Saturday, April 23, 2011

Judge Suspends HOA's Denial Of Access To Pool, Other Amenities Affecting 96 Condo Owners Where Only Six Were Delinquent In Maintenance Fees

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

  • Quail Run condo owners in Boynton Beach on Tuesday gained access to their clubhouse, pool and other amenities after the master association changed the locks. The master association had imposed a 2 1/2-month lockout for all owners, although only a few were in default of their maintenance dues.
  • Circuit Judge Timothy McCarthy signed off on the temporary injunction order Thursday, and the master association on Tuesday changed the locks back to allow most of the 96 condo owners entry into the facilities. About six are in foreclosure and have failed to make their dues.

For more, see Judge orders locks removed from Boynton Beach condo's pool and clubhouse.

Changing Nature Of NYC Foreclosure Crisis: Affected Renters In Multi-Family Buildings On Upswing

In New York City, Crain's New York Business reports:

  • The housing crisis continues to take a toll on multifamily rental properties in the city, with Brooklyn being one of the boroughs the hardest hit. Multifamily rental properties with five or more units, buildings that house nearly half of all New Yorkers, drew more foreclosure notices in the last two years than any period since the early 1990s, according to a Tuesday report. New York University's Furman Center for Real Estate and Urban Policy published the report, “State of New York City's Housing and Neighborhoods 2010.”
  • What struck us was the changing nature of the foreclosure crisis in the city,” said Ingrid Ellen, faculty co-director of the center. “People talk mostly about single-family housing, but we're seeing a rise in the number of multifamily properties that are seeing foreclosures.”
  • In the past five years, more than 2,100 multifamily rental properties received foreclosure notices, potentially affecting more than 44,000 households, according to the report.


  • The impact of such findings is widespread, affecting both tenants, who may have to vacate the foreclosed buildings, and the community. “Physical conditions are deteriorating in these buildings that are distressed,” Ms. Ellen said.
  • Those buildings receive an average of 21% more violations during the quarter when the formal notice is filed, and 15% more violations during the two quarters before and after a foreclosure notice compared to all other quarters. “Collectively, it's very costly if these buildings go to foreclosure.”

For more, see Foreclosure crisis shifts to multifamily buildings (Report says more than 2,100 multifamily rental properties received foreclosure notices, potentially affecting more than 44,000 households; Brooklyn hit hardest).

In related stories, see:

Alone, Broke & Target Of Seattle-Area Real Estate Profiteers

In Seattle, Washington, The Seattle Times reports on a local homeowner who's broke, alone, living without heat or utilities, believed by helpful neighbors to be of diminished mental health, on the verge of losing his mortgage-free home at a foreclosure sale for unpaid real estate taxes, and being circled by the vultures real estate investors looking to snag his house on the cheap.

  • Alan, 59, inherited this house free and clear after his father died six years ago. That makes him fortunate. But now he's broke and alone. He owes $4,100 in back utilities, more than $26,000 in property taxes and about $25,000 to the IRS. Unless he pays his 2008 property taxes — some $7,800 — by month's end, he faces foreclosure. That makes him desperate.
  • Strangers have been circling the neighborhood recently, photographing Alan's neglected house with its peeling trim, mossy blinds and rotting curtains. They know there's a good chance that King County will foreclose on the property to collect back taxes. For those real-estate investors, Alan's plight is a business opportunity.
  • One pony-tailed investor — a man who once bought an apartment building on the cheap from a 90-year-old woman with dementia — befriended Alan and appeared close to buying his house until a family lawyer warned Alan to stay away from him.
  • Meanwhile, neighbors are trying to get Alan help so that he can safely stay in his house.

For the rest of Alan's story, see Alone, broke and target of profiteers (A vulnerable man who many would call a hoarder has been living without heat or utilities in an affluent North Seattle neighborhood, where neighbors worry about his welfare and strangers have been circling in anticipation of King County foreclosing on his home for unpaid property taxes).

The Risks Of 'Senior Housing' For The Elderly & Infirm Seeking To Age In Peace In Their Final Years

A recent story in the Los Angeles Times shines some light on how the crappy economy and foreclosures are affecting the elderly and infirm who thought they would be living out the rest of their lives in the peace offered by continuing care retirement communities and other forms of senior housing:

  • "California's foreclosure crisis has severely impacted some of the most vulnerable tenants in our state — seniors who live in residential-care facilities," says state Sen. Mark Leno (D-San Francisco). "These residents had no warning that they were about to lose their homes, and their families and caretakers were left in a panic to find immediate emergency housing."
  • The situation is all the worse because of the health issues faced by many of those evicted. "Being uprooted like that is a horrifying situation for older adults, many of whom are frail and confused," says Shelley Woolery, who has been involved in two cases in her role as ombudsman program coordinator with the Council on Aging in Orange County.
  • Bankruptcies, foreclosures and other financial difficulties are inflicting new worries on residents and their families who thought they had secured their futures in a retirement community or other form of senior housing, ranging from "55+" developments to nursing homes. The problems confront older Americans at every income level.


  • Facilities range from independent-living apartments to skilled nursing facilities, allowing residents to "age in place." People typically move in when they are in good health and active; the promise, and the appeal, is that they won't need to move elsewhere if their health declines.
  • In addition to the steep buy-in, residents pay monthly maintenance fees. The entrance fee is usually said to be refundable to residents or their heirs if they move or die. But that can change if a facility goes out of business.
  • When a few facilities declared bankruptcy in recent years, the U.S. Senate Special Committee on Aging got involved and requested a study by the Government Accountability Office. Last summer, the GAO issued a report saying that investing in a continuing-care community involves "considerable risk" and urging state regulators to "be vigilant in their efforts to ensure adequate consumer protections for residents."(1)


  • In addition to placing a consumer's investment at risk, the current financial squeeze could cause a resident's monthly dues to spiral upward, the report said. Another problem with continuing-care retirement communities: Some consumers have found it difficult to retrieve buy-ins after leaving.
  • Elder-law specialists blame the economy: Seniors can't sell their homes, so they don't have the funds to move into the developments; that in turn limits the money the facilities have on hand to pay back those who are moving out.

For more, see Elderly and facing eviction (Foreclosures are affecting senior housing too, leaving residents and their investments at risk).

(1) For the GAO report, see Older Americans: Continuing Care Retirement Communities Can Provide Benefits, but Not Without Some Risk (go here for report summary).

Friday, April 22, 2011

HUD Backs Off On Position Allowing Lenders To Foreclose On Surviving Spouses Of Deceased Reverse Mortgage Borrowers

The New York Times reports:

  • In the face of a lawsuit from the AARP Foundation, the Department of Housing and Urban Development has backed off an apparent policy change that was putting some widows and widowers on the brink of foreclosure.
  • The dust-up involves reverse mortgages, financial products that allow older Americans with a decent amount of home equity to tap some of that equity if they are at least 62 years old. Unlike a home equity loan, where you have to pay the money back, with a reverse mortgage the bank pays you, say in a lump sum or in monthly payments. Once you no longer live in the home, you or your executor (if you’re dead) sells it and pays the bank back.
  • The foundation and Mehri & Skalet, a law firm, sued HUD in the wake of a policy letter in 2008 that seemed to state that widows or widowers who were not listed on a spouse’s reverse mortgage would have to repay the full amount of the deceased spouse’s mortgage. They’d have to do so even if the home was worth less than the outstanding loan.
  • Not long after, some surviving spouses found themselves unable to pay off the loans or get a new mortgage for the outstanding balance on the old reverse mortgage. As a result, they ended up in foreclosure proceedings. The foundation had sued on behalf of three of them.
  • In a letter it released [last] week, HUD rescinded the 2008 letter. And while this week’s letter didn’t say so specifically, Jean Constantine-Davis, a senior attorney for AARP Foundation Litigation, reports that the lenders will now halt foreclosure proceedings against its three plaintiffs for the time being. A HUD spokesman did not return a call seeking comment.
  • The lawsuit is not over, though. The foundation hopes that a judge will confirm that HUD cannot ever force a widow, widower or heir to pay a reverse mortgage lender more than a home is actually worth, whatever the balance may be on the mortgage.

