NYC Judge Voids Foreclosure Sale Over Use Of 'Sewer Service', Homeowner To Move Back In After Being Booted Two Years Ago

In East Elmhurst, Queens, the New York Daily News reports:

• Johnny Ferreira may be the luckiest guy in Queens. Ninety-nine times out of a hundred, a struggling homeowner who loses his home to foreclosure will never see it again. Last month, a judge vacated a bank's foreclosure sale of Ferreira's home, effectively handing him back his keys.
• As a result, Ferreira is preparing to move back into the same brick two-family with postage stamp front lawn, snug backyard and tidy driveway he'd been evicted from two years ago. "He loves that house," his lawyer, Pankaj Malik, said. "He doesn't want to move" again.
• The extremely unusual ruling appears to be a one-of-a-kind victory in New York for a homeowner in a battle that banks almost always win. The problems started in 2009 when Ferreira was evicted after his home in East Elmhurst a few blocks from LaGuardia Airport was sold at auction. He fought back in court.

***

• "When he came to me I said his chances of winning were slim to none because judges are loath to do something this drastic," the lawyer said. Then Queens Supreme Court Justice Allan Weiss suddenly set aside the auction sale and ordered Ferreira "restored to possession."

***

• Weiss ruled that Ferreira was never served with the foreclosure papers, depriving him of due process. The judge said the bank's document was filled with errors, including an incorrect docket number, and was never filed in court. "It was just shoddy paperwork," Malik said.(1)

For more, see Home sweet foreclosed home: Queens man returns to home after judge overrules bank's foreclosure.

For Justice Weiss' ruling, see Deutsche Bank Natl. Trust Co. v Quinones, 2011 NY Slip Op 31284(U) (NY Sup Ct., Queens County May 16, 2011).

(1) Justice Weiss offered these observations on the facts of the case and the application of New York law thereto (bold text is my emphasis):

• A party moving to vacate his default pursuant to CPLR 5015(a)(1) must demonstrate a reasonable excuse for the default and a potentially meritorious defense (see Eugene DiLorenzo, Inc. v. A.C. Dutton Lbr. Co., 67 NY2d 138, 143 [1968]).
  
  The defendant is relieved of that obligation when the basis for vacature is lack of personal jurisdiction (Harkless v. Reid, 23 AD3d 622 [2005]; Steele v. Hempstead Pub Taxi, 305 AD2d 401 [2003]).
  
  In the absence of personal jurisdiction, all subsequent proceedings are rendered null and void (see Feinstein v. Bergner, 48 NY2d 234, 241 [1979]; Muslusky v. Lehigh Val. Coal Co., 225 NY 584, 587 [1919]) and subject to vacature at any time without any conditions (see McMullen v. Arnone, 79 AD2d 496, 499 [1981] and cases cited therein).
  
  It is, at all times, the plaintiff’s burden to prove that jurisdiction over the defendant was obtained by proper service of process (see Pearson v. 1296 Pacific Street Associates, Inc., 67 AD3d 659 [2009] lv denied 14 NY3d 705 [2010]; Munoz v. Reyes, 40 AD3d 1059 [2007]). A process server's affidavit of service ordinarily constitutes prima facie evidence of the facts contained therein and proper service (see Deutsche Bank Nat. Trust Co. v. Pestano, 71 AD3d 1074 [2010]; Frankel v. Schilling, 149 AD2d 657, 659 [1989]).
  
  Here, the plaintiff has failed to submit any proof of service upon the defendant in this action. The affidavit of service plaintiff submitted has a Supreme Court, Kings County caption with Index Number 74150/08 (not the index number of the instant action) and was filed in the office of the County Clerk of Kings County.
  
  In addition, the affidavit of service asserts that service was made at 17-24 Curtis Rd, East Elmhurst, N.Y. which is not the foreclosed premises nor the premises which was the subject of the holdover proceeding nor defendant’s actual dwelling place when the action was commenced.
  
  The affidavit of service produced by the plaintiff, on its face, demonstrates lack of personal jurisdiction, and a traverse hearing is unnecessary. Plaintiff’s attorney’s assertion that regardless of the defective affidavit of service, the defendant was properly served is without probative value since he has no personal knowledge of the facts (see JMD Holding Corp. v. Congress Fin. Corp., 4 NY3d 373, 384-385 [2005]; Warrington v. Ryder Truck Rental, Inc., 35 AD3d 455 [2006]).
  
  With respect to plaintiff's claim of waiver, there was no waiver in this case. In appropriate circumstances, a defendant may be deemed to have waived his jurisdictional defense (see e.g. Lomando v. Duncan, 257 AD2d 649 [1999]; Biener v. Hystron Fibers, Inc., 78 AD2d 162 [1980]).
  
  A valid waiver "requires no more than the voluntary and intentional abandonment of a known right which, but for the waiver would have been enforceable" (Nassau Trust Co. v. Montrose Concrete Prods. Corp., 56 NY2d 175, 184). It may arise by an express agreement or by such conduct or a failure to act that will evince an intent not to claim the purported advantage (Hadden v. Consolidated Edison Co. of N.Y., 45 NY2d 466, 469 [1978]).
  
