(1) In reaching its conclusion, the three-judge Wisconsin appellate panel stated, in relevant part:

  • WISCONSIN STAT. § 806.07(1)(d) allows relief from a judgment or order if a "judgment is void." A judgment is void for purposes of §806.07 when the court rendering it lacked subject matter or personal jurisdiction. Richards v. First Union Secs., 2006 WI 55, ¶15, 290 Wis.2d 620, 714 N.W.2d 913. A court gains jurisdiction over the parties only by valid personal and substituted service. See WIS. STAT. § 801.04; see also Span v. Span, 52 Wis.2d 786, 789, 191 N.W.2d 209 (1971). Wisconsin compels strict compliance with the rules of statutory service, even though the consequences may appear to be harsh. Useni v. Boudron, 2003 WI App 98, ¶13, 264 Wis.2d 783, 662 N.W.2d 672.

    When a motion to reopen involves a question of proper service, the burden of proof is on the party seeking, pursuant to WIS. STAT. §806.07, to set aside or vacate a default judgment. See Richards,
    290 Wis.2d 620, ¶27. The evidence necessary to set aside a default judgment is evidence sufficient to allow a court to determine that the circuit court's findings of fact were contrary to the great weight and clear preponderance of the credible evidence. Id.


  • The Mattfelds contend both that PHH Mortgage did not exercise reasonable diligence in serving them personally and that PHH Mortgage failed to comply with WIS. STAT. ch. 985 when it published the summons. Based on our review of the record, we conclude that the Mattfelds have demonstrated that the circuit court's finding as to compliance with ch. 985 is contrary to the great weight of the evidence.

    WISCONSIN STAT. § 985.02 governs "[m]ethod of notification." It provides in relevant part that "[e]xcept as otherwise provided by law, a legal notice shall be published in a newspaper likely to give notice in the area or to the person affected." (Emphasis added.) Proof of publication is required by WIS. STAT. § 985.12 in the form of an affidavit of printing "annexed to a copy of the notice clipped from the newspaper, and specifying the date of each insertion." See § 985.12(1). Here, the affidavit of printing indicates that The Daily Reporter "is a public newspaper of general circulation, printed and published daily ... in the City of Milwaukee, in said county." While PHH Mortgage asserted that "The Daily Reporter is the predominant newspaper to publish legal notices in the Milwaukee Metropolitan area," it failed to provide any evidence to that effect. Indeed, a later affidavit submitted by the publisher notes that "The Daily Reporter is a newspaper that is distributed throughout the State of Wisconsin," but also states that it is "a qualified legal newspaper in Milwaukee County, but it is not a qualified legal newspaper in Waukesha County, where the property that is a subject of the action is located." In contrast, PHH Mortgage's proof of publication for notice of the sheriff's foreclosure sale published in the Waukesha Freeman newspaper contains a statement from the billing coordinator for the Waukesha Freeman, "a public newspaper of general circulation, printed and published ... in the City of Waukesha, in Waukesha County, Wisconsin." It is undisputed that at that time of publication the Mattfelds' last known residence was in Menomonee Falls in Waukesha county, and that Scott Mattfeld still resided in Menomonee Falls in October 2008.

    While PHH Mortgage asserts that the Mattfelds failed to provide argument or authority as to why The Daily Reporter would not have given notice to the Mattfelds, the undisputed record as it stood at the time of the default judgment failed to establish that publication in a newspaper "printed and published daily ... in the City of Milwaukee, in said county" would have been likely to provide notice to a resident of Menomonee Falls in Waukesha county. Although The Daily Reporter publisher later averred that the newspaper is distributed throughout Wisconsin, the only mention of Waukesha county was that The Daily Reporter was not qualified in that county. This again failed to establish that publication in The Daily Reporter would have been likely to provide notice to a resident of Waukesha county. The circuit court's finding to the contrary was against the great weight of the evidence of record at the time of the Mattfelds' WIS. STAT. §806.07 motion to reopen.

Couple Who Successfully Voided Mortgage Begin Feeling Heat Over Questionble Past; State Officials Say Earlier Incident Foreshadowed Their Legal Path

In Ankeny, Iowa, The Des Moines Register reports:

  • The Ankeny couple who used a loophole in Iowa law to pay almost nothing for a home have a history of questionable foreclosures that have raised red flags among state authorities, The Des Moines Register has learned. The Register reported Thursday that Matt and Jamie Danielson put almost no money down on their Ankeny house in 2007, negotiated $50,000 in cash at closing and made just one payment before they fell into foreclosure. Yet they succeeded in voiding their $320,000 mortgage and kept the home despite foreclosure proceedings because Iowa law requires both spouses to sign a mortgage, and Jamie Danielson did not.

