Saturday, July 9, 2011

HUD Left Holding The Bag On Potentially 'Flammable F'closure' As Hazardous Materials Crews Step In, Rip Apart Premises In Search For 'Meth' Chemicals

In West Valley, Utah, The Salt Lake Tribune reports:

  • Hazardous materials crews began digging in the backyard of a foreclosed home [] after the previous owner said chemicals used to make methamphetamine may have been buried in the backyard. So far, only a waste basin from an old outhouse and buried garbage and concrete blocks have been found at the scene [...]. Digging will conclude [...] with firefighters on standby.

  • The previous owner said he buried some stuff in the backyard, but he didn’t know where,” said West Valley Fire Capt. Bridger Williams. EnviroCare Inc., which specializes in dealing with hazardous materials, dug a number of holes by hand in search of what the man may have buried. “They (EnviroCare) wanted to make sure the home is safe and the property is safe for those who live nearby and for the eventual buyer,” Williams said.

  • John Hart, COO of EnviroCare said they were told chemicals used to make methamphetamine may have been buried in the backyard, so they used ground penetrating radar to search the area. They found eight areas of interest and started digging with plastic shovels so they didn’t create any sparks.

  • The home went into foreclosure more than a year ago and is now owned by the Federal government’s Housing and Urban Development program. The government is working to clean up the home and property and eventually sell [unload] it.

For the story, see Crews check for buried meth chemicals at foreclosure home.

Texas Homeowner/Couple Facing Demolition Order Head For Court In Effort Thwart Oncoming City Wrecking Ball

In Beaumont, Texas, The Southeast Texas Record reports:

  • Beaumont residents Charles and Angela Richard have filed suit against the city in hopes of saving their residence. [...] According to the petition, on May 18 the city served the Richards with notice that their home was not up to code and was slated to be demolished.

  • In their suit, the Richards claims they have brought the home up to code but the city refuses to rescind its order to vacate. Plaintiffs would (show) sic that there is no remedy at law that is clear and adequate to protect plaintiffs' property interest against this wrongful demolition by defendant," the suit states.

Source: Beaumont residents sues city to save home.

Revocation Of Mobile Home Park Operator's License Could Drive 30 Families Out From Homes

In Bradford Township, Wisconsin, The Janesville Gazette reports:

  • Juan and Anna Iniguez have a brand-new lease on their lot at Shady Hills Mobile Home Park. According to the lease, they can stay through at least December. And they want to stay. Desperately. But the lease doesn’t give them much confidence.

  • The Bradford Town Board has set a public hearing as part of the process to revoke Shady Hills owner David Merriam’s operating license.

  • The Rock County Health Department also has filed orders against the park. The county would support whatever decision the town made about Merriam’s license, Environmental Health Director Tim Banwell said.

  • If the license were revoked, it could mean the residents would have to move. [...] The Iniguezes are among the 30 households that in April were given a letter that states their lot leases were terminated as of Jan. 1. They had until July 4 to move out, the letter states.


  • The town of Bradford building inspector has recommended Merriam’s license be revoked based on the half-torn-down mobile homes, the lack of access for emergency vehicles and work that has been done on some units without a license.

  • The Rock County Health Department has issued an order for streets to be repaired, manholes secured and trash removed.

For more, see Action vs. owner could hurt Shady Hills tenants.

Indiana U.S. Senate Candidate Caught Taking Double Homestead Exemptions; Says He Didn't Mean To, Agrees To Pony Up Unpaid Back Taxes

Buried at the end of a recent article, the Evansville (Indiana) Press & Courier reports:

  • An Indianapolis television station reports that state treasurer and U.S. Senate candidate Richard Mourdock has taken more property tax breaks than allowed. WTHR-TV says Mourdock had a homestead exemption on a home in Evansville and a second one for an Indianapolis condominium, even though multiple homestead exemptions are not allowed.

  • Mourdock says he filed a form to cancel one of the exemptions but learned this month that Marion County officials misplaced the form. He says he has since filled out another form to cancel the credit and has made arrangements to pay back taxes.

  • Marion County Deputy Auditor Claudia Fuentes wrote in a memo this month that a previous owner applied for the deduction. Mourdock is a Republican seeking the U.S. Senate seat currently held by GOP Sen. Richard Lugar.

Source: Mourdock's taxes under scrutiny.

"This Is Only The Beginning!" Warns Florida Lawmaker As Insurance Industry Begins To Jack Up Rates On Homeowner Policies

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

  • Brace yourself before you open your next home insurance bill. When Paul Hobson received his State Farm Florida renewal this month, he was shocked to find the annual premium to insure his 2,200-square-foot house had increased to $2,715 from $1,092.

  • "That's a 152 percent increase. I called to make sure the figure was right," Hobson said. "Did the end of the world happen or something?" The State Farm office he called in Jupiter assured him the amount for his St. Lucie West home was correct and due in August.

  • In April, regulators granted State Farm an average 18.8 percent rate increase, but as Hobson discovered, those averages mean little because there is no cap. Some homeowners are being hit with huge increases.

