Saturday, June 4, 2011

Suspect Who Pleaded Guilty In Las Vegas Foreclosure Rescue Scam Ordered To Cough Up $6K In Victim Restitution

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

  • A man who pleaded guilty to misdemeanor petty theft in connection with a foreclosure rescue scam that he operated in Las Vegas in 2009 was ordered to pay his victims $6,086, Nevada Attorney General Catherine Cortez Masto said []. Vu Thuy Chau, also known as Steve Chau, operated under the business name U.S. Housing Help.

Source: Man ordered to pay $6,086 in foreclosure rescue scam.

Recently-Indicted Title Agent Cops Quick Plea In Serial Refinancing Scam; Accused Of Failing To Terminate Existing HELOC, Then Borrowing Against It

From the Office of the U.S. Attorney (District of Columbia):

  • Ronald Johannes Sneijder, 48, a former owner of a title and escrow company based in the District of Columbia, pled guilty today to the lead count in a recently filed indictment, bank fraud, [...].

***

  • He also agreed to forfeiture of $1,256,000. He is to be sentenced later this summer or fall [...] . Sneijder faces a probable sentence under the sentencing guidelines of 30 to 37 months of incarceration, restitution in the amount of $1,256,000, a fine, and other conditions.

For more, see Former Title and Escrow Agent Pleads Guilty to Mortgage Fraud Case Involves More Than $1.8 Million in Loans.

Nevada AG Bags Suspect In Alleged Home Equity Theft Ripoff Involving Forged Documents

From the Office of the Nevada Attorney General:

  • [T]he Office of the Nevada Attorney General announced the arrest Shafik Hirji for Theft in excess of $2,500 – a class B felony, and three counts of Uttering Forged Instruments – class D felonies. The arrest was made in connection with Hirji’s alleged theft of home equity in connection with a mortgage loan.

For the Nevada AG press release, see Attorney General Office Announces Arrest Of Shafik Hirji.

Closing Attorney Screws Up, Leaves Homebuyer Holding Foreclosure Notice Over Unpaid Real Estate Taxes; Forks Over Cash After Media Intervenes

In Charlotte, North Carolina, WSOC-TV Channel 9 reports:

  • A Charlotte homeowner was upset he got a tax bill after, he said, his closing attorney made a mistake. Antwan Morris said he got a great deal when he bought a starter home three months ago for $69,000.
  • But weeks later, he said, he got a final tax foreclosure warning for $1,300 in delinquent property taxes the previous owner didn't pay. “It definitely scared me,” Morris said. Morris blamed the attorney who handled the closing for failing to deduct the taxes before giving the seller his settlement check. “The taxes didn't get paid, (and) the attorney is not owning up to his mistake,” Morris said.
  • He said attorney Marcel McCrea of the Phillips McCrea Law Firm promised to pay the taxes but hadn’t and wasn’t returning his phone calls. Action 9 went looking for McCrea at an office he shares on Morehead Street, but a man there said he hadn’t been in that day. Action 9’s Don Griffin then called McCrea. He admitted he made a mistake and said he would pay the taxes.
  • Morris now has a receipt showing the taxes were paid in full. “It’s a relief, a big relief,” he said. “A load off me.” Morris now tells home buyers to get recommendations from their Realtors when selecting a closing attorney.

Source: Man Gets Unexpected Bill After Attorney Makes Mistake.

S. California Man Gets 21 Months In HELOC Scam; Applied For Multiple Accounts Simultaneously From Snoozing Lenders In $672K Ripoff

In Los Angeles, California, The Daily Breeze reports:

  • A former Marina del Rey man was sentenced Monday to 21 months in federal prison for defrauding banks by seeking home equity lines of credit simultaneously from four different federally insured financial institutions.
  • Larry P. Corbi Jr., 36, had pleaded guilty in Los Angeles federal court in November to one count of bank fraud, according to the U.S. Attorney's Office. In addition to the prison term, U.S. District Judge Dale S. Fischer ordered Corbi to pay $356,644 in restitution.
  • According to a plea agreement, Corbi bought a $620,000 home in Granada Hills in November 2007. In March 2008, he applied for four home equity lines of credit in amounts ranging from $122,000 to $191,000 from Washington Mutual Bank, GMAC ResCap, Countrywide Bank F.S.B. and Metlife Bank/PHH Mortgage Corp., prosecutors said.
  • Corbi concealed from each financial institution that he was concurrently applying for other credit lines that would also be secured by the Granada Hills home. Three of the four lines were approved and funded. In total, Corbi obtained $672,144 in loan proceeds, which included $200,000 he borrowed to buy the Granada Hills house, according to federal prosecutors.

Source: Former Marina del Rey man sentenced in home equity scheme.

Financially Strapped NY Mets' Owners To Dodge Foreclosure; Agree To Deed-In-Lieu

The Wall Street Journal reports:

  • The real-estate investment management business controlled by besieged Mets owners Fred Wilpon and Saul Katz is giving up a struggling Long Island office- building complex to its creditors, according to a person familiar with the matter.
  • Facing a foreclosure, a venture led by Sterling American Property Inc. is set to hand the keys of Woodlands Office Park, a 127,000-square-foot complex bought near the top of the market, to its mortgage holder, the person said.
  • The debt on the building, which had a balance of $12.7 million last summer, had been carved up into commercial mortgage backed securities after it was issued. It was being managed by ORIX Capital Markets, a special servicer. Gregory Nero, Sterling American's general counsel, declined to comment on the imminent transfer, known in the real-estate business as a "deed in lieu of foreclosure."

***

  • Messrs. Wilpon and Katz, of course, are dealing with other challenges much bigger than the loss of one complex by their real estate fund division. They face a $1 billion lawsuit filed by the trustee representing the victims of convicted Ponzi schemer, Bernard Madoff, claiming they should have known about the fraud.

For more, see Mets Owners Set to Turn Over Property.

Cops: Grandson Used Elderly Woman As Dupe To Score Loot In Real Estate Scam; Granny Left Embarrassed, Without Life Savings

In Highlands Ranch, Colorado, KUSA-TV Channel 9 reports:

  • Kirt McGhee lied about his grandmother's income on loan applications and used her credit to buy four homes worth $2.5 million, a Mercedes Benz, a Hummer and $14,000 worth of furniture, 9Wants to Know has learned. He promised to pay it all back, but never did.

  • Court records show he refinanced the homes and walked away with $100,000 in equity while the four homes fell into foreclosure, the Mercedes was repossessed and his grandma's life savings disappeared.(1)

  • "It just breaks my heart to think that my grandson would do this to me," said Mary, who didn't want 9Wants to Know to use her last name because she's embarrassed. "It's shameful to me to think that I fell for it, allowed this to happen to me and I'd rather people didn't know."

For more, see Grandson charged with spending grandma's life savings.
(1) Reportedly, McGhee, 38, has been charged with:
  • theft,
  • defrauding a creditor,
  • identity theft,
  • crimes against at-risk adults,
  • forgery,
  • issuing a false financial statement, and
  • obtaining signature by deception.
In a matter unrelated to the alleged scamming of his grandmother, the Colorado Division of Real Estate reportedly forced McGhee to surrender his real estate license last year, after an investigation found him guilty of making false promises to multiple renters in a rent-to-own racket. According to an investigative report in 2008, McGhee engaged in "a scheme to defraud renters and other participants in the Turn Key Investments, lease to own program," the story states.

