Saturday, April 9, 2011

Town Official Loses Elected Position After Copping Mortgage Fraud Plea; Used Elderly Mom As Unwitting Straw Buyer In Effort To Obtain $2M Loan

In St. Paul, Minnesota, the Pioneer Press reports:

  • A White Bear Township board member has lost the seat he has held almost continuously for 36 years after pleading guilty to mortgage fraud and money laundering Monday. Richard A. Sand, 59, has yet to be sentenced but could face up to nearly five years in federal prison.


  • Sand's admission came as part of a plea agreement with federal prosecutors and was made during a hearing in U.S. District Court in Minneapolis. Sand, an attorney, was initially indicted on three counts of mortgage fraud and 11 counts of money laundering. He pleaded guilty to one count each of fraud and laundering.


  • According to prosecutors, Sand, along with Donald W. Krause of Plymouth and Brenda Epperly of Oak Grove, crafted a home-purchase deal on a $1.6 million house in Orono in early 2008. The next day, the home was sold to Sand's mother, Antoinette Sand, now 86, for $2.6 million.
  • The loan application for the sale, totaling $2 million, grossly inflated Antoinette Sand's income and claimed she would bring about $600,000 earnest money to the closing, Sand admitted in court. The Sands had no money to bring to the closing — the $600,000 would come from two $1 million loans the trio secured from Bank of America and already sent to Epperly ahead of the closing.

For the story, see White Bear Township supervisor Richard Sand guilty of mortgage fraud (Longtime board member loses seat, faces nearly five years in federal prison).

Big Apple To Sell 'Bedbug Liens' In Effort To Squeeze Scofflaw Landlords Disregarding Their Obligations Under City's New Critter-Control Rules

In New York City, the New York Post reports:

  • New York City to bedbugs: “We’re biting back.” The City Council and Bloomberg administration officials will announce stepped-up rules [] targeting landlords who neglect bedbug problems in their buildings.
  • Under the new rules — which take effect immediately — building owners must inspect and treat apartments next to, above and below any unit that has bedbugs. They also must notify all tenants when bedbugs have been detected and distribute a plan on eradicating them.
  • Property owners who repeatedly fail to take care of bedbug infestations will be required to get a licensed exterminator to fill out a sworn affidavit indicating the problem has been handled. “We’re sending the message that we’re taking this seriously,” Council Speaker Christine Quinn said. “People are very nervous about bedbugs.”
  • The Department of Health will be empowered to send landlords who ignore bedbugs to the city’s Environmental Control Board, which can issue fines. Presently, only the Department of Housing Preservation and Development can issue violations to landlords for bedbugs.
  • In a last-resort move, the city would sell liens on properties whose owners ignore those fines. City officials will also unveil a Web site — — to arm residents with information on eradicating the pests.

For more, see A crawl to arms in bedbug war.

Another Controversy At Chase Bank; Loan Servicer Given 10 Days To 'Evict' Thousands Of Unwelcome Occupants From Guano-Filled REO It Seeks To Unload

In Tifton, Georgia, The Tifton Gazette reports:

  • An historic house at 316 W. Sixth St. has been found to be severely infested with up to 20,000 bats. Code enforcement officials posted a sign on the door Monday declaring the structure unfit for human habitation or any other use until the bats are cleared.
  • The interior and exterior walls are just full of guano,” said Melissa Skidmore of Tru Tech, an animal removal service from Marietta. “Some of it is old and has turned to dust and it is just a cocktail of pathogens. People going in will need proper equipment to cover their skin, clothes and noses. We are talking about between 10,000 and 20,000 bats.”


  • Skidmore said her company sent Chase Bank, who has possession of the house, a plan Friday on how it will remove the bats and a price to conduct the job. “It is a health hazard to anyone who wants to live in the house,” Skidmore said. “I’ve given the bank 10 days to decide what to do. If they don’t do anything, somebody will have to.”

For more, see Bats invade Tifton house (Up to 20,000 bats could be in historic home).

HOA Locks Out Dozens Of Maintenance-Paying Residents From Pool, Other Association Amenities Due To Several Delinquent Owners

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

  • Nearly 100 condo owners from the Quail Run development in Boynton Beach remain shut out of their pool, clubhouse and other amenities following a Friday hearing before Circuit Court Judge Timothy McCarthy. McCarthy asked for additional information briefs from attorneys representing the community's condo and master associations.

  • They have been at odds over the steps taken against all condo residents because the owners of five or six are in foreclosure and in default of their maintenance dues.

  • The judge said it seemed unfair that all would be punished when the master association still is receiving most residents' payments.


  • A few condo residents with physical impairments — such as Tom Saccomanno, who testified from his wheelchair — testified they needed access to the pool and exercise machines for medical reasons. Saccomanno had polio as a baby, broke his femur a decade ago and had been exercising at the Quail Run pool daily until Feb. 1. He's up to date on his dues to the associations, he said.

  • "My toes are numb from not going into the pool," Saccomanno said. "My numbness wasn't there … all these years, never bothered me."

  • Haas Gallaway, who said he also has been paying his assessments on time, used the pool after having knee-replacement surgery last fall. He's since had to go to the ocean to do some physical therapy work, he said.

  • Dick Cappello, the Quail Run master association's legal liaison, said the master board has no way of knowing who pays and who is in default.

For more, see Quail Run condo owners remain locked out of pool, clubhouse.

Dozens Of Poor Families Face The Boot As Judge Cites Structural, Health Reasons For Tagging Cash-Strapped 'Homeless Hotel' With 'Shut Down' Order

In Colorado Springs, Colorado, KKTV Channel 11 reports:

  • Dozens of families living in the Express Inn could soon be forced back out on the streets if the hotel can't get the funds to make repairs and/or avoid foreclosure. The hotel, [...] became a half-way house of sorts for homeless in the community when the city was at the height of its tent city problem.

  • [Last week], a judge ordered the hotel be shut down, citing structural and health reasons. The hotel is also in the midst of financial turmoil, and the non-profit hoping to purchase the hotel has yet to be able to strike up a deal.

  • Now in the face of being shut down, residents are growing concerned, but also believe a deal can be struck and repairs made before the judge's May 15th vacate deadline. "What we do here is we try to bring people in and help them get back on their feet and provide the care that they need to become self-sufficient" said Matthew Henderson, a resident and an employee. "It's not only my home, it's my livelihood, ya know, I don't have this I don't have nothing".

Source: Half-Way Hotel Facing Judge-Ordered Shut Down (Dozens of families living in the Express Inn could soon be forced back out on the streets if the hotel can't get the funds to make repairs and/or avoid foreclosure).

Tenants Left Scrambling After Alleged Rent Skimming Foreclosed Landlord Pockets Their 'Move-In" Money For Apartments Subject To Eviction Notices

In Bakersfield, California, KERO-TV Channel 23 reports:

  • Renee Fuentez and her family are scrambling to find a new place to live. They moved into an apartment complex on Parker Avenue about two weeks ago, only to find out a week later the complex was in foreclosure. "I asked him if it's for rent and he said, "Yes,"' said Fuentez.

  • The person Fuentez is referring to is the owner of the complex, Tommy Apostolides. Fuentez said he took her deposit and first month's rent, but failed to tell her about the problems facing the apartment complex.

  • "I gave him $1,350 for first month's rent and deposit and then I called the owner and he said I gave everything to the bank," said Fuentez. "So now they are asking us to be out by a certain date, and we don't have the money. He's not giving his deposit back."

  • Candy Rodriguez, who lives in another unit is in a similar situation. "I don't have any where to go," said Rodriguez. Rodriguez said he was living in another complex owned by Apostolides until that complex went into foreclosure.(1)

For more, see Woman Unknowingly Rents Foreclosed Apartment (Renter Found Out Apartment Was Foreclosed A Week After Moving In).

(1) See Staying Home: The Rights of Renters Living in Foreclosed Properties for those tenants left in a bad spot by rent skimming landlords in foreclosure.