  • "This is only the beginning. The rates are being approved quicker and easier on behalf of the insurance industry. It's quite sad," said state Sen. Mike Fasano, R-New Port Richey, who has been an advocate for consumers on insurance. "We have a governor now who is sympathetic to the insurance industry."

For more, see Uptick in homeowners insurance rates 'only the beginning'.

Call Out The Homeowner Pitchfork Brigade! Maine Banksters Win Preliminary Skirmish In Battle Over Proposed Anti-Crappy F'closure Document Legislation

Buried in a recent article in The Portland (Maine) Press Herald is this blurb on one of a number of bills that state lawmakers are trying to advance:

  • L.D. 145, "An Act to Protect Homeowners Subject to Foreclosure by Requiring the Foreclosing Entity to Provide the Court with Original Documents," sponsored by Rep. Roberta Beavers, D-South Berwick. The bill would require a mortgage holder to produce the original mortgage note as part of the civil foreclosure complaint.

  • Despite a unanimous vote in support from the Judiciary Committee, intense lobbying from the banking industry threatened the bill, so it was sent back to committee, Beavers said.

Source: Lawmakers put key proposals on hold.

Facing Financial Squeeze, D.C. Tax Collector Goes On Prowl Hunting For Homeowners Claiming Fraudulent Homestead Exemptions

In Washington, D.C., The Washington Post reports:

  • Perhaps the most important lesson about tax breaks is this: You have to know when you are eligible, and then you have to ask for them.

  • The D.C Official Code contains two popular real-property tax exemptions: the homestead exemption and the senior-citizen real-property tax exemption. These exemptions can save a homeowner many thousands of dollars annually. Understanding the eligibility rules is key because the tax savings are significant — and there are serious penalties for those who receive these tax benefits despite being ineligible.

  • In these times of tight municipal budgets, you’d better believe the District is aggressively auditing these valuable tax exemptions. In 2006, the Office of Tax and Revenue established a separate Homestead Audit Unit. According to the office’s spokeswoman, Natalie Wilson, the audit unit conducts approximately 10,000 “annual” audits and up to 3,000 “daily” audits.

  • This unit has been quite successful. In fiscal year 2010, it collected approximately $6.6 million in additional revenue for the District’s coffers. There is no statute of limitations on how far back the District can audit, bill and seek to collect delinquent taxes, penalties and interest.

For more, including homestead eligibility, filing requirements, and penalties for gaming the system, see D.C. property tax exemptions: Know when you’re eligible, and know when you’re not.

Friday, July 8, 2011

Lack Of Good Faith Sinks Alabama Homeowners' 'Chapter 20' Bankruptcy Gambit

A U.S. Bankruptcy Court in Anniston, Alabama recently kiboshed a homeowner/couple's attempt at pulling off a so-called 'Chapter 20' bankruptcy (ie. the filing of a Chapter 7 filing to obtain a discharge of unsecured debts, followed by a Chapter 13 filing to work out a 5-year payment plan on the arrearages on secured debts), finding the filing was made with a lack of good faith.(1)

The indicia of a lack of good faith found by the judge:

  • failure to file a Chapter 13 petition soon after obtaining the Chapter 7 discharge ("They waited over 3 years, during which time they incurred 37 new obligations and increased their debts by $37,620");

  • the lack of a need for a Chapter 13 filing immediately after the Chapter 7 discharge to work out any mortgage arrearages existing immediately thereafter ("And most significantly, their mortgage arrears — 3 monthly installments — was not a leftover from their 2007 Cases.");

  • The Debtors' probable intent to simply buy some time until they again became eligible to file another Chapter 7 petition, at which point they would be strategically positioned to once again stiff all their unsecured creditors (this time, on all new obligations incurred subsequent to the filing of the earlier Chapter 7 petition).

With regard to the last point, the court made this comment:

  • "The Debtors' probable motive for filing this case was to bide their time under the protection of the automatic stay (§ 362), and later a confirmation order (§ 1327), until they become eligible for another chapter 7 discharge. While the Court cannot be absolutely certain of the Debtors' motives, it can look at the totality of the circumstances to determine whether their case was filed in good faith, especially at a time they were not eligible for a discharge."

For the ruling, see In re Gaddis, Case No. 11-40050-JJR-13 (Bankr. N.D. Ala. Eastern Div. June 20, 2011).

(1) The judge's general position on so-called Chapter 20 filings was expressed in this excerpt:

  • This bankruptcy judge believes that with the enactment of BAPCPA, and specifically §1328(f)(1), most chapter 13 debtors are now prohibited from seeking relief under chapter 13 until the 4-year bar from discharge required by § 1328(f)(1) is satisfied; especially debtors who have incurred substantial post-chapter 7 debts and whose principal purpose for seeking chapter 13 relief is not to cure mortgage arrears that were left over after a recently granted chapter 7 discharge.