Friday, June 3, 2011

Cops Pinch Florida R/E Broker For Allegedly Swindling Nearly $300K By Trying To Sell Condos Owned By Others That Were In Foreclosure Or Off Market

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

  • A former president of a condominium association was arrested on fraud charges Friday after police said she swindled nearly $300,000 by trying to sell condos that were in foreclosure or off the market.
  • Barbara Lockett, 49, a licensed real estate broker, is charged with scheme to defraud. Police say Lockett told Dunedin businesswoman Kelly Choi that 22 condos at the Mission Hills Condominiums were good investments and open for sale. Lockett said she would help Choi, 48, complete paperwork and deal with the banks and told Choi where she could wire her money.
  • "She suggested she would teach me how to be an investor," Choi said. "I trusted her completely." As months passed, Choi began questioning why the owners were slow to respond. Lockett made excuses, blaming the slow economy, Choi said. That's when Choi contacted the owners, who told her they knew nothing of the deals, she said.

***

  • Lockett was arrested about 5 p.m. Friday and taken to the Pinellas County Jail, where her bail was assessed at $100,000. Police say there may be additional victims. Mission Hills, a sprawling complex south of Coachman Road and east of U.S. 19, has more than 400 condos for residents 55 years old or older.
  • Lockett, who also went by the name Diane, was president of the Mission Hills association's board of directors, presiding over more than $2 million in association fees. Shortly after Choi's police report last year, the board asked her to resign.

For more, see Former president of Clearwater condo association accused of fraud.

Florida Man Faces Organized Fraud Charge For Allegedly Using Dubious Docs In Title-Hijacking Racket Targeting Homes In Foreclosure, Unwitting Renters

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

  • A Wellington man was collecting thousands of dollars in rent every month on homes he didn't own, all while living in a posh five-bedroom house in the gated Versailles community, according to a Palm Beach County Sheriff's Office investigation.
  • Kesner Joaseus, 41, was arrested Thursday and charged with one count of organized fraud following a nine-month investigation that found 30 questionable quit-claim deeds giving Joaseus' company ownership of the properties.
  • Joaseus then could turn on the utilities in the homes, which were in foreclosure. In 10 cases where owners could be found, they confirmed to sheriff's detectives that they did not sign the quit-claim deeds giving K&R Investment Capital rights to the properties. Five of the 10 homes had been rented out with monthly payments as high as $1,200.

***

  • A quit-claim deed on Joaseus' own 8,000-square-foot Versailles home is one of the 30 questionable documents. Since 2006, the house has had two quit-claim deeds filed in the name of Joaseus' wife, Rose, with a $2 million sale recorded to a third party between the two deeds.

***

  • Palm Beach County Clerk of Courts Sharon Bock warned Friday that homeowners should watch for false or fraudulent filings made on their homes. It can be an expensive problem for the true home­owner, who may have to spend thousands of dollars and months in court to confirm ownership of the property and obtain an eviction.(1)

***

  • The quit-claim deeds filed by Joaseus also involved two notaries who admitted to detectives that they would stamp the deeds even though the owner of the property wasn't present. It is believed a third notary's stamp was stolen and his signature was forged on the deeds. It was the third notary's name that appears on a 2009 quit-claim deed awarding the Versailles home to Rose Joaseus, officials said.

For more, see Wellington man accused of filing questionable quit-claim deeds.

(1) Typically, it's up to the victimized homeowner to file a civil lawsuit known as a quiet title action, in which he/she has the burden of proving that the rogue land documents are forgeries, in order to remove any 'clouds', or claims (either legitimate or purported) on the title and otherwise clear up the mess and reclaim his/her home title. Further, the lawsuit has to name the scammer who perpetrated the ripoff, as well as anyone else (ie. mortgage lender, lienholder, subsequent purchaser, etc.) who may have acquired a purported interest in the property (innocently or otherwise) concurrent with, or subsequent to, the ripoff.

Defunct Title Insurance Agency Tagged With Lawsuit Over Alleged Failure To Pay Off Liens At Closing On New Home Sales Involving Dubious Developer

In Clark County, Nevada, Vegas Inc. reports:

  • Lawsuits are piling up in what attorneys call another real estate scam in Las Vegas — one in which buyers of new homes faced foreclosure a few months later because liens hadn’t been paid off during the escrow process and fraudulent title insurance policies were issued.
  • At the center of the litigation is the now-closed Direct Title Insurance Agency Inc., which operated at 8965 S. Eastern Ave., Suite 150. That company and others were hit with a class-action lawsuit alleging racketeering on April 15 in Clark County District Court in Las Vegas by attorney Matthew Callister.
  • Two homeowners in that lawsuit said they bought new homes late last year from Nevada Homes Group Inc./Wagner Homes Inc. in northwest Las Vegas neighborhoods called Day Dawn Vista and Day Dawn Crossing II — but both soon received foreclosure notices. That’s when they learned bank, subcontractor and homeowner association liens they were unaware of hadn’t been paid off at closing.
  • The title insurance policies were fraudulent, the lawsuit charged, because they falsely represented the homeowners were buying homes free and clear of encumbrances.

***

  • The lawsuit says Paul Wagner is the president of Wagner Homes and is a director of Nevada Homes Group. A different individual, Paul Wagner IV, is president of Nevada Homes Group, the lawsuit says.
  • The suit says Wagner Homes/Nevada Homes Group induced the homebuyers into choosing Direct Title Insurance Agency for escrow and title insurance services, but didn’t disclose that Paul Wagner, the founder of Wagner Homes, had been indicted last year on bank and wire fraud charges.
  • Wagner has pleaded innocent in that case in which a federal grand jury alleged that from 2007 to 2009, as a home builder, he arranged to sell homes at inflated prices to fraudulently kick back money from the mortgage loan to buyers as incentives for them to buy his homes.
  • The plaintiffs were not told that Nevada Homes Group was in reality a change in name only, designed to conceal the fact of Wagner’s indictment, and that the Wagner family still were the owners of Nevada Homes Group, with Paul Wagner IV being president and Paul Wagner being an officer,” the lawsuit charges.

For more, see Lawsuits allege Las Vegas homebuyers victims of title insurance scam.

Post-Closing Meth Contamination Discovery Keeps Couple From Moving Into 1st Home As 'Wells' Unloads REO Once Used By Squatters As 'Party Pad'

In Colorado Springs, Colorado, The Gazette reports:

  • In a scenario that plagues all too many homebuyers throughout the U.S., the Hardys discovered they’d bought a house contaminated by methamphetamine. In this case, the contamination apparently came from people using, not manufacturing, meth. (Click here to read a Q&A on how properties can become contaminated with meth.)
  • No matter; several samples taken from the house tested positive for meth contamination, and not willing to expose themselves to it anymore than they already had, the Hardys haven’t entered it since.
  • Now, they’re stuck with a $1,114-a-month house payment on a property they can’t occupy, while facing enormous cleanup costs. All their belongings, including the new furniture, remain in the house. Lauren, who learned she was pregnant right around the closing, miscarried a few weeks later.
  • Lauren’s father, Bob Wenz, has become the couple’s advocate, trying to make things right and hold someone accountable, but it may be a difficult battle to win. “It’s a mess,” Wenz said.
  • The Hardys want theirs to be a cautionary tale for anyone purchasing a house in Colorado, and they offer one piece of advice: Spring for the money for a meth-contamination test, because you can’t count on current laws to protect you, and you can’t know for sure what once took place in that property.

***

  • The house, built in 1989, went into foreclosure in July 2009. Wenz said it appears the owners had been renting it, and the renters trashed it. The bank that serviced the mortgage, Wells Fargo, took ownership of the house, then turned it over to the Veterans Administration, which guaranteed the loan.
  • Around that time, neighbors were reporting suspicious activity at the house, with people coming and going at all hours of the day. One neighbor, Mary Meredith, called the Wells Fargo office in San Francisco and spoke to someone in the president’s office.
  • What I told them was that there was a lot of traffic going in and out of the house,” she said. “We felt there were people who were actually — I guess the term would be squatting — in the house, and we suspected extensive drug use in the house, if not trafficking.”
  • It’s possible that Meredith’s complaint could have triggered a test for meth contamination and a cleanup, but no one acted on it. Jason Menke, a spokesman for Wells Fargo Home Mortgage, says their records show that neighbors called twice in July 2009 to report the property was “not secure,” and Wells Fargo passed along the information to the VA.
  • Our records indicate we were made aware that the property was not secure, but there’s nothing specific related to drug use or activity,” he said. The VA did not return phone calls to discuss what information they were given or whether they had reports of drug use at the house.
  • A series of arrests at the house in 2009 also failed to trigger any notification of possible meth contamination. In June 2009, sheriff’s deputies went to the house to check on a complaint about barking dogs and arrested a woman for possession of drug paraphernalia.
  • About three months later, deputies were called to the house again, and encountered the same woman, who admitted she had been “partying heavily the past few weeks,” according to the report. Deputies found meth in the master bedroom and another bedroom. The house was in shambles, the toilets were full of feces, and dog feces littered the basement floor.