For more, see Good News for Spouses of Reverse Mortgage Holders.

Florida AG: Loan Modification Outfit Clipped Homeowners For Thousand$ In Illegal Upfront Fees

From the Office of the Florida Attorney General:

  • Attorney General Pam Bondi filed a complaint against a home loan modification company for allegedly requiring consumers to pay an upfront fee for services. According to an investigation by the Attorney General’s Office, U.S. Mitigators, LLC, a company providing home loan modification services, was allegedly requiring consumers to pay an upfront fee of $2,100 before services were rendered.
  • Many consumers reported paying the $2,100 fee and an additional $399 application fee for services they never received. The Attorney General’s complaint against the company seeks more than $48,000 in restitution for consumers.
  • Charging upfront fees for loan modification services is illegal,” said Attorney General Pam Bondi. “If consumers have been asked to pay upfront fees for these types of services, I encourage them to file a complaint with my office.”

For the Florida AG press release, see Attorney General Bondi Warns Consumers of Home Loan Modification Scams.

$2.2M In Condos, Cash, Other Assets Surrendered By Operators Of South Florida-Based Loan Modification Racket To Settle Civil Charges With Feds

The Federal Trade Commission recently announced:

  • Under a settlement with the Federal Trade Commission, two companies and three individuals are banned from the mortgage relief services business and must relinquish $2.2 million in assets for consumer refunds. The action is part of the FTC’s ongoing effort to stop scams that target financially strapped homeowners seeking mortgage relief.
  • In November 2009, the FTC alleged that Kirkland Young LLC and its manager, David Botton, misrepresented themselves as consumer mortgage lenders, servicers, or their affiliates, and falsely promised they would modify consumers’ loans and make their mortgage payments more affordable. The court halted the operations and froze the defendants’ assets pending resolution of the case. The following month, the FTC added Botton’s sister, April Botton Krawiecki; their father, Samy Botton; and Attorney Aid LLC as defendants.

For the FTC press release, see FTC Settlement Collects $2.2 Million, Bans Marketers From Mortgage Relief Business (Company Targeted Consumers Facing Foreclosure).

Go here for links to some of the available court documents in this lawsuit.

(1) According to the Commission, in addition to banning the defendants from selling mortgage relief services, the settlement permanently prohibits them from misleading consumers about financial-related goods and services, such as misrepresenting loan or refund terms, affiliation with any person or government entity, and the ability to improve someone’s credit history. The settlement bars the defendants from selling or otherwise disclosing customers’ personal information, enforcing contracts with mortgage relief clients, and violating the Telemarketing Sales Rule. The settlement imposes a $6.1 million judgment that will be suspended when Samy Botton has paid $300,000; David Botton has surrendered certain assets, including a condo, a car, and a boat; April Botton Krawiecki has surrendered a condo; and Kirkland Young LLC and Attorney Aid LLC have surrendered all of their assets, worth $2.2 million.

Washington State Regulator Hits Suspected Out-Of-State Loan Modification, Forensic Audit Review Racket With C&D Order

From the Washington State Department of Financial Institutions:

  • The Washington State Department of Financial Institutions (DFI) has taken swift action to stop an unlicensed mortgage loan modification company from continuing to harm Washington consumers.
  • DFI issued a Temporary Cease and Desist Order against Home Credit Law Center, its President, attorney Brian R. Linnekens, and an employee, Derek Thomas. The Department ordered the Respondents, all of Los Angeles, to immediately cease and desist unlicensed activity, misrepresenting that Mr. Linnekens was licensed to practice law in Washington, and taking advance fees for loan modification services.


  • As the mortgage crisis continues in Washington, more homeowners are facing the prospect of foreclosure. Some, in a desperate search for relief, cling to any offer of help. Home Credit Law Center employees call Washington homeowners offering that relief for a $3,000 advance fee.

For the press release, see DFI Orders Unlicensed California Law Firm - Home Credit Law Center - To Stop Offering Unlawful Mortgage Loan Modifications (Brian R. Linnekens and his law firm charged with taking property from Washington residents by fraud or misrepresentation).

Go here to view a recent KING5-TV report on Home Credit Law Center.

Thursday, April 21, 2011

Nevada AG Bags Real Estate Agent In Alleged $115K Senior Citizen Ripoff Involving Forged Foreclosure Deed

From the Office of the Nevada Attorney General:

  • The Nevada Attorney General’s office [] announced the arrest of a local realtor, Christopher Brown, who works for Better Homes and Garden Desert Properties in connection with a scam relating to foreclosure auction sales.
  • The State alleges that Mr. Brown filed a fraudulent and forged Trustees Deed Upon Sale with the County Recorder transferring a property to an elderly victim prior to the actual foreclosure sale.
  • The victim had paid cash to purchase the property at auction. The State alleges instead of purchasing the property, the elderly victim’s payments were diverted by Mr. Brown for his personal use. The alleged victim is a senior citizen who lost over $115,000 based on the fraudulent promises by the Defendant.

For the Nevada AG press release, see Attorney General's Office Announces Arrest In Mortgege Fraud Theft Scam.

Cuomo 'Stops Payment' On Funds For NYS Foreclosure Prevention Service Program

In Albany, New York, The Albany Business Review reports:

  • Gov. Andrew Cuomo’s veto of $1.5 million to pay for foreclosure prevention services in New York shocked housing advocates who say the program is vital to help struggling homeowners. Cuomo’s veto means the Foreclosure Prevention Services Program will shut down at the end of this year, the advocates said.


  • Housing advocates had hoped for $15 million in the state budget to continue the program, but were only able to get $1.5 million set aside by Democrats who control the Assembly. Cuomo vetoed the funding. Cuomo wrote: "This item passed by the Legislature, to which I object and do not approve, is a new appropriation, but is improperly characterized as a reappropriation. Accordingly, this item is disapproved."

For the story, see Cuomo vetoes pay for foreclosure prevention services.

In a related story, see New York Law Journal: New York Legal Aid Groups Brace for Life After Cuts in LSC Funds.

Thanks to Bill Collins of Frontier Abstract, Rochester, NY For the heads-up on the story.