  A waiver "is not created by negligence, oversight, or thoughtlessness, and cannot be inferred from mere silence" (Peck v. Peck, 232 AD2d 540, 540 [1996]; see Golfo v. Kycia Associates, Inc., 45 AD3d 531 [2007]. Intent is an essential element of a waiver, and requires that the person against whom the waiver is asserted had, at the time or the waiver, actual or constructive knowledge of the existence of his rights or of the relevant facts to support such right and chose not to take advantage of it (S. & E. Motor Hire Corporation v. New York Indemnity Co., 255 NY 69 [1930]; see also Savasta v. 470 Newport Associates, 180 AD2d 624 [1992] Airco Alloys Division, Airco Inc. v. Niagara Mohawk Power Corp., 76 AD2d 68 [1980]).
  
  In this case, there is no evidence from which the defendant’s knowing and intelligent waiver may be inferred. [...]

The Heat Continues For One Bankster; Is It Time Yet To Take A 'Short' Position In BofA Stock?

Fortune Magazine reports:

• Are Countrywide mortgage-backed securities really mortgage-backed? Do banks even have the legal right to foreclose on certain homes?
• These are just a few of the questions raised since the foreclosure crisis revealed shoddy mortgage servicing practices at many of the big banks – practices that have led to countless investigations and lawsuits. Court testimony by a former Countrywide employee added to the intrigue last fall, because she confessed that many loans there weren't properly handled, bringing into doubt the validity of Countrywide's securitization process. Bank of America, which owns Countrywide, quickly silenced the discussion with firm denials.
• But Fortune has examined dozens of court records that corroborate the employee's testimony. And if Countrywide's mortgage securitizations systematically failed as it appears they did, Bank of America's potential liability dwarfs its shareholder equity, as the Congressional Oversight Panel points out.
• Last November, a decision in a New Jersey bankruptcy case brought to light the testimony of Linda DeMartini, operational team leader for the litigation management department for Bank of America, which intended to prove the bank had the right to foreclose on a debtor's mortgage. Instead, her testimony was key to the judge's ruling that Bank of America couldn't foreclose, and along the way DeMartini made two statements that called into question the securitization of Countrywide loans.
• She testified that Countrywide didn't deliver the notes to the securitization trustee, and that Countrywide notes weren't endorsed except on a case-by-case basis generally long after securitization ostensibly occurred. Both steps are required, in one form or another, under all securitization contracts.
• Only the delivery issue was really scrutinized at the time, because without a doubt the failure to deliver the notes would invalidate the securitization.
• The other issue, failure to endorse the notes, sparked a debate: the American Securitization Forum argues the notes would still have been securitized without endorsement, while Adam Levitin, associate professor of law at Georgetown Law, convincingly argues that they would not have been.
• If the securitization failed, a variety of securities fraud charges could follow. Indeed, one investor lawsuit based in part on DeMartini's testimony about endorsements and delivery has already been filed. And investors aren't the only possible pursuers of securities fraud -- New York Attorney General Eric Schneiderman is investigating mortgage securitizations by three banks, including Bank of America.

For more, see At Bank of America, more incomplete mortgage docs raise more questions (Fortune examined hundreds of foreclosure documents to determine the validity of mortgage securitizations after Bank of America debunked testimony about them last fall. The results raise more questions than they answer).

Bankster Attempt To Score 'Get Out Of Jail Free' Card Over MERS Mess Falls Flat; Pitchfork-Wielding Public To OR Lawmakers: Don't Even Think About It!

The Oregonian reports:

• A late attempt by the finance industry to waive Oregon mortgage recording laws in most foreclosures is dead. The Oregon House Judiciary Committee voted [] to approve Senate Bill 519 without an amendment sought last week by loan servicers, title companies and credit unions. The amendment would have relieved lenders of ensuring a property's ownership history is properly recorded in public records before foreclosing outside a courtroom.
• The committee voted with no debate to send the bill to a floor vote without the amendment. Afterward, co-chair Jeff Barker cited a public outcry over the amendment as reason for its failure and described an intense back-room negotiations to do so."There was a lot of opposition," said Barker, D-Aloha. "I probably got more emails about this than anything all session."(1)
• Document recording and signing issues have hung up foreclosures across the nation, and many of them have involved the Mortgage Electronic Registration System, or MERS.
• Federal judges in Oregon have blocked such foreclosures, saying MERS failed to record underlying documents properly as required by Oregon law in out-of-court foreclosures.(2)

For more, see MERS foreclosure amendment dies in Oregon House committee.

(1) No doubt the incensed public was driven to their pitchforks (metaphorically speaking, of course) in expressing their sentiments to state lawmakers on this issue, as evidenced by this photo of an obviously-outraged couple.

(2) For more on MERS' role in foreclosure actions:

• Mortgage Electronic Registration Systems, Inc.: A Survey of Cases Discussing MERS’ Authority to Act,
• The Case Against Allowing Mortgage Electronic Registration Systems, Inc. (MERS) to Initiate Foreclosure Proceedings,
• Two Faces: Demystifying the Mortgage Electronic Registration System's Land Title Theory,
• The Murky Mess of MERS: The Complications of Collecting on Promissory Notes When MERS is Around,
• Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System.