  • In December, a top official at the Iowa Finance Authority lodged a complaint with Iowa's Division of Banking after Jamie Danielson applied to obtain a mortgage broker's license. The complaint alleges that Jamie Danielson had already racked up $1.43 million in unsecured debt; that she and her husband appeared to profit handsomely from two previous house deals that wound up in foreclosure; and that Jamie Danielson was involved previously in a loan obtained by a relative who got a house for free because the relative's spouse did not sign the mortgage.

  • On Thursday at the Register's request, officials at the IFA's Title Guarantee Division released the formal complaint it sent late last year to the banking division. The newspaper contacted the Title Guarantee Division, which provides title insurance for lenders, because it had tried to help Citimortgage in its legal battle with the Danielsons.

  • Matthew White, the IFA's deputy director, alleged in the complaint that both Jamie Danielson and her mother had worked for First Horizon, a lender involved in a mortgage with a relative, Troy Hudson. In late 2006, Hudson succeeded in having his mortgage voided and won his house in foreclosure proceedings because his wife, Jodi, had not signed the loan. The loan was prepared by Danielson, the complaint says.

  • White and other IFA officials said in interviews Thursday that they believed the Hudson case foreshadowed the legal path that Danielson and her husband followed in the foreclosure on their Ankeny house the next year. "As a loan officer or originator, then or in the future, Jamie Danielson must be held to a higher standard than the normal homebuyer," White wrote in the complaint. "She had specific knowledge of what would happen if she did not sign the mortgage, and still fought to have the mortgage declared void against both of them."

  • In the Register's article on Thursday, the Danielsons blamed hasty oversight by their mortgage company for their luck in acquiring the house.

For more, see 'Free house' couple's earlier foreclosures are questioned.

For story update, see Cousin's use of mortgage loophole not disclosed in court (The assistant attorney general who challenged Matt and Jamie Danielson's fight for a free house in court said Friday he was unaware a relative of the Ankeny couple had won a free house previously by using the same legal loophole).

Go here to read the complaint made regarding the Danielsons to the Iowa Division of Banking. This link includes exhibits, including Jamie Danielson's personal bankruptcy filing.

Go here to read the Court of Appeals decision involving Jamie Danielson's cousin, Troy Hudson.

Goldman Says It's "Exploring Strategic Options For Litton Loan..." As It Begins Effort To Wash Hands Of Mortgage Servicing Unit

Bloomberg reports:

  • Goldman Sachs Group Inc., the fifth-biggest U.S. bank by assets, said it’s trying to sell Litton Loan Servicing LP, the Houston-based mortgage-servicing unit it acquired more than three years ago. “Goldman Sachs is exploring strategic options for Litton Loan Servicing, which include a possible sale,” Michael DuVally, a spokesman in New York, said in a telephone interview.

  • The company bought Litton in December 2007 as investors including billionaire Wilbur Ross and Centerbridge Capital Partners LLC purchased mortgage servicers to help them better understand the market and profit from buying discounted loans. Goldman Sachs is selling after failing to find enough opportunities to buy distressed mortgage loans, said a person familiar with the situation.


  • Since Goldman Sachs bought Litton, the value of the company’s mortgage-servicing rights has also evaporated. By the end of 2009, Goldman Sachs’s estimate for the fair value of the rights had dropped to $88 million from $283 million at the end of February 2008, according to regulatory filings.

For more, see Goldman Sachs Seeking to Sell Litton Mortgage-Servicing Unit.

See also, Business Insider: Why Goldman Sachs Wants To Get Rid Of Its Home Loan Servicing Unit ASAP:

Monday, March 21, 2011

Homestead Protection From Forced Sale Gets Boost For Some Bay State Homeowners; Will Ease Pressure From Bill Collector Threats Against Home Equity

The Boston Globe reports:

  • Credit card debt got you down? Revisions to the state’s Homestead Act that take effect Wednesday offer greater protection to [Massachusetts homeowners] from losing their homes to debt collectors.

  • Though the law won’t protect someone who doesn’t pay a mortgage from losing a home to foreclosure, it could protect a homeowner from being evicted because of claims from an automobile accident or credit card debt, said Secretary of State William F. Galvin.