Short-Selling Homeowner Found Liable For Losses Arising From Blown Title Search That Failed To Reveal Existence Of 2nd Mortgage Lien

The following facts have been taken from a recent ruling from a U.S. Bankruptcy Court in Mobile, Alabama:

  • Saddled with two mortgages on a home, said home being worth less than the amounts owed on the indebtedness it secured, homeowner David Young found it necessary to unload the home via a short sale.
  • At the time of the sale, SouthTrust Bank held a first mortgage on the property, and AmSouth Bank held a second mortgage on the property.
  • The homebuyers purchased title insurance from Stewart Title and Guaranty ("Stewart"), and Stewart hired RELI, Inc. to conduct the title search.
  • Being that the sale price for the home was actually worth less than the balance of the first mortgage (the 2nd mortgage was completely underwater), Young signed a personal promissory note to SouthTrust for the deficiency.
  • Young received no proceeds from the sale, which took place in June, 2004.
  • Young conveyed the property to the homebuyers by warranty deed, and by signing the deed, Young represented that the property was "`free and clear of all encumbrances'" and "that he would `warrant and . . . forever defend the title to said property'".
  • He also executed an Indemnity Affidavit in which he represented that no liens or encumbrances existed against the property and that he would indemnify RELI for any loss it may incur under its title policy.
  • The title report did not reveal AmSouth's second mortgage on the property.
  • In January 2005, the homebuyers received a letter from AmSouth indicating that the 2nd mortgage, undiscovered by the title search, was in default and subject to foreclosure.
  • In February 2005, AmSouth advised Stewart (the title insurance underwriter) that the second mortgage was in default, and Stewart ultimately coughed up the cash to pay off the debt secured by said mortgage that went undiscovered by the blown title search.
  • Stewart then sued RELI (the title searcher) over the blown title search.
  • A settlement agreement was ultimately reached whereby RELI's liability insurer forked over $200,000 to Stewart because of RELI's blown title search.
  • The liablity insurer, as subrogee of RELI, then decided to go after the broke homeowner, Young (who walked away from the sale of his home without a penny of the sale proceeds in his pocket), and filed suit against him to recover the funds paid to Stewart on account of the unpaid 2nd mortgage that was missed by RELI's blown title search.
  • The basis for this lawsuit was the fact that Young signed the Indemnity Affidavit, in which he represented that no liens or encumbrances existed against the property and that he would indemnify RELI for any loss it may incur under its title policy.

Despite Young's arguments that:

  1. the mortgage to AmSouth was properly recorded with the Probate Court of Mobile County and was easily searchable under the defendant's name;
  2. RELI is a title agent in the business of real property title work and admittedly overlooked the recordation of AmSouth's mortgage;
  3. Ala. Code §35-4-90 (1975) charges Zurich, as subrogee of RELI, with knowledge of the AmSouth mortgage, as a properly recorded instrument constitutes "conclusive knowledge to all the world of everything that appears on the face of the instrument." Boyce v. Cassese, 941 So.2d 932, 943 (Ala. 2006) citing Ala. Code §35-4-90 (1975); and
  4. under Alabama law, RELI had notice of the mortgage and could not have reasonably relied upon the indemnity affidavit of the defendant,

the court found that Young, by reason of his signing the Indemnity Affidavit, was liable for the amount paid by RELI's insurer to Stewart that arose because of RELI's screw-up in failing to discover the properly recorded 2nd mortgage, and for reasons set forth in the court ruling, the court found that this liability was non-dischargeable in Young's bankruptcy proceeding.

For the ruling, see Zurich American Ins. Co. v. Young (In re Young), Case No. 05-11355-WSS, Adv. Proc. No. 10-00036 (Bankr. S.D. Ala. April 7, 2011).

Former Bay Area 'Bakery Associate' Feeling Heat From Criminal Probe, Civil Suits Alleging Use Of Forged Land Documents To Swipe Real Estate

In Northern California, The Oakland Tribune reports:

  • Even as the murder trial of the former Your Black Muslim Bakery's last chief executive progresses, a former bakery associate is the subject of several civil lawsuits accusing him of fraud.
  • Jamall Joseph Robinson, 25, also known as Yasir Hakeem Azzem or Jamal Bey, was among bakery associates charged with aiding bakery CEO Yusuf Bey IV in the 2005 vandalism of two North Oakland liquor stores, an incident caught on videotape that made national headlines.
  • Prosecutors in 2007 dropped charges against Robinson in that case, but a police report indicated he had done security work for a firm associated with the bakery and since then his name has continued to pop up in connection with other bakery associates.


  • Now Robinson is being sued for real estate fraud in Alameda and Contra Costa counties.


  • In Alameda County, Robinson is accused of stealing his aunt's house out from under her. [...] Espinoza sued Robinson on March 15 in Alameda County Superior Court, seeking $1.5 million in various damages. She claims Robinson served her Jan. 19 with a notice to pay rent or vacate her own property "followed by threats and physical violence."
  • Robinson had filed with the county a notarized Jan. 5 quitclaim deed on which Espinoza claims he forged her signature, transferring the property to ABM Enterprise. ABM then transferred the property to him under the name Aafiya Muhammad with a Jan. 12 grant deed.
  • That same day he filed a $900,000 deed of trust with himself as the trustor, or borrower; First American Title Insurance Co. as the trustee, or titleholder; and another of his businesses -- the Millionaires Boys Club Corp. -- as the beneficiary, or lender.
  • He filed another grant deed Feb. 10 transferring the property's ownership once again to another of his businesses, Beverly Hills Escrow and Funding Corp. A First American Financial Corp. spokeswoman said she was looking into the matter, and was unable to comment Friday.
  • These documents all bear the same notary's signature. Alameda County prosecutors refused to comment on whether a criminal investigation is under way, but a source familiar with the case said the notary has admitted Espinoza never appeared before her to sign the original quitclaim deed, as the notary had attested. The notary didn't respond to a voice message left at her home.


  • In Contra Costa County, Robinson is being accused of selling homes he never even owned. Jordan Wu, a real estate investor from Allen, Texas, sued Robinson -- under the name Aafiya Muhammad -- for fraud March 1. Wui's lawsuit says he found Robinson through a real-estate auction website, and eventually wired $71,000 for properties [...] in Richmond; Robinson then sent him deeds for the properties.
  • But Wu soon noticed the deeds had irregularities. On one, the recorder's date stamp was dated before the notary's signature -- the same notary as in Espinoza's case. A second bore the same recording seal and document number as the first. And all three had notary signatures, stamps and other markings that didn't match up in some way.
  • Before he could ask about these irregularities, Wu was served with a lawsuit by Anatasia Ponomareva, [one of the] real owner[s]. Ponomareva's notarized signature seemed to be on the deed Robinson had provided, but the lawsuit said she lives in Russia and hasn't been to the United States in years, and so couldn't have signed the deed at all. The lawsuit says Wu demanded an explanation from Robinson but didn't get one, and so he had no choice but to acknowledge Ponomareva's ownership.
  • "Absolutely we believe this was a forgery," Ponomareva's attorney, Thomas Fama of San Ramon, said in late March. Fama said his client has obtained "a judgment from the court to quiet title and to rescind the invalid deeds, so the title is now back in her name."
  • Fama said the Contra Costa County District Attorney's office contacted him about this case in December. Deputy District Attorney Ken McCormick, in charge of his office's real estate fraud unit, confirmed Thursday that it's an open investigation.

For more, see Allegations of real estate fraud dog former associate of Your Black Muslim Bakery.