Friday, April 8, 2011

Harassed Consumers Fight Back Against Sleazy Bill Collectors; Suits Skyrocket As Growing Army Of 'Contingency Fee' FDCPA Lawyers Target Industry

In Minneapolis, Missesota, the Star Tribune reports:

  • Minneapolis attorney Pete Barry points expectantly at the video screen, drawing the attention of the 16 attorneys in the hotel conference room who've come to learn his trade secrets.
  • On the screen, a debt collector with spiky hair is squirming, his eyes darting back and forth as Barry barrages him with questions. "You see!" Barry yells triumphantly. "He's lying. Collectors often lie. If it's between me and him in front of a jury, I'll win every day."
  • Hounded by collection firms that buy unpaid debts and relentlessly pursue debtors through court judgments, many of Barry's clients have turned to him for relief from what they contend is nothing short of harassment.
  • Yet the legal movement Barry helped create -- by training hundreds of lawyers at grueling, 30-hour boot camps that cost $2,500 per head -- has begun to look more and more like the collections industry he despises. Federal lawsuits by debtors against collectors have soared sevenfold over the past decade, in a mirror image of the huge jump in collections judgments that Barry and others accuse debt collectors of churning out mill-style without regard to accuracy.
  • And while collectors usually win judgments when they go to court, debtors are finding success when they fight back. Debtors win so easily, in fact, that about a third of those who sue do it again, according to WebRecon, a Michigan firm that tracks the litigation.
  • High-volume consumer law firms are churning out lawsuits as efficiently as the collectors they battle. Many of these suits are cookie-cutter complaints that are skimpy on details -- just like many collection actions clogging the nation's court systems.
  • Some debtors, armed with scripts and recorders given to them by attorneys, have goaded collectors into making abusive comments that violate the federal Fair Debt Collection Practices Act, or FDCPA. At least 80 people have sued creditors more than 10 times under the law. On message boards and blogs, debtors brag of gaming a system that is otherwise stacked in favor of lenders.


  • Barry and his client were awarded $275,000 in a legal settlement [in one egregious case]. That's just one of more than 2,000 such cases he has pressed in the past decade. Barry declined to disclose his income, but he works on a contingency basis, meaning he doesn't collect attorneys' fees unless he wins.

For more (a must-read for those looking to slam sleazy collectors), see Debtors in court -- suing collectors (Pete Barry, a Minneapolis attorney, has flown all over the country conducting boot camps for lawyers, teaching them how to sue debt collectors under the federal Fair Debt Collection Practices Act (FDCPA)).

Go here for more on Barry's law firm, Barry & Slade, LLC (We Sue Abusive Debt Collectors™).

Unwitting Homeowner Suspects Monthly House Payments To Escrow Company Are Mysteriously Disappearing, Leaving Her Facing Imminent Foreclosure

In El Paso, Texas, KTSM-TV Channel 9 reports:

  • Last week, an El Paso woman said she's been making mortgage payments through an escrow company, but they haven't been paying the bank. She has just over a week to figure out how to avoid foreclosure.
  • Much has happened since we told you about Yadira Castro's situation. Earlier this month, she got a foreclosure notice, but said she doesn't understand how, if she had been responsibly paying her mortgage through the escrow company that she had used to buy her home.
  • Since the story aired on Tuesday, Castro said the owner of the escrow company contacted her. “She texted me on Friday, saying...for me not to worry about it, that the foreclosure is stopped, that she had already spoke[n] to the mortgage company,” said Castro.
  • But she said she called the foreclosure attorneys and heard something different. “They told call this week to see what's going on, but they haven't told me the foreclosure is stopped or anything like that.” And with the foreclosure date looming, Castro said she's dreading it.
  • I don't want April the 5th to get here because I don't know my reaction, how it's going to be,” said Castro. [...] Meantime, calls to the escrow company [] were not answered.

For the story, see Woman Facing Foreclosure Even Though She's Made Payments.

Go here for the story update.

Dunning The Dead - Putting The Squeeze On Grieving Family Over The Recently-Deceased's Debts

In Minneapolis, Minnesota, the Star Tribune reports:

  • Todd Murray recalls the exact moment when he decided to end his brief career as a debt collections attorney. In late summer of 2008, his boss at the collections law firm of Gurstel Chargo in Golden Valley informed him that he would be going after a particularly hard-to-tap group -- the dead.
  • "I remember thinking, My God, how can anyone actually do this?" said Murray, now a consumer rights attorney. "The whole idea of calling someone still grieving from the loss of a loved one, over some credit card debt, seemed so repulsive to me. I just couldn't do it."
  • Dead men pay no bills, but their grieving families can. Collecting on those debts has become a lucrative specialty in the booming collections industry. Employing tactics developed specifically for persuading the grief-stricken to pay, including the use of sympathy cards and scripted appeals, a select group of collection firms has made this its niche.


  • Consumer advocates argue that the collection efforts rely on guilt or misinformation to get people to pay. The elderly are particularly vulnerable, they argue, often willing to write a check just to make the phone calls stop.

For more, see Death won't stop these debt collectors (A new breed of collector is targeting the still-grieving family members of people who have died without paying their bills).

In a related story, see Paying the debts of a deceased relative: What you should know.

The Continuing Force-Placed Insurance Squeeze

A recent column in The New York Times addresses the problems homeowners face when their mortgage servicers use force-placed insurance to gouge them out of outrageous premiums. Among the abuses reported: threatening homeowners with the imposition of force-placed flood insurance for homes and condos that may not necessarily be located in a flood plain.

For the column, see Insurance Dictated By the Bank.

Some Washington State Homeowners Fall For Pitch Peddling Foreclosure Defense 'Strategy' Asserting 'Sweat Equity' Liens Against Lenders

The Seattle Times reports:

  • Fueled by a strange cocktail of legal theories, some Puget Sound-area homeowners facing foreclosure are slapping their lenders with multimillion-dollar "sweat equity" counterclaims and other measures promoted by shadowy consultants.
  • But the maneuvers may only deepen the financial and legal difficulties of struggling borrowers. "No reason to waste the money," said a former Monroe homeowner named Jeff, who paid $4,000 to a firm claiming it could avert foreclosure of the home on which he owed about $650,000. His "sweat equity" claim that the lender owed him $2.62 million "actually did no good," said Jeff, who discussed his financial problems on condition his last name not be used. "I don't think it postponed (the foreclosure) a single day."
  • The latest rash of such filings originates with a firm called Equitas Solutions, whose website lists a post-office box in Lakewood, Pierce County, but no phone number and no working email.
  • At least a dozen local homeowners in recent months have staked out large "sweat equity" claims, all seemingly working from the same Equitas script: First they record a Uniform Commercial Code (UCC) filing with the state Department of Licensing, then a so-called "lis pendens" document with the county recorder's office asserting that litigation on the property is pending.
  • The documents are peppered with quaint, quasilegalistic phrases, in one spot demanding payment be made "in lawful money of the United States, a dollar being described in the 1792 US Coinage Act as 371.25 grains of fine silver, or the equivalent of gold, notes or other instruments acceptable to claimant."
  • Several Equitas clients followed up their UCC claims with lawsuits in federal court, acting as their own lawyers. Using virtually identical language, they've filed voluminous documents that, among other things, challenge the constitutionality of the state law allowing lenders to foreclose on deeds of trust without going to court.

For more, see Borrowers facing foreclosure try dubious 'sweat equity' claims.

Deficiency Judgments After Foreclosure Not A Hollow Threat, Say Foreclosure Defense Attorneys, Mortgage Industry Experts

The Palm Beach Post reports:

  • He once lived just steps from the ocean in a home valued last decade at more than $500,000. But John Ericksen has fallen - far - and the bank that took away his Juno Beach home last year isn't done with him yet.

  • In November, Riverside National Bank won a $151,461 claim against the down-and-out handyman who now resides in a one-bedroom trailer in Riviera Beach's scruffy Ocean Tide mobile home park.

  • Called a "deficiency judgment," the claim is what Ericksen, 59, still owes on the loan for a home he's already lost. "They are actually trying to get money from me?" said a surprised Ericksen when contacted by The Palm Beach Post. "Good luck with that one. I'm pretty much out."

  • In Florida, banks have five years to file for a deficiency judgment and up to 20 years to collect. But nearly six years into the state's foreclosure onslaught and with more than 100,000 foreclosures filed in Palm Beach County since the real estate bust, the number of deficiency claims sought by the banks is minuscule.