For more, see Meth contamination haunts Springs homebuyers ('It really is buyer beware').

(1) For other stories relating to the unwitting purchase of homes infected with methamphetamine residue, see:

$200K+ Engineering Screw-Up May Force Alabama Couple, Neighbors Out Of Custom-Built Homes

In Autaugville, Alabama, the Montgomery Advertiser reports:

  • Jim and Lisa White stand inside their home at Cottrell Landing subdi­vision, not knowing if engi­neering errors will force them to leave it because their house does not meet floodplain ordinance standards.
  • Two years after they moved into their custom-built home that sits alongside Swift Creek, they learned it was constructed five-feet below the required flood ele­vation. It wasn't just their home, but the homes of four other fami­lies in their subdivision of six houses.
  • The Whites, whose home is 10 feet off the ground from the front lot line, have been told to fix the problem at their own cost. That's some/thing they can't af­ford to do. "I want someone to step up and take care of this," Jim White said. "We've been trying to get the issue taken care of outside of a lawsuit."
  • The Cottrell Landing homes are in violation of the Autauga County Floodplain ordinance, which requires that their homes' finished floor elevation be con­structed 1 foot above the base flood elevation, which is de­termined by the Federal Emergency Management Agency.
  • The Whites recognize the danger of floods. It's hard for them not to as they follow the cresting waters of the Mississippi River and the damage it is causing as it flows through state after state until it reaches New Orleans and the Gulf Coast.
  • The Whites' home was built high above the nearby waters, just not high enough. "Their situation is more unique," said David Bufkin, Autauga County engineer. "The houses were built and they used an erroneous benchmark and it messed all of them up, so all of the houses are off, about 4.5 feet too low."
  • A little more than four feet may not sound like much, but raising the house would cost more than $200,000 and not raising it could cost them their home since they could be forced out of the house if it is not in compliance. The Whites said they and their neighbors built their houses to comply with what they were told were the building requirements.

For the story, see Engineering errors may force families out of homes.

Thursday, June 2, 2011

1031 Exchange Facilitator Convicted In Escrow Funds Swindle; 4 Victims Left Without $21M In Proceeds From Real Estate Sales Earmarked For Reinvestment

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

  • Ezri Namvar, a prominent Los Angeles businessman and real estate developer, was found guilty [] of four wire fraud charges for stealing approximately $21 million from four clients who allowed his “qualified intermediary” company to hold their money in safekeeping before it was reinvested in real estate. [...] The jury convicted a second defendant on the four wire fraud charges. Hamid Tabatabai, 63 of Agoura Hills, was Namvar’s right-hand man at the qualified intermediary company.

***

  • The evidence presented at trial showed that four victims entered into agreements to have approximately $25 million deposited with Namvar’s company, Namco Financial Exchange Corp. (NFE), which held itself out as a qualified intermediary for real estate transactions commonly called “like-kind exchanges,” “tax-free exchanges” or “1031 exchanges.” Under exchange agreements with NFE, the money belonging to the victims was to be held in safekeeping so the money would be available upon demand to effectuate 1031 exchanges.
  • However, instead of holding the money as promised, Namvar, with the assistance of Tabatabai, used the victims’ money for a variety of unauthorized and undisclosed purposes, including paying off creditors and investors of Namvar’s investment company, Namco Capital Group, Inc. (NCG).

***

  • During the course of the fraudulent scheme, the four victims provided NFE with approximately $25 million in 1031 exchange proceeds, of which only approximately $4 million was returned to or used on behalf of the victims.(1)

For the U.S. Attorney press release, see Prominent L.A. Businessman Convicted On Federal Fraud Charges For Stealing $21 Million Entrusted To His Firm.

Go here for other posts on Section 1031 exchange escrow ripoffs.

(1) In addition to losing their money, the victims also face a stiff Federal income tax bill (a bill they were looking to defer by reinvesting their loot within a certain time frame, in accordance with Section 1031 of the Internal Revenue Code) on the profits from the real estate investment sales that generated the proceeds, with the prospect of having insufficient cash to pay it.

So-Called 'Sovereign Citizen' Gets 17+ Years For Screwing Over 17 Churches In Bogus Debt Reduction Foreclosure Rescue Scam

In Memphis, Tennessee, The Commercial Appeal reports:

  • A Memphis man has been sentenced to 17 1/2 years in federal prison after his conviction earlier this year of running a bogus debt-reduction company that defrauded regional churches of hundreds of thousands of dollars.
  • Charles A. McKuhn Jr. traveled to several states in 2009 and met with pastors and church officials, falsely represented himself as a banker and persuaded them to pay him large sums of money for debt reduction and lines of credit for building funds, court documents show.
  • He also convinced churches that owed debts to banks and other lending institutions not to pay those institutions, but to pay his companies called Intersec Capital Trust and Taurian Worldwide Inc.

For the story, see Memphis man gets 17 years for bilking churches.

For earlier post, see Trial Begins For "Sovereign Citizen" Accused In F'closure Rescue, Loan Reduction Scam; Judge Rejects "Diplomatic Immunity/Moor Defense" As "Gibberish".

For the details of the criminal charges, see U.S. v. McKuhn.

Go here for other posts on rackets involving so-called sovereign claims.

4 Sentenced In Straw Buyer Scam That Fleeced Banks, Then Used 'Rent To Own' Lure To Dupe Would-Be Buyers Into Paying On Homes That Ended In F'closure

In Raleigh, North Carolina, The News & Observer reports:

  • Triangle, state and federal officials say they used a relatively new state law to break up a mortgage fraud ring in the Triangle that bilked housing lenders across the state out of millions of dollars. Four people were charged with being part of the ring and were the first to be convicted under the N.C. Residential Mortgage Fraud Act of 2007.
  • Douglas Scott Allen, 37, his wife Renee Keiser, 44; Antonious Iskander, 27; and Matthew Garrett, 45, all were sentenced to prison as a result of their involvement in a mortgage fraud scheme with Saving Carolina, a company that operated in Wake and Durham counties, according to state Commissioner of Banks Joseph Smith Jr.(1)

***

  • Authorities say they participated in a scheme that involved the purchase of residential properties by illegitimate borrowers, who submitted false information about their employment and income to qualify for mortgage loans.
  • The properties were then rented to residents who hoped eventually to own the properties. The conspirators pocketed the cash but never repaid the loans, causing the properties to go into foreclosure, resulting in millions of dollars in losses to the home lenders.

For the story, see Four sentenced for mortgage fraud.

For the North Carolina Commissioner of Banks press release, see N.C. Commissioner of Banks and Wake County District Attorney Stop Mortgage Fraud Ring.