    In any event, § 1328(f)(1) cannot be ignored, and the ineligibility of a debtor to receive a discharge in a chapter 13 case must be considered as a critical factor in a court's determination of whether a chapter 13 case was filed in good faith as required by Section 1325(a)(7), a section also enacted with BAPCPA. In re Gonzalez, No. 08-15277-B-13, 2008 WL 5068837 (Bankr. E.D. Cal. Nov. 25, 2008).

Texas Homeowners In Foreclosure, Residential Tenants Could Feel Some Effects From New State 'Assignment Of Rents' Law

Lexology reports:

  • The Texas legislature just rewrote all real estate loan documents in Texas which include an assignment of rents to the lender (and almost all commercial real estate loans do) when it passed the new Chapter 64 of the Texas Property Code. The Governor signed the bill on June 17, and the law is effective immediately.

    What does this mean to you?

  • LANDLORDS: As of now, a landlord cannot collect rents after its lender gives it notice of default and demands the rents and must turn over any rents it collects to the lender. The landlord can keep the rents already collected except pre-paid rents.

    COMMERCIAL TENANTS: As of now, a commercial tenant should not pay the landlord rent after it receives notice from the landlord's lender demanding the rents, or the tenant may have to pay rent twice.

Among the effects on homeowners & tenants in residential property:

  • An assignment of rents is not effective in a home equity loan or a reverse mortgage and cannot be enforced against a against the borrower's homestead if the homestead is a one to four family dwelling and the property was the borrower's homestead both when the assignment was executed and when the enforcement action is taken.(1)

  • Upon giving notice, the lender is entitled to all uncollected rents and all pre-paid rents. The lender is not entitled to rents already collected by the borrower, except for pre-paid rents that accrue on or after the date the lender gives notice. The tenant is not obligated to pay to the lender any rent that was prepaid to the borrower (i.e. the landlord) before the tenant received notice from the lender.

  • After the tenant receives the notice, the tenant is obligated to pay rent to the lender and cannot satisfy its obligation to pay rent by paying the landlord (unless the property is the tenant's primary residence).

  • If the property is the tenant's primary residence, the tenant can discharge his or her obligation to pay rent by paying either the lender or the borrower (i.e. the landlord).(2)

For more, see The Texas legislature may have just rewritten your real estate loans (requires subscription; if no subscription, TRY HERE; or GO HERE - then click the appropriate link for the story).

(1) Arguably, this law (at least in theory) should make it that much easier for rent-skimming, non-owner occupant homeowners to be charged criminally with theft, conversion, etc. when pocketing tenants' rent payments while contemporaneously stiffing lenders out of their loan payments when facing foreclosure (provided, of course, that the homeowner's mortgage contains an assignment of rents to begin with - which is not uncommon for mortgages securing 2 to 4-family homes).

(2) Where the residential tenant has the legal option of paying either a financially strapped landlord facing foreclosure or a lender seeking to preserve its loan collateral, he may be well-advised to pay the lender. A landlord facing foreclosure is more likely to pocket the cash and not pay the utility bills (ie. water, electric, trash pick-up, etc.) or make necessary repairs than the foreclosing lender (although don't hold your breath expecting the lender to be too efficient in handling the situation).

Using California Trust Deeds To Secure Non-Accelerable Or Contingent Serial Obligations - Pitfalls & Possible Solutions

A recent article in Lexology discusses the pitfalls of using real estate in California to secure non-accelerable or contingent, serial obligations, such as rent payments or indemnification obligations, resulting from the operation of, among other related statutes:

  • Section 726 (ie. “one form of action” or "one action" rule, along with with its judicially created corollary rule that a creditor must resort to its “security first”(1)), and

  • Section 580d (the anti-deficiency provision)

of the California Code of Civil Procedure in non-judicial foreclosures under California law.

Along with a discussion of the pitfalls, approaches to deal with them are explored.

For those in California (and, I suppose, anywhere else, for that matter) who have any idea what all this might be referring to and may have some interest,(2) see One deed of trust and several obligations: the case for layered foreclosure in California (requires subscription; if no subscription, GO HERE; or TRY HERE - then click appropriate link for the story).

(1) Go here for links to several dozen California cases addressing the state's "one form of action" and "security first" rules.

(2) If not, don't worry about it, it's not important anyway.

Equitable Subrogation Takes Hit From Kentucky Supreme Court

In another post that may be for title professionals only (also for real estate legal professionals involved in undoing/voiding mortgages on homes arising as a result of a home equity ripoff), Lexology reports:

  • Lenders, title insurance companies and their agents should be aware that on April 21, 2011, the Supreme Court of Kentucky issued a decision that could have a significant effect on Kentucky courts’ application of the doctrine of equitable subrogation in Kentucky. Wells Fargo Bank, Minnesota, N.A. v. Commonwealth, --- S.W.3d ---, 2011 WL 1620578 (Ky. Apr. 21, 2011).


  • [T]he Court reached a number of conclusions that should give lenders, title agents and title insurers pause:

    “[P]rofessional mortgage lenders should be held to a higher standard for purposes of determining whether the lender acted under a justifiable or excusable mistake of fact in failing to duly investigate prior liens.” Id. at 13-14.

    “Equity also demands that the responsibility for a defective title examination be allocated to the party who is most culpable.” Id. at 14.

    Equitable subrogation must not be used to “bail out a negligent title insurer.” Id. at 15.

    “Those title insurers are engaged in the very profitable business of assuring that their lending institution customers receive a clear title by insuring such.” Id. at 15.

    Describing a lender’s decision not to make a loan if it must first satisfy a tax lien as “the sound lending practices that our society deserves, especially in the aftermath of this nation’s 2008 financial meltdown.” Id. at 19.

  • The Wells Fargo Court’s holding was narrowly limited to a conclusion that “a professional lender who has actual or constructive knowledge of an earlier recorded general tax lien may not benefit from an equitable reordering of the liens.” Wells Fargo at 19.

  • The holding does not expressly affect equitable subrogation in the context of competing “professional lenders,” for example, so the ramifications of the decision could be limited. But the above-quoted language could easily lead to further erosion of equitable subrogation, something that would significantly affect lenders, title insurers and their agents.

For more, see Wells Fargo v. Commonwealth: the death knell for equitable subrogation? (requires subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link for the story).

The Saga Of 'Sunny' Sheu - NYC Man Who Fought Foreclosure After Being Victimized By Forged Land Documents Winds Up Dead

In New York City, Black Star News reports:

  • Since his death last summer, associates of Sun Ming Sheu, an activist fighting alleged judicial corruption in New York, remain convinced that he was murdered and that police aren't investigating his death because of a coverup.

  • They point to the alleged kidnapping and death threats by New York Police Department (NYPD) officers Sheu reported to the FBI, the highly suspicious circumstances of Sheu’s injury, the contradictions in the official reports of his death, and most conspicuously, the lack of any investigation by law enforcement, even after the manner of Sheu’s death was ruled "undetermined" by the Medical Examiner, making an investigation legally mandatory.

  • They also cite a motive - the silencing of Sheu three days after he declared that he had discovered proof of felonies by a New York State Supreme Court Judge.

  • Perhaps the most ominous evidence of foul play, the associates say, is the video Sunny Sheu made weeks before his death - now posted on Youtube - in which he predicts his own murder and names the parties he feels will be responsible; parties including a sitting State Supreme Court Judge [Joseph Golia] and two detectives of the Queens District Attorney office whom he had claimed "kidnapped" and threatened him months prior.

For more, see Was Sunny Sheu, Foe Of Judicial Corruption, Murdered? (Activist Dead Weeks After Posting Video About His Fears) (Part One of a Series).

See also, Business Insider: The Unbelievable Story Of The Queens Man Who Fought Foreclosure And Wound Up Dead.

For an August 4, 2009 post on Sonny Sheu, see Queens Homeowner Fights To Hold Onto Home Stolen In Deed Theft Scheme; May Lose House Anyway Despite Successful Forgery Prosecution Against Scammers.

Thursday, July 7, 2011

NY Bankruptcy Court: REMIC Investor Lacks Standing In Chapter 11 Case Where Debtor's Property Secures Loan Included In Pool Held By Trust

Lexology reports:

  • In a recent decision, the Bankruptcy Court for the Southern District of New York concluded that an investor in a Real Estate Mortgage Investment Conduit ("REMIC") lacked standing to object to the sale of a chapter 11 debtor's real property, despite that the property served as collateral for loans held in trust by the REMIC for the benefit of its investors.

For more, see REMIC investor lacks standing to object to sale of collateral in borrower's bankruptcy reorganization (requires subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link for the story).

For the ruling, see In re: Innkeepers USA Trust, Case No. 10-13800 (Bankr. S.D. N.Y. April 1, 2011).

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

'Lien Priority' Battles Between Recorded, Unrecorded Interests In Real Estate Continue; Homebuyer Downpayment Lien Trumps Builder's Construction Loan

Bona fide purchaser fans (including title insurance lawyers & agents, as well as home buyers making downpayment deposits on yet-to-be-built homes & condos, and construction lenders) may find the following butchered summary of some of the facts from a recent ruling of the South Carolina Court of Appeals of some interest:

  1. Covington, an experienced real estate broker, enters into a contract with Wingard, a real estate developer, for the purchase of a yet-to-be built home.

  2. Covington gives Wingard two downpayment checks, one for $10,000, which was deposited shortly thereafter, and one for $276,700, which was given with the instruction that it was not to be deposited until after Wingard obtained a mortgage loan to commence construction of the premises.

  3. The $276,700 check given by Covington was a 'hot check' (ie. he did not have sufficient funds in his bank account to cover this amount).

  4. As a precondition for the yet-to-be obtained construction loan, lender required Wingard to sell the unit for each lot in the development.

  5. Wingard apparently met the condition, as lender subsequently provided a $7,000,000 construction loan.

  6. Shortly after the mortgage securing the construction loan was recorded, Wingard deposited Covington's $276,700 check which, because Covington had since deposited sufficient funds in his account to cover it subsequent to its issuance, was no longer 'hot', and cleared without incident.

  7. Wingard ultimately defaulted on the construction mortgage, and the lender initiated foreclosure.

  8. At some point thereafter, a question arose regarding the lien priority involving the competing interests of the lender's recorded construction mortgage, and Covington's equitable lien(1) (which, by its very nature, is an unrecorded lien) for the amount of his down payment deposit.


As between the competing interests of Covington's unrecorded equitable lien and the lender's recorded mortgage, which lien has priority on the premises?

If you guessed that the lender's recorded mortgage had priority over Covington's unrecorded equitable lien for the amount of his downpayment money, GUESS AGAIN.

Given the specific facts of this case, and as set forth in the court's ruling, Covington's equitable lien for his downpayment cash trumps the lender's construction loan, so that any foreclosure of the mortgage will leave Covington's lien for his downpayment unaffected (ie. the bank's construction loan is, in effect, treated as a 2nd mortgage subordinate to Covington's lien; if he does not recover his downpayment money, Covington (along with other would-be buyers who coughed up deposits on the struggling project) will then be able to foreclose on the bank to reclaim his cash).

Further, the court found this to be the case, notwithstanding the fact that Covington's $276,700 check:

  • was held uncashed by Wingard until after the construction loan was made, and

  • was written at a time when there were insufficient funds in the bank to cover the payment (although funds were ultimately made available when the check was eventually deposited).

For full facts, the ruling, and the court's application of the relevant law, see Regions Bank v. Wingard Properties, Inc., Opinion No. 4846 (S.C. Ct. App. June 22, 2011).

(1) I mention in passing that when a buyer pays a downpayment for any purchase of real estate, the buyer is generally entitled to an equitable lien on the premises for the amount of his deposit. The entitlement to such an equitable lien is usually not any big deal - except, of course, in those cases where the transaction ultimately fails to close and the seller and/or escrow agent refuses to refund the deposit back to the buyer.bona fide purchaser

Judge To Bill Collectors: Courtroom Is Not A "Land Of Oz!"

From a May, 2010 story in The New York Times:

  • As New Yorkers have tumbled into credit card debt in large numbers during the great recession, bill collectors have inundated the courts to get what they say is due. In turn, the courts have issued hundreds of thousands of orders against residents. Some consumer groups argue that by doing so, the courts have become little more than an arm of the debt collection industry.

  • Now, a few judges in New York State are suggesting that they agree, at least in part, with the consumer groups. They have fumed at debt collectors and their lawyers, scolding them for interest as high as 30 percent a year and berating them for false statements and abusive practices.

  • Some of the rulings have even been sarcastic or incredulous. In December, a Staten Island judge said debt collectors seemed to think their lawsuits were taking place in a legal Land of Oz, where everyone was supposed to follow anticonsumer rules invented by some unseen debt-collection wizard.


  • In the Staten Island case, the judge, Philip S. Straniere, said a credit card company was claiming interest of 28 percent on the balance due, which would be illegal as usury under New York law. The company argued that the credit card issued to a New Yorker that seemed to be from a national company had actually been issued by a one-branch bank in Utah, which had no usury law.

  • Like the Land of Oz, run by a Wizard who no one has ever seen,” Judge Straniere wrote, “the Land of Credit Cards permits consumers to be bound by agreements they never sign, agreements they may never have received, subject to change without notice and the laws of a state other than those existing where they reside.”(1)

  • The judge ruled that the supposed agreement allowing unlimited interest charges was not enforceable in New York.(2)

For the story, see In New York, Some Judges Are Now Skeptical About Debt Collectors’ Claims.

For Judge Straniere's ruling, see American Express Travel Related Services Company, Inc. v. Assih, 2009 NY Slip Op 29527 (NYC Civ. Ct., Richmond Cty., 2009).

(1) Commenting on the rules governing the consumer credit and debt collection industries, Judge Straniere makes this observation:

  • Having dealt with thousands of consumer credit cases over the years the court is sometimes caused to wonder if the regulations governing this industry originated in the "Wonderful Land of Oz" and not in the legislature of the various states and national government.

(2) Judge Straniere gave the lender the kiblosh on the usury issue with this remark:

  • The Wizard in the "Wizard of Oz" warned Dorothy and friends, "Do not arouse the wrath of the great and powerful Oz," I am sure the court will likewise be arousing the wrath of the plaintiff by finding that the credit card agreement entered into by the defendant with any of the plaintiff's entities is void as in violation of New York's usury statute.

Defective Foreclosure At Center Of REO Homebuyers' Dilemma; Discover They Acquired Crappy Title When Subsequent Refinance Attempt Failed

In Cape Coral, Florida, The News Press reports:

  • Brian and Holly Barnhart thought they were home free when they bought their Cape Coral dream house from Wells Fargo Bank - but the bank didn't even own the house.

  • Now the Barnharts, who emptied their life savings to buy the house for $153,000 cash and renovate it for another $80,000, are stuck in limbo along with their two small children and a baby due in July.


  • At the heart of the problem is a mortgage foreclosure lawsuit filed by Wells Fargo in 2007 against Richard Riccobono for a mortgage he had on the house. The bank won the suit and then took back possession of the house, but moved July 30, 2009, to set aside its ownership.

  • That caused ownership of the house to revert to Riccobono. But on Nov. 3, 2010, Wells Fargo sold the house to the Barnharts - who discovered two months later they didn't really own it when they applied for a mortgage.

  • Their plight is the latest in a string of cases in which people are suffering the aftershocks of the wave of foreclosures that swept through the county after the real estate bubble burst at the end of 2005.(1)

For more, see Exclusive: Cape Coral family pays Wells Fargo for home bank didn't own.

(1) Unless they updated their owner's title insurance policy (assuming, of course, they obtained one when they bought the home in the first place) to reflect the additional $80,000 investment for renovations (or unless they have something in their existing policy that addresses market value increases - for which they would have paid an additional insurance premium), the Barnhart's may find that their title insurance coverage is limited to the $153,000 they paid for their home. (It may be possible, however, that the Barnhart's can go to court and request that a judge impose an equitable lien on the property for the $80K expended to fix the place up.)

Virginia Homeowner's F'closure Challenge Leaves Public Auction Buyer Out $310K With Ongoing Tax Bills, In 2-Year Tug-Of-War For Possession Of Premises

In Richmond, Virginia, the Richmond Times Dispatch reports:

  • The foreclosure mess rocking the nation is playing out in Richmond.

  • On one side is a father-and-son team who bought a house in Windsor Farms as an investment at a foreclosure auction nearly two years ago but can't take possession of the house.

  • On the other is the couple who owned the house — and claim they still do, alleging that the foreclosure process was improper and should be voided.

  • Now, the case is tied up in the courts. [...] Judge Walter W. Stout of Richmond Circuit Court said Monday that the case has become a quagmire because of questions relating to title and possession.


  • Similar cases are likely to pop up, as foreclosures continue to mount nationwide and lenders and attorneys general in all 50 states review foreclosure procedures for possible improprieties.


  • The Watsons paid $310,200 for the house at a foreclosure auction on the steps of the John Marshall Courts Building in July 2009. Their name was recorded a couple of weeks later on the deed of trust. They have paid property taxes of nearly $15,000 since then, said their attorney, William K. Grogan.

  • But it's not clear who owns the house. The Nicholsons have not paid any mortgage or rent for at least 30 months, Grogan said in court filings. But the Nicholsons allege that the foreclosure process on their home was bogus, according to court records. [...] The couple has posted more than $19,000 in bonds, the Nicholsons' attorney said. "He is not a freeloader," Henry W. McLaughlin, one of two attorneys representing the Nicholsons, said at a recent court hearing.

For more, see Windsor Farms foreclosure case a quagmire.

Wednesday, July 6, 2011

Another Florida Homeowner Suffers Pre-Foreclosure House-Trashing; Cops To Victim: Don't Bother Us, It's A 'Civil Matter!'

In Brooksville, Florida, WTSP-TV Channel 10 reports:

  • Imagine coming back to your home after being away a few weeks and finding the locks changed and the home trashed. That's what happened to Chris Boudreau of Brooksville. Boudreau showed us the home, which was stripped bare.

  • Walking through the living room, he tells us "I used to have a couch, a sofa, a couple of end tables, a TV, DVD player, tapes and cabinet... but they are now gone."

  • It happened after 21 Mortgage Corporation in Knoxville, which is Boudreau's lender, hired a local company to do the job. The mortgage company spokesperson refused to talk to us, but we talked to Boudreau's attorney, Tom Altman.

  • According to Altman, the woman from the mortgage company told him Florida is a "self help state," and that's why they are allowed to do this. However, Altman explained he was holding the mortgage and Florida is not a self help state. He says he told the woman Florida has strict mortgage foreclosure laws and they were being violated by the company.

  • But the Hernando Sheriff's Office apparently has no interest in enforcing those laws... or burglary, breaking and entering and trespassing, either. They say it is a civil matter, even though everything from the house was taken or thrown in the dumpster. The wedding dress belonging to Boudreau's wife was even cut to shreds.

  • "When she saw what happened, she actually went into in the dumpster trying to go through the stuff," Boudreau says. "She was crying her eyes out."

  • Boudreau's attorney says the Hernando Sheriff's Office is flat wrong. "Although Boudreau had fallen behind a bit in his mortgage, there were no foreclosure proceedings in effect," Altman says. "That means the people who trashed bordures home and took his possessions should be arrested and prosecuted like common criminals."

  • Boudreau says he just wants to get his stuff back. However, that seems unlikely and it appears Boudreau will have to sue to be compensated for his losses.

Source: Man falls behind on payments, mortgage company has home trashed.

(1) For examples of filed lawsuits involving illegal bank break-in, "trash-out" & lockout cases, see:

For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

(2) This isn't the first time that cops have washed their hands when investigating these real estate-related crimes. See:

BofA At Center Of Another Servicer Screw-Up; Buyer Who Paid Cash Barely Dodges Foreclosure On Recently-Bought Home Once Owned By Delinquent Borrower

In Sacramento, California, The Sacramento Bee reports:

  • Kamal Sharma almost lost his house in a foreclosure auction the other day. The funny thing is: He doesn't even owe any money on it. Sharma's story – an extreme case even in Sacramento's chaotic real estate market – shows that lenders continue to make foreclosure mistakes despite extensive publicity and promises to fix problems, which include sloppy paperwork and communication breakdowns.


  • Sharma's troubles started last month when he arrived at his West Sacramento house one day to find a foreclosure notice from the servicing arm of Bank of America taped to the front door. Sharma, 34, had paid $85,000 in cash for the three-bedroom home in March, using money from a settlement he received from a workplace accident in which he lost half of his left foot. He planned to rent the house out for income.

  • After the foreclosure notice arrived, other curious things happened. A potential buyer came snooping around the neighborhood, and then a property management firm refused to list the house as a rental due to the foreclosure notice.

  • Unable to reach BofA for answers, Sharma headed to West Sacramento City Hall on June 22, the day his house was scheduled for auction. That's when the bank abruptly called off the sale just as buyers were lining up. Sharma still hasn't heard anything directly from BofA. But in response to a Bee inquiry, the bank apologized and attributed the problem to a "data entry error" that restarted an old foreclosure action against the home's previous owner.

For more, see Wrongful home foreclosures rare – but devastating.

Foreclosure Rescue Operator Gets 12 Months, Ordered To Pay $48K For Ripping Off 15 Victims In Upront Fee Loan Modification Scam

In Ventura County, California, the Ventura County Star reports:

  • A judge on Tuesday sentenced a 55-year-old Ventura woman to a year in jail after she pleaded guilty to running an illegal real estate foreclosure rescue scam that lured 15 victims who paid her thousands of dollars. Ventura County Superior Court Judge Edward Brodie ordered Maria Victoria Santos to pay $48,000 as restitution and put her on five years probation, according to Deputy District Attorney Dominic Kardum.

  • Santos pleaded guilty in February to three felony counts of unlawful acts by a foreclosure consultant and four counts of grand theft, Kardum said in a press release.

  • Santos victimized predominately Spanish-speaking Ventura County residents and advertised her foreclosure scam on local Spanish-speaking radio stations. Santos promised to save people's homes from foreclosure provided they pay her thousands of dollars in up-front fees, Kardum said.

Source: Ventura woman sentenced to year in jail in real estate scam.

Adult Daughter's Homestead Claim Against Deceased Mom's Estate Trumps Foreclosure Rescue Operator

The following facts are taken from a recent ruling of the Minnesota Court of Appeals ('Yennie' = foreclosure rescue operator; 'Wolf' = now-deceased homeowner):

  • Yennie's claim against the estate is based on a written agreement that he and Wolf executed in August 2004. The agreement, which is entitled "Investment Agreement Conveying Partial Interest in Real Property," relates to Wolf's home in the city of Plainview.

    The agreement provides that Yennie will assist Wolf in redeeming the property from foreclosure, make payments to bring the mortgage up to date, and perform repairs to the house in anticipation of its sale.

    The agreement further provides that, upon the sale of the property, Wolf would receive the first $47,500 in proceeds; Yennie then would receive reimbursement for the expenditures he made; and Wolf and Yennie then would evenly split the remaining proceeds.

    Wolf died intestate on January 22, 2010. Yennie filed a claim against the estate in the amount of approximately $28,000, which reflects expenditures he made pursuant to the 2004 written agreement.

    The personal representative disallowed the claim. Meanwhile, Wolf's daughter, his only surviving heir, filed a [statutory homestead] claim against the estate in the amount of $10,000.

In applying Minnesota law, the state appeals court held that, by reason of the homestead provisions in the state statute, Wolf's daughter was entitled to priority over the claim made by Yennie for the $28,000 he shelled out to fix up Wolf's home and pay the bills.

Inasmuch as there was insufficient money in this case to pay off all the claims made against the estate, and Wolf's daughter cashed out on her $10,000 homestead claim in full, Yennie was consequently left partially holding the bag on his claim, entitled to split whatever was left in the estate with one other claimant, and pocketing only a fraction of what he ponied up to fix up the home of the now-deceased homeowner.

For the ruling, see In re Estate of Wolf, No. A10-2029 (Minn. App. June 20, 2011) (unpublished).

Use Of Quiet Title & Slander Of Title In Undoing Real Estate Equity Ripoff, Voiding Deeds & Mortgages

The successful use of a quiet title and slander of title lawsuit in an effort to undo a real estate equity scam perpetrated on an elderly property owner by his nephew and a gang of others was the focus of a December, 2009 ruling of an Illinois appeals court.

The fact pattern involved, among other things, a purported sale leaseback, coupled with a repurchase option, of property and the recording of forged land documents.

For those in Illinois (and possibly elsewhere) in the business of undoing and unwinding these ripoffs on behalf of the victims, there may be some points of interest, including the following:

  • action to quiet title,

  • requirements for adequately proving slander of title,

  • essential elements of a forgery,

  • cloud on title ("is the semblance of title" which is "unfounded" or "which it would be inequitable to enforce"),

  • authority of an agent (may be actual or apparent and, if actual, may be express or implied),

  • ratification of agent's unauthorized acts,

  • failed attempt by the bank that financed the ripoff to reinstate its mortgage lien that had been voided by the trial court (unsuccessfully argued judicial estoppel and unclean hands),

  • imposition of punitive damages in a slander of title case,

  • availability of an attorney fee award for the victim in a slander of title case,(1)

  • factors in determining an appropriate award for attorneys fees for the victimized property owner (liability for which is imposed on the scammers),

  • applicability of a contingency fee risk multiplier in calculating the award for attorneys fees(2) (court approved use of a multiplier of 3 to determine the total fee award of $595,574 for the contingent portion of the fee).
For the ruling, see Gambino v. Boulevard Mortg. Corp., 398 Ill. App. 3d 21, 922 NE 2d 380 (Ill. App. 1st Dist., 6th Div. 2009) (Appeal denied by Gambino v. Blvd. Mortg. Corp. (W.W. Funding, L.L.C.), 2010 Ill. LEXIS 909 (Ill., May 26, 2010)).

(1) With respect to the appropriateness of awarding attorneys fees in a slander of title action, the Illinois appeals court made this observation:
  • Contrary to the Wolf defendants' argument, there is authority in Illinois providing that recovery for slander of title actions permit recovery of those costs and attorney fees which directly flow from the wrongful disparagement. Home Investments Fund v. Robertson, 10 Ill. App.3d 840, 844, 295 N.E.2d 85 (1973).

    Further, plaintiffs were entitled to recover those costs and attorney fees directly related to the quieting of title and to those damages directly related to a slander of title, i.e., loss of vendibility, etc.
    Robertson, 10 Ill.App.3d at 844, 295 N.E.2d 85.
(2) For more on the use of risk multipliers in calculating prevailing party attorney fees in pro bono and contingency fee cases, see:

More On Void vs. Voidable

Whether one is looking to undo or unwind an abusive real estate deal, set aside a deed, mortgage or other conveyance, or vacate/void a foreclosure judgment, the distinction between its status as void and voidable may, in many cases, be the most important issue to address.

In this regard, the following reminder as to the fundamental difference between void and voidable (in the context of a court judgment under attack) appeared in a recent ruling from an Ohio appeals court, a reminder that can't be repeated enough:

  • {¶11} " 'The distinction between "void" and "voidable" is crucial. If a judgment is deemed void, it is considered a legal nullity which can be attacked collaterally.

    Conversely, if a judgment is deemed voidable, it will have the effect of a proper legal order unless its propriety is successfully challenged through a direct attack on the merits. * * * ' " GMAC, LLC v. Greene, 10th Dist. No. 08AP-295, 2008-Ohio-4461, ¶27, quoting State v. Montgomery, 6th Dist. No. H-02-039, 2003-Ohio-4095, ¶10, quoting Clark v. Wilson (July 28, 2000), 11th Dist. No. 2000-T-0063.

    A judgment is void where service of process has not been accomplished or where the court lacks subject-matter jurisdiction. Deckerd v. Deckerd (June 24, 1999), 7th Dist. No. 98-CO-59.

    In contrast, "[a] voidable judgment is one rendered by a court having jurisdiction and although seemingly valid, is irregular and erroneous." GMAC at ¶26, quoting Montgomery at ¶9, citing Black's Law Dictionary (7 Ed.1999) 848

The significance of the distinction(2) lies in:

  1. the timing and (in the context of court judgments) method of attack relating to any challenge made by the injured party:

    (void - can be challenged at any time and (in the context of court judgments) can be collaterally attacked; voidable - subject to time constraints and (in the case of court judgments) rules set forth in the state rules of civil procedure);
  2. the effect on the rights of those who subsequently acquire an interest in any property, the title to which may be implicated by the judgment, conveyance, contract, etc.:

    (void - all subsequent acquirers are out of luck and acquire nothing, even those who may otherwise qualify as bona fide purchasers; voidable - will not trump the rights of subsequent purchasers and encumbrancers if, and only if, they qualify for protection as bona fide purchasers).

For the ruling, see Wagenbrenner v. Wagenbrenner, 2011-Ohio-2811 (Ohio App. 10th Dist., Franklin County, June 9, 2011).

(1) For Ohio civil procedure junkies, the court then added this point:

  • {¶12} It is well-settled that a court has the inherent authority to vacate a void judgment and that a void judgment may be challenged at any time. The Milton Banking Co. v. Dulaney, 4th Dist. No. 09CA10, 2010-Ohio-1907, ¶26.

    However, "[a] voidable judgment is subject to direct appeal and to the provisions of Civ.R. 60(B). A Civ.R. 60(B) application for relief must be made to the trial court that rendered the judgment from which relief is sought." Montgomery at ¶9 (internal citations omitted). See also GMAC; