Saturday, June 25, 2011

Auctioneer Faces Administrative Charges Over Advertising 'Absoulte' Sale Of Property Subject To $2.3M Mortgage In Foreclosure

In Rapid City, South Dakota, the South Dakota Journal reports:

  • The South Dakota Real Estate Commission is accusing auctioneer Martin Jurisch of unprofessional conduct just a year after he settled to avoid an investigation in a similar case.
  • The commission plans a formal hearing to consider a complaint lodged in February in which the Rapid City auctioneer is accused of advertising an auction as absolutewhen the property was encumbered by $2.3 million in mortgages and was the subject of a pending foreclosure.
  • In an absolute auction, the property must sell to the high bidder no matter how low the price, which in this case put the seller at risk if the sale price wasn’t high enough to pay the mortgages, according to the complaint.
  • The commission’s formal complaint against Jurisch accuses him of six violations of state real estate laws. After the hearing, the commission could issue Jurisch a letter of reprimand, revoke or suspend his license, fine him up to $2,500 or order any combination of the penalties.

For more, see Real Estate Commission accuses auctioneer, former mayor of violations.

(1) Reportedly, Jurisch agreed last year to a settlement to resolve a complaint that he refused to sell 2,909 acres in Bennett County at what was advertised as an absolute auction. A prospective buyer complained Jurisch withdrew the land from sale when the high bid fell short of the amount needed to pay off the property owner’s mortgage.

Judge Dodges Judgment Of Eviction; Coughs Up Cash, Moves Out Of Rented Home After Being Accused Of Stiffing Landlord In Foreclosure Out Of $3,600

In Bridgeport, Connecticut, the Connecticut Post reports:

  • Probate Judge Paul Ganim averted an eviction hearing Wednesday and voluntarily agreed to vacate the Black Rock home he was renting. "We always talked about getting out in June and we are out," Ganim commented.
  • Gayle Gleckler, who owns the single-family house [...] that Ganim and a female companion have been renting since October 2009, claimed Ganim owes her $3,600 in back rent. She filed suit against him in housing court here seeking his eviction.
  • Gleckler's lawyer, Robert Russo, said he has withdrawn the lawsuit since Ganim moved out. He said Ganim is continuing to pay rent while he keeps a storage unit on the front lawn. "This lady was paid, she was under foreclosure and needs to sell the property and I certainly sympathize with her financial plight," said Ganim.

Source: Probate Judge Ganim averts eviction by leaving home.

Judge Accused Of Fixing Foreclosure Case Found Guilty Of Corruption Charges; Co-Defendant Facing 22 Years Copped Earlier Plea & Testified Against Him

In Akron, Ohio, WEWS-TV Channel 5 reports:

  • The Cuyahoga County judge charged in the county corruption investigation for allegedly fixing a foreclosure case has been found guilty on three of the five charges he was facing. The federal jury returned the verdict against Judge Steven Terry shortly before 2 p.m. Monday in Akron. Terry, who was facing five charges, was found guilty of counts one, three and four – which were related to conspiracy to commit mail fraud and mail fraud.


  • During closing arguments Friday, the prosecutor said there are recorded phone conversations between Terry and former Cuyahoga County Auditor Frank Russo that proved Terry was corrupt. [...] Russo, who is facing 22 years in prison after pleading guilty to his role in the corruption scandal, testified earlier this week that he gave campaign contributions to Terry and expected to get benefits, like favorable rulings, in return.(1)

For the story, see Cuyahoga County Judge Steven Terry found guilty of mail fraud in corruption case.

(1) Given his admitted 'track record' of 'expecting benefits', Russo no doubt will be expecting benefits (in the form of a prison sentence 'buydown') for 'bellying up' and giving testimony to sink his robe-wearing confederate.

Cops Pinch Columbus Man Who May Have Used Forged HUD Work Orders To Access Vacant Homes In Central Ohio Burglary Spree

In Delaware County, Ohio, the Westerville News & Public Opinion reports:

  • The Delaware County Sheriff's Department has arrested a man suspected in 20 recent burglaries of vacant homes across Central Ohio, including 10 in Delaware County.Sheriff reports said Monte Shoemaker, 24, of Martinsburg Drive in Columbus, was arrested last Wednesday, June 1 after Cottage Realty, Inc. agent Dave Schulte saw two suspects entering one of his vacant properties on Dauer Court in Powell and called police.


  • When deputies found Shoemaker in the home, they retrieved keys to multiple homes along with out-of-state work orders for recently burglarized homes, according to reports. After further investigation, the [Housing] and Urban Development work orders that Shoemaker had been presenting to receive keys to homes were determined to be fake, according to reports.


  • On Monday, June 6, Sheriff Walter L. Davis III confirmed the department had found evidence to link Shoemaker to many recent burglaries of model homes in Delaware and Franklin counties.
  • "The suspect can be linked to at least 10 (burglaries) in Delaware and we believe we're going on 10 in Franklin County -- a total of 20 burglaries in Central Ohio," he said "We're currently going through facts, data and evidence." Shoemaker has not yet been charged with the multiple breaking and entering crimes aside from the June 1 incident, according to Delaware County Municipal Court records.

For more, see Suspect may have used fake work orders to enter houses (A Columbus man is a suspect in 20 burglaries of vacant homes across Franklin and Delaware counties).

San Diego Man Facing F'closure Cops Plea To Forging 'Court-Issued' Temporary Injunction In Attempt To Dupe Stiffed Lenders Into Stalling Sale Of Home

In San Diego, California, The San Diego Union Tribune reports:

  • A San Diego man has pleaded guilty to forging the signature of a federal judge and creating a fake order with the hopes of forestalling the foreclosure of his Mission Valley Home. Marc Uribe, 45, entered the plea Wednesday before U.S. Magistrate Judge Cathy Ann Bencivengo.
  • Uribe acknowledged in the plea that he created a falsified court order and forged the signature of a fictional federal judge named Ivan Gonzalez, Assistant U.S. Attorney Robert Huie said.
  • Uribe issued the fake order with a civil lawsuit against various lenders. The forged order instructed the lenders that they were temporarily prohibited from foreclosing on his home.

For the story, see Man pleads guilty to forging a judge's signature.

Chase Left Holding The Bag On Slimy, Snake-Infested Home As Creepy Creatures Force Unwitting Homebuyer, Family To Abandon Abhorrent Abode

In Rexburg, Idaho, The Seattle Times reports:

  • They slithered behind the walls at night and released foul-smelling musk into the drinking water. Ben Sessions once killed 42 in a single day. Shortly after buying their dream home, Sessions and his wife discovered it was infested with thousands of garter snakes. Their growing family lived as if in a horror movie for three months. They abandoned the property, but the home briefly went back on the market more than a year later, and they fear it could attract another unsuspecting buyer.


  • Now owned by JP Morgan Chase, it was listed at $114,900 in December, according to, a real-estate data firm. That price fell to $109,200 in January. The Animal Planet network then featured the couple's story in its "Infested" series. The listing was removed, and it has stayed off the market while Chase decided what to do with it.
  • Darcy Donahoe-Wilmot, a Chase spokeswoman in Seattle, said the bank has contracted to have the snakes trapped and released from the house. Once the infestation is gone, the house will be up for sale again and a report will be issued to potential buyers.
  • "We can't list the house until its been taken care of," Donahoe-Wilmot said. An estimate of how much it would cost to remove the snakes and how long the process would take was not available.

For all the gory details, see Idaho family abandons snake-infested house (Shortly after buying their dream home, Ben Sessions and his wife discovered it was infested with thousands of garter snakes. They abandoned the property, but the home briefly went back on the market more than a year later, and they fear it could attract another unsuspecting buyer).