  • It’s an important protection for homeowners,’’ Galvin said. “Especially in an age where people have been really bedeviled by debt. This is not going to solve the mortgage problem. But it does solve the problem where people put their home at risk.’’

  • In the past, people were protected up to $500,000 if they filed a so-called homestead declaration on their primary residence. They will still have that protection after filing, but now, even if they have not filed a homestead declaration, homeowners will have automatic protection up to $125,000.

  • And couples who are over 62 or disabled will get double the protection — up to $1 million if both partners file a homestead declaration. “It starts with the concept that the home is something we want people to protect,’’ Galvin said. “The objective here is to protect the home so that people aren’t out on the street.’’

  • Homeowners who already have filed homestead declarations do not need to refile to be protected by the new law. And people who seek a homestead declaration will now be covered even for preexisting debt. Attorney groups had pushed for years for revisions to the state’s antiquated homestead law, which was originally enacted when women had limited rights to property.

  • The new law makes clear that children and both spouses are protected, even if the person who signed the homestead declaration dies. Under the revisions, both spouses who own the home must sign the homestead declaration, and if only one is considered the owner, he or she must declare marital status and whether a spouse is living there. If a single homeowner gets married after seeking the homestead declaration, the protection is automatically extended to the spouse. The new law covers manufactured homes and properties that are held in trust.

  • The law generally protects a home from claims against the homeowner. But not all claims. A divorced father who fails to pay child support and lives in a million-dollar home would not be covered, for example. Nor would someone who uses his home as collateral for another loan.

  • But, the law could lessen the chance a homeowner would be required to sell his home during a bankruptcy liquidation. And, the spouse of a compulsive gambler who runs up credit card debt would no longer be at risk of losing the family home, he said.

  • Anyone can file a homestead declaration on a primary residence for a cost of $35 at the county Registry of Deeds. More information is available there and on the [Massachusetts] secretary of state’s website, (1)

Source: Beginning this week, Homestead Act strengthens protection.

See also, Secretary Galvin Announces Changes to the Homestead Protection Law:

  • "Homestead protections now extend to pre-existing debts and the proceeds of a sale or insurance coverage.(2) [...] If you are purchasing your new principal residence, your closing attorney must provide you, as a mortgagor, with notice of your right to declare a homestead protection. At that time, you will be asked to acknowledge receipt of this notice in writing."

(1) Given the proliferation of sleazy "zombie debt" buyers acquiring old, stale, delinquent credit card accounts for pennies on the dollar with the view of forcing collection through forced sales of real estate, wage garnishment, etc., there seems to be no reason for Massachusetts homeowners not to cough up the $35 and file the homestead declaration to get the benefit of the entire $500,000 of home equity protection from these bill collectors (who typically count on consumers being unaware of their legal rights in order to squeeze them out of cash that needn't be paid out).

Unlike some states (ie. Florida and Texas, to name two), Massachusetts requires the formal filing of a declaration to reap the full protections of the state's homestead law against forced sale. This recent change in Massachusetts law will at least now extend partial protection, to the extent of $125,000 of home equity, to those homeowners who have failed, unwittingly or otherwise, to file the formal declaration with the appropriate county office.

For the homestead declaration forms and additional information, see:

  • Declaration of Homestead for Homes Owned by Natural Persons,
  • Declaration of Homestead for Homes Owned by Trustee(s),
  • Questions and Answers, The Homestead Act (Massachusetts General Laws, Ch. 188, §1-10, William Francis Galvin, Secretary of the Commonwealth; updated 3/11/11) ("The declaration of homestead shall benefit each owner named on the homestead and each of the owner’s family members who occupy or intend to occupy the home as their primary residence. Each family member shall have the right to use, occupy and enjoy the home. The new law provides additional protections to spouses that are not listed as owners in their principal residences. For example, protection extends automatically to a new spouse where an unmarried person declared a homestead and later marries. Also, divorcing spouses are protected against the loss of homestead through termination or divorce. Neither divorce nor remarriage will affect the homestead of the spouse who still primarily resides in the home. [...] Additionally, if there are dependent minor children, under the age of 21, living with all elderly or disabled homeowners, you may wish to consult an attorney in order to adequately protect the children’s right to use, occupy and enjoy the home. Be sure to use the proper homestead form when you file.")