Wednesday, April 20, 2011

W. Texas Feds Score Conviction In Flipping Scam Targeting Home Sellers w/ Phony Foreclosure Rescue Promises, Homebuyers w/ Bogus Owner Financing Deals

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

  • United States Attorney John E. Murphy announced that in Midland [], a federal jury convicted 34-year-old Marcus Rosenberger in connection with an estimated $190,000 fraudulent real estate scheme. Rosenberger was convicted of one count of conspiracy to commit mail and wire fraud, one count of mail fraud and ten counts of wire fraud.
  • For approximately one year beginning in March 2009, Rosenberger and 35-year-old Jason Heath Morrison of Midland, operated a real estate investment venture under the company name of Vanguard Properties which focused on property "flipping."
  • Jurors found that during the conspiracy, Rosenberger and Morrison identified at least ten properties that were in residential foreclosure and scheduled to be sold at auction within weeks. They approached owners with a plan to avoid the consequences of foreclosure and preserve the owners’ credit ratings by relinquishing the property to the defendants.
  • In exchange for relinquishing the property, the defendants promised to pay off the existing property lien. Unbeknownst to the property owners, Rosenberg and Morrison never paid the existing liens. Instead, they placed ads in the Midland Reporter Telegram to sell the property under an owner-finance agreement.
  • They concealed from the buyers the fact that the properties had existing liens. The buyers made down payments–$5,000 to $10,000–and made subsequent monthly payments to the defendants.
  • The homes ultimately went into foreclosure on the undisclosed liens and were sold at auction. The original homeowners were left with a foreclosure on their credit and the new buyers, without homes and the money they paid for the houses.
  • In January, Morrison pleaded guilty to the same charges.(1) Both Morrison and Rosenberger face up to 20 years in federal prison per count and restitution. Morrison is scheduled to be sentenced on May 26, 2011; Rosenberger, June 29, 2011.
  • This investigation was conducted by the Midland Police Department. Assistant United States Attorney Austin Berry is prosecuting this case on behalf of the Government.

For the U.S. Attorney press release, see Federal Jury In Midland Convicts Odessa Man In Connection With Real Estate Fraud Scheme.

(1) Regarding Morrison's January guilty plea, the press release is silent as to whether he scored a 'squeal deal' with the Feds, where he would agree to finger Rosenberger at trial for the latter's role in this racket in an attempt to 'buy down' some prison time to be handed out at a future sentencing hearing.

NC Man Pleads Guilty In Mortgage Fraud, Rent-Skimming Ripoff That Unloaded Builder's Inventory Onto Wanna-Be 'Rent-To-Own' Homebuyers w/ Crappy Credit

In Raleigh, North Carolina, WTVD-TV Channel 11 reports:

  • The suspected ring leader of a rent to own scam pleaded guilty to multiple charged Friday. ABC11 Eyewitness News I-Team Troubleshooter Diane Wilson exposed the scam when it first happened more than a year ago. The multi-million dollar mortgage scheme ripped off Triangle residents and banks.
  • Douglas Scott Allen pleaded guilty Friday to five counts of obtaining property under false pretenses of more than $100,000. The charges relate to a rent-to-own scam with a company Allen owned called Saving Carolina. In all, investigators say the scheme happened throughout the Triangle and involved 16 houses that Saving Carolina found buyers for.
  • "There was an act of fraud to obtain the mortgage loan, specifically false verification of employment, false verification of income to entice the loan or banks or loan officers to approve the loan to allow the mortgage to be closed and property be purchased," the prosecutor told the court Friday.
  • Prosecutors say once Allen got the home financed, Saving Carolina would find renters and promise them the dream of home ownership through rent to own. "We don't have perfect credit; this was a program that helped people," victim Sherry Williams said. "We thought it was a great opportunity to own a house."
  • Saving Carolina put Williams in a Raleigh home and despite Williams making monthly rent payments to Saving Carolina; she received a foreclosure letter in the mail. She learned her rent payments weren't being made to the mortgage company. The bank foreclosed on the home she dreamed of owning and she was forced to move out. "It's heart breaking, it really is," Williams said. "The kids love it. We love it."


  • Despite the scheme being multi-million dollar, investigators say the people behind Saving Carolina didn't make all that money -- it was the banks that lost big. Prosecutors say Saving Carolina made money by getting kickbacks from builders whose houses they used and by collecting those rent payments.
  • A judge sentence Allen to a minimum of almost four years to a maximum of six years behind bars. Allen still has 11 charges pending in Durham relating to the rent to own deal. Besides Allen, three other have been convicted for their involvement.

For the story, see Suspected scam ring leader pleads guilty.

Clearwater Cops Pinch Pair Suspected Of Using Forged Land Documents To Hijack Title To Real Estate & Pocketing Proceeds From Subsequent Sales, Rentals

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

  • Two Clearwater women are accused of forging documents to fraudulently sell or rent homes in foreclosure, then pocketing the proceeds, authorities said.
  • Clearwater police arrested Silvia N. Lopez-Mateos, 37, of 618 Snug Island, and Adriana Abreu, 43, of 943 Narcissus Ave., on Monday. Lopez-Mateos, whose alias is Lina Maria Alverez, was charged with grand theft, fraudulent use of personal identification and violation of probation on a grand theft conviction out of Palm Beach County. Abreu, who also goes by the name Andriana Cortes, was charged with scheme to defraud, grand theft and several counts of sale of security by unregistered dealer.
  • Clearwater police said employees at Integrity Title on Belcher Road contacted them and said they had been scammed out of $113,000 by a woman who forged a quitclaim deed to acquire a home, sold it and kept the proceeds.
  • Detectives learned that Lopez-Mateos was working with Abreu and that the two had fraudulently purchased at least eight homes, then sold or rented them for profit, police said. Detectives suspect there may be more victims, said Clearwater police spokeswoman Elizabeth Watts.
  • On Monday, when the two women went to another title company, Advantage Title on Belcher Road, to collect a $23,000 check for another property they obtained illegally, detectives closed in on them, police said.

For more, see Two women accused of selling homes they didn't own.

Sacramento Feds Bag 4th Conviction In Mtg. Fraud, Flipping, Rent To Own Racket That Screwed Over Investors, Would-Be Buyers w/ Crappy Credit

From the Office of the U.S. Attorney (Sacramento, California):

  • United States Attorney Benjamin B. Wagner announced [] that Gabriel Richard Viramontes, 48, of Elk Grove, was convicted [] of six counts of bank fraud and seven counts of mail fraud. The guilty verdict was returned by a federal court jury in Sacramento after a seven-day trial [...].
  • According to testimony presented at trial, Viramontes and three co-defendants (who had already pleaded guilty to related charges(1)) engaged in a mortgage fraud scheme in the Sacramento area that involved at least 19 homes with loans of more than $8 million.
  • From June 2006 through October 2006, the defendants through VFM Investment Group, Esnian Mortgage Realty, and Freedom Capital Mortgage, engaged in a mortgage fraud scheme by asking investors to purchase with no money down single family homes on behalf of others with bad credit who wished to purchase homes. The investors were told they would benefit financially from the transactions.
  • The defendants then defrauded lenders such as Washington Mutual Bank, Long Beach Mortgage, and Fremont Investment and Loan by submitting fraudulent loan applications that inflated the buyers' income, falsely stated that a buyer was employed at a specific job, and falsely stated that the properties would be owner-occupied.
  • The purpose of the scheme was to ensure that the home purchase transactions closed, so that the defendants would receive substantial loan broker commissions and illegal kickbacks from real estate sales commissions.

For the U.S. Attorney press release, see Jury Convicts Elk Grove Man in Sacramento Area Mortgage Fraud Scheme.

Thanks to Tim McDonald for the heads-up on the story.

(1) James Roy Martin, 40, pleaded guilty to making false statements on a loan application and money laundering on March 26, 2010. Mario Fellini III, 42, pleaded guilty to making false statements on a loan application on March 12, 2010. Joseph Salvatore Gallo, 38, pleaded guilty to misprision of felony on February 18, 2011. All are from the Sacramento area.