(1) According to the story:

  • Allen pleaded guilty to five counts of obtaining property under false pretenses and was sentenced to 44 to 62 months in prison;
  • Garrett pleaded guilty to one count of residential mortgage fraud and was placed on 18 months of probation and fined $5,000. Garrett's real estate license was suspended;
  • Iskander pleaded guilty to two counts of residential mortgage fraud and was placed on 18 months of probation and fined $2,000;
  • Keiser spent eight months in jail and was sentenced to time served after she pleaded guilty to residential mortgage fraud. rent skimming

Servicemembers Find Themselves Battling On Home Front As Well As In War Zones; Financial Struggles Make Maintaining Security Clearances Uncertain

In Las Vegas, Nevada, the Las Vegas Review Journal reports:

  • These soldiers and airmen have dropped bombs or have seen them explode in Iraq and Afghanistan, so they know firsthand the stress of fighting the nation's wars. Now they are battling a different kind of stress at home in the Las Vegas Valley -- the chronic stress that weighs on them from being at ground zero of the mortgage crisis.
  • When they get orders to move somewhere else, they have no choice but to go. In many cases, they face six-figure losses on their homes through short sales or foreclosure.
  • They also risk losing their security clearances, which could prevent them from flying warplanes and leading troops after they arrive at their new assignments. "This has been more stressful than my deployment," said Lt. Col. Eric Wishart, who is trying to sell a home worth 60 percent less than he paid for it. "And going to Afghanistan is no picnic."
  • Wishart is not alone. More than a thousand airmen at Nellis Air Force Base have been trapped in the mortgage crisis and are unable to refinance, according to a survey by Rep. Joe Heck, R-Nev. The survey found 740 airmen upside down on their mortgages don't qualify for the Pentagon aid program, another 263 can't sell their homes at a break-even price and some are renting them at a monthly loss.
  • Of the base's 8,932 personnel, 32 are in foreclosure and 98 have completed short sales or are in the process of completing one. After seeing this snapshot of what is happening at Nellis, Heck proposed an amendment to a defense bill to shed more light on the problem. While the bill doesn't provide funding for an assistance program, it would study the problem nationwide across all branches of the services.
  • "Service members become distracted by personal and financial issues, rather than focusing on their mission," Heck said earlier this month , noting that a soldier's ruined credit makes it difficult for them to maintain their security clearances.

For more, including the stories of a couple of the airmen, see When troops get orders to move, some risk losing houses.

Failure To Search Title Leads To F'closure For Homeowner Despite Making All Payments; Builder Failed To Pay Off Existing Lien In Owner-Financed Sale

In Weslaco, Texas, KRGV-TV Channel 5 reports:

  • A sign of the future connected to pain of the past. Behind the plastic and metal of the auction sign is an experience too sad for Nelda Rodriguez to bear. "There I go again," said Rodriguez as she wiped her tears. This home was her dream. It was her escape from violence. "It's just one thing after another after another," said Rodriguez. Rodriguez said her ex husband abused her.
  • She moved here to get away. A year later she gets this a notice. "The attorney to Compass Bank said this house is not mine," said Rodriguez. The notice said she didn't own the home and the true owner is in foreclosure. "I have my receipts and I was paying everything I was suppose to be paying," said Rodriguez. She called CHANNEL 5 NEWS for help. We investigated.
  • We pulled records on the property and the home. Turns out, Compass Bank is right: Rodriguez doesn't own this home. She owner-financed it through a construction company. "I feel real bad. In a way, I feel dumb because I let this happen to me," said Rodriguez.
  • Dunlyn Homes, L.L.C., the construction company, owned the house Rodriguez moved into. They had financed the building of the home through the bank. The bank claimed it had not been paid and demanded payment in full. Dunlyn Homes wasn't able to meet that obligation. The bank foreclosed on the house.
  • We tracked down the man in charge of the company. Juan Noriega was president of the construction company at the time Rodriguez bought her house. Noriega agreed there was a lien on the home, but he claimed it was a mistake. He says the bank agreed to extend the loan and take his payments. He claims he made them.
  • "Texas State Bank said don't worry about it. Just rent it or owner finance the houses, whatever you do as long as you take the payment. We'll worry about it in a couple of years," said Noriega over the phone.

For more, see Owner Financed Home Foreclosed.

Wednesday, June 1, 2011

NY Appellate Court Has Critical Words For MERS In Recent Ruling; Could Be Sign Of Things To Come For Foreclosure Actions In Empire State

Housing Wire reports:

  • A decision by New York's 2nd Appellate Division may not have a direct impact on the issue of when Mortgage Electronic Registration Systems has standing in foreclosure cases, but it contains persuasive language that could be a shot across the bow when it comes to jurisdiction relating to MERS.
  • In Aurora Loan Services v. Steven Weisblum, the appellate court overturned a lower court's decision to dismiss claims the Weisblum family made against Aurora. The appellate court concluded that Aurora's motion for summary judgment should have been denied and said Aurora failed to comply with the Real Property Actions and Proceedings Law under the Home Equity Theft Prevention Act.
  • While the decision was not directly based on MERS, attorneys say language in the decision could impact later court rulings because it gives an appellate court's view on how MERS operated in this particular transaction.

***

  • On the MERS standing issue, which is not what the case was decided on, the Weisblums argued that Aurora did not have standing because it failed to provide evidence of MERS' authority to assign the first mortgage note tied to the home.
  • The court said "Aurora failed to provide a copy of the first note but submitted a copy of the original first mortgage and a series of assignments culminating in the purported assignment of the first note and mortgage to Aurora. The first mortgage was originally held by MERS, as nominee for Credit Suisse; the mortgage document recites that the lender on the first note is Credit Suisse, but there is nothing in this document to establish the authority of MERS to assign the first note."
  • The court goes on to say MERS later assigned the first mortgage with the underlying note and then made successive mortgage assignments. "While, in some circumstances, the assignment of a note may effect the transfer of the mortgage as an inseparable incident of the debt, here the assignment instruments purport to do the opposite, without any evidence that MERS initially physically possessed the note or had the authority from the lender to assign it."
  • The case also outlined what is needed for a foreclosing party to have an equitable interest in a mortgage — namely the plaintiff has to be both "the holder or assignee of the subject mortgage, holder or assignee of the underlying note — either by physical delivery or a written assignment prior to the commencement of the action that led to the plaintiffs filing a complaint." The court ruled Aurora failed to make this showing.

For more, see NY appellate court scrutinizes the MERS standing issue.

For the ruling, see Aurora Loan Servs., LLC v Weisblum, 2011 NY Slip Op 04184 (NY App. Div. 2d Dept. May 17, 2011).

DC High Court Affirms Ruling Nixing Improper Foreclosure Attempt Over $359 Unpaid Water Charge, Voiding Lien Based On Notice Mailed To Wrong Address

A recent ruling by the District of Columbia Court of Appeals affirmed a lower court decision throwing out an attempt by a real estate investor, who ostensibly trafficks in municipal liens, to improperly foreclose on a $359.63 lien for unpaid water & sewer charges on the property belonging to one Charles E. Heyward.(1)

In addition, the court went further and affirmed the lower court ruling finding that, because of a failure to give proper notice (the certificate of delinquent charges that gave rise to the lien was mailed by the D.C. Department of Public Works to the wrong address - 715 Irving Street, N.W. instead of 715 Irving Street, N.E. - maybe a typo by a clerk in the billing department???), the lien itself was void. Accordingly, the water & sewer lien was nullified.(2)

For the ruling, see Crusader v. Heyward, No. 09-CV-1414 (D.C. May 26, 2011).

(1) In this regard, the court stated (bold text is my emphasis):

  • D.C. Code § 34-2407.02 (2001) governs the enforcement of liens for unpaid water and sewer charges, and it specifies the time line and procedures necessary to effectuate such a lien. Specifically, § 34-2407.02 (a)(3) states the “Mayor may enforce the lien . . . in the same manner that real property tax liens are enforced pursuant to Chapter 13 and Subchapter IV of Chapter 13A of Title 47.” Additionally, § 34-2407.02 (a)(4) provides that “real property may be sold for the unpaid water and sanitary sewer charges . . . at a tax sale in accordance with the provisions for the sale of property for delinquent real property taxes pursuant to Chapter 13 of Title 47.” If the property is sold, the purchaser will receive a certificate of sale, but the property owner has the right to redeem the property within the time frame specified by statute. D.C. Code §§ 47-1304, -1306, -1360 (2001).