  • A review of thousands of Palm Beach County court records by The Palm Beach Post found just 133 deficiency claims filed between April 2006 and November 2010 on foreclosed residential properties. They were made by 88 servicers or lenders, with 68 resulting in a judge granting the right to pursue the deficiency. Most of the lenders that have obtained deficiency judgments in Palm Beach County are small community banks.

  • Foreclosure defense attorneys and mortgage industry experts say that despite the lack of claims, the deficiency judgment is not a hollow threat. Banks are just too overwhelmed right now processing the foreclosures to switch gears and pursue the money they've been shorted.
For more, see Foreclosures' hidden risk: Debt that haunts for two decades.

In a related story, see St. Petersburg Times: Deficiency judgments let creditors haunt borrowers for up to 20 years.

Thursday, April 7, 2011

Insurance Underwriter Tags Agent With Lawsuit Over Blown Title Search In Home Refinance; Seeks $136K+ For Failure To Discover 2nd Mortgage Lien

In Madison, Wisconsin, The Madison Record reports:

  • A Madison County title company is suing one of its contractors for allegedly failing to fulfill its agreement. First American Title Insurance Company and its subsidiary, United General Title Insurance Company, filed the lawsuit March 18 in Madison County Circuit Court against Nations Title Agency of Missouri Inc.
  • According to the complaint, Nations Title had an agreement with United General to obtain applications for title insurance and complete examinations of those real estate titles, among other duties. United General also claims the contract would protect them from any loss due to errors on the part of Nations Title.
  • In September 2005, Maurice and Diane Heidel allegedly refinanced their New Baden property through Homestead Mortgage for nearly $100,000. United General says Nations Title issued a title commitment for that loan without doing a proper title search of the property.
  • After the Heidels entered into foreclosure on the Clinton County property, a previous mortgage of more that $63,000 was allegedly discovered.
  • Since that original mortgage was not paid at the Heidels' refinancing closing, a lien remained on the property, leaving United General liable for the amount due. First American Title says it settled the claim with the bank in May 2009 and asked Nations Title to reimburse them for the payment, which the company allegedly refused to do.
  • First American and United General accuse Nations Title of breach of contract and ask to be awarded more than $136,000 plus interest and court costs.

Source: Title company sued for not discovering second mortgage.

Florida Lawmaker Tries Again In Effort To Curb Use Of 'Adverse Possession' Claims In Home-Snatching Rackets Targeting Vacant Houses

In Tallahassee, Florida, WBBH-TV Channel 2 reports:

  • For at least two years, Sen. Paula Dockery, R-Lakeland, has tried to make it more difficult for people to take possession of land or homes that they don't own. An unusual state law that has roots back to the 1800s allows someone to pay property taxes on homes or land they don't own. If after seven years there is no protest from the owner, the squatter can get the title to the property by filing an "adverse possession" claim.
  • It was intended to encourage the development of blighted or abandoned property that is not generating tax income. But in recent years this little-known state law has been abused due to the proliferation of vacant homes from the collapse of the Florida housing market.
  • Companies have sprung up that scout for vacant or abandoned homes and file adverse possession claims, renting them out and making a profit. The homeowner often isn't aware, and in more than one instance, a Realtor or family member is shocked to discover the property takeover. They find that the home's locks have been changed.
  • Law enforcement officials have been called in to sort out the confusion, and in several cases, have made arrests for fraud. Polk County, where Dockery lives, has been besieged with more than 800 of these claims, but it's a statewide problem.
  • "It is happening all across the state and it is becoming more and more of an issue," said Marsha Faux, president of the Florida Association of Property Appraisers and the Polk County Property Appraiser.
  • The proposal to make it more difficult to file adverse possession claims has struggled to gain approval from the Legislature. Last year it passed the Florida Senate but stalled in the House of Representatives. This year, the bill's prognosis looks promising. The measure (SB 1142, HB 927) is up in the Senate Budget Committee Thursday and has passed one House committee. "We are just trying to update an archaic law," Dockery said.

For more, see Bill would stamp out squatters' claims.

Outfit Peddling Loan Principal Reduction Services Settles Civil Charges With Arizona AG

From the Office of the Arizona Attorney General:

  • Attorney General Tom Horne [] announced a settlement agreement with Scottsdale based Principal Reduction Group, LLC, and Brian Cutright, owner and operations manager of Principal Reduction Group, LLC.
  • Pursuant to the settlement agreement, Principal Reduction Group and Brian Cutright agree to no longer engage in any activity, directly or on behalf of any third party, that involves originating, closing, or modifying any term of a consumer’s mortgage loan, or obtaining a reduction on a consumer’s debt, of any kind, while in the State of Arizona or on behalf of any Arizona consumer. [...] Additionally, the settlement agreement provides for full restitution to the consumers who filed complaints with this office; on average, those consumers paid $5,500 each for principal reduction services from the Defendants.
  • Finally, the settlement agreement requires the Defendants to pay $25,000 as civil penalties and $5,000 for attorneys costs and fees. The Attorney General shall deposit the funds into the consumer protection-consumer fraud revolving fund. This settlement agreement is pursuant to a consent judgment currently awaiting court approval.

For the Arizona AG press release, see Attorney General Tom Horne Announces Settlement Agreement With Principal Reduction Group, LLC.

Convicted Loan Modification Scammer Cops Another Plea In Neighboring County; Judge Puts $10K Jail Sentence 'Buy-Out' Deal On Table

In Washtenaw County, Michigan, reports:

  • A Grosse Pointe man was convicted [last] week of bilking three Saline women who turned to him for help to avoid foreclosure. Bryan Crevier, 50, pleaded guilty to three counts of fraud by false pretenses and avoided a jury trial scheduled to start Monday, Washtenaw County court records show. Prosecutors will dismiss three counts of larceny by conversion between $1,000 and $20,000 at sentencing May 11.
  • Authorities charged Crevier last spring after a lengthy investigation by Saline police showed he took nearly $10,000 from the three women who were in financial hardship and wanted to refinance their homes. He presented himself as a mortgage modification consultant but never submitted the victim’s payments or paperwork to lenders.
  • Under a sentencing agreement with Circuit Judge Archie Brown, Crevier must repay at least half the full amount he took from the women in 2008, or he faces 60 days in jail, records show.
  • The entire amount of restitution, which has not been determined yet, must be paid within two years or he faces another 60 days incarceration.
  • Court officials said Crevier submitted checks of $1,000 to each victim at the plea hearing to avoid jail immediately. He remains free pending sentencing.
  • Crevier is currently on probation for running a similar scam in Macomb County. He was sentenced to one year probation last fall on two counts of fraud by false pretenses, prison records show. He must also meet a dozen conditions, including repayment to those victims and not leaving the state without the court’s permission.

Source: Man pleads guilty to bilking Saline women he promised to help avoid foreclosure.

Fight Within The Fight In NYC Homeowners' Lawsuit Brought To Undo Damage Caused By Sale Leaseback, Equity Stripping Ripoff

A recent ruling by a New York City trial court on a motion to dismiss in ongoing litigation provides an illustration of the kind of 'sub-battles' that can potentially occur when defendants named in a lawsuit brought by a screwed-over homeowner in a sale leaseback equity stripping ripoff(1) start fighting against each other.

The ruling did not address any of the merits of the homeowners' case, but rather, addressed the viability of certain crossclaims asserted by the bank who funded the ripoff (on behalf of the sale leaseback peddler) against the homeowners' attorney, both of whom were named as defendants by the homeowners in their lawsuit.

Frankly, the ruling doesn't make for interesting reading unless, of course, you're really into this stuff.

For the ruling, see Richards v. Cesare, 2011 NY Slip Op 30207 (NYS Supreme Court, New York County, January 19, 2011).

(1) Go here for the homeowners' lawsuit, which seeks to recharacterize the sale leaseback agreement as an equitable mortgage, and asserts violations of the Federal Truth in Lending Act, Home Ownership Equity Protection Act, Real Estate Settlement Procedures Act, Federal Racketeer Influenced and Corrupt Organizations Act (RICO), New York Real Property Law $265-a (ie. the Home Equity Theft Protection Act), New York State General Business Law Sec. 349 (“the Deceptive Practices Act”), Breach of Contract, Breach of Fiduciary Duty and Professional Malpractice, common law claims of Fraud, Civil Conspiracy to Commit Fraud, Aiding and Abetting Fraud, Conversion, Negligence, and Quiet Title to the subject property by having declared as void the fraudulent deed transfer.