Tuesday, April 19, 2011

More On "Bottom Of the Barrel" Mortgage Loan Servicing Practices

The New York Times reports:

  • ONE too many times, this court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry. With each revelation, one hopes that the bottom of the barrel has been reached and that the industry will self correct. Sadly, this does not appear to be reality.”
  • This trenchant take comes courtesy of Elizabeth W. Magner, a bankruptcy court judge in the Eastern District of Louisiana. In an April 7 opinion involving a couple whose bank tried to foreclose on them even though they were current on their mortgage, you can sense Ms. Magner’s frustration with financial institutions that administer home loan payments and records.
  • Ms. Magner is just one of many judges overseeing cases involving troubled borrowers, of course. But because her judicial duties seem to have made her an expert on mortgage servicing, Ms. Magner’s views could not be more timely and important. This is especially true, given that state attorneys general seem intent on striking a settlement with servicers before they have conducted a comprehensive and thorough examination of industry practices.
  • By presiding over a variety of cases involving borrower abuse, Ms. Magner has probably done more investigating than some of the attorneys general who are so eager to cut a deal with the banks.


  • THE use of a robo-signer in the Wilson matter seemed to be the last straw for Ms. Magner. In sanctioning Lender Processing, she wrote: “The fraud perpetrated on the court, debtors and trustee would be shocking if this court had less experience concerning the conduct of mortgage services.”
  • She added: “Serious problems persist in mortgage loan administration. But for the dogged determination of the United States Trustee’s office and debtors’ counsel, these issues would not come to light and countless debtors would suffer.”
  • For those who argue that servicing errors encountered by troubled borrowers are rare mistakes, Ms. Magner’s rulings should be required reading. “The deference afforded the lending community has resulted in an abuse of trust,”(1) she wrote in the Wilson ruling. Truer words were never spoken.
For more, see Homework Regulators Aren’t Doing.

(1) Judge Magner's further comments in her ruling on this abuse of trust also bear repeating (see In re Wilson, Case 07-11862 (Bankr. E.D. La. April 6, 2011) (p. 21-22, 25):

  • The abuse begins with a title. In this case, Ms. Goebel was cloaked with the position of "Assistant Secretary,” in a purposeful attempt to convey an experience level and importance beyond her actual abilities. Ms. Goebel is an earnest young woman, but with no training or experience in banking or lending. By her own account, she has rocketed through the LPS hierarchy receiving promotions at a pace of one (1) promotion per six (6) to eight (8) month period. Her ability to slavishly adhere to LPS’ procedures has not only been rewarded, but has assured the development of her tunnel vision. Ms. Goebel does not understand the importance of her duties, and LPS failed to provide her with the tools to question the information to which she attests.


  • In this case the lender and LPS cloaked Ms. Goebel with a title that implied knowledge and gravity. LPS could have identified Ms. Goebel as a document execution clerk but it didn’t. The reason is evident, LPS wanted to perpetrate the illusion that she was both Option One’s employee and a person with personal and detailed knowledge of the loan. Neither was the case.

State Bar Investigator: "Now We're Seeing The Loan Mod People Morph Into The Sue-Your-Bank People" As Scammers Circumvent Upfont Fee Prohibitions

In Sacramento, California, The Sacramento Bee reports:

  • Sacramentans struggling to keep their homes increasingly are suing their lenders for fraud, even though judges rarely rule in their favor. Desperation has led some of these homeowners to pay thousands of dollars to people who are not lawyers to help prepare their cases. Others hire attorneys in lawsuit mills that aggressively solicit for clients. "It's the new scam," said Tom Layton, an investigator for the State Bar of California.
  • The number of lawsuits filed by individuals against banks and mortgage companies in the Sacramento region has more than doubled, rising to about 250 in the last six months, up from about 115 from the same period two years ago, according to a Bee review of court records in Sacramento and Placer counties.
  • Many of the lawsuits are filed by frustrated owners tired of dealing with banks that repeatedly transfer calls or reject loan modifications after a successful trial. But homeowners don't always know what they're getting into when they go to court. Some unscrupulous operators, Layton said, are charging large fees for little work.
  • The Legislature barred lawyers and non-lawyers alike from charging upfront fees to file a loan modification; however, there is no ban on collecting such fees for preparing a lawsuit.
  • "Now we're seeing the loan mod people morph into the sue-your-bank people," Layton said.


  • Jim Towery, the State Bar's chief trial counsel, said people without a law license should not be preparing lawsuits. "It is illegal," he said. "It falls under the category of the unlicensed practice of law."(1)

For more, see Sacramentans sue lenders to save homes – but few succeed.

(1) See also: Loan Modification and Mass Joinder Lawsuit Scams:

  • These charlatans align themselves with unethical and inexperienced attorneys who pay them generous referral fees for signing up clients attorneys. They get these clients to pay thousands of dollars upfront to join mass joinder plaintiff lawsuits without ever meeting an attorney.
  • They get these people to pay by guarantying that these lawsuits will be successful. They tell these clients that no mortgage payments are to be made during the several years that it will take for the lawsuit to wind through the court system. They promise balance reductions to below market value. They give their word that the attorneys have already won similar cases and have saved hundreds of family homes through these lawsuits. They are quite convincing as they explain how lenders are afraid of the negative publicity that these mass joinder plaintiff lawsuits generate.

Sale Leaseback Foreclosure Rescue Peddler Gets 10 Years After Jury Finds Guilt On Charges Of Obtaining Goods By False Pretense

In Horry County, South Carolina, The Horry Independent reports:

  • A Lexington, N.C., man was sentenced to 10 years in jail and fined $500 for each of two counts of obtaining goods by false pretense [] after an Horry County jury found that he had been involved in questionable mortgage transactions.
  • Robert Steve Jolly, 61, [...] will serve the two sentences concurrently. An Horry County jury was unable to agree on a third charge of practicing law without a license and was declared hung on that issue.
  • Several Horry County homeowners testified in a two-day trial that they turned to Jolly for help with their mortgages, but ended up with nothing but trouble. Jolly’s attorney Wesley Locklair told the jury that what Jolly did was not criminal and his intentions were not to cheat or defraud distressed homeowners. “He was trying to assist in saving their home from banks with bad lending practices,” Locklair said.
  • The case went to the jury late Wednesday after Jolly took the stand in his own defense. At one point Jolly was named as a defendant in 45 mortgage foreclosure cases.

Source: Jolly gets 10 years.

See also The Sun News: Three more caught in Myrtle Beach area mortgage fraud:

  • Jolly had been operating a foreclosure rescue scam since March 2007, according to a lawsuit filed against him by the state attorney general's office. At least 45 people were taken in by the scam, court records show.
  • Jolly told home owners that he could suspend foreclosure proceedings if they would sign their home over to him and then start making monthly payments to him, according to court documents. Jolly, however had no authority to stop the foreclosures. Instead, he kept the monthly payments for himself as the foreclosures proceeded.


  • "Mr. Jolly instructed that if I would sign my properties to him he would take over ownership, avoid foreclosure, rent the properties back to me at a rate I could afford based on my income and offered to sell the properties back to me in the future if and when I could afford them," [one homeowner] said.

Payment Of Inflated 'Doc Stamps' On Court-Ordered Central Florida Foreclosure Sales May Be Skewing Prices, Hiding Investor Profits

In Orlando, Florida, the Orlando Sentinel reports:

  • Properties purchased through Orange County Clerk of Courts foreclosure sales at one price are appearing in the county Property Appraiser's Office records at a higher price, often tens of thousands of dollars more, according to an Orlando Sentinel review of 16 recent purchases.
  • The discrepancy illustrates inherent flaws in a system that apparently allows investors buying up distressed properties to inflate the sale price of their real estate by paying a slightly higher state tax on the sale, commonly known as "documentary stamp tax." The disparity in prices has gone unnoticed by the three county government bodies with a role in the sale and recording process — until now.
  • By having higher sale prices on record with the Orange County Property Appraiser's Office, investors looking to later unload the properties could mask their profits when they sell the real estate to new buyers.
  • It's not clear how widespread the bogus sale prices are, but the implications are vast in a county that saw nearly 18,000 foreclosure cases last year alone. The phony sales prices could be skewing appraisals being done in those neighborhoods and influencing bank lending practices as well, said Orange County Property Appraiser Bill Donegan.