    Here, there has been no showing that the property was ever offered at a public auction in accordance with the statute. In its brief, Crusader argues that “all of the liens ... subsequently sold and assigned to Strategic [Crusader’s predecessor-in-interest] had previously been bid off at a tax auction in the District of Columbia.”

    In response to that claim, the trial court, relying on several statutory provisions, properly ruled that “assignments between private entities are not ‘tax sales’ as intended by [§] 47-1385.” Crusader cites no contrary authority and there is nothing in the record that indicates any property transfer at a public auction. Moreover, Crusader concedes that there was no tax sale. For these reasons, the trial court correctly concluded that Crusader did not comport with the statutory requirements for enforcing its lien. Therefore, the trial court did not err in dismissing its complaint.

(2) In this regard, the court stated (bold text is my emphasis):

  • Crusader also contends that its lien on the property was valid, and the trial court erred in voiding it. We disagree. As already noted, the certificate of delinquent charges that gave rise to the lien was mailed to Heyward at 715 Irving Street, N.W., but the lien was on property located at 715 Irving Street, N.E. In addition, the original sale of the lien from WASA to Breen Capital did not comport with the requirements of D.C. Code § 47-1303.04 (d) because the document assigning the lien failed to state Heyward’s name and the dollar amount due, including penalties and interest.

    While we have not expressly ruled that a lien is void when a party fails to strictly adhere to the statutory notice requirements, other jurisdictions have recognized this principle. See Town of Pownal v. Anderson, 728 A.2d 1254, 1259 (Me. 1999) (“The failure to properly name a record owner of the property on the tax lien certificate rendered the lien void even when that unnamed owner had actual knowledge of the lien’s existence.”); Cary v. Town of Harrington, 534 A.2d 355, 358 (Me. 1987) (“Because the tax lien certificates recorded by the Town do not strictly comply with the statutory requirements [the certificates failed to properly identify the property owner’s name], the tax lien mortgages are void . . . .”).

    We are in full agreement with the authorities cited above. Crusader’s failure to notify Heyward of his right of redemption is a significant statutory defect, which cannot be cured given our tenets of public policy and strict adherence to statutory compliance. A failure of this magnitude warrants the nullification of the lien itself. Thus, the trial court properly invalidated Crusader’s lien on Heyward’s property.

    The judgment on appeal is Affirmed.

-------------------------------

It may be worth noting that, in voiding the lien, the trial judge relied on Boddie v. Robinson, 430 A.2d 519, 523 (D.C. 1981) in determining that the lien was void, because Crusader failed to notify Heyward of his statutory right to redeem his property in that the notice was sent to the wrong address. The appeals court apparently did not see Boddie as supporting that proposition, and instead, looked to the rulings of the Maine Supreme Court to find support for voiding the lien.

Ohio Appeals Court: Failure To Assert That Notice Of Acceleration Was Sent To Homeowner Sinks F'closure; Another Lower Court Ruling Suffers Reversal

The failure of a foreclosing lender to present any evidence of a written notice of acceleration having been sent to a homeowner was sufficient to sink another foreclosure judgment, according to a recent ruling by an Ohio appeals court.(1)

A second aspect of this ruling that may be of interest to those avid fans of the Ohio Rules of Civil Procedure is that the attorney for the foreclosing lender was successful in improperly introducing evidence in obtaining its foreclosure judgment. In allowing the foreclosing lender's attorney to get away with it, the appeals court apparently had its hands tied by existing case law, noting that the homeowner had not properly objected to the improper introduction of the materials in the lower court proceeding. Because the appeals court booted the foreclosure judgment on other grounds, the homeowner will now get a renewed opportunity to object to the improper evidence.(2)

Another aspect of the court's ruling that may be of interest is that an "official" for the lender who signed a mortgage assignment and an affidavit filed in the case may have been a multiple corporate hat-wearing robosigner. The homeowner had correctly observed that, within about a month, the "official" signed an assignment of the mortgage at issue as a vice president of MERS, and then he signed the affidavit in question as a vice president of CitiMortgage. Because their was no evidence on the record before the appellate court actually contradicting the official's Citimortgage affiliation at the time of the signing of the affidavit, it had no choice but to accept the affidavit.(3)

For the ruling, see CitiMortgage, Inc. v. Elia, 2011-Ohio-2499 (Ohio App. 9th Dist. Summit County, May 25, 2011).

See Florida Appellate Courts Continue The Clean-Up; Another Lower Court Error In Rubber-Stamped Foreclosure Case Caught, Booted Back, where a Florida lower court ruling also recently suffered reversal involving a homeowner's claim that a notice of acceleration was not properly sent by the foreclosing entity.

Thanks to Ohio FRAUDClosure for the heads-up on the story.

(1) In this regard, the court observed (bold text is my emphasis):

  • {¶15} The only statement in Menne’s affidavit that even hints at CitiMortgage having complied with the notice provisions of their mortgage is Menne’s statement that CitiMortgage “has elected to call the entire balance of said account due and payable, in accordance with the terms of the note and mortgage.” CitiMortgage did not present any evidence of written notice actually having been sent to the Elias. Compare GMAC Mtge., L.L.C. v. Jacobs, 9th Dist. No. 24984, 2011-Ohio-1780, at ¶16-18 (upholding summary judgment award to bank where bank’s affidavit provided that “written notice of default was given in accordance with the terms of the note and mortgage”).

    Moreover, CitiMortage did not file any response or reply, much less any additional evidence, when the Elias directly challenged the notice deficiency in their own affidavits in support of their memorandum in opposition/cross-motion for summary judgment. Compare Ly at ¶22 (concluding that bank rebutted debtor’s assertion that bank failed to send notice of default/acceleration where bank filed supplemental affidavit, incorporating letters of notice sent to the debtor).

    On appeal, CitiMortgage’s response to the Elias’ notice challenge is that it would be “a waste of [] judicial resources” for this Court to remand this matter because the Elias clearly know they defaulted and CitiMortgage would simply re-file its motion, adding language that notice was provided. Had CitiMortgage filed proper materials in the first instance, however, far more judicial resources might have been saved. The plain language of the mortgage clearly requires that the Elias be given notice “prior to acceleration.” It was CitiMortgage’s burden to prove that the notice was given. Under these circumstances, we cannot conclude that CitiMortgage met its initial Dresher burden and showed that it complied with paragraph 22 of the mortgage note. Accord Kelly at ¶14.
(2) In this regard, the court observed (bold text is my emphasis):
  • {¶9} Civ.R. 56(C) limits the types of evidentiary materials that a party may present when seeking or defending against summary judgment. Civ.R. 56(C) (limiting summary judgment evidence to “pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence, and written stipulations of fact”). “The proper procedure for introducing evidentiary matter not specifically authorized by Civ.R. 56(C) is to incorporate it by reference in a properly framed affidavit pursuant to Civ.R. 56(E).” Skidmore & Assoc. Co., L.P.A. v. Southerland (1993), 89 Ohio App.3d 177, 179. “[P]apers referred to in an affidavit ‘shall be attached to or served with the affidavit.’” GMAC Mtge., L.L.C. v. Jacobs, 9th Dist. No. 24984, 2011-Ohio-1780, at ¶17, quoting Civ.R. 56(E).

    Even so, it is the opposing party’s duty to object when a summary judgment motion relies upon improperly introduced materials. Id. “[I]f the opposing party fails to object to improperly introduced evidentiary materials, the trial court may, in its sound discretion, consider those materials in ruling on the summary judgment motion.” Wolford v. Sanchez, 9th Dist. No. 05CA008674, 2005-Ohio-6992, at ¶20, quoting Christe v. GMS Mgt. Co., Inc. (1997), 124 Ohio App.3d 84, 90.