Inflated Fees, Force-Placed Insurance, Robosigning Among MBS Investor Concerns In Suit Demanding Bankster Accounting Over Loan Servicing Costs

In New York City, Reuters reports:

• The Knights of Columbus, a 129-year-old Catholic charitable organization, is suing Bank of New York Mellon to obtain information about residential mortgage loans the former lending giant Countrywide funneled into some of the Knights' investments.
• The Knights, who have a $17-billion investment portfolio, invested in two residential-mortgage-backed security trusts. The organization is questioning how Countrywide handled foreclosures as the "master servicer" of the loans, according to the complaint filed Thursday in New York Supreme Court in Manhattan. BNY Mellon is the trustee.
• The complaint pointed to "recent revelations" that Countrywide may have been "acting for its own benefit rather than for the benefit of investors," and thereby "damaging the borrowers" whose loans make up the trusts.
• Kevin Heine, a spokesman for BNY Mellon, said, "The complaint does not assert any claims against BNY Mellon or seek damages. The complaint merely seeks an accounting."

***

• The complaint says courts around the country have responded to the loan servicers' "notoriously flawed paperwork" by instituting new procedures, such as allowing the courts to pass on the cost of scrutinizing the documentation to the foreclosing firms.
• The Knights are requesting an accounting of the "extra fees and costs associated with robo-signing," to assure that those costs are borne by the loan servicers and not passed on to the beneficiaries of the trusts.
• The complaint also cites problems with Bank of America failing to promptly pursue valid foreclosures or dispose of real-estate-owned properties, practices that can increase the severity of losses associated with defaulted loans, according to the Knights' complaint. The complaint requests an accounting of these losses as well.(1)

For the story, see Knights of Columbus sue for Countrywide loan information.

For the lawsuit, see Knights of Columbus v. The Bank of New York Mellon, New York Supreme Court, New York County, No. 651442-2011.

Go here for links to other filed court documents.

(1) Paragraph 1 of the lawsuit summarizes the complaint:

• This action requests the Court to order an immediate accounting of two trusts known as CWALT 2005-6CB and CWALT 2006-6CB (the “Trusts”). The Trusts hold residential mortgage loans for the benefit of investors such as Plaintiff.
  
  An accounting is required because one or more of the Trust administrators have:
  
  (1) been examined by the Office of Comptroller of the Currency, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, which “found critical deficiencies and shortcomings in foreclosure governance processes, foreclosure document preparation processes, and oversight and monitoring of third party law firms and vendors”;
  
  (2) been accused by the City of Buffalo, among others, for failing to properly care for and dispose of unoccupied properties, contributing to the deterioration of neighborhoods and increasing losses to the Trusts’ beneficiaries;
  
  (3) been found by the Office of the Comptroller of the Currency to have “engaged in unsafe or unsound banking practices” “[i]n connection with certain foreclosures of loans in its residential mortgage servicing portfolio”, which is subjecting each Trust to unknown costs and expenses;
  
  (4) been accused by the Federal Trade Commission of engaging in a deliberate strategy to “mark up” the actual cost of services that are ultimately paid by each Trust;
  
  (5) been exposed by the AMERICAN BANKER for using affiliates to place on homes insurance costing up to ten times the price of regular policies, which premiums are ultimately charged to the beneficiaries of each Trust; and
  
  (6) had a court find that a practice that an employee of a Trust administrator testified under oath was “customary” precluded a similar trust from enforcing its rights under a mortgage.

For the City of Buffalo accusations, see City of Buffalo v. ABN Amro Mortgage Group Inc., et al.

For the American Banker stories, see

• Ties to Insurers Could Land Mortgage Servicers in More Trouble (Force-placed policies impose costs on both homeowner, investor),
• Losses from Force-Placed Insurance Are Beginning to Rankle Investors,
• New Questions about Banks' Force-Placed Insurance Deals (QBE, carrier used by Wells Fargo and SunTrust, avoids oversight through 'surplus lines' structure).

Florida Bar Clears Foreclosure Defense Attorney In Probe Into Billing Practices

The Palm Beach Post reports:

• Foreclosure defense attorney Peter Ticktin was cleared of wrongdoing by the Florida Bar following a complaint about his firm placing second mortgages on clients' homes to pay for services. Ticktin, who is based in Deerfield Beach but has offices throughout Florida, uses the unique payment plan in cases where homeowners wouldn't otherwise be able to afford an attorney.
• The Bar opened an investigation following media reports about how struggling homeowners were paying court costs. In addition to paying a monthly stipend - a common practice in foreclosure defense - Ticktin said he came up with the second mortgage as a type of contingency fee. If Ticktin's firm gets a case dismissed or a mortgage reduced, the client must take out a new mortgage that awards the firm 40 percent of whatever the homeowner saved.
• A letter from the Bar dated Monday says a grievance committee found "insufficient evidence to determine probable cause for disciplinary proceedings." "We knew we didn't do anything wrong," Ticktin said. "There is no logical reason why it wouldn't be appropriate or ethical."(1)

Source: Florida Bar clears foreclosure lawyer Ticktin over plan.