  • The amount of that tax is supposed to reflect the sale price, but in the cases reviewed by the Sentinel, the payments exceeded what the buyers should have paid. [...] Investors spending a few hundred more on the doc stamps on the front end could artificially inflate the sales prices by tens of thousands of dollars — and they have.

For more, see Foreclosure auctions: Are bogus prices hiding profit?

For story update, see Foreclosure auctions: Bogus-price issue appears to be limited to sales in Orange.

Military Man Gets 11th Hour Stay Of Foreclosure Sale As Court-Appointed Attorney Gets Slammed For Failure To Notify Client Of Legal Action

In Clearwater, Florida, The Tampa Tribune reports:

  • United States Coast Guardsman Keith A. Johnson returned last year from serving in a defense role overseas to find his bank had foreclosed on his home. It was set to be auctioned off at the courthouse the next day.
  • It was a shock because Johnson was never notified of the foreclosure lawsuit against him, court documents show. The lender, Wells Fargo Bank, also failed to notify his wife, even though court records show it had sent her numerous letters about a modification request – up until a few weeks before a judge granted the foreclosure.


  • In this case, Wells Fargo told the court it couldn't find Johnson to tell him about the suit. So the lender's attorney, in accordance with the Servicemember Act, asked the judge to appoint a guardian ad litem to represent Johnson. The St. Petersburg firm representing Wells Fargo, the Law Office of Douglas C. Zahm, recommended Tampa attorney Jay D. Passer, and the court approved the appointment.
  • However, three months later, Passer said he also couldn't locate Johnson. He told the court the plaintiff's pleadings "appear to be in compliance" with state law, court records show. That report was key to allowing the foreclosure to proceed.
  • "That report waived the service member's rights even though the attorney didn't speak with him one time," said Col. John S. Odom, Jr., a nationally-recognized military lawyer whose book, A Judge's Guide to the Servicemembers Civil Relief Act, is expected to be released later this year by the American Bar Association.


  • "An attorney ad litem is supposed to defend the person just as though they were being paid $1 million a day to do it," [Sarasota attorney and Florida legal treatise author Henry P. Trawick, Jr.] said. "I think it's ridiculous that they couldn't find him, but even then, the attorney should have tied it up in court until his client returned."


  • St. Petersburg foreclosure defense attorney Matt Weidner represents Johnson and said it would have been easy to find him. "All he had to do is walk up to the Coast Guard gate in Clearwater and say, "I need to find this guy,'" Weidner said. "The military knows where their people are. I don't think his level of inquiry is sufficient for even a civilian."


  • Meanwhile, Johnson waits on this day in court. He was granted an emergency injunction to stop the sale of the home. For now, Johnson is living in the home, but Wells Fargo's judgment still stands.

For more, see Military man returns from war to find home foreclosed.

Monday, April 18, 2011

Lawsuit: Chase Gave WV Couple A Loan Modification 'Jerk-Around' After Squeezing Them For Retroactive Charges On Force-Placed Insurance

In Huntington, West Virginia, The West Virginia Record reports:

  • A Lesage couple is suing JPMorgan Chase Bank and Chase Home Finance after they claim the bank breached its contract with them.
  • Denise Ash and Matthew Ash purchased their home in 2003 for $91,000, which was financed with a loan through First Franklin Financial Corporation, according to a complaint filed March 24 in Cabell Circuit Court. The couple claims the loan was ultimately assigned to JPMorgan Chase Bank and the servicing of the loan was assigned to Chase Home Financial.
  • In the summer of 2010, Chase Home Financial informed the Ashes that it would be raising their payments from $680 to $1,190 for repayment of force-placed insurance over the previous two years,(1) according to the suit.
  • The couple claims they contacted Chase because they were concerned about being able to afford the new payment and a representative suggested they apply for a loan modification and stated that the couple should not may any payments until the loan modification was processed.
  • In August 2010, the Ashes were denied their loan modification request. Unable to pay the total amount of the arrears, they requested any other loss mitigation assistance, according to the suit. The Ashes claim in January they received a second offer to consider them for a loan modification, so they sent Chase the documentation it requested. On Feb. 24, Chase's foreclosure trustee informed the Ashes that their loan was accelerated in advance of a foreclosure sale.
  • The Ashes claim the defendants breached their contracts and duty of good faith by exercising their discretion under the contract in bad faith.

According to the lawsuit, the defendants breached their contracts and duty of good faith:

  1. by discouraging the Ashes from making payments on the loan;
  2. by representing to the Ashes that hardship assistance was forthcoming;
  3. by exercising their discretion in bad faith in refusing to provide the Ashes with a loan modification as represented; and
  4. by referring the couple's home to foreclosure.

The Ashes are seeking actual, compensatory and punitive damages and civil penalties, and are being represented Bren J. Pomponio and Daniel F. Hedges.(2)

Source: Lesage couple sues Chase for breach of contract.

(1) For more on the loan servicing industry's force-placed insurance racket, see South Florida Homeowners Seek Class Action Status In Lawsuit Tagging Loan Servicer Over Dubious, Force-Placed Insurance 'Gravy Train'.

(2) Both attorneys are associated with Mountain State Justice, a non-profit public interest law office that provides free legal services in their areas of practice to qualifying, low-income West Virginians, and whose work currently focuses primarily on combating predatory lending and abusive debt collection techniques through individual and class action lawsuits.

Banksters Score Pass In Preliminary Settlement w/ Bank Regulators; Still Face F'closure Risk As Deal Not Expected To Affect Ongoing Probe By State AGs

The Washington Post reports:

  • Three federal agencies announced agreements with the nation’s largest mortgage servicers Wednesday that aim to stem shoddy foreclosure practices. But the plans do not immediately impose financial penalties on the companies or force them to reduce the mortgage debt for troubled borrowers.
  • The deals require the mortgage servicers to identify and compensate borrowers who suffered financial harm, but the details have not yet been decided.


  • Some lawmakers and consumer groups said the enforcement actions are weak and won’t fix the problems that surfaced last fall. By then, news reports and lawsuits showed that mortgage servicers were using fake documents, forged signatures and other shortcuts to quickly evict families from foreclosed houses. The revelations prompted many of the nation’s largest lenders to temporarily halt foreclosures and sort through the mess.
  • The three regulators that reached the deal Wednesday — the Office of the Comptroller of the Currency, the Federal Reserve and the soon-defunct Office of Thrift Supervision — have at times been cast by those critics as being too friendly to the industry.
  • State attorneys general, the Justice Department and several federal agencies are trying to negotiate a separate settlement with the banks, which sources say might force the companies to pay at least $20 billion in fines. That money would then be used to slash the mortgage debt of borrowers who owe more than their houses are worth.
  • The OCC said its deal would not undermine the broader settlement being negotiated by the attorneys general. “I would not only hope that they would dovetail, but I think the two really need to mesh,” said John Walsh, acting comptroller of the currency.