    {¶10} The Elias did not object to CitiMortgage’s summary judgment motion on the basis that it referred to improper Civ.R. 56(C) materials, which were not incorporated by reference in Menne’s affidavit. Further, they did not object to Menne’s affidavit on the basis that it lacked any attachments. See Civ.R. 56(E).

    The Elias only challenged the affidavit on the grounds that: (1) Menne lacked personal knowledge to attest to the statements contained therein; and (2) it did not show that CitiMortgage complied with paragraph 22 of the mortgage before pursuing the remedy of foreclosure. Compare U.S. Bank, N.A. v. Richards, 9th Dist. No. 25052, 2010-Ohio-3981, at ¶19. Thus, we limit our review to those issues. See Wolford at ¶20 (holding that trial court may disregard defects in Civ.R. 56 materials if the opposing party fails to object to the defects).

(3) In this regard, the court observed (bold text is my emphasis):

  • {¶12} [W]e are troubled by the fact that CitiMortgage opted not to respond, either in the court below or on appeal, to the Elias’ argument that Menne’s affiliation with the bank is questionable.

    Specifically, the Elias correctly observed that, on February 2, 2009, Menne signed an assignment of the mortgage at issue as a vice president of MERS and, on March 3, 2009, he signed the affidavit in question as a vice president of CitiMortgage.

    Without any additional evidence in the record before us that actually contradicts Menne’s assertion that he was a vice president of CitiMortgage at the time he signed an affidavit on its behalf, however, we cannot reject his averment on the basis of the Elias’ unsupported observation. The Elias’ argument that Menne’s affidavit is deficient because it is not based on personal knowledge lacks merit.

Highlights From Recent Oregon Court Ruling Booting MERS

The following are some of the highlights of a recent court ruling from U.S. District Judge Owen M. Panner in Medford, Oregon (Hooker v. Northwest Trustee Services, Inc., et al., Case 1:10-cv-03111-PA (D. Or. May 25, 2011)), who slammed MERS for its role in another failed foreclosure attempt (bold text is my emphasis):

(1) Requirement That All Assignments Be Recorded Before Carrying Out Foreclosure:

  • That MERS was the agent or nominee of the beneficiary does not mean the non-judicial foreclosure proceedings necessarily violated Oregon law. In re McCoy, 2011 WL 477820, at *4. As in other recent cases in this district, "The problem that defendants run into in this case is an apparent failure to record assignments necessary for the foreclosure." Burgett v. MERS, 2010 WL 4282105, at *3 (D. Or. Oct. 20); see also In re McCoy, 2011 WL 477820, at *4. In Oregon, a trustee may conduct a non-judicial foreclosure sale only if:

    The trust deed, any assignments of the trust deed by the trustee or the beneficiary and any appointment of a successor trustee are recorded in the mortgage records in the counties in which the property described in the deed is situated.

    ORS 86.735 (1) (emphasis added).

    Should the beneficiary choose to itiate non-judicial foreclosure proceedings, the Act's recording requirements mandate the recording of any assignments of the beneficial interest the trust deed. Burgett, 2010 WL 4282105, at *2; In re McCoy, 2011 WL 477820, at *3. Defendants appear to argue that rather than requiring the recording of every assignment of the trust deed, the Act allows defendants to instead track every assignment of the trust deed within the MERS system, recording only the final assignment of the trust deed in the county land records. Because the Oregon Trust Deed Act requires the recording of all assignments by the beneficiary, defendants' argument fails. ORS 86.735(1); see In re McCoy, 2011 WL 477820, at *3 4.

(2) Relevance of Borrower's Default In Attempt To Foreclose Is Of No Consequence When Recording Rules Are Violated:

  • While I recognize that plaintiffs have failed to make any payments on the note since September 2009, that failure does not permit defendants to violate Oregon law regulating non-judicial foreclosure. The Oregon Trust Deed Act "represents a well-coordinated statutory scheme to protect grantors from the unauthorized foreclosure and wrongful sale of property, while at the same time providing creditors with a quick and efficient remedy against a defaulting grantor." Staffordshire Investments, Inc. v. Cal-Western Reconveyance Corp., 209 Or. App. 528, 542, 149 P.3d 150, 157 (2006).

    In part due to the legislature's desire "to protect the grantor against the unauthorized loss of its property," a party conducting a non-judicial foreclosure must demonstrate strict compliance with the Act. Id. As demonstrated above, the MIN Summary demonstrates defendants failed to comply with the Oregon Trust Deed Act.

(3) Judge Panner's Observation On the Banksters' Self-Created Mess & Concerms About Foreclosure Actions Without Judicial Oversight:

  • Foreclosure by advertisement and sale, which is designed to take place outside of any judicial review, necessarily relies on the foreclosing party to accurately review and assess its own authority to foreclosure. Considering that the non-judicial foreclosure of one's home is a particularly harsh event, and given the numerous problems I see in nearly every non-judicial foreclosure case I preside over, a procedure relying on a bank or trustee to self-assess its own authority to foreclose is deeply troubling to me.

    I recognize that MERS, and its registered bank users, created much of the confusion involved in the foreclosure process. By listing a nominal beneficiary that is clearly described in the trust deed as anything but the actual beneficiary, the MERS system creates confusion as to who has the authority to do what with the trust deed. The MERS system raises serious concerns regarding the appropriateness and validity of foreclosure by advertisement and sale outside of any judicial proceeding.

(4) The Value Of The Dissenting Opinion Of Minnesota Supreme Court Justice Alan C. Page [who, by the way, is a retired NFL defensive lineman and member of the Pro Football Hall Of Fame] In Jackson v. Mortgage Electronic Registration Systems, Inc..

In the following excerpts, Judge Panner in Oregon quotes from the dissenting opinion of an earlier Minnesota court decision ruling in favor of MERS:(1)

  • As Justice Page of the Supreme Court of Minnesota summarized:

    MERS claims to hold legal title, but only legal title to the mortgage being foreclosed. MERS also claims that in foreclosing mortgages it acts only as nominee for its members. But MERS can act as nominee for only the particular MERS member who holds the promissory note at any particular time and, when that promissory note is assigned between members, the member for which MERS acts as nominee, and on whose behalf MERS holds legal title, necessarily changes. In other words, the entity on whose behalf MERS holds legal title to the mortgage changes every time the promissory note is assigned.

    Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d 487, 503-04 (Minn. 2009) (Page, J., dissenting). Although Justice Page wrote in dissent in a case involving a Minnesota statute, his concerns apply to numerous cases pending before me.

***

  • [I]t is apparent with the benefit of hindsight that the ability of lenders to freely and anonymously transfer notes among themselves facilitated, if not created, the financial banking crisis in which our country currently finds itself. It is not only borrowers but also other lenders who rightfully are interested in who has held a particular promissory note. For example, a lender who holds a promissory note that has become worthless may have an interest in knowing the hands through which that note passed.

    Jackson, 770 N.W.2d at 504 (Page, J., dissenting). Justice Page wrote in dissent, but his views are persuasive.
    (2)

(1) In quoting from a dissenting opinion from an out-of-state court ruling that has no binding legal effect in Oregon, Judge Panner's action illustrates why appellate-level judges (ie. Justice Page) spend time writing dissenting opinions. The fact that none of Justice Page's colleagues on the Minnesota Supreme Court shared his view in the 6-1 ruling in Jackson didn't mean there wouldn't be other judges from around the country (ie. Judge Panner, among possibly many others) who would find his observations and concerns useful when considering subsequent cases.

(2) In his dissent in Jackson, Justice Page also made this prescient observation:

  • As a result of our court's holding, namely, that the mortgage transfers between MERS members need not be recorded before a mortgage can be foreclosed by advertisement, neither borrowers nor lenders will ever be able to hold anyone in the chain of transfers accountable. That is not sound public policy.

BofA, Morgan Stanley To Spring For $22.4M To Settle Suits Alleging Illegal Foreclosures Against Active Duty Servicemembers

Bloomberg reports:

  • Bank of America Corp. and Morgan Stanley units will pay $22.4 million to resolve U.S. allegations that they improperly foreclosed on active-duty soldiers, including some who suffered severe injuries, without first obtaining court orders.
  • The Bank of America unit will pay $20 million to settle a lawsuit alleging improper foreclosure on about 160 members of the military between 2006 and 2009, the Justice Department said in a statement []. Morgan Stanley’s Saxon Mortgage Services Inc. unit will pay $2.35 million to resolve a lawsuit alleging it improperly foreclosed on 17 service members from 2006 to 2009. [...] The foreclosures violated the Servicemembers Civil Relief Act, which was enacted to shield deployed military personnel from financial stress, according to the Justice Department.(1)

For more, see BofA, Morgan Stanley Settle Claims on Military Foreclosures.

(1) For more from the U.S. Department of Justice:

USDOJ, Michigan Lenders Settle Race-Based "Redlining" Allegations In Detroit-Area Fair Housing, ECOA Lawsuit

In Detroit, Michigan, Thomson Reuters reports:

  • On May 5, 2011, the Department of Justice (DOJ) announced that it had reached a settlement with Citizens Republic Bancorp Inc. (CRBC) and Citizens Bank of Flint, Michigan in a lawsuit alleging a pattern or practice of lending discrimination or “redlining” in Detroit in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA).
  • The lawsuit filed by the Justice Department alleged that CRBC, as the successor to Republic Bank, and Citizens Bank violated the FHA and ECOA, which prohibit discrimination on the basis of race and color in a lending institution’s mortgage lending practices, by serving the credit needs of the residents of predominantly white neighborhoods in the Detroit metropolitan area to a significantly greater extent than the credit needs of majority African-American neighborhoods. Detroit has long had highly segregated residential housing patterns, especially for African-Americans.
  • The DOJ alleged that the lenders’ lending footprintformed a virtual horseshoe around and excluded most majority-black census tracts in the City of Detroit,” and that the lenders obtained “significantly” fewer applications from majority-black areas than from majority white areas.(1)

For more, see Jonathan W. Cannon on Detroit lending discrimination settlement.

(1) For more from the U.S. Department of Justice:

Tuesday, May 31, 2011

Oregon Banksters Respond To Unfavorable MERS Ruling By Waving Wads Of Cash In Attempt To Buy Off State Lawmakers, Change Document Recording Laws

The Oregonian reports:

  • The foreclosure fight in Oregon jumped to a new level this week after a federal judge in Medford rebuked the industry's sloppy practices in blocking the seizure of a Jacksonville home,(1) and mortgage issuers turned to the Legislature to find a quick fix to the legal quagmire.

***

  • Today, the mortgage and banking industry turned to the Oregon Legislature for help. The House Judiciary Committee entertained a last-minute amendment to an affordable housing bill that would rid the recording requirements holding up MERS foreclosures. Lobbyists for banks, credit unions and title companies said the amendments were needed to lift a cloud over thousands of Oregon homes.
  • "It's created a significant issue for the title industry, certainly, and, among others, the people who own these homes," said Alan Brickley, an attorney for First American Title Insurance Co. in Portland.
  • The Northwest Credit Union Association and Oregon Financial Services Association also testified in favor of the amendment. The amendment was proposed to Senate Bill 519, which is designed to protect affordable housing financing in foreclosures. Its introduction sent the bill's co-sponsor, Sen. Suzanne Bonamici, D-Beaverton, and a deputy of Oregon Attorney General John Kroger scrambling to defend the state's existing recording law.
  • Committee co-chair Wayne Krieger, R-Gold Beach, postponed action on the amendment until Tuesday."It's a gut and stuff and will emasculate the recording requirements," said Phil Querin, a real-estate attorney in Portland. "It should be strongly opposed."

For the story, see Judge blocks Oregon foreclosure, sharply criticizes mortgage industry's practices and MERS.

In a related story, see Poll: Should Oregon lawmakers give foreclosures, MERS a do-over?

(1) For the court ruling, see Hooker v. Northwest Trustee Services, Inc., et al., Case 1:10-cv-03111-PA (D. Or. May 25, 2011).

"A Procedure Relying On A Bank Or Trustee To Self-Assess Its Own Authority To Foreclose Is Deeply Troubling To Me!" Says Judge In Another MERS Kibosh

In Medford, Oregon, The Oregonian reports:

  • The foreclosure fight in Oregon jumped to a new level this week after a federal judge in Medford rebuked the industry's sloppy practices in blocking the seizure of a Jacksonville home, and mortgage issuers turned to the Legislature to find a quick fix to the legal quagmire.
  • U.S. District Judge Owen Panner questioned whether big banks should be allowed to foreclose without court supervision -- as required in 23 states but not Oregon, where one in every 500 homes is in foreclosure, according to Realty Trac Inc. That's compared with one out of 600 nationwide.
  • Panner specifically warned of problems in cases involving the Mortgage Electronic Registration System. MERS was set up by the banking industry to rapidly package and sell mortgages as securities without recording each sale in county recorder offices. The "MERS system raises serious concerns regarding the appropriateness and validity of foreclosure by advertisement and sale outside of any judicial proceeding," he said Wednesday in a 16-page ruling.
  • "Given the numerous problems I see in nearly every non-judicial foreclosure case I preside over, a procedure relying on a bank or trustee to self-assess its own authority to foreclose is deeply troubling to me," he wrote. A spokeswoman for MERS, Janis Smith, said it would appeal the ruling, which Smith described as inconsistent with earlier court decisions in the state.
  • Since October, federal judges in six separate Oregon cases have halted foreclosures involving MERS, saying its participation caused lenders to violate the state's recording law.(1)

For more, see Judge blocks Oregon foreclosure, sharply criticizes mortgage industry's practices and MERS.

For the court ruling, see Hooker v. Northwest Trustee Services, Inc., et al., Case 1:10-cv-03111-PA (D. Or. May 25, 2011).

(1) For the other five Oregon federal court decisions which all raise questions about the legality of hundreds of foreclosures in the state, see:

Maine 'Supremes' Kibosh F'closure Based On Crappy Paperwork; Instruct Trial Judge To Consider Clipping Banksters For Sanctions, Homeowner's Legal Fees

The Wall Street Journal reports:

  • The Maine Supreme Judicial Court overturned the foreclosure of a Maine homeowner after concluding that the supporting documentation filed by the foreclosing bank was “inherently untrustworthy.”
  • The decision, handed down Friday, underscores the potential for more delays in foreclosures as banks are unable to foreclose on borrowers after being challenged in court for using questionable paperwork.
  • The issues raised in the case are separate from the robo-signing scandal that first erupted last fall, where bank employees were accused of signing paperwork without reviewing their contents. Instead, Dana and Robin Murphy challenged irregularities in the foreclosure documents that suggested potential fabrications or other shortcuts.

***

  • The case turned on several affidavits filed by HSBC Mortgage Services Inc. that were designed to establish the facts of the case. The court ruled that affidavits used by HSBC were not “of a quality that would be admissible at trial.”
  • A trial court had initially ruled that HSBC failed to demonstrate standing to foreclose and that it improperly notified the Murphys about the foreclosure. HSBC then filed a new affidavit, and the trial court blessed the foreclosure.

***

  • The court said it didn’t have enough information to conclude that a fraud had been committed on the court, as the Murphys had implied, but it did rule that the loan paperwork submitted in the cases was unsatisfactory. It returned the case back to the trial court and HSBC won’t be able to foreclose until the issues raised on the appeal are addressed.
  • It is a really clear statement by the Maine Supreme Court about the quality” of foreclosure affidavits “that is going to be required,” said Thomas Cox, one of their attorneys. “That quality has been singularly absent in Maine and throughout the country.”