(1) However, there could be a problem if, once the case is over and the client's overall liability for attorney fees is determined, the amount of the contingent fee, coupled with the fixed monthly stipend paid, is found to be "clearly excessive." See (bold text is my emphasis):

• Rule 4-1.5, Florida Rules of Professional Conduct:
  
  (a) Illegal, Prohibited, or Clearly Excessive Fees and Costs
  
  An attorney shall not enter into an agreement for, charge, or collect an illegal, prohibited, or clearly excessive fee or cost, or a fee generated by employment that was obtained through advertising or solicitation not in compliance with the Rules Regulating The Florida Bar.
  
  A fee or cost is clearly excessive when: [go here for more of Rule 4-1.5, Florida Rules of Professional Conduct].
• The Florida Bar v. Richardson, 574 So. 2d 60 (Fla. 1990):
  
  This Court recognizes that a lawyer's fee will vary in accordance with many factors; however, we fully concur with the expert witness's statement in this case that all of the time a lawyer spends on a case is not necessarily the amount of time for which he can properly charge his client.
  
  As explained by the expert witness, "[I]t's the time that reasonably should be devoted to accomplish a particular task." This statement is consistent with the principles we set forth in Standard Guaranty Insurance Co. v. Quanstrom, 555 So.2d 828 (Fla. 1990), and Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145 (Fla. 1985), neither of which allows billing clients solely on billable hours or charging clients without determining what is the reasonable time to accomplish a particular task.
• The Florida Bar v. Moriber, 314 So. 2d 145 (Fla. 1975):
  
  Few, if any, areas of attorney discipline are as subject to differing interpretations as the matter of what constitutes an excessive attorney's fee. See The Florida Bar v. Winn, 208 So.2d 809 (Fla. 1968), cert. den., 393 U.S. 914, 89 S.Ct. 236, 21 L.Ed.2d 199. The answer turns upon multiple factors including the difficulty of the case; the contingencies, if any, upon which the fee is based; the novelty of the legal issues presented; the experience of the attorney; the quality of his work product; and the amount of time spent in preparation and litigation.
• Franklin & Marbin, PA v. Mascola, 711 So. 2d 46 (Fla. App. 4th DCA 1998): Commenting on attorneys fee contracts with clients and their enforceabilty, generally, the court observed:
  
  Of course, the supreme court has also long held that attorney's fee contracts are infused with the public interest and that attorneys are not free to negotiate just any fee. In Baruch v. Giblin, 122 Fla. 59, 164 So. 831 (1935), the court said:
  
  "Lawyers are officers of the court. The court is an instrument of society for the administration of justice. Justice should be administered economically, efficiently, and expeditiously. The attorney's fee is, therefore, a very important factor in the administration of justice, and if it is not determined with proper relation to that fact it results in a species of social malpractice that undermines the confidence of the public in the bench and bar. It does more than that; it brings the court into disrepute and destroys its power to perform adequately the function of its creation."
  
  164 So. at 833. To meet this public interest, the supreme court has adopted specific rules regulating attorney's fees.[7],[8] The issue of enforceability of lawyer fee contracts is set out in a specific rule that states:
  
  "Contracts or agreements for attorney's fees between an attorney and client will ordinarily be enforceable according to the terms of such contracts or agreements, unless found to be illegal, obtained through advertising or solicitation not in compliance with the Rules Regulating The Florida Bar, prohibited by this rule, or clearly excessive as defined by this rule."[9]
• Chandris, S.A. v. Yanakakis, 668 So.2d 180 (Fla.1995), where the Florida Supreme Court held that fee contracts that do not comply with the lawyer disciplinary rules are subject to being held void as against public policy. See also American Casualty Co. v. Coastal Caisson Drill Co., 542 So.2d 957, 958 (Fla.1989); City of Miami v. Benson, 63 So.2d 916 (Fla. 1953); City of Leesburg v. Ware, 113 Fla. 760, 767, 153 So. 87, 90 (1934).

Go here for approximately 100 or so links to Florida cases addressing the issue of attorneys' fees that are 'clearly excessive.' (It may be that, given the Bar's seemingly slumbering approach recently in probing complaints against attorneys in connection with home foreclosures (see The Palm Beach Post: Foreclosure fraud complaints flood Florida Bar but no lawyer reprimands so far), a homeowner may have to file a civil lawsuit to seek redress rather than simply file a complaint with The Florida Bar in a case where one believes they've been clipped with legal fees that are 'clearly excessive'). In this regard, one needs to remember that, just because The Florida Bar says there is no ethical violation of the rules, it doesn't necessarily mean they are right. A court of law (probably an appellate level court) has the final say.

Go here for some links to cases from other jusrisdictions addessing 'clearly excessive' attorneys' fees (or GO HERE to refine a search for the jursidiction of your interest).