  • The actions taken by the three agencies are based on the findings of an interagency review last year that discovered “significant problems” from a sampling of foreclosure actions by those companies.
  • The companies violated federal and state laws, mishandled foreclosure documents and failed to properly oversee the foreclosure attorneys working on their behalf, the review concluded, contradicting past claims by the industry.
  • Consumer advocates and some lawmakers reacted negatively. Rep. Maxine Waters (D-Calif.) said the enforcement actions are “disappointing – but not surprising – given the history of our nation’s banking regulators” who have been accused of being too soft on the institutions they oversee.

For the story, see Regulators, mortgage servicers agree on reforms.

In a related story, see Reuters: Analysis: U.S. banks still face big foreclosure risks (U.S. banks still face severe consequences from allegations of pervasive mishandling of home foreclosures, despite reaching a relatively mild settlement with the bank regulators).

South Florida Homeowners Seek Class Action Status In Lawsuit Tagging Loan Servicer Over Dubious, Force-Placed Insurance 'Gravy Train'

American Banker reports:

  • The first time Luis Juarez heard of force-placed insurance was when he received a $25,000 bill for it in the mail. A Florida doctor and homeowner, Juarez had been dropped by his previous insurer over a roofing issue. Though that lapse violated his obligation under the mortgage to maintain coverage on the property, he was current on his loan payments and heard nothing from the servicer Wells Fargo & Co. for more than a year.
  • Then on May 10, 2010, Juarez got a note from QBE Specialty Insurance, a partner of Wells. It said that QBE was retroactively charging him $25,000 for a policy that had expired two months earlier, according to court filings. Neither the price tag — nearly quadruple his original policy's rate, according to court papers — nor the expired status of the QBE policy were a mistake.
  • The use of carriers like QBE adds another public wrinkle to the controversy over banks' imposition of homeowners coverage, because the carriers are unregulated in major states such as Florida. Wells Fargo, SunTrust Banks Inc. and others are buying what is called "surplus-line" insurance, which is neither governed by state premium caps nor guaranteed by state funds. That leaves the insurer free to charge whatever rates it pleases — and to share some of the proceeds with banks through payments to their affiliates.
  • Force-placed insurance is already under fire from a coalition of state attorneys general because it burdens troubled borrowers with expensive premiums, provides inferior coverage and often dumps the cost on mortgage investors at the time of foreclosure if borrowers failed to pay the premiums. In the process, banks reap lucrative commissions from insurers.


  • QBE is "more aggressive in placement, and their pricing is worse," said Jeffrey Golant, a Florida attorney who recently filed a lawsuit on behalf of Juarez and others alleging that Wells Fargo and QBE engaged in self-dealing and charged unreasonable premiums. "There is no regulation of their rates at all, and they appear to believe that being surplus lines allows them to do anything they want."
  • According to the lawsuit, which seeks class-action status, the premiums were nearly four times those for the policy Juarez had bought through a state-run company that normally charges Florida's maximum legal rate. Wells Fargo said that the Juarez case was "unique" in that the lapse in voluntary coverage was not detected for well over a year.


  • Force-placed insurance is lucrative for mortgage servicers. An American Banker story published in November found that banks often collect sizable force-placed commissions from insurers — even when servicers do not perform significant work in the production of the policy.(1) Mortgage bond analysts and borrower advocates have flagged this relationship as a potential conflict of interest.

For more, see New Questions about Banks' Force-Placed Insurance Deals (QBE, carrier used by Wells Fargo and SunTrust, avoids oversight through 'surplus lines' structure).

For the lawsuit, see Williams, et al. v. Wells Fargo Financial Inc., et al.

(1) See Ties to Insurers Could Land Mortgage Servicers in More Trouble (Force-placed policies impose costs on both homeowner, investor):

  • "There's no arm's-length transaction here, and that creates all sorts of incentives for the servicer to force-place excessive insurance and overcharge consumers for policies that provide minimal benefit," said Diane Thompson, of counsel for the National Consumer Law Center. "Servicers and insurers have turned this into a gravy train." [...] State court filings show alleged abuse in which banks charged borrowers for unnecessary insurance and backdated policies providing coverage retroactively.

Maryland Foreclosure Mill, Six Attorneys Tagged With Federal Robosigner Suit Seeking Class Action Status reports:

  • A federal class action claims that thousands of Maryland homeowners lost their homes because of the illegal robo-signing operation of the Shapiro & Burson law firm, with offices in Baltimore, Md., and Fairfax, Va., and six of its attorneys.(1) The suit also charges the firm charged excessive fees.
  • The suit notes that the State's Attorney in Prince George's County, Md., has opened a criminal inquiry into the firm's practices and has received statements from a former employee who said he was told to sign thousands of affidavits without seeing any evidence that the statements in the affidavits were true.
  • The plaintiffs, Charles Smalley and Pamela Ball, lost their homes in foreclosure actions involving the Shapiro & Burson firm, even though the firm allegedly did not have possession of the documents necessary to justify the actions.


  • Jose Portillo, an employee of the law firm, signed the affidavits that resulted in the foreclosure and Ball's subsequent eviction. Portillo later exposed practices he said he was forced to undertake and described "an elaborate robo-signing operation whereby each Defendant financially benefitted from fees and commission in carrying out foreclosures tainted by fraud," the suit alleges.
  • Portillo also stated that he witnessed attorneys forging other attorneys' signatures to foreclosure documents.


  • The lawsuit is filed on behalf of all Maryland residents whose residential property was foreclosed by Sharpiro & Burson during the last four years. It estimates there are at least 250 members of the class and "potentially thousands," based on Portillo's statements. It seeks an award of triple damages for each class member.

For more, see Law Firm's Robo-Signers Defrauded Thousands, Class Action Charges (Suit says Virginia law firm illegally foreclosed on "potentially thousands" of Maryland homes).

For the lawsuit, see Smalley, et al. v. Shapiro and Burson, LLC.

(1) The individual attorneys named as defendants in this alleged robosigner racket are:

  • John S. Burson, William M. Savage, Gregory N. Britto, Jason Murphy, Kristine D. Brown, and Erik W. Yoder.

Sunday, April 17, 2011

"Bottom Of The Barrel" Has Not Yet Been Reached, Says Bankruptcy Judge In Slamming Mortgage Servicing Fraudsters Filing "Sham" Foreclosure Affidavits

In New Orleans, Louisiana, Housing Wire reports:

  • The U.S. Bankruptcy Court for the Eastern District of Louisiana will sanction Lender Processing Services after an employee at the firm was found to have improperly signed a court affidavit that put a nondefaulted borrower in line for foreclosure.
  • Ron and LaRhonda Wilson were current on their mortgage and making payments under a court-approved Chapter 13 bankruptcy plan when Option One Mortgage Co., their mortgage servicer, attempted to foreclose in early 2008 by filing a series of motions with the court.
  • The U.S. Trustee, a U.S. Department of Justice unit responsible for overseeing the administration of bankruptcy cases, eventually intervened in the dispute and last December asked the Louisiana court to sanction LPS for what it said was the firm's misrepresentation of payments received, but not properly posted to the borrower's account.
  • U.S. Bankruptcy Judge Elizabeth Magner ruled in an order entered last week that the affidavit of indebtedness an LPS employee signed on behalf of Option One, attesting to the debt owed and alleged nonpayments, was a fraud on the court.