Go here for links to the filed answers to the complaint and some other documents filed in this case.

Representing the homeowner is City Bar Justice Center, a nonprofit 501(c)(3) affiliate of the New York City Bar Association, which seeks to promote the providing of pro bono legal services to low income clients.

Wednesday, April 6, 2011

Orange County DA Charges Five In Alleged "Shared Equity" Foreclosure Rescue Scam That Led To Loss Of Homes For 16 Financially Strapped Families

In Orange County, California, the Rancho Santa Margarita Patch reports:

  • A Coto de Caza man and a Rancho Santa Margarita woman are among the five people implicated in a real estate scheme in which they allegedly defrauded banks and homebuyers of more than $8 million and cost 16 families their homes.
  • William David Robin, 53, and Agida Jamil, 52, will be arraigned next week. Robin will be arraigned April 7 at 8:30 a.m. at the Central Justice Center in Santa Ana. Jamil will be arraigned April 4.
  • Authorities consider Robin the mastermind behind the scheme that began in 2006. He faces a maximum term of 12 years eight months in prison and is currently free on $500,000 bail. Jamil is free on $50,000 bail. Two others, Christopher Allen Taylor, 38, of Riverside and Richard Cadieu, 73, of Laguna Woods, will be arraigned Friday at 9 a.m. Zane Rogers, 49, of Paso Robles, will be arraigned April 7 along with Robin.
  • According to the Orange County district attorney's office, Robin—owner of Pacific Vantage in Rancho Santa Margarita—along with Jamil and Taylor in 2006 began advertising and marketing ashared-equity program” for the purchase of homes in Southern California.
  • They are accused of instructing buyers to pay half the mortgage to Pacific Vantage while Pacific Vantage paid the full amount to the mortgage lending institution; after two or three years, the buyer had the option to buy out Pacific Vantage or sell the house and split the profit.
  • After making several payments to the lender as part of the “shared-equity program” agreement, the district attorney alleges that Pacific Vantage ceased payment to the lender on all 16 properties in 2007 while the homebuyers continued to send their monthly mortgage payments to Pacific Vantage.
  • All 16 homebuyers lost their homes to foreclosure.
  • Each of the five defendants is charged with one felony count each of conspiracy to commit grand theft and conspiracy to make false financial statements with sentencing enhancements and allegations for property loss over $3.2 million, property loss over $1.3 million, aggravated white collar crime over $500,000, property loss over $200,000, aggravated white collar crime over $100,000, property loss over $100,000 and property loss over $65,000.

For more, see Scheme Bilked Millions, Cost 16 Families Their Homes (William David Robin of Coto de Caza is accused of masterminding a scheme to defraud banks and steal from homebuyers—all of whom lost their homes to foreclosure).

Disgraced Ex-Real Estate Agent Bagged In Texas; Brought Back To Pennsylvania To Face Charges In 35 Sale Leaseback, Equity Stripping Ripoffs

In Harrisburg, Pennsylvania, The York Dispatch reports:

  • A former East Berlin real estate agent allegedly defrauded mortgage lenders, homeowners and investors out of $2.7 million. Joanne M. Seeley, 40, now of Tolar, Texas, is free on supervised bail while awaiting trial in federal court, tentatively set for May 2, according to the U.S. Attorney's Office in Harrisburg.
  • She was arraigned Tuesday in federal court on the 10-count indictment, according to assistant U.S. attorney Kim Douglas Daniel. Seeley is charged with five counts each of wire fraud and making unlawful monetary transactions.
  • Between 2006 and 2008, Seeley owned and operated the East Berlin-based business S&D Property Solutions. She was a licensed real estate agent until November 2006, when she surrendered her license in lieu of disciplinary action, according to a news release from the U.S. Attorney's Office.
  • The indictment against her alleges Seeley used false real estate contracts, inflated property appraisals, bogus employment verifications and fictional leases to defraud people and companies out of money. The alleged crimes happened in York, Adams, Cumberland and Dauphin counties, officials said.
  • The allegations: Seeley would find homes listed for sheriff's sale and tell the homeowners they could avoid foreclosure by selling their homes to her or her buyers, who would then lease the properties back to the homeowners after the sale, the indictment alleges.
  • Seeley assured homeowners this would allow them to pay off debts, rebuild their credit ratings and allow them to qualify for new mortgages when they bought back their homes a year or so later, according to the news release.


  • The defrauded homeowners were never able to buy back their homes, the U.S. Attorney's Office said.

For the story, see Feds charge former East Berlin woman in $2.7M real estate scam.

See also, WHTM-TV Channel 27: Former East Berlin real estate agent charged in $2.7 fraud case (A former East Berlin real estate agent has been charged with defrauding 14 mortgage lenders, 35 home owners and five investors in Cumberland, Dauphin, York and Adams counties out of $2.7 million, according to federal prosecutors).

For the U.S. Attorney (Harrisburg, Pennsylvania) press release, see Former Operator Of York County Real Estate Firm Charged With $2.7 Million Mortgage Fraud Scheme.

Michigan Duo Pinched With 'False Pretenses' Charge In Alleged Sale Leaseback, Foreclosure Rescue Scam

In Lansing Township, Michigan, the Lansing State Journal reports:

  • Two Lansing-area women have been charged in connection with a foreclosure-rescue fraud. Joella Jean Britton, 37, of Eagle, and Nicole Lee Otis, 35, of Lansing were each recently charged with one count of false pretenses for their involvement in a scam that resulted in a Lansing Township couple being evicted from their home, according to a statement from Michigan Attorney General Bill Schuette.
  • The homeowners went into default on their mortgage in 2005 and were at risk of going into foreclosure. Later that year, Schuette alleges Britton coordinated a deal in which Otis would purchase the home and later sell it back to the homeowners on a land contract.
  • The homeowners gave part of the sale proceeds back to Otis for the $20,000 down payment, according to Schuette. The homeowners made payments under the land contract, but Otis stopped paying the mortgage and the home fell into foreclosure.
  • Lansing Township police investigated the case after the homeowners filed a complaint in 2007. Otis was arrested last week, and Britton is expected to turn herself in this week. They're expected to be arraigned later this week. If convicted of the felony, they face up to 10 years in prison.

Source: Two Lansing-area women charged in foreclosure-rescue scam.

Sacramento DA: Trio Clipped 16 Vulnerable Homeowners In Illegal Loan Modification Ripoff; Attorney Also Accused Of $60K Client Trust Fund Heist

In Sacramento County, California, the Fair Oaks Patch reports:

  • Arrest warrants were issued Wednesday for three men accused of preying on more than a dozen vulnerable borrowers facing foreclosure or unaffordable mortgage payments, including those in Fair Oaks and Carmichael.
  • From November 2009 to about June 2010, the Sacramento County District Attorney’s Office says the loan modification business run by Ashik Azeez, 49, Frank Joseph Ferris, 69, and Vicente Jose Perez, 49, all of Sacramento, performed unlicensed loan modification activities, improperly collected advance service fees, and failed to notify clients that paying a loan modification through a third party was unnecessary.


  • The warrant request outlined 16 separate instances in which people were charged upfront for loan modification costs or otherwise swindled, including many that occurred after the company was issued a cease and desist order this past October.


  • Ferris is also implicated in a separate matter in which he [allegedly] misappropriated $60,000 in client funds while a licensed attorney.

For more, see Fair Oaks Couple Lost Home In Loan Modification Swindle (Arrest warrants issued for employees of Turbo Mortgage Modification).

Brooklyn DA's Real Estate Crime Unit Pinches 18 Suspects In Various Realty-Related Rackets

In Brooklyn, New York, the New York Post reports:

  • Real-estate crime is so prevalent in Brooklyn, even a former city councilman was duped, the Brooklyn district attorney said yesterday. The Mortgage Fraud and Real Estate Crimes Unit has recently locked up 18 people on a variety of scams including reverse mortgage schemes that prey on the elderly and loan-modification swindles like the one that duped former Councilman Kendall Stewart, DA Charles Hynes said.
  • In three loan-modification cases, including Stewart's, scammers posing as financial-services specialists solicited up-front fees -- which are prohibited -- to process loan modifications to stave off foreclosures.
  • In one brazen case of attempted fraud, Hynes said, a man named Ralph Baker "had the gall, or, as we say in Brooklyn, the chutzpah" to pester the DA's office to help recover a $1.7 million brownstone that he claimed had been stolen from him. The only problem was that the home belonged to a different Ralph Baker, Hynes said.
  • The unit was set up two years ago after Sen. Charles Schumer, who was at yesterday's announcement, arranged an $875,000 federal grant, Hynes said.