Friday, June 24, 2011

Title Insurance Considerations For Lenders Foreclosing In California

Lexology reports:

  • With mortgage defaults on the rise, a growing number of lenders are being forced to foreclose on their collateral, either judicially or non-judicially, exercising the private power of sale.
  • Once a lender determines that it must take title to the property securing the loan, it is important that the lender understand what title coverage it has and needs during and after the foreclosure process.
  • What protection does a Trustee Sale Guaranty and/or Litigation Guaranty provide the lender? Does the lender’s current Lender’s Title Policy provide it with sufficient protection, or does the lender want to obtain a new Owner’s Title Policy?
  • The following is a description of the title protection that a Trustee Sale Guaranty and Litigation Guaranty provide a California lender and a brief discussion of the factors to consider when deciding whether to obtain an Owner’s Title Policy after a foreclosure sale.

For more, see Title insurance and foreclosure: What type of title coverage do lenders need in connection with a foreclosure in California? (paid subscription required; if no subscription, GO HERE).

Ticket-Lacking 'Lawyer' Buys Delinquent Debts As Price Of Admission To Protracted Foreclosure, Bankruptcy Litigation

In Worcester, Massachusetts, the Worcester Telegram & Gazette reports on a story of a law school graduate who, despite the fact that he's failed the state bar exam five times and is not licensed to practice law, has nevertheless carved out a name for himself as a dogged litigator appearing regularly before the local state and federal courts representing one particularly litigious client, himself:

  • On most days, you can find Ara Eresian Jr. either poring over thick law books at the public law library on Main Street or tending to matters across the street at the state courthouse.
  • The 57-year-old Shrewsbury man has scores of cases on the dockets of state and federal courts, many that have been litigated and appealed for years. His painstakingly researched legal pleadings number in the tens of thousands of pages and counting.
  • But Mr. Eresian is not a lawyer. He is a kind of continual plaintiff who sues over real estate deals in which he claims a stake, usually representing himself. In some cases, Mr. Eresian buys the rights to debts or court judgments as a means of inserting himself into bankruptcy cases or foreclosure proceedings.
  • The would-be lawyer, who holds a law degree but has failed the bar exam five times, stands infamous among local attorneys more for his doggedness in the face of defeat than for his legal acumen. Undeterred by adverse rulings from judges, Mr. Eresian appeals nearly every loss, tying up the subjects of his lawsuits in court for years and leaving them with mounting legal bills.(1)

For more, see Legal fights never end (Who Is Ara Eresian; Why Does He Do It?).

(1) Reportedly, one case (In re Scheffer, Case No. 06-41218-MSH (Bankr. D. Mass. May 25, 2011)) involved a local homeowner/couple who had filed for bankruptcy. Eresian reportedly purchased an unpaid debt to a local heating oil company owed by them, thereby making him a creditor with the legal standing to challenge the couple's bankruptcy protection.

As the story goes, Mr. Eresian's parents, first generation Armenian-Americans originally from Somerville, once owned the home where the couple now live. Eresian apparently grew up in the three-bedroom ranch, which his parents lost to a foreclosure more than two decades ago. In rejecting Eresian's challenge, U.S. Bankruptcy Melvin S. Judge Hoffman characterized Mr. Eresian's case against the couple as a “misguided and obsessive crusade to avenge" that foreclosure, which the couple had nothing to do with. Reportedly, the couple's attorney said his clients were left bewildered by Eresian's legal onslaught that put their home at risk. A few of Judge Hoffman's comments from his ruling:

  • "I find that Mr. Eresian purchased the Peterson Oil claim in order to gain standing so he could more effectively continue his campaign of harassment against the debtors, the unlucky owners of his childhood home. [...] Mr. Eresian has exhibited a pattern of behavior that any reasonable person would find shocking. He has needlessly multiplied litigation in this Court and has saddled the debtors with the need to defend their discharges a year after they were granted."

Broward Judges Asked To Supply Compromising Info Regarding Possible Attempts To Score Post-Bench Employment With Local Foreclosure Mill

In Fort Lauderdale, Florida, Broward Palm Beach New Times reports:

  • Would you trust Broward judges to supply compromising information about themselves? That's what they're being asked to do now, essentially...A few weeks ago, we wrote about outgoing Broward County Chief Judge Victor Tobin leaving his post to join a foreclosure law firm that stands to benefit from policies he crafted.
  • Among Tobin's accomplishment as head honcho at the courthouse is the institution of the "rocket docket," which allows judges to move a foreclosure case forward in the blink of an overworked attorney's eye. (Matt Taibbi wrote a scathing account of the process in Rolling Stone.)
  • Now somebody -- we swear it wasn't us -- has initiated a vast public records request that could reveal whether Tobin or other judges were actively angling for employment based on their current positions.


  • As reported on JAABlog, the request filed under Florida's saving-grace public-records laws seeks a broad range of communications from the year preceding Tobin's announcement that he was leaving the bench:

    All records of the judicial branch relating to discussions of employment and career opportunities, salary offers, salary negotiations, benefits, other forms of compensation, employment starting dates, current employment exit strategy, hiring procedures, job applications, letters of recommendation, and/or incentives regarding the employment of judges of the Seventeenth Judicial Circuit to or from any employee or representative of the Law Office of Marshall Watson, including but not limited to emails, letters, meeting minutes, calendar pages.
  • Now that's certainly a hell of a lot of information for anyone to search for... which is why courthouse General Counsel Alexandra V. Rieman is outsourcing the duty of supplying the information to the judges themselves.
  • In an email, she forwarded the request to circuit judges and asked them to supply her with copies of documents matching the description. "If you have any questions," she wrote, "please contact me."
  • Yes, how quickly does the "empty trash" button work??

For the story, see Chief Judge Victor Tobin's Questionable Exit Prompts Massive Public-Records Search.

Ex-Bug Board Commish Cops Plea To Using Dead Man's ID To Score Double Homestead Exemption; Ordered To Cough Up $60K In Back Real Estate Taxes, Fines

The Florida Keys Keynoter reports:

  • When all is said and done, former Florida Keys Mosquito Control Board Commissioner Charles Langstaff will end up paying more than $60,000 in back taxes for his homestead exemption fraud. Langstaff, 66, pleaded guilty Monday to the misdemeanor in Levy County and was ordered to pay more than $14,000 to that county.
  • Langstaff, a commissioner from 1998 until 2010, admitted using the Social Security number of a dead Islamorada man to secure a homestead exemption on his Morriston property near Gainesville. He was a longtime employee at Beyer Funeral Home in Key Largo.


  • [Levy County State Attorney's Office's lead investigator Spencer] Mann said Langstaff's agreement would settle only Levy County's lien against his Levy County property.
  • According to the Monroe County Tax Collector's Office, Langstaff still has a $45,683 lien on his Key Largo home for claiming the exemption while he lived in Levy.
  • [Monroe County] Tax Collector Danise Henriquez said her office filed the lien in both Levy and Monroe counties. [...] Henriquez added that Langstaff's homestead exemptions have been revoked from both of his properties. "He is going to have to file [for an exemption] wherever he is going to reside," she said.

For the story, see Former bug-board member in hole for $60,000.