(2) See Questions and Answers, The Homestead Act (at page 4):

  • What if my home is sold or damaged? If the home is sold, the sale proceeds shall be protected by the homestead for one (1) year after the date of the sale or on the date when a new home is purchased with the proceeds, which ever is earlier. If the home is damaged by a fire, for example, the insurance proceeds are protected for two (2) years after the date of the fire or on the date when the home is reconstructed or a new home is purchased, which ever is earlier.

Crackdowns Continue In Effort To Recover Unpaid Real Estate Taxes Stemming From Fraudulent Florida Homestead Claims

In Deltona, Florida, Southwest Volusia News reports:

  • Morgan Gilreath, Volusia County Property Appraiser, knows that Florida Homestead Exemption fraud is a problem, in not only Volusia County, but also the entire State of Florida and Gilreath is not standing idly by.


  • Over the past four years, our Homestead Compliance Investigative Unit, (HCIU), has accounted for cases bringing in to Volusia County and City governments $14.3 million in back taxes, interest, and penalties where homestead violations occurred.” The HCIU consists of two former fraud/ law enforcement investigators. Gilreath stated that there is a recent vacancy available for a third investigator and hopes to fill it soon.

  • There have been cases where in excess of $80,000.00 has been recovered from one property owner while there is a currently unresolved case that could involve in excess of $120,000.00 if resolved against the property owner.

  • In Hollywood, Florida, a Hollywood Police Detective who was on loan to the Broward County Property Appraiser’s Office discovered 1,187 cases of homestead fraud in Hollywood alone, in an eight-month period. The net result: $750,000.00 in back taxes collected and $69 million restored to city tax rolls.

For more, see Volusia Homestead Fraud (Volusia County Property Appraiser finds $14.3 million).

(1) Penalties for Homestead Exemption Fraud: Information obtained from the Volusia County Appraisers Office web site discloses the following:

  • Florida Statute 196.131(2) provides that “any person who knowingly and willfully gives false information for the purpose of claiming homestead exemption is guilty of a misdemeanor of the first degree, punishable by a term of imprisonment not exceeding 1 year or a fine not exceeding $5,000.00 or both."

    Florida Statute 196.161(1)(b) further states that “upon determination by the property appraiser that for any year or years within the prior 10 years a person who was not entitled to a homestead exemption was granted a homestead exemption from ad valorem taxes, it shall be the duty of the property appraiser making such determination to serve upon the owner a notice of intent to record in the public records of the county a notice of tax lien against any property owned by that person in the county, and such property shall be identified in the notice of tax lien. Such property which is situated in this state shall be subject to the taxes exempted thereby, plus a penalty of 50 percent of the unpaid taxes for each year and 15 percent interest per annum.”

Sloppy Lender, State Homestead Law Leave Iowa Couple w/ Voided Mortgage; Bank Left Holding The Bag After Failing To Get Wife's Signature On Loan Docs

In Ankeny, Iowa, the Des Moines Register reports:

  • Talk about sticking one to the bank. Matt and Jamie Danielson own their $278,000 Ankeny home outright, and paid almost nothing for it. A hasty home-loan approval and a 123-year-old law that requires mortgages be signed by both spouses helped the couple fight foreclosure all the way to the Iowa Court of Appeals. They won, and though they made only one payment to lender Citimortgage, the mortgage is now void and they get to keep the home.

  • "It's dumb luck that we're in this house," said Matt Danielson, 33. The banking lobby is chagrined. The Iowa Bankers Association is backing legislation that would change the law so this never happens again.


  • The law's original intent was to protect husbands and wives from liability if one spouse made a disastrous financial decision unbeknownst to the other or against her or his wishes. [...] The Iowa law invoked by [attorney Jerry] Wanek in the Danielson case dates to 1888, and has its roots in a law passed in 1851. It was intended to stop one spouse from ripping off the other. It invalidates sales of — or loans on — a home, unless both spouses sign. The idea is to prevent one spouse from refinancing a mortgage and taking off with the cash.(1)


  • Wanek, the Danielsons' lawyer, doesn't believe it's right to pass a law to protect banks from their own - or their mortgage brokers' - mistakes.

For more, see Iowa loophole voids mortgage, gives couple 'a free house'.

For the ruling of the Iowa Court Of Appeals, see Citimortgage, Inc. v. Danielson, 771 N.W.2d 653, 2009 Iowa App. LEXIS 1071 (Iowa Ct. App., 2009) (Go here for the Google Scholar version, containing embedded hyperlinks).