Source: Brooklyn is scamville.

Cattle Call Of 9,000 Wayward Lawsuits Abandoned By Dethroned Foreclosure Mill King Set For Hearing & Possible Dismissal In Palm Beach County

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

  • Palm Beach County courts will sort through nearly 9,000 wayward foreclosures in a cattle call of cases from the collapsed Law Offices of David J. Stern. Chief Judge Peter Blanc ordered hearings for pending Stern foreclosures that the firm has said it no longer has the manpower to withdraw from as counsel of record.
  • For homeowners, a Friday letter from Blanc to Stern outlining the procedures for case management conferences could mean a dismissal if no one from the bank's side attends the hearing. The bank could re-file the foreclosure, but it would likely cause a delay of months or even a year considering the recent slowdown in new filings.
  • Stern told judges in a March 4 letter that he was shutting down his foreclosure business at the end of the month, leaving as many as 100,000 cases statewide in limbo. Blanc asked Stern in his response to reconsider the "unilateral decision to cease representation" of the cases because it is not an approved or recognized way for an attorney to quit a case.


  • The chief judges in both [Miam-Dade and Broward] counties agree that Stern's letter is not a legal way to withdraw from cases. Linda Kelly Kearson, general counsel for the Miami-Dade courts, wrote in her response to Stern that a withdrawal from an estimated 20,000 cases could not occur with the "submission of a 575-page list of case numbers to the chief judge." Stern's attempt "does not comply with the Florida Rules of Civil Procedure and is thus, unacceptable," she wrote.
  • Stern lost most of his foreclosure business in the fall following allegations of mishandled and possibly fraudulent paperwork. The transfer of cases to new attorneys has been difficult, especially considering the firm has since laid off much of its staff.

For more, see South Florida law firm's demise puts 9,000 foreclosures in limbo.

Multiple Issues Addressed By Recent Ruling On Defendants' Motions To Dismiss Filed In Sale Leaseback, Equity Stripping Litigation

A U.S. District Court in Maryland recently issued a ruling addressing motions to dismiss filed by multiple defendants relating to a slew of charges brought in a civil RICO case filed by the victim of a sale leaseback, equity stripping racket.

In his lawsuit, the victim alleged fraud and civil conspiracy to commit fraud, violations of the District of Columbia Home Equity Protection Act, District of Columbia Consumer Protection Procedures Act, violation of the Federal Racketeer Influenced and Corrupt Organizations Act, unjust enrichment; breach of contract, rescission, unconscionability, failure of consideration, declaratory judgment/quiet title.

The named defendants in the lawsuit were the sale leaseback peddlers, straw buyers, closing agent, and the banks who funded the scam.

For the reasons set forth in a rather exhaustive (and exhausting) ruling (which may make for interesting reading for attorneys that are involved in litigation efforts to undo these rackets), the court granted in part, and denied in part, the motions to dismiss filed by the various defendants.

For the ruling, see Day v. DB Capital Group, LLC, No. DKC 10-1658 (D. Md., March 11, 2011).

Court Dismisses Bank From NJ Sale Leaseback Equity Stripping Victim's Lawsuit Based On Pleading Defect; Gives Homeowner Chance To Amend Complaint

In a lawsuit filed by by a homeowner of a foreclosure rescue, equity stripping ripoff, a U.S. District Court in New Jersey dismissed, on procedural grounds and without prejudice, the claims made against Cornerstone Bank, the financial institution who (apparently unwitting) funded the alleged ripoff orchestrated by a sale leaseback peddler.

The underlying basis for the homeowner's claims was that sale-leaseback was a disguised financing transaction that should be recharacterized as an equitable mortgage.(1) According to the court:

  • Although, applying the Johnson v. Novastar Mortgage, Inc. test, it appears Plaintiff has pled sufficient facts to assert the sale-leaseback arrangement was an equitable mortgage, the Complaint is void of any facts alleging the role and involvement of Defendant Cornerstone in the transaction.

    As noted by Defendant Cornerstone, Plaintiff's Complaint makes "vague references to a `loan'", but never avers the parties to the loan or who financed the loan. (Doc. 19, Def. Br. 9). Plaintiff's sole allegation concerning why the Court should impose an equitable mortgage is that Defendant Cornerstone "was on notice by its own HUD1 and other documents accompanying the transaction" that it funded a foreclosure rescue transaction. (Doc. 1, Compl. ¶ 63).

    This sole allegation for Defendant Cornerstone's liability fails to meet the Twombly/Iqbal threshold standard for pleading. It is a bald legal conclusion unsupported by averments in the Complaint. [...] The Court will grant Plaintiff leave to, within thirty days of entry of the Order accompanying this Opinion, file an Amended Complaint to cure the pleading defects relating to Defendant Cornerstone.

An important reminder to those looking to undo sale-leaseback, equity stripping scams in New Jersey, is that, no matter how unwitting the lender may have been when funding this ripoff, the the general rule in New Jersey is that possession of real estate by the occupant thereof which is actual, open and visible, inconsistent with the title of the apparent owner [ie. the sale-leaseback peddler] by the record is constructive notice to all the world of the rights of the party in possession, and that this rule applies, not only to would-be buyers, but also applies to a person proposing to take a mortgage on the property.(2)

When looking to attack the mortgagee's interest held by a lender who funds these deals (unwittingly or otherwise), it is important to assert that, in addition to any other evidence that the bank was on notice, it was placed on constructive notice of the ripoff by reason of the victimized homeowner's continued occupancy of the premises where such occupany is actual, open and visible, and allow the judge to decide whether or not this principle applies to the facts of the case.

For the court ruling, see Davidson v. Cornerstone Bank, No. 10-2825 (D.N.J. February 16, 2011).

(1) The court briefly described what is meant by an 'equitable mortgage' in the following excerpt (bold text is my emphasis):
  • An equitable mortgage is a judicially created doctrine that arises when "a deed or contract, lacking the characteristics of a common law mortgage, is used for the purpose of pledging real property, or some interest therein, as security for a debt or obligation, and with the intention that it shall have effect as a mortgage, equity will give effect to the intention of the parties." Bank of New York v. Patel, No. F-3482-05, 2006 WL 337074, at * 2 (N.J. Super. Ct. Ch. Div. 2006) (quoting J.W. Pierson Co. v. Freeman, 113 N.J. Eq. 268, 271 (E & A 1933)).

    Among other circumstances, courts have imposed an equitable mortgage when the plaintiff, to avoid foreclosure, enters into a sale-leaseback agreement with a defendant. Johnson v. Novastar Mortg., Inc., 698 F. Supp.2d 463, 469-470 (D.N.J. 2010); see In re PCH Assocs., 949 F.2d 585, 600 (2nd Cir. 1991) (treating a sale-leaseback as an equitable mortgage). To determine whether a transaction constitutes a sale-leaseback arrangement, and consequently an equitable mortgage, Courts in this district apply a multi-factor test.[10] Johnson, 698 F. Supp.2d at 469-470. The determination of whether the parties' interactions created an equitable mortgage is not limited to the existence of an express contract. Id. at 470-71. An equitable mortgage may arise between parties that did not have any direct interactions. Id.

(2) See generally, Clawans v. Ordway Bldg. & Loan Ass'n, 112 N.J. Eq. 280; 164 A. 267 (E & A 1933) (bold text is my emphasis):

  • In Wood v. Price, 79 N.J. Eq. 620, 81 A. 983, Mr. Justice Voorhees said (at p. 624): "All authorities are agreed that the general rule is that possession of real estate which is actual, open and visible occupation, inconsistent with the title of the apparent owner by the record and not equivocal, occasional or for a temporary or special purpose, is constructive notice to all the world of the rights of the party in possession."