(On a side note, it is not unheard of for a court, in determining what constitutes a reasonable attorney fee, to disregard applying a percentage of value approach and, instead, use the lodestar method to calculate the amount of the fee an attorney is entitled to. See Nager v. Teachers' Retirement System of The City of New York, 57 A.D.3d 389, 869 N.Y.S.2d 492 (NY App. Div. 1st Dept. 2008):

• Supreme Court properly used the lodestar method in determining the reasonable value of plaintiffs' attorneys' services in instituting and settling this class action, rather than applying a percentage of the value of the settlement, in view of the enormous disparity in result between the two methods (see Goldberger v Integrated Resources, Inc., 209 F3d 43, 50 [2d Cir 2000]; In re Washington Pub. Power Supply Sys. Sec. Litig., 19 F3d 1291, 1297-1298 [9th Cir 1994]), [...].

Something for litigants to keep in mind when they think their attorney may be taking advantage of their vulnerable situation in getting them to agree to an unfavorable attorney fee agreement.)

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

Further, there could also be a 'negligence' problem for any foreclosure defense attorney in Florida (and possibly in other states) who, after gaining a favorable ruling in court on behalf of a client facing foreclosure:

• fails to then file a motion with the court requesting prevailing party attorneys fees to be awarded (the liability for payment to be imposed by the court upon the losing party; ie. the foreclosing bankster), and,
• where a contingency fee is involved, fails to request that a contingency fee multiplier be applied when calculating the attorney fee award.

See:

• Fla. Appeals Court: Homeowner Entitled To Nail Bank For Prevailing Party Legal Fees After Lender Voluntarily Dismissed F'closure Case w/out Prejudice,
• Defending A Foreclosure Defense Case Pro Bono? Don't Forget The Contingency Risk Factor When Sticking Losing Lender With Tab.

Top Secret Video Of Banksters Discussing MERS' Problem?

What may be a video of a top secret meeting of banksters discussing the current foreclosure problems they face as a result of the MERS mess has been found floating around online on YouTube.

The meeting could have taken place somewhere in Germany, since the participants all spoke in German, but English subtitles have been added.

Those who don't mind more than a few "f-bombs" can go here for what could be a 'MERS bankster video.'

Thanks to Deontos for the heads-up on this video.

HUD: Underwriters' Refusal To Insure Titles Due To MERS' Michigan Mess Requires Reforeclosure Of Crappy Deeds

National Mortgage News reports:

• The Department of Housing and Urban Development will re-foreclose on all its REO properties in Michigan where the original foreclosure was conducted in the name of MERS using the state’s nonjudicial process.
• In late April, the Michigan Court of Appeals ruled that Mortgage Electronic Registration Systems Inc. is ineligible to use the state’s nonjudicial foreclosure process because MERS does not meet the requirements to foreclose by advertisement and should have filed the foreclosures through the state’s judicial process. That ruling vacated the 2009 foreclosures of two borrowers.(1)
• In an email to HUD mortgagees that was obtained by National Mortgage News, the agency said most of the major title insurance company underwriters have ceased issuing title insurance for any properties where MERS foreclosed by advertisement.
• “As a result, any Michigan REO properties in HUD’s inventory that cannot close due to an inability to obtain title insurance must be re-foreclosed in accordance with the Michigan Court of Appeals opinion,” the email reads.(2)

For more, see MERS Ruling Forces HUD to Reforeclose on Mich. REO.

(1) For more on the crappy title problem in connection with improperly foreclosed homes, see:

• Daily Finance: Why the Foreclosure Mess Settlement Proposal Can't Fix the Damage,
• Naked Capitalism: On the Clouded Title Mess and the Difficulties of Cleaning It Up.

(2) For earlier posts on the colossal "home title" mess created by MERS' non-judicial foreclosures in Michigan, see:

• Unwitting Homebuyer Of MERS-Related REO Told "Don't Move In, There's A Problem!" As 'Crappy-Title Clouds' Darken Over F'closd Houses Thru-Out Michigan,
• Grandson: MERS Illegal Foreclosure Forced Sale Of Dying Gandmother's Home; Hope Still Alive In Attempt To Recover Title,
• MI Suit Seeks Hundred$ Of Million$ From MERS Over Allegedly "Illegally Prosecuted" F'closures; Points To Recent State Appeals Court Ruling For Support,
• Michigan To Join Massachusetts As Real Estate Resale Market Quagmire After Recent State Appeals Court 'Anti-MERS' Ruling?,
• MI Appeals Court: MERS' Screw-Up Makes F'closure Proceedings Void Ab Initio (Does State Now Have 'Ibanez' Problem w/ Respect To Future Titleholders?).

80% Of Success Is Just Showing Up!

William A. Roper, Jr. writes in the Mortgage Servicing Fraud Forum:

• Woody Allen has suggested that 80% of success is just showing up. The reciprocal to that is that one LOSES about 99% of the time when one FAILS TO SHOW UP. This is a key reason that it is imperative to ANSWER any foreclosure suit in which the defendant is properly named and served.
• The purported mortgage investors acting as plaintiffs routinely WIN cases when borrowers fail to answer and default.
• But an interesting thing has been taking place in an increasing percentage of appellate cases over the last year. The mortgage investors have been defaulting in a seemingly growing number of instances by either failing to file an appellee's brief or otherwise confessing error in the appellate courts.
• The decision in Augenstein v. Deutsche Bank was one such case in Kentucky. There the Kentucky Court of Appeals not only overturned the summary judgment, but also dismissed the case.
• The Court of Appeals for the Fifth District in Florida overturned two foreclosure judgments this week by confession of error:
  