(1) Part of the commentary made by the state Court of Appeals on the application of the Iowa homestead law (Chapter 561, Iowa Statutes) in this case follows (bold text is my emphasis):

  • "Homestead rights are jealously guarded by the law." Michel, 683 N.W.2d at 101; see also Merchants Mut. Bonding Co. v. Underberg, 291 N.W.2d 19, 21 (Iowa 1980) ("Homestead laws are creatures of public policy, designed to promote the stability and welfare of the state by preserving a home where the family may be sheltered and live beyond the reach of economic misfortune.").

    One way in which the legislature has sought to protect homesteads is through Iowa Code section 561.13, which invalidates encumbrances of the homestead not signed by both spouses unless and until the spouse of the owner executes the same or a like instrument. See Thayer v. Sherman, 218 Iowa 451, 458, 255 N.W. 506, 509 (1934) (The provisions of this section are for the benefit of all who are interested in the homestead. It is designed as a protection to the wife, the children, and the husband himself.).

    If section 561.13 is not satisfied, the transaction is invalid as to both the husband and the wife. See Martin v. Martin, 720 N.W.2d 732, 736 (Iowa 2006) (finding deed attempting to convey a homestead invalid where it was not signed by the owner‟s spouse); Beal Bank v. Siems, 670 N.W.2d 119, 124 (Iowa 2003) (holding mortgage on homestead void because not signed by owner‟s spouse as required by section 561.13).

    Section 561.13 was not satisfied in this case because the mortgage encumbering the parties' homestead was signed only by Matthew, who was married to Jamie at the time of the encumbrance. The mortgage is therefore invalid and void as to both Matthew and Jamie. See Martin, 720 N.W.2d at 738 (emphasizing section 561.13 makes a conveyance or encumbrance of the homestead "invalid—that is, void—without the signature of both spouses, not merely voidable by the spouse who did not sign").

    Citimortgage attempts to avoid the harsh effect of section 561.13 in this case by asserting Matthew procured the mortgage by fraudulently misrepresenting his marital status, which it contends should result in the imposition of an equitable mortgage. The district court denied this claim, finding there was "not one piece of evidence to indicate Mr. Danielson knowingly or with any intent to defraud gave false information to anyone throughout this transaction." Citimortgage claims the district court erred in so concluding. We do not agree.


One somewhat interesting piece of trivia is that attorney Jerrold Wanek, who represented the Danielsons as reported in the Des Moines Register story, also successfully represented the homeowner who voided his mortgage in the above-referenced Beal Bank v. Siems case, which was decided by the Iowa Supreme Court in 2003.

For another relatively recent Iowa case where a sloppy lender was left holding the bag in a similar situation, see Wells Fargo Bank, N.A. v. Hudson, 2007 Iowa App. LEXIS 1867 (Iowa Ct. App. 2007) :

  • The district court dismissed on summary judgment Wells Fargo Bank's (Wells Fargo) petition for foreclosure of a real estate mortgage on property owned by defendant Troy D. Hudson. The court found the undisputed facts to be that (1) the property at the time the mortgage was given was the homestead of Troy and his wife, defendant Jodi Hudson, and (2) Jodi Hudson had not signed either the note or the mortgage. Under these facts in applying Iowa Code section 561.13 (2005), the district court found the mortgage was null and void. On appeal Wells Fargo contends (1) the district court erred in granting summary judgment, and (2) Wells Fargo should have been found to have an equitable mortgage or equitable lien on the property. We affirm.

Wisconsin Appeals Court OKs Home Foreclosure Where Refinanced Mortgage Lacked One Co-Owner's Signature; Says Bank Steps Into Former Lender's Shoes

The State Bar of Wisconsin News reports:

  • After the brother defaulted on a separate mortgage loan, the District I Wisconsin Court of Appeals recently applied the doctrine of equitable subrogation to uphold a foreclosure judgment against his sister’s interest in a home they both owned.

  • Nora Dallas and Fredie Rogers, brother and sister, obtained a quit-claim deed to their mother’s home. In 2003, both executed a mortgage and mortgage note on the acquired home with Fair Finance Corporation (Fair Finance) so Rogers could buy a different house.

  • In 2004, Rogers refinanced with Wachovia Mortgage (Wachovia), formerly known as World Savings Bank. This loan, secured by a mortgage on the home Rogers owned with Dallas, discharged the Fair Finance mortgage. Dallas was not a party to the new loan.