    The testimony relating to the complainant's possession, accepted by the trial court as true, was, we think, sufficient to bring that possession within the application of the rule thus stated. It was held by this court in La Combe v. Headley, 91 N.J. Eq. 63, 108 A. 185, opinion by the chief-justice, that: "It is the duty of an intending purchaser of land which is in the possession of a person other than the intending grantor to inquire of the occupant and ascertain the rights under which he holds; and if he does not make such inquiry, he is chargeable with notice of such facts as the inquiry, if it had been in fact made, would have revealed."

    The efficacy of notice by actual possession applies to a person proposing to take a mortgage on the property. Phelan v. Brady, 119 N.Y. 587, 23 N.E. 1109; Chicago and A. R. Co. v. Kelly, 182 Ill. 267; 54 N.E. 979. The inquiry required to be made of the occupant must, of course, be made with due diligence; and it was not so made in the instant case. Indeed the visitation of the defendant's representatives at the premises seems to have been directed towards the physical condition of the property and not at all towards the character or significance of the occupancy.

For more on this point, see New Jersey Bona Fide Purchaser, Possession, Duty To Inquire.

See also, Faulty Service Of Process In Tax Foreclosure, Failure To Investigate Rights Of Persons In Possession Leaves Unwitting Buyer Empty Handed.

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

For two recent cases from other states in which the scam-funding lender of the sale leaseback deal was found to have constructive notice of the ripoff as a result of the homeowner's continued open possession of the subject home, see:

Tuesday, April 5, 2011

CBS' "60 Minutes On Foreclosure Fraud

The Wall Street Journal's Deal Journal blog reports:

  • 60 Minutes” [Sunday] night weighed in with a thoughtful segment on the mortgage mess involving faulty or fraudulent mortgage paperwork. (Deal Journal readers previously have dubbed this the “Fauxclosure Crisis.”)
  • The news magazine program went in search of “Linda Green,” a woman in rural Georgia whose signature was on thousands on mortgage documents as a vice president of more than 20 banks — at the same time. Linda Green told “60 Minutes” she had never been a bank vice president, but was dubbed one by an alleged mortgage sweatshop because her name was short and easy to spell.
  • (Other news outlets, including the Washington Post, previously have dug into the many people who claimed to be “Linda Green” on foreclosure affidavits.)
  • Click HERE to watch the “60 Minutes” segment.

Source: Watch ’60 Minutes’ Take On Foreclosure Crisis.

Florida Judges Beginning To See The Light In Foreclosure Actions?

The Palm Beach Post reports:

  • Angry and exasperated by faulty foreclosure documents, judges throughout Florida are hitting back by increasingly dismissing cases and boldly accusing lawyers of "fraud upon the court."
  • A Palm Beach Post review of cases in state and appellate courts found judges are routinely dismissing cases for questionable paperwork.(1) Although in most cases the bank is allowed to refile the case with the appropriate documents, in a growing number of cases judges are awarding homeowners their homes free and clear after finding fraud upon the court.
  • Still, critics say judges are not doing enough. "The judges are the gatekeepers to jurisprudence, to the Florida Constitution, to access to the courts and to due process," said attorney Chip Parker, a Jacksonville foreclosure defense attorney who was recently investigated by the Florida Bar for his critical comments about so-called "rocket dockets" during an interview with CNN.(2) "It's discouraging when it appears as if there is an exception being made for foreclosure cases."
  • In February, Miami-Dade County Circuit Judge Maxine Cohen Lando took one of the largest foreclosure law firms in the state to task in a public hearing meant to send a message.(3) She called Marc A. Ben-Ezra, founding partner of Ben-Ezra & Katz P.A., before her to explain discrepancies in a case handled by an attorney in his Fort Lauderdale-based firm.
  • "This case should have never been filed," said Lando, who referred to the firm's work on the case as "shoddy" and "grossly incompetent." She called Ben-Ezra a "robot" who filed whatever the banks sent him, and held him in contempt of court.
  • She then gave the homeowner the home - free and clear - and barred the lender from refiling the foreclosure. Attorney Maria Mussari, who represents the homeowner, said she wasn't surprised. "She has become a voice for other judges,"(4) Mussari said. "If judges crack down on following the rules, we'll still have foreclosures, but maybe the banks will pay attention and do it right."
  • Mussari said it's taken a while for the courts to wake up to the foreclosure disorder because homeowners were largely unrepresented and judges overwhelmed. "It's not that they don't care," she said. "They have thousands of cases on their docket and it's the same thing over and over again."

For more, see Foreclosure crisis: Fed-up judges crack down disorder in the courts.

(1) See, for example, these Palm Beach Post resources:

(2) See also, Approved "Sandbagging" Of Homeowners At Court Hearings, Banks Filing Incomplete Affidavits Reflect Disregard For Procedure By Some F'closure Judges.

(3) See, Hearing Transcript, Central Mortgage Co. v. Gonzalez Del Real.

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

Sloppy Securitization Sinks Foreclosure In AL Case; Judge "Surprised To The Point Of Astonishment" At Bank's Failure To Comply w/ Terms Of Its Own PSA

AOL's DailyFinance reports:

  • On March 30, an Alabama judge issued a short, conclusory order that stopped foreclosure on the home of a beleaguered family, and also prevents the same bank in the case from trying to foreclose against that couple, ever again.
  • This may not seem like big news -- but upon review of the underlying documents, the extraordinarily important nature of the decision and the case becomes obvious.

    No Securitization, No Foreclosure

  • The couple involved, the Horaces, took out a predatory mortgage with Encore Credit Corp in November, 2005. Apparently Encore sold their loan to EMC Mortgage Corp, who then tried to securitize it in a Bear Stearns deal. If the securitization had been done properly, in February 2006 the trust created to hold the loans would have acquired the Horace loan.
  • Once the Horaces defaulted, as they did in 2007, the trustee would have been able to foreclose on the Horaces. And that's why this case is so big: the judge found the securitization of the Horace loan wasn't done properly, so the trustee -- LaSalle National Bank Association, now part of Bank of America -- couldn't foreclose.
  • In making that decision, the judge is the first to really address the issue, head-on: If a screwed-up securitization process meant a loan never got securitized, can a bank foreclose under the state versions of the Uniform Commercial Code anyway?

  • This judge says no, finding that since the securitization was busted, the trust didn't have the right to foreclose, period. Since the judge's order(1) doesn't explain, how should people understand his decision? Luckily, the underlying documents make the judge's decision obvious.

For more, see Court: Busted Securitization Prevents Foreclosure.

See also:

For the homeowner's summary judgment filings, see:

(1) In his order, Russell County Circuit Judge Albert L. Johnson zings the bank with this gem:

  • "[T]he Court is surprised to the point of astonishment that the defendant trust (LaSalle Bank National Association) did not comply with the terms of its own Pooling and Servicing Agreement and further did not comply with New York Law in attempting to obtain assignment of plaintiff's Horace's note and mortgage."

For 20 reasons you need to request through formal discovery in any mortgage-related lawsuit the Pooling and Servicing Agreement and why it is relevant, see Max Gardner’s Top Reasons for Wanting a Pooling & Servicing Agreement.

For more on the problems that foreclosing lenders have reason to fear in connection with PSA screw-ups, see The Alphabet Problem and the Pooling and Servicing Agreement.

See Finding Investor Restrictions on Loan Modifications for some guidance on locating pooling and servicing agreements.

California Appeals Court Ruling Highlights Distinction Between Void & Voidable In Foreclosure Sale

A 2000 ruling of a California appeals court addresses the significance in making the distinction between a deed that is absolutely void, and one that is merely voidable.

The case involved a foreclosure/trustee's sale of real estate owned by one, Dimock. At some point before the sale, the lender recorded a substitution of trustee which substituted Calmco Trustee Services, Inc. as the trustee of record in the place of Commonwealth Trust Deed Services, Inc., the original trustee. This substitution was ostensibly made in error, however, no one bothered to record any document which expressly abandoned or otherwise vacated the Calmco substitution. Commonwealth then carried out the foreclosure sale.

In reversing a lower court ruling, the California appeals court found that the trustee's deed issued by Commonwealth was absolutely void (ie. wholly void, void ab initio) as opposed to being merely voidable because, based on the recorded documents, it had no authority to conduct the sale. It ruled that Calmco had the sole power to convey the property.