  • "The affidavit is typical. It purports to be executed under oath before a notary and two (2) witnesses," Magner said in her ruling. "It provides the name and title of the affiant and represents that the affiant has personal knowledge of the facts contained in the affidavit. In fact, it is a sham."
  • LPS officers executed 1,000 documents per day for Option One and other clients, and testified that each day [LPS' robosigner Dory] Goebel received roughly 30 documents to sign, according to court documents. Ms. Goebel allocated two hours per day for "document execution" and she estimated in her testimony that it took her between five and 10 minutes to sign each one, reviewing the computer record of those payments posted.
  • The judge characterized Goebel as an "earnest young woman but with no training or experience in banking or lending" for her job and title of "assistant secretary." Goebel admitted she would have signed the affidavit, even if she knew of the unposted payments, without questioning it because her signature was requested by legal counsel at The Boles Firm.
  • "It is evident that LPS blindly relied on counsel to account for the loan and all material representations. In short, the affidavit was nothing other than a farce and hardly the evidence required to support relief," Magner wrote in her ruling.
  • Magner said default affidavits were meant to be a lender's representation to the court of the status of the loan and were accepted routinely in state and federal courts in lieu of live testimony. "They are an accommodation to the lending community based on a belief by the courts that the facts they present are virtually unassailable. The deference afforded the lending community has resulted in an abuse of trust," Magner wrote.(1)


  • In her ruling, Magner suggests that such shortcuts were rampant across an entire industry. "The fraud perpetrated on the court, debtors and trustee would be shocking if this court had less experience concerning the conduct of mortgage servicers. One too many times, this court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry," Magner said in her ruling.
  • "With each revelation, one hopes that the bottom of the barrel has been reached and that the industry will self correct. Sadly, this does not appear to be reality."

For more, see Tech snafu, improper foreclosure affidavit lead to sanctions for LPS.

For Judge Magner's ruling, see In re Wilson, Case 07-11862 (Bankr. E.D. La. April 6, 2011).

For additional background information on this case, see DailyFinance: When Banks Outsource Foreclosures, Nothing Good Happens:

  • It's a Louisiana bankruptcy case involving a single foreclosure that best illustrates the problems with the banks' outsourcing their mortgage default work to LPS or similar entities.


  • In that Lousiana case, involving the bankruptcy of Ron and La Rhonda Wilson, LPS is facing sanctions for allegedly committing perjury during a hearing held to find out why the bank -- Option One -- twice asked the bankruptcy court for permission to foreclose when the debtors were current on their mortgage.

(1) Judge Magner continued with this observation on the loan servicer's abuse of trust:

  • The abuse begins with a title. In this case, Ms. Goebel was cloaked with the position of "Assistant Secretary,” in a purposeful attempt to convey an experience level and importance beyond her actual abilities. Ms. Goebel is an earnest young woman, but with no training or experience in banking or lending. By her own account, she has rocketed through the LPS hierarchy receiving promotions at a pace of one (1) promotion per six (6) to eight (8) month period. Her ability to slavishly adhere to LPS’ procedures has not only been rewarded, but has assured the development of her tunnel vision. Ms. Goebel does not understand the importance of her duties, and LPS failed to provide her with the tools to question the information to which she attests.


  • In this case the lender and LPS cloaked Ms. Goebel with a title that implied knowledge and gravity. LPS could have identified Ms. Goebel as a document execution clerk but it didn’t. The reason is evident, LPS wanted to perpetrate the illusion that she was both Option One’s employee and a person with personal and detailed knowledge of the loan. Neither was the case.

Florida Appeals Court Reverses Foreclosure Judgment, Boots Case Back To Lower Court As 'Senior' Judge Gets 'Nabbed' For Empty-Headed, Rubber-Stamping

In a straightforward, two-paragraph ruling, a three-judge panel of Florida's Fifth District Court of Appeal recently reversed a foreclosure judgment from an Orange County Circuit Court issued by Senior Judge Emerson R. Thompson, Jr.

The dearth of extensive legal analysis in a case a court needed only two paragraphs to dispose of,(1) coupled with the fact that no attorney bothered to appear on appeal on behalf of the foreclosing bankster, is an indicator that the foreclosure judgment was so obviously flawed on its face that it shouldn't have required the effort and expense to seek an appeals court correction to arrive at the proper result in the first place.

In my view, this foreclosure judgment is an example of garbage cranked out by an out-of-control 'rocket docket' fueled by rubber stamping, senior trial judges called out of retirement to keep the court's foreclosure 'assembly line' moving along (and to pocket an additional retirement check), and it took the filing of an appeal by the victimized homeowner to obtain vindication.(2)

Representing the homeowner was Kaufman, Englett & Lynd, PLLC, of Orlando, Florida.

For the ruling, see Khan v. Bank of America, 5D10-3288 (Fla. 5th DCA, April 8, 2011).

(1) The court's analysis follows:

  • In its amended complaint to foreclose a mortgage on the Khans' home, Bank of America alleged that it was the owner and holder of the note and mortgage. However, the copy of the note attached to the amended complaint bears an endorsement from Bank of America to Wells Fargo Bank, N.A. as trustee for the holders of Banc of America Mortgage Securities, Inc. Mortgage Pass-Through Certificates, Series 2006-B. The Khans correctly raised the issue of Bank of America's standing to prosecute the foreclosure based on the assignment of the note to Wells Fargo Bank.

    The proper party with standing to foreclose a note and mortgage is the holder of the note and mortgage or the holder's representative. See Taylor v. Deutsche Bank Nat. Trust. Co., 44 So.3d 618, 622 (Fla. 5th DCA 2010); BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So.3d 936, 938 (Fla. 2d DCA 2010). While Bank of America alleged in its unverified complaint that it was the holder of the note and mortgage, the copy of the note attached to the amended complaint contradicts that allegation. When exhibits are attached to a complaint, the contents of the exhibits control over the allegations of the complaint. See Hunt Ridge at Tall Pines, Inc. v. Hall, 766 So.2d 399, 401 (Fla. 2d DCA 2000). Because the exhibit to Bank of America's amended complaint conflicts with its allegations concerning standing, Bank of America did not establish that it had standing to foreclose the mortgage as a matter of law. As a result, the trial court acted prematurely in entering the final summary judgment of foreclosure in favor of Bank of America. We, therefore, reverse the final summary judgment of foreclosure and remand for further proceedings.

(2) In a related story, see Housing Wire: Florida foreclosure defense attorneys allege 'rocket docket' abuses:

  • [A]ffidavits filed last week by ACLU attorneys representing homeowners, suggest Florida's attempt to speed up the process has been a detriment to homeowners challenging their foreclosures.
  • The ACLU filed its petition with a Florida appellate court last week in an attempt to block the court from rushing foreclosures through this "rocket docket." In its filing, defense attorneys from across the state complained of judges' actions.

For more from the American Civil Liberties Union in their recent efforts to curb the crap created by Florida 'rocket dockets', see:

Lender Gives Up On Foreclosure, Discharges Mortgage, Cancels Debt, Hands Florida Man Free & Clear Title To Home

In Jacksonvile, Florida, The Florida Times Union reports:

  • Perry Laspina was in the middle of foreclosure with the possibility of losing the house he owned in Jacksonville. Then the mail came one day in late January telling him that the house was his. Despite the $72,000 mortgage that he barely paid anything on, despite the foreclosure ... the house was his.
  • In the middle of foreclosures gone wild, of a system overloaded by sheer volume, judicial investigations and allegations of corners cut, Laspina ended up with the house. Despite the fact that he didn't have an attorney in the foreclosure proceedings, the mortgage holder simply gave up and walked away. "I've never seen anything like this in my life," he said.
  • It's a tale populated with many of the major players in the national foreclosure drama: The law firm of David Stern, the Mortgage Electronic Registration Systems (better known as MERS) and a mortgage packaged with others and sold into a securitized trust.

For how it happened, see Bank gives man foreclosed house for free.