Bank Backs Down On Alleged Intimidation In Foreclosure Action; White Shoe Law Firm's Naming Of Fraud Expert's Son In Suit Viewed As Act Of Retaliation

The Huffington Post reports:

  • Deutsche Bank has dropped the son of high-profile foreclosure fraud investigator Lynn Szymoniak from the foreclosure case against her, according to new court documents. The bank had added Szymoniak's son, Mark Cullen, to the foreclosure suit this May, a move that many experts saw as an act of retaliation against Szymoniak, who has publicized banks' widespread use of forged signatures in the foreclosure process to improperly give borrowers the boot. On June 8, lawyers filed a "Notice of Dropping Party" with the Florida court dismissing its previous claims against Cullen.


  • When the bank refiled [a previously-thrown out foreclosure action against Szymoniak], her son, Mark Cullen, had been named a party to the lawsuit, creating a blight on his legal record and a major hassle for the family. Independent foreclosure attorneys accused the bank of attempting to intimidate Szymoniak's family and retaliating against Szymoniak for her public activism.


  • [Mortgage servicer] American Home declined to comment after the new court documents were filed, but a spokesperson told HuffPost earlier that the decision to include Szymoniak's son in the refiled lawsuit was not an act of retaliation. Instead, they said at the time they believed him to be a tenant who could have a secondary claim to the home. He was named in the foreclosure suit, American Home said, to make sure that he couldn't come back and press legal claims against American Home if his mother is later evicted.
  • But Szymoniak's son, Mark Cullen, has not lived there for seven years, Szymoniak said. He is a graduate student in poetry at the New School in New York, a fact that any cursory inquiry by American Home's lawyers could have detected.


  • When Szymoniak challenged the foreclosure, the bank brought in Florida corporate law behemoth Akerman Senterfit & Eidson. It wasn't the notoriously sloppy foreclosure mill adding Szymoniak's son to the case -- it was an expensive team of corporate law experts.
  • That fact reinforced the impression among Florida foreclosure attorneys that the decision to add Szymoniak's son to the mortgage was an act of intimidation. Akerman did not respond to phone calls for comment but conferred with American Home prior to the mortgage servicer's interactions with HuffPost.

For the story, see Bank Drops Legal Pressure On Foreclosure Fraud Expert's Family.

Thursday, June 23, 2011

Maryland Man Gets 13 Months For Violating State Anti-Foreclosure Rescue Law After $8,500 Ripoff Of Homeowner Needing House Payment Help

In Harford County, Maryland, The Baltimore Sun reports:

  • A Baltimore man was sentenced to spend 13 months in jail last week for defrauding a Harford County couple in a mortgage workout scam that a prosecutor says cost them thousands of dollars and may have contributed to the loss of their home.
  • Frank G. Debelius, 54, [...] pleaded guilty June 8 in Harford County Circuit Court to theft of more than $500 and violating the state's Protection of Homeowners in Foreclosure Act. "It's the first mortgage fraud case that has been prosecuted in Harford County," Bill Christoforo, a veteran assistant state's attorney who prosecuted the case, said.


  • Debelius told the couple he was with Bay One Mortgage, provided them with his professional card and offered to help them [with their unaffordable mortgage payments], according to the prosecutor. "The long and short of it was this guy said, 'I'm going to do a workout for you with your mortgage company,'" Christoforo said.
  • Debelius told the Rories that he went to their mortgage company and convinced that company to knock $100,000 off the principal of the loan and extend their payments, Christoforo explained. Debelius then told the Rories he needed $8,500 in order to complete the deal, and the Rories made the payment. "He was never in contact with the mortgage holder and never made it happen," Christoforo said.


  • The couple's foreclosure troubles ultimately came to the attention of Circuit Court Judge William Carr, who referred the case to the Harford State's Attorney's Office. "Unfortunately it was really too late," Christoforo said. "They lost their home." Christoforo speculated that the $8,500 may have helped the couple keep the home.
  • A nine-count grand jury indictment was handed down against Debelius in June 2010. Last week, Debelius pleaded guilty to two counts and was sentenced to three years in jail, by Circuit Court Judge Emory Plitt Jr., who then suspended one year and 11 months of that sentence. Debelius also received one day credit on his jail sentence. Debelius was ordered to serve four years supervised probation upon his release from jail and to pay restitution.
  • Christoforo said the Rories may not have been Debelius' only victims. He said another woman in Baltimore City has made similar claims against Debelius. "My feeling is there's other cases like this, probably that have gone on or are going on in the [Harford] county," Christoforo said.

For the story, see Harford couple duped in mortgage fraud.

Final Defendant Goes Down In Scam Using Rent To Own Racket To Lure, Rip Off Investors, Would-Be Homebuyers On 100+ Homes That Ended Up In Foreclosure

From the Office of the U.S. Attorney (Portland, Oregon):

  • Jennifer Venable, 29, of Beaverton, Oregon, was sentenced by the Honorable Robert E. Jones of the United States District Court on June 8, 2011, to 5 years probation and ordered to pay $15,000 in restitution relative to her January 13, 2011 wire fraud conviction.


  • Ms. Venable’s sentencing brings to an end the prosecutions related to the conduct of Jeremy Richardson and his company, Richardson Equities LLC. Richardson’s company ran a “rent-to-own” scheme that promised high profits to investors who purchased homes on behalf of tenants who agreed to purchase the home from the investor at a price greater than the original purchase price when their credit improved.
  • To effect the scheme, the investor would apply for a residential mortgage using inflated asset and income information and lie about the true nature of the loan. Richardson and his associates purchased over 100 homes in the Portland area valued in excess of $35 million.
  • In every case, Richardson and his investors failed to maintain their financial obligations and the properties fell into foreclosure.(1)

For the U.S. Attorney press release, see Sentencing of Real Estate Agent Concludes Prosecution of Mortgage Fraud Scheme.

(1) According to the press release, on May 4, 2010, Jeremy Richardson was sentenced to 37 months in federal custody following his guilty plea to money laundering. In addition to Richardson and Venable, others involved in the rent-to own scheme involved:

  • Nicolas Cooper of Portland, Oregon, who was sentenced to a term of 5 years probation and ordered to pay $102,058 in restitution on May 23, 2011,
  • Andrew Paul Shute of Seattle Washington, who was sentenced to 5 years of probation and ordered to pay $61,332 in restitution following his plea of guilty to wire fraud related to his activities as a mortgage broker on behalf of Richardson; and
  • Tyler Jacob Marsten of Tulsa, Oklahoma, who was sentenced to 5 years probation and ordered to pay $39,549 in restitution following his conviction for bank fraud related to his activities as a mortgage broker on behalf of Richardson.

Would-Be Homebuyers Under Rent-To-Own Deal Get Clipped Out Of $12K Upfront, Monthly Payments As Rent-Skimming Owner Pockets Cash, Stiffs Bank

In St. Charles, Missouri, KTVI-TV Channel 2 reports:

  • If you don't qualify for a conventional home loan, you might want to proceed with caution if lease to own is your only option. We talked with a couple who now have to fight to keep a roof over their hea^ds while battling serious health concerns.
  • Brian and Teresa Wilson understand what it means to have terminal cancer. They didn't expect they'd be fighting health issues and a bad deal on a lease to own agreement for a house.
  • They signed a contract on this house in St. Charles County in February 2011. The family traveled a lot with Brian's job. And they just wanted to settle into their own home. But Brian says they've gotten the shock of their lives. "We've since come to find out that this home is not, is in foreclosure and has not had a current payment made in over seven months."
  • Brian signed a contract and lease agreement with a St. Louis area real estate investor who's come to the attention of the Better Business Bureau. The BBB recommends extreme caution when dealing with Jack l. Roddy, JMZ homes, JMZ Investment Group. Jim Judge of the BBB explains why they started investigating. "We're getting complaints from consumers that are getting into lease to own situations with this company."
  • Wilson says, "It was two months behind going into default in February when I gave him a check for twelve thousand dollars plus we made a thousand dollar rent payment every month on time since then." Four checks written by the Brian were cashed. Jack Roddy had no comment when we called him.