An excerpt from the ruling:

  • As Dimock points out, because Commonwealth had no power to convey his property its deed to Emerald was void as opposed to merely voidable. That is, the Commonwealth deed was a complete nullity with no force or effect as opposed to one which may be set aside but only through the intervention of equity. (See Little v. CFS Service Corp. (1987) 188 Cal.App.3d 1354, 1358-1359 [233 Cal.Rptr. 923].)


  • The more fundamental difficulty we have with the defendants' contention that the Commonwealth deed was only voidable and not void, is that the particular circumstances which have permitted other courts to save defective foreclosure sales as voidable rather than void, do not exist here. In Little v. CFS Service Corp., supra, 188 Cal.App.3d at pages 1358-1359, the court reviewed the California cases which considered whether defects in notice made a foreclosure sale void or voidable. The court found: "Although the extent of the defect is not determinative, what seems to be determinative is the existence and effect of a conclusive presumption of regularity of the sale. A deed of trust, which binds the trustor, may direct the trustee to include in the deed to the property recitals that notice was given as required under the deed of trust and state that such recitals shall be conclusive proof of the truthfulness and regularity thereof." (Id. at p. 1359.)

  • Where no such recitals as to the regularity of a sale appear in a deed and there was a defect in the notice to the trustor, the deed has been found void. (Ibid.) Where such recitals appear on the face of a deed but the deed also sets forth facts which are inconsistent with the recital of regularity, the deed has been found void on the basis that the deed showed that the recitals were not valid. (Ibid., citing Holland v. Pendleton Mtge. Co. (1943) 61 Cal.App.2d 570, 576-577 [143 P.2d 493].)

For the ruling, see Dimock v. Emerald Properties (2000) 81 Cal.App.4th 868 , 97 Cal.Rptr.2d 255.

Go here for more on Void & Voidable Deeds. DeedVoidVoidable

More On Void vs. Voidable Deeds

Contained in a recent ruling of a New York trial court in Suffolk County, New York was a brief discussion on the distinction between deeds that are void ab initio and deeds that are merely voidable under New York law, and may offer some insight to those looking to undo/unwind fraudulent real estate transactions:

  • It is well settled law that if a document purportedly conveying or encumbering property is void, the conveyance or encumbrance is a nullity and neither the grantee nor those subsequent in the chain of title or encumbrances, including bona fide purchasers or encumbrancers for value within the contemplation of RPL § 291 or § 266, gain anything of value from the void transaction (see Marden v Dorothy, 160 NY 39 [1899]; First Natl. Bank of Nevada v Williams, 74 AD3d 740 [2d Dept 2010]; Johnson v Melnikoff, 65 AD3d 519 [2d Dept 2009]; GMAC Mtge. Corp. v Chan, 56 AD3d 521 [2d Dept 2008]; Public Admin. of Kings County v Samerson, 298 AD2d 512 [2d Dept 2002]).

    It is equally well settled that deeds and encumbrances that are forged or executed under false pretenses are the result of fraud in the factum (a/k/a fraud in the execution) and are void ab initio (see Marden v Dorothy
    , 160 NY 39, supra; GMAC Mtge. Corp. v Chan, 56 AD3d 521, supra; Cruz v Cruz, 37 AD3d 754 [2d Dept 2007]). Persons claiming superior title to premises may possess viable defenses to a mortgage foreclosure action instituted against a mortgagor whose title to the mortgaged premises was derived from a forged deed or otherwise void transaction (see Wargo v Jean, 77 AD3d 919 [2d Dept 2010]; GMAC Mtge. Corp. v Chan, 56 AD3d 521, supra).

    In contrast, fraudulently induced deeds and other documents are voidable, not void (see Marden v Dorothy, 160 NY 39, supra; Dalessio v Kressler, 6 AD3d 57 [2d Dept 2004]; Yin Wu v Wu, 288 AD2d 104 [2d Dept 2001]). Claims resting on the voidability of fraudulently induced deeds are dependent upon the establishment of the elements of claims for fraud in the inducement and the specialized pleading requirements that attach thereto (see CPLR 3016; Cash v Tital Fin. Serv., Inc. 58 AD3d 785 [2d Dept 2009]; Dalessio v Kressler, 6 AD3d 57, supra; Mix v Neff, 99 AD3d 180 [3d Dept 1984]).
    As in the case of void deeds, persons claiming superior title to premises that were mortgaged by one whose title was derived from a fraudulently induced deed, may possess viable defenses to an action by the mortgagee to foreclose the mortgage (see
    Wargo v Jean, 77 AD3d 919, supra). For the ruling, which also touches on the various statutes of limitations for the types of actions that can be brought to undo the 'dirty deeds,' see JPMorgan Chase Bank, Natl. Assn. v. Kalpakis, 2011 NY Slip Op 50374(U) (NY Supreme Court, Suffolk County, March 8, 2011).

Go here for more on Void & Voidable Deeds. DeedVoidVoidable

The Confused Nature Of Distinguishing Between Void & Voidable Contracts

In a recent issue of the Campbell Law Review, author Jesse A. Schaeffer writes:

  • Contract law has a problem. With predictable recurrence, court opinions, statutes, scholarly literature, and contract draftsmen use the words "void," "voidable," and "unenforceable" - as well as dozens of other terms of the same ilk - to describe flawed contracts. Yet the meaning of these declarations is persistently and maddeningly slippery. In the rare case where the precise meanings of these words are pressed into service in the courtroom, litigants are often surprised to find the court announce that a transaction formerly (and unequivocally) declared to be void is, in fact, merely voidable or unenforceable. The scope of the problem is as widespread as it is trifled; though the distinction between void and voidable is sometimes the most important issue in contract disputes, very little serious, scholarly attention has been paid to the nature of the distinction.
  • Perhaps this dearth of attention can be explained by the fact that many people view the source of the problem as simply one of form. In this view, the confusion is merely a symptom of linguistic laziness. If the legal profession was to more precisely employ the proper terminology, the "problem" would fade away. For others, however, the problem springs from the nature and function of language itself. In this view, words are imperfect symbols that are often insufficient to fully communicate the underlying concepts.

For more, see Beyond a Definition: Understanding the Nature of Void and Voidable Contracts (33 Campbell L. Rev. 193, Fall, 2010).

Thanks to Deontos for the link to the article. DeedVoidVoidable

Void vs. Voidable Deeds & The Effect Of Forged Documents

A recent ruling by the Maryland Court of Appeals, the state's highest court, had the opportunity to address the following question:

  • "Does the use of a deed that is neither a forged document, nor signed with a forged signature, but which derives its transactional vitality from forged corporate articles of amendment, render a conveyance of land void ab initio, or, is good title transferred to bona fide purchasers for value without notice?" [ie. is the conveyance of land rendered merely voidable?]
For a number of reasons, the court ruled that a forged signature on the articles of amendment does not operate to void the deed ab initio.

The court's ruling contains an analysis of the 'void/voidable' and 'forgery-false pretenses' distinctions and the role they play in the protection granted under the recording statutes. A person otherwise qualifying as a bona fide purchaser under the recording act receives no protection under a `void' deed. On the other hand, a person otherwise qualified as a bona fide purchaser for value does receive protection in purchasing from one whose title is merely 'voidable.'(1)

For the ruling, see Scotch Bonnett Realty Corporation v. Matthews, 417 Md. 570; 11 A.3d 801 (January 21, 2011).

See Julian v. Buonassissi, 414 Md. 641, 997 A.2d 104 (2010), for another recent ruling by the Maryland Court of Appeals, in which the court addressed the issue of whether a deed of trust that violated the Maryland Protection of Homeowners in Foreclosure Act (ie. the state's 'anti-sale leaseback, equity stripping' statute) was void ab initio or whether it was merely voidable (ie. where a bona fide purchaser for value gets the protection from the recording statutes).

Go here for more on Void & Voidable Deeds.