  • Then Rogers defaulted on the Wachovia mortgage, and Wachovia brought a foreclosure action against Dallas’s interest. The circuit court granted summary judgment to Wachovia. Dallas appealed, arguing foreclosure was not warranted because she did not sign the Wachovia loan.

  • In Wachovia Mortgage v. Dallas, 2010AP1359 (March 15, 2011), the appeals court affirmed the circuit court based on the doctrine of equitable subrogation, ruling that “Wachovia is entitled to foreclose on Dallas’s interest in the house because the encumbrance on that interest was discharged by the [Wachovia] loan.”

  • Noting that subrogation is an equitable doctrine invoked to avoid unjust enrichment, Judge Ralph Fine explained that Wachovia “paid the debt for which Dallas was liable.”(1)

For more, see Appeals court applies doctrine of equitable subrogation to uphold foreclosure judgment (Where one party refinances a mortgage loan secured by a home owned by two people, the other party is not immune from foreclosure on the refinanced mortgage).

(1) The Wisconsin appeals court court explained the doctrine of equitable subrogation, and its application, as follows:

  • “Subrogation is an equitable doctrine invoked to avoid unjust enrichment, and may properly be applied whenever a person other than a mere volunteer pays a debt which in equity and good conscience should be satisfied by another.” Rock River Lumber Corp. v. Universal Mortgage Corp. of Wisconsin, 82 Wis. 2d 235, 240–241, 262 N.W.2d 114, 116 (1978). Thus, “[e]quitable subrogation is a doctrine whereby one who has paid off another’s mortgage obligation is treated as the owner of that obligation.” Countrywide Home Loans, Inc. v. Schmidt, 2007 WI App 243, ¶1, 306 Wis. 2d 200, 202, 742 N.W.2d 901, 902 (permitting subsequent mortgagee to step into the shoes of an earlier mortgagee to the extent that the subsequent mortgagee satisfied the earlier mortgage).

    Further, equitable subrogation does not require that there be a contract between the parties. Rock River Lumber Corp., 82 Wis. 2d at 241–242, 262 N.W.2d at 117 (“The object of subrogation is ‘to do substantial justice independent of form or contract relation between the parties.’”) (quoted source and ellipses omitted). It is thus immaterial that Dallas signed neither the World Savings Bank mortgage note nor the World Savings Bank mortgage because the loan was used to satisfy the Fair Finance mortgage, which Dallas executed and on which she was liable, and because Wachovia, as World Savings’s successor, does not seek any deficiency judgment against her.


  • Wachovia steps into Fair Finance’s shoes, and there is nothing unfair about this result. See Countrywide Home Loans, Inc., 2007 WI App 243, ¶14, 306 Wis. 2d at 208, 742 N.W.2d at 905 (The “equitable subrogation doctrine [is] one of ‘pure, unmixed equity.’”) (quoted source omitted).


Contrast this ruling with the recent court ruling in Deutsche Bank National Trust Co. v. Boswell, 2011-Ohio-673, 2011 Ohio App. LEXIS 589 (Ohio App. 1st Dist., February 16, 2011), where an Ohio state appeals court refused to apply the doctrine of equitable subrogation to aid a lender out of a jam, holding that a mortgagee was not entitled to the benefits of equitable subrogation where the screw-up in making the loan was due to its own negligence. See also:

In the Wisconsin case, either the lender's negligence was apparently never raised as an issue before the trial court, or it may be that (unlike Ohio law) there is no "negligence exception" to the doctrine of equitable subrogation under Wisconsin law (or if there is, it may not have been applicable to the specific set of facts at issue).

Secured Lender's Negligent Screw-Up When Failing To Pay Off All Existing Real Estate Liens Gives Unpaid Lienholder Priority Over New Mortgage In Ohio

Lexology reports:

  • A recent Ohio appellate holding reinforces last year’s Ohio Supreme Court decision on the negligence exception to the doctrine of equitable subrogation. In Deutsche Bank National Trust Co. v. Boswell, 2011-Ohio-673, 2011 Ohio App. LEXIS 589 (Ohio App. 1st Dist. 2011), the plaintiff bank brought suit seeking foreclosure on defendants’ property. The bank argued that the doctrine of equitable subrogation gave its mortgage priority over a judgment lien recorded two weeks prior to the mortgage. Although not specified in the opinion, the defendants used part of the bank’s mortgage to satisfy other existing liens on the property. The judgment lien holder argued that the doctrine did not apply since the bank’s predecessor in interest (the mortgage company that originated the loan) failed to discover the judgment lien.