  Gillen v. Federal National, No. 5D09-4194 (May 27, 2011)
  
  Blumenfeld v. Fifth Third, No. 5D10-3638 (May 27, 2011)
• There is not any useful case law to cite from these decisions, though the Appellant's Brief in each case might be worth a look. But the decisions are reflective of the increasing tendency for the foreclosure mills to abandon appeals. I am going to begin to collect in this thread the cases where a foreclosure judgment is set aside by confession of error or where the appellee fails to file an appellate brief.(1)

For Bill Roper's entire post thread, see Appellee Confession of Error: Sometimes the Borrower Can Win By Appealing and then Just Showing Up!

Thanks to Deontos for the heads-up on the MSF Forum post.

(1) Bill Roper adds the following:

• Here are two earlier examples of foreclosures overturned by confession of error in Florida:
  
  Frost v. LaSalle Bank, No. 4D09-2668, 46 So. 3d 173, 2010 Fla. App. LEXIS 16269, 35 Fla. L. Weekly D 2370 (Fl. App. 4th Dist. 2010)
  
  Mera v. EMC Mortg. Corp., Case No. 2D09-1826, 21 So. 3d 921; 2009 Fla. App. LEXIS 18391; 34 Fla. L. Weekly D 2494 (Fl. App. 2nd Dist. 2009)
• And a few more cases involving a failure to file a brief and/or a confession of error:
  
  Alejandre v. Deutsche Bank Trust Co. Ams., No. 4D09-2280, 44 So. 3d 1288, 2010 Fla. App. LEXIS 15544, 35 Fla. L. Weekly D 2254 (Fl. App. 4th Dist. 2010)
  
  Benoit v. Bank of New York, No. 4D09-898, 18 So.3d 731 (Fl. App. 4th Dist. 2009)
  
  Challenger Investment Group, LC v. Ebony & Ivory, LLC, No. 3D07-1113, 958 So.2d 1011 (Fl. App. 3rd Dist. 2007)

While we're at it, tack these cases onto the list as well:

• Bravo v. National City Bank, No. 3D10-1828 (Fla. App. 3d DCA, February 23, 2011) (confession of error; a pro se case),
• Blair v. HomEq Servicing Corp., No. 2008-CA-000001-MR (Ky. App. 2009) (unpublished) (failure to file a brief; a pro se case),
• Opella v. Bayview Loan Servicing, LLC, 48 So.3d 185 (Fla. App. 3d DCA, November 24, 2010) (confession of error; a pro se case).

On a related point, see Vinson v. Vidal, 28 So. 3d 614 (Miss. Ct. App. 2009):

• This Court has long held that an appellee's failure to file a brief is tantamount to confession of error and will be accepted as such unless the reviewing court can say with confidence, after considering the record and the brief of the appealing party, that there was no error. Varvaris v. Perreault, 813 So.2d 750, 752(¶ 5) (Miss.Ct. App.2001) (citing Dethlefs v. Beau Maison Dev. Corp., 458 So.2d 714, 717 (Miss.1984)). "Automatic reversal is not required where [the] appellee fails to file a brief." Id. (quoting N.E. v. L.H., 761 So.2d 956, 962(¶ 14) (Miss.Ct.App.2000)). In order to merit reversal, "[t]he appellant's argument `should at least create enough doubt in the judiciousness of the trial court's judgment that this Court cannot say with confidence that the case should be affirmed." Id. (citing Selman v. Selman, 722 So.2d 547, 551(¶ 13) (Miss.1998)).

Foreclosure Trustee Screw-Up The Focus Of Ongoing Arizona Lawsuit

In Maricopa County, Arizona, a recent story in The Arizona Republic describes current litigation in a state appeals court in a dispute over ownership of property that was purportedly sold in a foreclosure sale.

The story centers on the apparent screw-ups by the trustee who conducted the sale, and serves as a reminder that the conduct of those having a role in properly carrying out a public auction in the foreclosure context needs to be scrutinized closely for errors, irregularities, etc. which, apparently, are not all that uncommon.(1)

For the story, see Judges hear Elevation Chandler land dispute.

(1) See, for example:

• Computer Keystroke Error Costs Foreclosing Lender $400K As Winning Bidder Snags Home Out From Under Citibank For Pennies On The Dollar,
• Washington State AG: Some Of The Largest Foreclosure Trustees Have Failed To Comply With 'In-State Office' Requirements When Conducting Forced Sales,
• Washington State Foreclosure Trustee Slammed For $98K+ Damages For "Extreme & Outrageous" Conduct In Jerking Around Financially Strapped Homeowner,
• Utah AG To BofA: Continued Illegal Foreclosures Will Lead To Lawsuit ("At issue is whether ReconTrust [the foreclosure trustee] is violating state law by foreclosing on homes in its own name instead of that of an attorney who is a member of the Utah State Bar or a title company registered to conduct business here as required by state law).

NY Appeals Court: Failure To Strictly Comply With Notice Requirements Under State Anti-Equity Stripping Statute Enough To Sink Foreclosure Action

A recent ruling by a New York intermediate appellate court (which, by the way, reversed another lower court ruling in a foreclosure action) serves as a reminder that notices required to be served on homeowners facing foreclosure pursuant to the New York State's anti-foreclosure rescue, equity stripping statute are, in fact, mandatory, and failure to comply with the notice requirements is enough to sink the foreclosure action.

The appeals court gives the following summary of the law in the first paragraph of their ruling:

• In First Natl. Bank of Chicago v Silver (73 AD3d 162) (hereinafter Silver), we held that the plaintiff in a foreclosure action has the burden of demonstrating compliance with Real Property Actions and Proceedings Law § 1303 (hereinafter RPAPL 1303), a notice requirement of the Home Equity Theft Prevention Act (see Real Property Law § 265-a [hereinafter HETPA]).
  
  Proper service of RPAPL 1303 notice with the summons and complaint is a condition precedent to the commencement of the action, and noncompliance results in dismissal of the complaint. In the appeal before us, we are called upon to consider another notice pursuant to HETPA which must be served at least 90 days prior to commencement of the foreclosure action pursuant to Real Property Actions and Proceedings Law § 1304 (hereinafter RPAPL 1304).(1)
  
  Consistent with the rationale of Silver, we determine that proper service of RPAPL 1304 notice is also a condition precedent to the commencement of the action. Here, the plaintiff failed to establish compliance with RPAPL 1304, requiring dismissal of the complaint insofar as asserted against the mortgagors.

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

(1) The court elaborated on its position, and described the contents of, and requirements surrounding, the mandatory RPAPL 1304 notice in this excerpt (bold text is my emphasis):

• In holding that compliance with RPAPL 1303 is a mandatory condition precedent to the commencement of a foreclosure action, we were persuaded by the explicit statutory requirements and mandatory language of RPAPL 1303, as well as the Legislative purpose behind HETPA (see Silver, 73 AD3d at 165, 169).
  
  In the case before us, unlike Silver, the notice provision of RPAPL 1304 is at issue. The Supreme Court here determined that "actual or constructive notice" of the content of RPAPL 1304 suffices under circumstances where the borrower has not shown prejudice from the lender's failure to strictly comply with the statute. We disagree.
  
  Thus, we now make clear what is implicit in Silver, namely, that proper service of the RPAPL 1304 notice containing the statutorily-mandated content is a condition precedent to the commencement of the foreclosure action. The plaintiff's failure to show strict compliance requires dismissal.
  
  We reach this determination for reasons similar to those stated in Silver. RPAPL 1304, like RPAPL 1303, contains specific, mandatory language in keeping with the underlying purpose of HETPA to afford greater protections to homeowners confronted with foreclosure (see Silver, 73 AD3d at 165).
  
  Both statutes have titles containing the word "required" (RPAPL 1304 ["Required prior notices"]; RPAPL 1303 ["Foreclosures; required notices"]). Content, timing, and service provisions of RPAPL 1304 are very specific and couched in mandatory language. "[A]t least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower, including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower in at least fourteen-point type" of certain statutory-specific information (RPAPL 1304[1]).
  
  The notice must be prefaced with the warning, "YOU COULD LOSE YOUR HOME. PLEASE READ THE FOLLOWING NOTICE CAREFULLY," and must contain the specific language set forth in RPAPL 1304(1), including information concerning the homeowner's right to cure a default and access to counseling agencies to obtain financial help. Indeed, as noted, the RPAPL 1304 notice must include "a list of at least five housing counseling agencies as designated by the division of housing and community renewal, that serve the region where the borrower resides" with their "last known addresses and telephone numbers" (RPAPL 1304[2]).
  
  With regard to the manner of service, RPAPL 1304 is equally precise: "Such notice shall be sent by such lender, assignee or mortgage loan servicer to the borrower, by registered or certified mail and also by first-class mail to the last known address of the borrower, and if different, to the residence that is the subject of the mortgage . . . in a separate envelope from any other mailing or notice" (RPAPL 1304[2]).

Alleged Lawyer-Renting Racket At Center Of West Virginia AG Lawsuit Tagging Out-Of-State Outfit Peddling Debt Settlement Services

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

• West Virginia Attorney General Darrell McGraw filed suit Friday to ban a debt settlement company from doing business in the state. The suit, filed in the Circuit Court of Kanawha County, names as defendants: Morgan Drexen's principle owner Walter J. Ledda; attorneys Rachelle McIntyre-Nicholson of West Virginia and Lawrence W. Williamson of Kansas; and the California law firm of Vincent Howard and Damian Nassiri.
• In his complaint, McGraw asks that the court enjoin the out-of-state lawyers from practicing law in West Virginia and cease operation of the debt settlement business. The suit alleges that Morgan Drexen, Inc., a Nevada company based in greater Los Angeles that claims to be a support services company for attorneys providing debt settlement services, is selling debt settlement services to West Virginia consumers and misrepresenting the services are being provided by lawyers.
• Lawyers who are licensed to practice law in West Virginia are exempt from some state regulations that govern the debt settlement industry. "Although the debt settlement approach to debt relief may work for some persons, the service has legal consequences and should only be offered by persons licensed to practice law in West Virginia," McGraw said.

***

• By linking to [West Virginia-]licensed lawyers, Morgan Drexen allegedly maintains it can avoid applicable state debt collection laws and charge higher fees than normal, McGraw says. These [West Virginia-licensed] lawyers allegedly do no substantive work and are merely renting out their licenses to Morgan Drexen.

For more, see McGraw sues lawyers over debt settlement company.

Minneapolis Homeowner Recovers Lost Home, Gets New Payment Schedule After Flaw Found In Serving Required Paperwork In Foreclosure Process

In Minneapolis, Minnesota, Fox 9 News reports:

• A Minneapolis woman, who was facing foreclosure, is back in her home for the long term. Tanya Deba's troubles began when her hours at her job were cut and she fell behind on her mortgage. She tried to catch up, but just could not.
• In March, Fox 9 told her story and showed how she was packing up her belongings expecting to be evicted at a moments notice. She didn't want her 2 kids to lose their lifelong home. Deba found help in an organization called Financial Integrity Foundation. For a fee, the Twin Cities group assists homeowners in finding flaws in foreclosures.
• Financial Integrity Foundation discovered her mortgage company had never served the paperwork to this homeowner about the foreclosure.
• Delivery of that paperwork is required by law in a foreclosure. She filed a lawsuit against the company. The two sides settled out of court and the bank set Deba up with a new 30-year fixed rate mortgage.

Source: Woman Fights Foreclosure & Wins.

Beleaguered Bankster Beefs Up Political Influence By Adding Recently-Retired U.S. Senator Onto Payroll

The Huffington Post reports:

• With Goldman Sachs' latest high-profile hire, the Wall Street giant is unlikely to shake its Government Sachs nickname or the reputation for exerting undue influence in Washington that it implies.(1)
• Goldman announced Friday that it had named three-term Sen. Judd Gregg an international adviser to the bank. The New Hampshire Republican will "provide strategic advice to the firm and its clients, and assist in business development initiatives across our global franchise," Goldman said in a statement.

For more, see Judd Gregg Hired By Goldman Sachs As International Advisor.

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

(1) See The Huffington Post: Government Sachs: Goldman's Close Ties To Washington Arouse Envy, Raise Questions:

• [G]oldman has more than 30 ex-government officials working as registered lobbyists on staff, including former House Majority Leader Richard Gephardt (D-Mo.) to represent its interests on issues related to TARP, according to Mother Jones.

De Facto Temporary Moratorium For All Current Non-Judicial Foreclosures For Owner-Occupied Hawai'ian Homes

The Honolulu Star Advertiser reports:

• It will be several months until a key consumer-protection provision of Hawaii's overhauled foreclosure law can be used. But there has been one immediate impact: a freeze on many new foreclosures and auctions of homes owned by occupants.
• The new law, which took effect earlier this month, did not prescribe a foreclosure moratorium, but the law prohibits lenders from holding nonjudicial foreclosure auctions until borrowers have an opportunity to participate in a dispute resolution program.
• The dispute resolution program, a pivotal piece of the law, is slated to begin operating by Oct. 1. So in effect, existing foreclosure cases between owner-occupants and lenders are on hold for up to five months.

***

• The law also is hindering lenders from starting some new foreclosure cases until the state is ready with the dispute resolution program. This could postpone hundreds of foreclosure filings over the next few months.
• The freeze stands to affect many, but not all, auctions and new foreclosure cases. Only nonjudicial foreclosures against homeowners who have lived in their homes for a minimum 200 consecutive days are eligible to participate in the dispute resolution program.
• Excluded are judicial foreclosure cases, which represent a small minority of home foreclosures, and cases involving commercial property, time shares and homes owned by investors. Foreclosures initiated by condominium or homeowner associations are also exempt from this aspect of the law.

***

• Another part of the law allows borrowers to convert a nonjudicial foreclosure to a judicial foreclosure overseen by a judge. Industry observers say it will be interesting to see how use of the law plays out — especially regarding how many borrowers use the dispute-resolution tool and whether lenders avoid it by turning to judicial foreclosure.

For more, see Law's delay halts foreclosures (The required state dispute resolution program has not been set up, slowing many repossessions).

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 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:

• Meth Lab Residue in Homes Triggers Litigation (Lawsuits over contaminated homes focus on failure to disclose issue),
• Lawyer Successfully Squeezes Settlement From Insurer For Client's Damage Claim From Unknown Meth Lab,
• Unwitting Buyer Of Home Used As Meth Lab Wins Lawsuit Against Broker, Seller; Court Orders Rescission, Damages, Attorney Fees,
• Wave Of Meth Lab Home Contamination Litigation On The Horizon?,
• Ohio Woman Unwittingly Buys Home Once Used As Meth Lab; Sues Former Owner While Fighting Foreclosure; Fears Connection To Kids' Chronic Illnesses,
• Minnesota Couple Duped Into Buying Home Once Used As Meth Lab; Arbitration Award A "Pyrrhic" Victory, Lender May Wind Up Holding The Bag,
• Go here for more posts on meth home horror stories.

$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.

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.