9 Thompson on Real Property § 82.12, at 650-51 (2d Thomas ed. 1999). DeedVoidVoidable

Monday, April 4, 2011

Mortgage Industry-Designed Roadblock Prevents Homeowners From Obtaining Legitimate Loan Modifications

In Atlanta, Gorgia, ProPublica reports:

  • Pamela Jeter of Atlanta, Ga., has been trying to get a mortgage modification for more than two years. She seems like an ideal candidate. She has shown she can stay current with a reduction in her monthly mortgage payments. Everybody would seem to win. Even the investors who ultimately own her loan think she should be able to get one. So, why is Jeter facing foreclosure?


  • Two big banks act as middlemen between the homeowners like Jeter who make payments and the mortgage-backed securities investors who ultimately receive them. The banks' jobs were supposed to be relatively hands-off, devoted more than anything to processing homeowner payments. When the housing bubble burst, they faced new demands.
  • One of those middleman roles is well-known to homeowners: the mortgage servicer, responsible for collecting homeowner payments and evaluating requests for a modification.
  • But it's another middleman that's proven the real barrier for Jeter: the trustee, who is supposed to be the investors' representative, making sure the servicer is maximizing investors' returns and distributing checks to them. HSBC is the trustee for the pool of loans of which Jeter's is a part -- and it's refused to approve any modifications for loans like hers, saying the contracts around the mortgages simply don't allow it.
  • The good news for Jeter is that, in what seems an unprecedented step, her servicer OneWest has taken HSBC to court in order to allow modifications. It filed suit in June of last year. But in a sign of just how convoluted the mortgage world has become, OneWest is also pushing to foreclose on her. A recent sale date was avoided only after her lawyer threatened to sue.

For more, see Lawsuit Reveals How a Middleman Is Blocking Mortgage Modifications for Homeowners.

Recent Ruling In Bond Insurer's Suit Could Force Chase To Eat Million$ In Crappy HELOCs; Court Rejects "Onesies & Twosies" Approach To Remedy Breaches

Reuters reports:

  • JPMorgan Chase & Co could be forced to repurchase thousands of home equity loans, after a judge ruled in favor of a bond insurer that argued it could build its case based on a sampling of loans.
  • The ruling against EMC Mortgage Corp, once a unit of Bear Stearns Cos, comes amid many lawsuits seeking to force banks to buy back tens of billions of dollars of mortgage and other home loans that went sour. JPMorgan bought Bear Stearns in 2008.
  • Syncora Guarantee Inc now can pursue claims concerning the entire 9,871-loan pool that backed a securities issue, according to the ruling late Friday from U.S. District Judge Paul Crotty in Manhattan.
  • The ruling lowers the hurdle for insurers trying to prove they were deceived by banks, and increases the potential that banks could be forced to buy back more loans. Crotty rejected EMC's claim that Syncora be forced to show breaches related to individual loans.(1) Syncora had insured the interest and principal payments on part of a $666 million mortgage bond backed by the loans.

For more, see JPMorgan loses court ruling over loan putbacks (Syncora can pursue claims based on entire loan pool; Insurer need not show breaches of individual loans).

For the court ruling, see Syncora Guarantee Inc. v. EMC Mortgage Corp., No. 09 Civ. 3106-PAC (USDC, S.D. N.Y. March 25, 2011).

(1) From footnote 4 of the court ruling:

  • The repurchase protocol is a low-powered sanction for bad mortgages that slip through the cracks. It is a narrow remedy ("onesies and twosies") that is appropriate for individualized breaches and designed to facilitate an ongoing information exchange among the parties.

    This is not what is alleged here. Here, Syncora alleges massive misleading and disruption of any meaningful change by distorting the truth. The futility of applying an individualized remedy to allegedly widespread misrepresentations is evident in the fact that, of the 1,300 loans actually submitted under the repurchase protocol, EMC has remedied only 20. This .015% success rate does not bode well for the efficiency of employing the repurchase protocol for a generalized claim of breach.

    Accordingly, EMC cannot reasonably expect the Court to examine each of the 9,871 transactions to determine whether there has been a breach, with the sole remedy of putting them back one by one. This transaction was put together in days and months. It is now in its second year of litigation.

Lawyer's 'Boot Camps' Help Growth In Army Of FDCPA Attorneys; Contingent Fee Deals Drive Increase In Table-Turning Consumers' War On Sleazy Collectors

A recent story in the Minneapolis Star Tribune profiled consumer attorney Pete Barry, a local lawyer who's become well-known for his efforts directed not only at putting the squeeze on sleazy bill collection agencies for violating the rights of debtors under the Federal Fair Debt Collection Practices Act ("FDCPA"), but also for training other attorneys around the country through his FDCPA Boot Camp to do the same. An excerpt from the story on how his FDCPA Boot Camp for attorneys was born:

  • He quickly came to appreciate the FDCPA as a little-understood protection for consumers. The 1977 law bars collectors from using obscenities or making threats, such as telling someone they will be thrown in jail. It sets fines of up to $1,000 per lawsuit and requires offending collectors to reimburse debtors' attorneys fees. And because it focuses on collectors' practices, rather than creditors, the lawsuits can't be derailed by clauses in credit agreements requiring binding arbitration.
  • Barry became one of the first attorneys in the nation to make a living exclusively suing debt collectors. He did so just as consumer debt levels began to mushroom. Between 1997 and 2009, outstanding credit-card debt soared from $515 billion to $969 billion. By 1999, Barry was already winning five-figure settlements in FDCPA cases.
  • One day in 2001, Barry got a call from two San Diego attorneys who wanted to know how to build a practice around suing collectors. Barry jumped on a plane and spent the next five days in a Sheraton hotel there, explaining the nuances of the law over salads and Diet Cokes.
  • Soon, Barry began getting calls from attorneys everywhere. Would he do a tutorial for them, too? His boot camp was born, helping create an army of FDCPA attorneys. Just two lawyers made a living filing suits under the federal law 20 years ago. Now, there are more than 400.


  • Barry sees the boot camps as playing a vital role in keeping the collections industry in check. At a recent camp in Minneapolis, he poked fun of collectors who thought they were above the law -- until they got sued.(1)


  • For all his success, Barry may no longer be the attorney most hated by the collections industry. That distinction has passed to a handful of high-volume law firms that generate thousands of FDCPA cases a year.
  • The most prolific is a Los Angeles law firm run by Adam Krohn, a Barry boot camp graduate and founding partner of Krohn & Moss Ltd. Three years ago, Krohn's firm specialized in suing car dealers and manufacturers under state "lemon laws" that protect car buyers against defective vehicles. When auto sales tanked, Krohn turned his attention to FDCPA litigation.
  • He sent notices to many of his 40,000 past clients, announcing that his firm had begun suing debt collectors. Today, his firm files 15 percent of all FDCPA lawsuits in U.S. courts, according to WebRecon. "I wish I could tell you a great story about how my mother was driven to madness by a debt collector," Krohn said with a laugh. "But I can't. I love what I do, and I don't mind calling it a business."
  • Ten law firms accounted for 40 percent of the 9,290 cases filed nationwide in federal courts against collection firms in 2009, according to WebRecon.
For the story, (a must-read for those looking to slam sleazy collectors), see Debtors in court -- suing collectors (Pete Barry, a Minneapolis attorney, has flown all over the country conducting boot camps for lawyers, teaching them how to sue debt collectors under the federal Fair Debt Collection Practices Act (FDCPA)).

Go here for more on Barry's law firm, Barry & Slade, LLC (We Sue Abusive Debt Collectors™).

(1) Barry plays recordings from tense question-and-answer sessions known as depositions in his boot camps, the story states, and reportedly includes one from a 2005 case that Barry won by prodding a collector into admitting that he swore over the phone.

  • "Why did you call my client a low-life piece of shit?" Barry asked the collector, according to the transcript. "In about 10 seconds you're going to have that answer, Mr. Barry," the man replied. "I'd like the answer now, please," Barry said. "Well, you have to get it when I give it. ..." the collector said. "I'm asking you, and I'm going to ask you again, the question is, why did you call my client a low-life piece of shit?" Barry said. "Because in my opinion, a person who doesn't pay his bills ... is a person who in my opinion is a low-life piece of shit," the man replied.

According to the story, the collector lost, Barry and his client were awarded $275,000 in a legal settlement, and is just one of more than 2,000 such cases he has pressed in the past decade. Barry works on a contingency basis, meaning he doesn't collect attorneys' fees unless he wins, the story states.