***

  • Cox says the ruling is also noteworthy because the Maine Supreme Court appeared to tell the borrowers to seek sanctions, including the payment of legal expenses. “They’re telling us to pursue those motions. It’s the first time I’ve seen a high court do so,” says Cox.(1)

For the story, see Maine High Court Overturns Foreclosure, Cites ‘Untrustworthy’ Paperwork.

For the ruling, see HSBC Mortgage Services, Inc. v. Dana S. Murphy, et al., 2011 ME 59 (May 19, 2011).

(1) The Maine Supreme Court said:

  • On remand, the court should determine, pursuant to either or both M.R. Civ. P. 11(a) and 56(g), whether to award the Murphys their expenses, including reasonable attorney fees, incurred defending against HSBC’s two motions for summary judgment before the court and on appeal.

Court Refuses To Void Contract, Says It's Valid & Binding Despite Forged Signatures Where Victims Were Screwed Over By Their Dishonest Attorney/Agent

Financial Fraud Law reports:

  • A federal district court in New York has ruled that clients are bound when their attorney forges their signature to a settlement agreement they never authorized.
  • In this case, the victims were clients of disgraced New York City lawyer Marc Dreier. The court explained the general rule that "the risk of loss from the unauthorized acts of a dishonest agent falls on the principal that selected the agent."(1)
  • Dreier’s clients retained him and authorized him to negotiate a resolution of the dispute with the third party and he served as the conduit for all of the communications between his clients and the other party. As a result of Dreier's fraud, the other party paid over $6.3 million to him, and “should not be compelled to pay a second time,” the court concluded.

Source: Forged Signature Binds Dreier Clients To Settlement, Court Rules.

For the ruling, see In re Dreier LLP (aka Gardi et. al. v. Jana Partners, LLC et. al.) 08-15051 (SMB), Adv. Pro. No. 10-3642 (SMB) (S.D.N.Y. May 23, 2011).

Thanks to Deontos for the heads-up on the story.

(1) The trial judge made this, among other, observations (bold text is my emphasis):

  • [D]reier duped both parties, and the well-settled rule of agency law dictates that as between two innocent parties, "the risk of loss from the unauthorized acts of a dishonest agent falls on the principal that selected the agent." Kirschner v. KPMG, LLP, 938 N.E.2d 941, 951 (N.Y. 2010) (quoting Andre Romanelli, Inc. v. Citibank, N.A., 875 N.Y.S.2d 14, 16 (N.Y. App. Div. 2009)).

    This precise rule was applied by two state supreme courts in factually similar situations involving an attorney’s forgery of his client’s signature to unauthorized settlement documents.

    In the first case, Cohen v. Goldman, 132 A.2d 414 (R.I. 1957), the attorney settled a lawsuit without his client’s knowledge or consent, and forged the client’s signature on a release and the settlement check. Id. at 415. The trial court vacated the settlement because of the forgery, id. at 416, but the Supreme Court reversed.

***

  • The Supreme Court of Pennsylvania reached the same result on similar facts in Rothman v. Fillette, 469 A.2d 543 (Pa. 1983). There, Rothman hired Madnick as his attorney to represent him in a personal injury action against Fillette. Without Rothman’s knowledge or consent, Madnick settled the lawsuit and forged Rothman’s name to the release and the settlement check, and converted the proceeds. The lawsuit was marked settled, but after discovering the unauthorized settlement, Rothman sought to reinstate the lawsuit against Fillette. The lower court reinstated the lawsuit and Fillette appealed. Id. at 544–45. The Pennsylvania Supreme Court reversed.

Florida Appellate Courts Continue The Clean-Up; Another Lower Court Error In Rubber-Stamped Foreclosure Case Caught, Booted Back

Confronted with another screw-up by a state trial judge (this time, it was Charlotte County Circuit Judge Lee A. Schreiber) presiding over a home foreclosure action, a Florida appeals court once again found itself compelled to find error and kick the case back to the lower court for further proceedings.

Among the highlights here were:

  • a lender's attorney filing a motion for summary judgment prior to the homeowner filing an answer to the complaint,
  • the homeowner/couple withdrawing a motion to dismiss the day before the hearing and then filing an answer to the complaint, containing several common defenses, including a claim that the foreclosing entity had not provided the notice of acceleration that the standard language in the mortgage requires it to provide,
  • the trial court improvidently entering a summary judgment against the homeowner/couple even though nothing in the record refuted the homeowners' claim that they had not received the notice of acceleration.(1)

For the ruling, see Goncharuk v. HSBC Mortgage Services, Inc., 2D10-2629 (Fla. 2d DCA, May 20, 2011).

Representing the homeowner was Gregg Horowitz, Sarasota, Florida.

(1) The 3-judge appellate panel addressed this issue in the following excerpt (bold text is my emphasis):

  • Vasiliy and Marina Goncharuk appeal a final judgment of foreclosure entered after the trial court granted a motion for summary judgment in favor of HSBC Mortgage Services, Inc. We reverse. The procedural posture of this case and the disputed issue of fact that requires reversal of the summary judgment appear to be virtually identical to those in Sandoro v. HSBC Bank, USA National Ass'n, 55 So.3d 730 (Fla. 2d DCA 2011).

***

  • HSBC Mortgage seems to believe that the Goncharuks did something improper by waiting until the day before the hearing to withdraw their motion to dismiss and file an answer. At least in this context, we are aware of no rule of procedure that would prevent the Goncharuks from taking this step. Given that the answer contains no unusual defenses, nothing suggests that this step was taken for any improper purpose.

    As we explained in Sandoro and in several earlier cases, a plaintiff who moves for summary judgment before a defendant files an answer has a difficult burden.

    When a plaintiff moves for summary judgment before the defendant answers the complaint, the plaintiff "must not only establish that no genuine issue of material fact is present in the record as it stands, but also that the defendant could not raise any genuine issues of material fact if the defendant were permitted to answer the complaint."

    Sandoro, 55 So. 3d at 732 (quoting BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques,
    28 So.3d 936, 938 (Fla. 2d DCA 2010)). See also Howell v. Ed Bebb, Inc., 35 So.3d 167, 168 (Fla. 2d DCA 2010); Brakefield v. CIT Group/Consumer Fin., Inc., 787 So.2d 115, 116 (Fla. 2d DCA 2001).

    The plaintiff must essentially anticipate the content of the defendant's answer and establish that the record would have no genuine issue of material fact even if the answer were already on file. In Sandoro, the lender failed to address the notice of acceleration in its motion for summary judgment and accompanying affidavits. 55 So. 3d at 731-32. HSBC Mortgage failed to address the same issue in this case; therefore, we must reverse the final judgment of foreclosure and remand for further proceedings.

    Reversed and remanded.

Monday, May 30, 2011

California, Illinois AGs Slap Subpoenas On Foreclosure Document Preparation Sweatshop As Some States Begin Acting Independently Of 50-State AG Probe

Bloomberg reports:

  • The attorneys general of four states including Illinois and California announced new demands in their probes of foreclosure practices by banks and the mortgage- servicing industry.
  • California Attorney General Kamala Harris said [] she subpoenaed Lender Processing Services Inc. (LPS) as part of her investigation into so-called “robo-signing,” the practice signing foreclosure documents without verifying their accuracy.
  • Illinois Attorney General Lisa Madigan is issuing subpoenas to Lender Processing and Nationwide Title Clearing Inc., another Florida-based company, she said [].
  • Foreclosure became a rubber-stamping operation that robbed many homeowners of the American dream without a fair and accurate process,” Madigan said in a statement. “California homeowners have been exposed to fraud and crime at every step of the mortgage process,” Harris said in a separate statement.

For more, see Four States’ Lawyers Announce New Foreclosure Probe Actions.

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