  • The doctrine of equitable subrogation operates as an exception to the general rule of “first in time, first in right.” Under the doctrine, a mortgagejumpsother liens in priority if part of its proceeds satisfy higher priority liens on the property.

  • Last year, the Ohio Supreme Court examined the doctrine in ABN Amro Mtge. Group v. Kangah, 126 Ohio St.3d 425, 2010-Ohio-3379, holding that equitable subrogation did not apply to a fact pattern similar to Boswell. The Court held that a mortgagee was not entitled to the benefits of equitable subrogation if it was negligent in failing to discover existing liens prior to executing a mortgage.

  • In Boswell, the First District Court of Appeals found that the plaintiff bank failed to explain why it had not discovered the judgment, a matter of public record, prior to executing and recording its mortgage. As a result, the court granted priority to the judgment lien over the bank’s mortgage.

Source: Recent Ohio decision reinforces negligence exception to doctrine of equitable estoppel (requires subscription; if no subscription, GO HERE, or TRY HERE - then click appropriate link for the story.).

Sunday, March 20, 2011

Unwitting Investors Duped Into Buying Crappy Mortgage Paper Make Gains In Effort To Obtain Documents Proving Bankster Fraud & Enforce Buyback Demands

Reuters reports:

  • U.S. banks may be turning on one another in the legal battle over losses on mortgage-backed bonds. Big pension funds and other investors are demanding compensation from banks that sold them supposedly low-risk mortgage-backed bonds that disintegrated in the housing crisis, a fight that ultimately could cost Wall Street $100 billion or more.

  • One big legal obstacle for investors has been getting documents they say will prove those bonds were anything but low-risk. Demands for documents have to come from the trustees who administer the bonds, and until recently trustees have stayed out of the legal fray.

  • That may be changing. A recent Delaware lawsuit illustrates the increased aggressiveness of trustees in helping investors make their case. An attorney for one trustee, Wells Fargo & Co, spent a year pursuing documents from EMC Mortgage Corp, a unit of JPMorgan Chase & Co.

  • Court documents show EMC, which JPMorgan inherited as part of its shotgun acquisition of Bear Stearns in 2008, faces several other requests from trustees, including Citigroup Inc. The lawsuit is among the first of its kind by a trustee, partly because investors have only recently organized themselves in large enough numbers to force trustees to consider their demands.

For more, see Mortgage bondholders gain key ally in putback fight.

No Boot For Pro Se Homeowner In Convoluted Foreclosure Eviction Case; Woman Claiming BofA Refused To Talk To Her About Payments Granted Jury Trial

In Centreville, Michigan, WOOD-TV Channel 8 reports:

  • The first jury trial in 30 years in an eviction case in St. Joseph County has left home owner Robin Roberts "thrilled." Trials are rare in eviction cases, which usually take a few minutes in front of a judge. But District Judge Jeffrey Middleton Friday agreed to grant her the jury trial as FannieMae tries to evict her from her foreclosed home in Three Rivers.

  • Roberts said the trouble started in 2006 when she put a friend who was living with her on the deed to her house and on a new refinance agreement. Something went wrong. "The paper work was done improperly," she said. It left her on the deed as the owner of the property but left her name off the mortgage note. The lender said the now long-gone roomate was the only person named on the mortgage note.

  • Roberts learned that only after she got behind on her payments and found that Bank of America -- which had taken over the loan from her first mortgage company, Countrywide -- refused to talk to her about saving her home because she was not on the note. "I was willing to pay," Roberts said, "but then they told me I was not an owner and they would have no discussion with me at all."

  • Her house has been foreclosed and sold, and FannieMae, the government-supported mortgage backer, is trying to evict her. She decided to fight in court and asked for a jury trial. In granting the jury trial, Judge Middleton expressed concern that Roberts will be "at a terrible disadvantage" against experienced lawyers. "You need legal representation," he told her, "but you aren't able to get it, through no fault of your own."

  • Roberts said she has tried a list of attorneys. Even Legal Aid refused to take her case, something which Judge Middleton found disappointing. "The reason no attorney will take your case," he said, is "this is a convoluted mess and you don't have any money."

For more, see Rare jury trial in foreclosure eviction (First trial of this nature in 30 years).