  • The Wilsons say they researched the company before signing the contract but saw no red flags. They believe the mortgage is still held by the original owners. Something they just discovered. Teresa was the first to hear the news.

For the story, see Contact 2: Lease to Own Scam.

Would-Be Homebuyer Gets Boot After Paying Rent-Skimming Middleman $6K Upfront, Monthly Payments In Rent To Own Deal; Title Owner Also Left Holding Bag

In El Paso, Texas, KFOX-TV Channel 14 reports:

  • Leticia Ornelas said she's been buying a house for two years only to find out none of her payments ever made it to the mortgage company. Now she's been kicked out of the home and she’s suing the man who supposedly sold her the home, Lorenzo Trujillo.(1)
  • Signs that were targeted towards people with bad credit are what first got Ornelas’ attention. She said she and Trujillo had a plan to fix her credit while buying a Horizon City home; $6,000 down, $695 a month.
  • Once she was approved for a bank loan, a man named Erick Martinez came to her door and told her the house was his and it was under foreclosure. Ornelas had to move out. "I was scared like, what do you mean I'm not buying this house?” Ornelas said. “They told me even the owner wasn't given the payments at all and that's why this house was up for an action."
  • Trujillo spoke with KFOX14 today. He admits that Ornelas’ payments never went to the mortgage company. "We came to an agreement and told her if she’s unhappy, we can buy this house back from her,” said Trujillo.
  • Ornelas is suing Trujillo in small claims court. She doesn’t understand how Trujillo can buy the house back from her when he never sold it to her in the first place.
  • Martinez also has a lawsuit against Trujillo. Martinez said he didn’t realize that no payments had been made to the mortgage company. Martinez originally hired Trujillo to sell the house for him.

Source: Woman Says She Bought A House But Seller Never Paid Mortgage (Woman Sues To Get Money Back After, She Says, She Was Scammed).

(1) This isn't the first time a Lorenzo Trujillo has made the news for involvement in a dubious real estate deal. See August 5, 2009: KFOX-TV Channel 14: Woman Shocked To Find People Living In Her El Paso Home:

  • A former El Paso woman says people are living in her Lower Valley home that she never sold. Tammy Diaz asked a real estate investor to help her sell this home more than two years ago. Diaz moved to Corpus Christi, and almost never heard from him again.
    Diaz in 2007 faced a separation from her husband and impending foreclosure on her home. So she reached out for help.
  • "He made it seem like everything was real perfect, he was going to be able to sell our house for us," said Diaz.
  • Diaz is talking about Lorenzo Trujillo. Diaz was under the impression that Trujillo was going to sell her home in 45 days, but two years later, she said she had gotten no news from Trujillo.

Dozens Of Would-Be Illinois Home Buyers Under 'Rent To Own' Deals May Face The Boot Over Landlord's Pending Foreclosure

In Sangamon County, Illinois, The State Journal Register reports:

  • A Sangamon County judge has appointed a receiver to take over stewardship of nearly 130 homes, most in Springfield, while foreclosure actions are pending. The order issued Thursday by Circuit Judge Patrick Londrigan effectively takes the properties away from JSP Investments while State Bank of Lincoln, which says it is owed nearly $6.8 million, attempts to gain title to the properties via a foreclosure action filed in March. That could take several months, according to Phillip Montalvo, the bank’s attorney.
  • In the meantime, The Apartment Mart of Springfield will manage the properties, performing maintenance, collecting rents and evicting tenants when necessary, according to the court order.


  • Dozens of the tenants have contracts-for-deed or rent-to-own agreements with JSP, according to court documents. Montalvo said he is not certain just how many tenants have contracts to purchase homes. The bank has discovered that some tenants who had contracts have moved, he said. “The records we have are very, very old,” Montalvo said. Montalvo said he cannot guarantee that tenants still in their homes with rent-to-own agreements will be able to have rent money paid to JSP apply toward purchase.
  • One problem, he said, is most of the rent-to-own contracts were never filed with the Sangamon County recorder’s office. If contracts were recorded before JSP obtained bank financing, tenants have a better shot of having claims honored, he said.(1)


  • Montalvo said there are two lessons to be drawn from the case. One is to have rent-to-own contracts filed with the county recorder’s office so tenants can be in a position to have contracts honored. Another is to keep all receipts for rental payments, he said.
  • Linda Stephenson, who signed a rent-to-own agreement for a JSP house on North Ninth Street, said she has receipts, but never had her contract filed with the recorder’s office. She said she signed a rent-to-own contract four years ago and stopped paying rent to JSP two months ago, after learning that her home was in foreclosure through no fault of her own.
  • Nobody knows what’s going to happen,” said Stephenson, whose home with a neatly kept yard and flowerbeds is a bright spot on a street where several houses are in disrepair. "We don’t know if we’re going to lose our home. “I love living here.”

For the story, see Receiver appointed to oversee 130 JSP properties.

(1) If the would-be buyers under the unrecorded rent-to-own deals and contract for deed arrangements took possession of their homes prior to the seller-landlord getting the mortgage loan from the bank, and if said possession was actual, open, and notorious, it may be that the earlier-created, but unrecorded, interests held by the would-be buyers in their homes will trump the lender's later-created, recorded interest in the mortgage.

When determining the priority of competing interests and equities in real estate, the general rule is that the interest that is recorded in the public records first will have priority over later-recorded or unrecorded interests. The determination is made without regard to when the interest was actually created.

However, a frequently overlooked exception to this rule exists where the holder of a later-created, but earlier-recorded interest fails to qualify for status as a bona fide purchaser. Such failure will disqualify the holder of the earlier-recorded interest for the protection afforded by the state recording statutes. In such a case, the holder of the earlier-created, but unrecorded or later-recorded interest will have priority.

Whether the mortgage lender in this case would qualify as a bona fide purchaser (assuming the loan was made after the renters took possession of their homes) would turn on whether or not the lender had 'notice' of the latter's unrecorded rights. If the lender is found to have had 'notice' of the would-be buyers possession, protection as a bona fide purchaser would be unavailable to it (note that, under the law, one can be found to have had 'notice' of a fact, even if he/she did not have actual knowledge of the fact).

In most states, one seeking to acquire an interest in the real estate (either as a buyer or lender) generally has the duty to know who was in possession of the property before making the purchase or secured loan, and to inquire of the occupants into any rights or equities they may hold. In this regard, when an ordinary inspection of the premises by a purchaser or mortgage lender, followed by reasonable inquiry, would reveal the existence of unrecorded rights or equities, then that purchaser or mortgage lender is charged with notice of those rights. Whether or not the buyer or secured lender had actual knowledge (to be distinguished from 'actual notice') of the occupant's possession is generally immaterial. As many courts have observed, if it were allowed that by failing to acquaint oneself with the fact of possession, the buyer or lender could avoid the effect of this rule, one could purposely avoid any inquiry on the subject, and thereby evade the rule and its consequences entirely.

A U.S. Bankruptcy Judge (In Re Polo Builders, Inc., 433 B.R. 700 (Bankr. N.D. Ill. E. Div. 2010)) recently observed that "[i]t has long been settled in Illinois ... that possession of property is notice of whatever rights to the property the party in possession claims ...", and emphasized this point in a footnote by adding: "So long, in fact, that more than a century ago the Illinois Supreme Court described the rule as "too well settled to call for the citation of authorities" citing Mason v. Mullahey, 145 Ill. 383, 388, 34 N.E. 36, 36 (1893)." Cases too numerous to list here support this proposition in the state. See:


For those in neighboring Missouri, support for this proposition can be found in (bold text is my emphasis):

Obernay v. Chamberlin, 506 SW 2d 446 (Mo. 1974):

  • The leading Missouri case on this subject is Drey v. Doyle, 99 Mo. 459, 12 S.W. 287, wherein the court stated: "Now from the line of former adjudications of this court it is plain to be seen that the notice which will postpone a recorded instrument, affecting real estate, to a prior unrecorded one, must be actual notice. Such notice may be shown by direct evidence, or it may be inferred from facts and circumstances. The question is one of fact, and is to be determined like any other fact.

    Circumstances coming to the knowledge of the subsequent purchaser, which would put a prudent person upon inquiry, should go to the jury as evidence of notice. In short any evidence tending to show knowledge of the prior unrecorded instrument should be received as evidence of notice. The inference to be drawn from the facts and circumstances is one of fact and not of law.

    Possession and knowledge thereof will, in ordinary cases, be good proof of notice of the title under which the party in possession claims. Such evidence, under other circumstances, will be of little value."

    The Missouri cases on this subject are treated at length in an article on possession as notice, appearing in 16 Mo.L.Rev. 142 (April, 1951).

Hayward v. Arnold, 779 SW 2d 342 (Mo. App. W.D. 1989):

Janss v. Pearman, 863 SW 2d 643 (Mo. App. S.D. 1993):

See also, Hart v. Parrish, 244 SW 2d 105 (Mo. 1951):

  • Plaintiff Hart was familiar with property and knew defendant-respondent Lillian Parrish, widow of Charles H. Parrish, was in possession, "living on the property." In these circumstances, it should not be held Mittler had no notice of the fraud upon which defendant Lillian has relied for cancellation.


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


By the way, a discussion that may be helpful in understanding the concepts of 'actual notice', 'actual knowledge', and the 'duty to inquire' can be found in this excerpt from Hatcher v. Hall, 292 SW 2d 619 (Mo. App. S.D. 1956) (bold text is my emphasis):

  • It is true that, as our courts have reiterated many times, notice is regarded in law as actual where the person sought to be charged therewith either knows of the existence of the particular fact in question or is conscious of having the means of knowing it, even though such means may not be employed by him;[12] and that, since notice does not mean positive information brought directly home to the person sought to be affected thereby, whatever fairly is sufficient to put an ordinarily prudent person on inquiry constitutes notice to him of such facts as would be disclosed by reasonable pursuit and proper inquiry.[13]

    For, justice is not so indulgent as to encourage one to shut his eyes to circumstances which would excite the zetetic impulse in an ordinarily prudent individual [Drey v. Doyle
    , 99 Mo. 459, 469, 12 S.W. 287, 289] or to throw away the key to the door of exploration through which the facts reasonably might be ascertained [Barrett v. Davis, 104 Mo. 549, 561, 16 S.W. 377, 380; James v. Hutchinson, Mo.App., 211 S.W.2d 507, 511]; and, from early times, our courts "have always recognized that the still small voice of suggestion, emanating as it will from contiguous facts and surrounding circumstances, pregnant with inference and provocative of inquiry, is as potent to impart notice as a presidential proclamation, or an army with banners." Connecticut Mut. Life Ins. Co. v. Smith, 117 Mo. 261, 292-293, 22 S.W. 623, 629; Adams v. Gossom, 228 Mo. 566, 583, 129 S.W. 16, 21.

    However, one is put on inquiry and charged with notice of the facts which would be disclosed thereby, only when "`the inquiry becomes a duty, and the failure to make it a negligent omission'" [Laughlin v. Findlay
    , 324 Mo. 1021, 1024, 25 S.W.2d 464, 465(1)];[14] or, as otherwise stated, "`(w)here there is a duty of finding out and knowing, negligent ignorance has the same effect in law as actual knowledge.'"[15]

    Whether the circumstances are sufficient to give rise to a duty of further inquiry is ordinarily a question of fact[16] [at least where the evidence is conflicting or is such that more than one inference of fact might be drawn therefrom (Merrill on Notice, Vol. 1, Section 64, p. 61)], frequently fraught with appreciable difficulty and always determinable in the light of the circumstances of the particular case under consideration;[17] and whether, when one is put on inquiry, the exercise of common prudence and ordinary diligence [Edwards v. Carondelet Milling Co., 108 Mo. App. 275, 287, 83 S.W. 764, 768; Kitchen v. St. Louis, K. C. & N. Ry. Co.
    , 69 Mo. 224, 265] in further investigation would have led to discovery of the information, knowledge of which is sought to be charged, likewise usually becomes a question of fact.[18]

Wednesday, June 22, 2011

Victimized Couple Gets Little Help From Title Insurer After Discovering Deed To Home May Have Been Forged; Suspect Currently Faces Criminal Trial

In Murrieta, California, KABC-TV Channel 7 reports:

  • A family is being told the house they thought they bought in Murrieta actually belongs to someone else. The family says they can't stop making their mortgage payments. "Even though you've made your payments in full every month, you could get a knock at the door saying get out," said would-be homeowner Charlie Zahari. "If you look at it, we're renters in a house we can't move out of."
  • That was hardly the feeling last summer where there was all the euphoria of buying their first home. They custom painted the girls' bedrooms and sodded the backyard. They stopped making improvements when they found out they're not the legal owners of the home.
  • "We actually got a call from the FBI who said we just wanted to inform you that your house has been part of a deed fraud scheme," Zahari said. Karen Tappert is the person the Zahari's say is responsible for stealing the home and selling it to them. She's facing federal charges,(1) but that does little to help the Zahari's with their situation. They must continue paying for the home or otherwise put their credit at risk. They can also be forced to vacate at any moment.
  • Officials said it started when the original owners of the property vacated the house because they thought the bank was going to foreclose on them. That never happened, and the alleged scam artists swooped in and fraudulently sold it to the Zaharis.
  • The family said neither the title company, First American Title Insurance, nor the bank have done much to help answer how the title company allowed the purchase of the home in the first place.
  • In a statement, First American said, "For privacy reasons we cannot comment on the specifics of Mr. & Mrs. Zahari's claim, however, generally the process of establishing title involves other necessary parties and is dependent on their cooperation. This process can be time consuming and complicated."
  • Bank of America also said they're a victim too and they're working with the title company for a resolution. Tappert's federal trial is under way in Nevada.

Source: FBI informs family they bought stolen house in Murrieta.

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

(1) For more on Karen Tappert's indictment, see Vegas Feds Say Woman Used Fraudulent Deeds In Foreclosure Rescue Ripoffs & Squatter Scams.

Robosigning Notaries From Now-Defunct Georgia Foreclosure 'Sweatshop' Find Themselves In Local Clerk Of Court's Crosshairs Over Bogus 'Docx' Docs

In Fulton County, Georgia, WSB-TV Channel 2 reports:

  • Fulton County's clerk of court said homeowners from across the country have filed complaints questioning the credentials of notaries who signed their mortgage documents. Cathelene "Tina" Robinson said she's already revoked certifications from several of the notaries involved. "As a notary, your job is to prevent fraud," said Robinson, who commissions all of Fulton County's notaries.
  • The notary affixes his or her seal to a document to verify the signatures on it are authentic. But employees from at least one foreclosure mill said they were turning out documents by the thousands, signing names of fictitious bank representatives.
  • "It's awful. It's terrible. It should not have occurred," said Robinson. She vowed to investigate any claims of notaries misusing their seals. "Once the notary comes in, we do fact finding. We ask questions," she said.
  • In the past three months, Robinson has revoked the certifications of four notaries who worked for an Alpharetta company called Docx. The company is accused of robo-signing hundreds of thousands of foreclosure documents for banks around the country. Channel 2 investigative reporter Jodie Fleischer reviewed Robinson's files and found at least 10 remaining Docx notaries with remaining inquiries.
  • Last year, Robinson's office cleared three notaries of wrongdoing after they insisted they witnessed a valid signature. Robinson couldn't prove them wrong at the time, despite wild variations in the same name, Linda Green, signed on many of the documents.
  • Now Robinson is considering trying to pull all of the Docx documents filed locally to check out the notaries. One told Fleischer that Docx paid for her to become a notary.
  • Notaries are not required to list their employers on the application, and Georgia requires no training or test to become a notary. Robinson would like to see the state tighten its laws. "Anyone that has any concerns as it relates to any person Fulton County commissioned, I would be happy, please contact me so we can investigate," she said.
  • But all Robinson can do is revoke their notary seals. Any criminal prosecution would have to come from the district attorney. There is also an ongoing federal investigation.

For the story, see Official Vows To Investigate Notary Misuse Claims.

Lawsuit: Home Buyer Took Possession Of Premises Pre-Closing, Rented To Tenants, Then Refused To Close

In Beaumont, Texas, The Southeast Texas Record reports:

  • A woman has filed suit against the couple who she claims promised to buy real estate from her, placed tenants in the property, then reneged on their original offer to purchase the property.
  • Mary Ross Stinebrickner claims she agreed to sell property at 4340 Chaison St. in Beaumont to defendants Rex and Kathy Johnson. The Johnsons signed an agreement to sell real estate form on July 8, 2010, according to the complaint filed May 25 in Jefferson County District Court.
  • After signing the form but before the closing on the property, the Johnsons took possession of the property and placed tenants in it, the suit states. At the closing, however, the defendants refused to sign the deed of trust and lien note, the complaint says. They have also refused to evict their tenants from the property, Stinebrickner claims.
  • As a result, the Johnsons are making rent money from property that Stinebrickner still owns and is making tax payments on, according to the complaint.

For the story, see Owner claims buyer reneged on property sale.

Recently-Issued Bankster Anti-Flopping Short Sale Contracts Put Real Estate Agents On Hot Seat As Brokers Bellyache

The Sarasota Herald Tribune reports:

  • New short-sale contracts issued by two of the largest banks in the country are causing concern in the local real estate community.
  • The contracts, which were issued by Bank of America and Wells Fargo, ask real estate agents to certify -- under penalty of perjury -- that the short sales they are conducting are "arms length" and that the properties will not be resold within 30 to 90 days of closing.
  • The object of the contracts, according to Sarasota attorney Evan Berlin, is to protect banks against what has become known as "flopping" -- a form of mortgage fraud in which real estate professionals get banks to accept low-ball prices for properties in some stage of foreclosure and quickly resell them at higher prices.
  • Though real estate agents acknowledge flopping is a legitimate concern for banks, they see the new contracts as another way in which banks are shifting more of the financial burden and liability of making sure mortgage fraud does not occur onto them. "The contracts put extra pressure on Realtors to do due diligence and could have a chilling effect on legitimate flip transactions," Berlin said.

For more, including contract excerpts from the Wells Fargo and Bank of America short sale documents, see New short-sale contracts upsetting Realtors.

Tuesday, June 21, 2011

Failure To File Motion Within 90 Days Of Deed Delivery Consummating NY Foreclosure Sale Sinks Lender's Move To Score Deficiency Judgment

A recent ruling by a New York intermediate appellate court serves as a reminder that, in New York, where the proceeds of the foreclosure sale fail to cover the entire amount due on the loan, a foreclosing mortgage lender will be deemed to be legally "out of luck" in any attempt to obtain a deficiency judgment against those liable on the loan if it fails to file a motion for a deficiency judgment "within ninety days after the date of the consummation of the sale by the delivery of the proper deed of conveyance to the purchaser", as one recent lender sadly discovered.(1)

The lender's desperate attempt to salvage the situation with the argument that the '90-day meter' should not begin to run until the referee's (foreclosure) deed could, under state law, legally be recorded fell on unpersuaded judicial ears.(2)(3)

For the ruling, see Cicero v Aspen Hills II, LLC, 2011 NY Slip Op 05153 (NY Sup. Ct. App. Div. 3rd Dept. June 16, 2011).

(1) Contrast the 90-day time period in New York with the five year time period in Florida (with an additional 20 years to collect). See Time in which the plaintiff must apply for a deficiency judgment in a Florida foreclosure case. Check state law for the applicable time frame in your state.

(2) From the ruling:

  • Pursuant to the RPAPL, "the mortgagee in a mortgage foreclosure action [may] recover a deficiency judgment for the difference between the amount of indebtedness on the mortgage and either the auction price at the foreclosure sale or the fair market value of the property, whichever is higher" (BTC Mtge. Invs. Trust 1997-SI v Altamont Farms, 284 AD2d 849, 849-850 [2001]; see RPAPL 1371 [2]).

    The statute requires, however, that a motion for a deficiency judgment be made "within ninety days after the date of the consummation of the sale by the delivery of the proper deed of conveyance to the purchaser" (RPAPL 1371 [2]).

    The 90-day period is a provision in the nature of a statute of limitations, thus "[f]ailure by plaintiff to serve notice within the 90-day period is a complete bar to the entry of a deficiency judgment" (Amsterdam Sav. Bank v Amsterdam Pharm. Dev. Corp., 106 AD2d 797, 797 [1984]).

    Here, no dispute exists that the appointed referee delivered the deed to plaintiff on November 23, 2009, or that there was any deficiency in the deed itself. Plaintiff was required, therefore, to file the motion by February 21, 2010 — 90 days from delivery of the deed — and, accordingly, Supreme Court properly held that plaintiff's March 25, 2010 motion was untimely (see Citicorp Mtge. v Strong, 227 AD2d 818, 820-821 [1996]; National Bank of Sussex County v Betar, 207 AD2d 610, 612 [1994]).

    Plaintiff asserts, instead, that the 90-day period did not begin to run until the expert's appraisals of the mortgaged properties were delivered to plaintiff on January 13, 2010. Specifically, because the deed could not be recorded in New York State until two tax forms were completed — the TP-584 and the RP-5217 — which could not be executed until the fair market value was derived from the appraisals, plaintiff argues that consummation of the sale, and the commencement of the 90-day period, did not occur until the appraisals were delivered.

    We disagree. Both our statutory and common laws dictate that transfer of real property occurs at the delivery of a properly executed deed, rather than when the deed is recorded (see Real Property Law § 244; Manhattan Life Ins. Co. v Continental Ins. Cos., 33 NY2d 370, 372 [1974]; Janian v Barnes, 284 AD2d 717, 718 [2001]).

    Plaintiff's attempt to read the clear reference to "delivery of the proper deed of conveyance" in RPAPL 1371(2) to require something more than the delivery of the properly executed deed to commence the limitations period is not persuasive (see Citicorp Mtge. v Strong, 227 AD2d at 820-821; Savings Bank of Utica v 561-575 Delaware Ave., 201 AD2d 946, 946 [1994]; Crossland Sav. v Patton, 182 AD2d 496, 496 [1992], lv denied 80 NY2d 755 [1992]).
(3) This ruling should serve as a reminder to foreclosed homeowners in New York (and elsewhere) that the unpaid balance on a foreclosed loan cannot be collected (either by the lender, some zombie debt buyer who may have swooped in and bought the crappy paper for 'pennies on the dollar', or any other scavenger) unless and until:
  • a motion requesting a hearing for the granting of a deficiency judgment is filed with the court within the proper time period,
  • a judge holds the hearing (with all parties receiving proper notice thereof), and
  • a judge grants the deficiency judgment, determining exactly what the deficiency amount is (typically, and as set forth in Cicero v Aspen Hills II, LLC, it is "the difference between the amount of indebtedness on the mortgage and either the auction price at the foreclosure sale or the fair market value of the property, whichever is higher").
A word of caution to foreclosed homeowners: beware of zombie debt buyers and other vultures that gobble up these unpaid deficiency debts from foreclosing lenders (see e.g. Short Sellers, Foreclosed Borrowers May Be In For Big Surprise As Collection Firms Scramble To Buy Up Unpaid Loan Deficiencies), and who then attempt to collect on them without first having obtained a deficiency judgment. Keep in mind that, not only are they not allowed to do this, but if they do, they are giving you a good case for a lawsuit against them for violation the federal Fair Debt Collection Practices Act, as well as any applicable state law.

See Fla. Appeals Court Nabs Sneaky F'closing Lender In Attempt To Improperly Go After Foreclosed Property Owner's Personal Assets To Satisfy Unpaid Debt for an example of one foreclosing lender who almost got away with duping a snoozing trial judge into signing a court order allowing for the collection of an unpaid post-foreclosure sale debt where the lender did not first obtain a deficiency judgment in the court that granted the foreclosure.

Trafficking In Deficiency Judgments An Upcoming Cottage Industry Being Seen On The Horizon?

The following excerpt buried in a recent story in the Sarasota Herald Tribune serves as a caution to financially-strapped homeowners and 'strategic defaulters' thinking of walking away from their underwater homes and investment property:

  • Florida is gliding quietly into a new and potentially painful part of the boom-bust cycle, where stacked-up "deficiency judgments" for unpaid condo fees and unsatisfied mortgages could come back to haunt past owners. Many of them thought they had escaped further costs when they handed their home over to their lender.

  • When a lender sells a foreclosed home for less than the mortgage, the difference -- or "deficiency" -- is typically registered in the court proceedings as being owed by the original borrower, but it is seldom paid.

  • The same thing can happen with unpaid condo or homeowner fees. Either as part of the bank foreclosure or through a separate foreclosure action, the homeowner or condo association can ask the court for a deficiency judgment.

  • In either case, even if these debt instruments gather dust for years, they remain valid and are accruing interest at the rate of 6 percent to 18 percent per year.


  • [In Florida, t]here is a five-year period from the end of a case judgment to establish a deficiency judgment.(1) Then that judgment lasts for 10 years and it can be renewed for another 10 years. "You can even sue at the end and get more time, so there is all the time in the world to collect on these things,"(2) Soto said. "Yet there is this pervasive rumor that you can somehow walk away from your house and never have to worry about it again. And it is simply not true."(3)
For more, see Foreclosure fees haunt homeowner associations.

(1) See Time in which the plaintiff must apply for a deficiency judgment in a Florida foreclosure case.

(2) See Burshan v. Nat'l Union Fire Ins. Co., 805 So.2d 835 (Fla. 4th DCA 2001):
  • The "main purpose of an action on a judgment is to obtain a new judgment which will facilitate the ultimate goal of securing satisfaction of the original cause of action." Adams v. Adams, 691 So.2d 10, 11 (Fla. 4th DCA 1997).

    If a limitations period has almost run on a judgment, a judgment creditor "can start the limitation period anew by bringing an action on the judgment to obtain a new judgment." 47 AM.JUR.2D Judgments § 945 (1995); accord Adams
    , 691 So.2d at 11 (quoting Koerber v. Middlesex College, 136 Vt. 4, 383 A.2d 1054, 1057 (1978)). A party may not relitigate the merits of the original cause of action in an action on a judgment. See Klee v. Cola, 401 So.2d 871, 872 (Fla. 4th DCA 1981).

(3) There is also a pervasive belief (and seemingly persuasive argument) that a judgment creditor can just sit on its claim, without making any attempt to collect on the money owed, wait for the debtor to get financially back on his feet, and then go after him for the unpaid debt, all the while accumulating additional judgment interest on the amount owed.

Specifically in Florida (and elsewhere, I'm sure), a "foot-dragging" creditor intentionally twiddling its thumbs in such a case may be found to to have "slept on its rights" and, consequently, leave itself vulnerable to a laches defense, as some presumably flabbergasted creditors in Florida have mournfully discovered, even though the 20-year period had yet to expire. See:

  • Winter v. Allstate Mortg. Corp., 303 So. 2d 399 (Fla. App. 3d DCA. 1974):

    Of course, a party ordinarily has twenty years in which to enforce a judgment in Florida. However, when undue delays are exercised without sufficient reason, it has been held that equitable defenes may be raised which may cut off the right to satisfy a judgment. Orr v. Allen-Hanford, Inc., Fla.1946, 158 Fla. 34, 27 So.2d 823; Blackburn v. Venice Inlet Co., Fla.1949, 38 So.2d 43.

    In the instant case, no effort was undertaken by the original judgment creditor, Brown, to satisfy his judgment, and it was not until eight years later that the appellee brought this action which informed the appellants for the first time of the existence of the judgment.

    It is also apparent that appellee's motive in purchasing the judgment was to assist it in acquiring the appellants' property at a reduced price. To permit foreclosure on a relatively valuable piece of property to satisfy the comparatively meager sum due because of the judgment would be inequitable under the circumstances of this case.

    Therefore, for the reasons stated, the judgment appealed is reversed and the cause is remanded with directions to enter judgment in favor of the appellants.
  • Blackburn v. Venice Inlet Co., Fla.1949, 38 So.2d 43:

    In the case of Orr v. Allen-Hanford, Inc., 158 Fla. 34, 27 So.2d 823, we held that a creditor may satisfy his judgment within twenty years, but when undue delays are exercised without sufficient reasons shown therefor, equitable defenses become available that may cut off the right to satisfy the judgment.

See also, NH Couple Beats Back Debt Scavenger's Attempt To Collect On Zombie Debt From Old Foreclosed Mortgage:

  • The judge also agreed with Wright's argument, under a legal doctrine known as a "Laches" defense, that Cadle had waited to try to collect the debt so that interest and late fees would pile up. The original loan deficiency on the Lessards' note was about $14,000, but Cadle was trying to collect nearly $30,000 by the time the lawsuit was filed.

Zombie Debt That Came Back To Life & Bite 'Deed-In-Lieu-Conveying' Homeowner Leads To Suit Against Fannie, BoA, Foreclosure Mill Sweatshop

In Fort Myers, Florida, The News Press reports:

  • David Cruz Jr. got what he believed was a great offer in a foreclosure lawsuit filed against him by giant mortgage lender Fannie Mae. If Cruz deeded the modest Fort Myers investment house back to Fannie Mae, the government-backed company would release him from the loan's $123,750 note: the obligation underlying his mortgage.

  • He deeded the house back to Fannie Mae, but court records show he didn't get what he bargained for. Now, experts say, he and thousands of others in Florida who took the same deal from Fannie are at risk of being stalked by a so-called "zombie note:" debt that appears dead and gone but still can come back to life.

  • Cruz, of Fort Lauderdale, is suing Fannie in Lee circuit court along with its loan servicer Bank of America and their attorney, Fort Lauderdale-based Law Office of Marshall C. Watson, which handled the foreclosure and the deed-back deal.


  • Even if Fannie has the note, Cruz should take little comfort from the fact he's dealing with a federally backed entity, said Jack Williams, resident scholar at the American Bankruptcy Institute and a bankruptcy professor at Georgia State University. "That note is a legal obligation," he said, and even if Fannie Mae doesn't sue, it could sell the debt to someone who would.

  • "We saw something very similar to this in the debacle in the '80s, people buying notes from the government and suing," Williams said. "I won't rule out that could happen again. They sold the note to collection agencies and law firms and places like that."

  • In the real estate meltdown of the '80s, he said, it was the Resolution Trust Corp., set up by the federal government to liquidate mortgage loans and other real estate assets held by failed savings and loan associations.

  • "Let me tell you, people made millions of dollars suing homeowners back in the day," Williams said. Some of the debt was in the form of deficiency notes: court judgments saying a certain amount was owed even after the property was sold at public auction. But in other cases, Williams said, it was the note, straight up.

For more, see 'Zombie notes' live to haunt deed transfers (Thousands affected by Fannie Mae tactics) (if link expires, TRY HERE).

Failure To Record Earlier-Created Mortgage No Bar To Priority Over Later-Created, Recorded Mortgage, Says Brooklyn Trial Court

The following facts are taken from a recent ruling of a Brooklyn, New York trial court denying a defendant's motion for dismissal by one bankster in litigation against another bankster:

  1. On or about August 10, 2005, a property owner, one Hemant, and a co-owner obtained a $302,250 mortgage loan from Fremont Investment and Loan.

  2. Inexplicably, Fremont failed to record the mortgage (further, at the time of the litigation in this matter, Fremont admitted that it was not in possession of the mortgage documents).

  3. Thereafter on March 30, 2007, Hemant executed a deed purportedly conveying all of his right title and interest to the premises to defendants Seema and Sushma, his daughters.

  4. The deed was recorded on March 30, 2007. On March 30, 2007 Seema and Sushma executed a note and mortgage for $423,750 secured by the Premises, said note and mortgage ultimately winding up in the hands of HSBC.

  5. In the process of carrying out the March 30, 2007 transaction, Hemant delivered two affidavits at the closing in which he states that he has received zero consideration for the transfer of the premises, that the transfer was between family members and two transfer tax documents which state that the consideration for the transfer was $0.

  6. In contrast to those documents, the HUD-1 form states that Hemant received $296,000 in consideration for the transfer.

  7. Also, the checks issued at the closing were endorsed to parties other than Hemant and his daughters (an attorney's affirmation authenticating copies of checks issued in connection with this closing, which involved Delta Finding (now held by HSBC) and the parties was submitted to the court affirming that the checks were issued to persons and entities including Sushma Rambaran, HKR Construction, Varsha Construction, and 81-83-85 Blake Avenue LLC).
In this case, the court was asked to address, as between Fremont (holder of the earlier-created mortgage that recklessly went unrecorded) and HSBC (holder of the later-created, but earlier recorded mortgage), whose mortgage has priority on the property in question. Specifically, Defendant HSBC moved to be dismissed from what apparently was a foreclosure action brought by Fremont (actually, by MERS, as Fremont's nominee), HSBC claiming that its mortgage had priority over Fremont's mortgage.

Question: Which has priority over the other, Fremont's earlier-created, unrecorded mortgage or HSBC's later-created, earlier-recorded mortgage.

Answer: If you said HSBC's mortgage has priority, you may well be wrong. Based on the foregoing facts (which have been assumed to be true in deciding a motion to dismiss), Kings County Supreme Court Justice Herbert Kramer denied HSBC's motion to dismiss, "hold[ing] that a genuine issue of material fact exists as to whether the mortgagee was a bona fide purchaser due to the discrepancies in the closing documents."(1)

For the ruling, see Mortgage Elec. Registration Sys., Inc. v Rambaran, 2011 NY Slip Op 50966(U) (NY Sup. Ct. Kings County, May 23, 2011).

  1. Inasmuch as attorneys from The Law Division of Fidelity National Title Group., Inc., New York City, represented HSBC in this case, one can reasonably surmise that Fidelity was the insurance company that issued HSBC its mortgagee's title insurance policy (which means Fidelity, along with the agent who ostensibly butchered the closing of the March 30, 2007 transaction, may ultimately be the ones left holding the bag on this apparent screw-up).
  2. While apparently not central to Justice Kramer's ruling, Mortgage Electronic Registration Systems played a role in the origination/servicing of both mortgages involved in this controversy. Yet another fine mess MERS finds itself in the middle of.

(1) Justice Kramer begins his analysis by stating that New York follows the (seemingly) universally well-known general rule that, as a 'race-notice' state, an earlier-recorded instrument (ie. HSBC) has priority over a later-recorded or unrecorded instrument (ie. Fremont).

He then refers to what is seemingly a universally unknown (or, at least, not understood) exception to the general rule, in this excerpt:

  • However, there are several exceptions carved out of this general rule. For example, a prior recorded mortgage would lose priority to an unrecorded mortgage if the mortgagee had notice, actual or constructive of such a conveyance.

    If a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty if a degree of negligence equally fatal to his claim, to be considered a bona fide purchaser. Maiorano v. Garson, 886 N.Y.S.2d 190 [2d Dep't 2009] citing Williamson v. Brown, 15 NY 354, 362 (internal citations omitted).

In the following brief discussion, Justice Kramer sets forth his reasons for denying HSBC's motion to dismiss:

  • The defendant, HSBC moves for dismissal on the grounds that the defendant's purported lien was not recorded at the time that HSBC took a mortgage on the subject property. HSBC asserts that it had no knowledge, actual or constructive of the purported lien and therefore a bona fide good faith purchasers/encumbrancers and that the mortgage which they hold has priority.[2]

    Plaintiff, in opposition to the motion contends that HSBC is not a bona fide purchaser in good faith because, as discussed above, the closing documents associated with the transfer of the property between Hemant and his daughters conflict. Plaintiff further asserts that the contradiction between the documents raised HSBC's duty to inquire as to whether the transfer was a fraudulent transfer designed to evade Hemant's creditors.

    This Court holds that the discrepancies in the closing documents were sufficient to put HSBC on notice to further inquire as to the bona fides of the transaction. No evidence has submitted that HSBC engaged in any additional investigation in light of the discrepancies. Rather, it seems that HSBC simply pushed the documents through without the critical eye which is required in these transactions.

    Gone are the days in which closing documents are merely meant to be shuffled and stacked. A lending institution has an affirmative duty to inquire into the bona fides of the documents, prior to taking mortgage on a property. If they fail in that duty their status as a bona fide purchaser is threatened. See, Southwell v. Middleton, 17 Misc 3d 1129(A) [Sup. Kings. 2007].
    [3] [Where the court held that discrepancies between the closing checks gave rise to a duty to further investigate the transactions].

    Accordingly, the motion is denied.

Delaware Judiciary To Zombie Debt Buyers, Collectors Coming To Court Claiming They're Owed Cash: Prove It!

From Public Citizen's Consumer Law & Policy Blog:

  • The Delaware courts have posted an administrative directive setting higher standards for consumer debt collectors to plead and document their collection actions. Among other things the directive calls for debt buyers to identify the original creditor and all assignments of the debt and to attach a copy of the original contract.
  • The latter requirement will be challenging for credit card debts, because the written credit card account agreement is a thing of the past; most credit card contracts are now formed (according to the card issuers anyway) when a consumer clicks an "I agree" button, and the contract terms are somewhere in the cloud. You can read and respond to comments on the directive here.

Source: Delaware Courts to Collectors: Prove It.

In related stories, see:

Thanks to Deontos for the heads up on the CL&P Blog post.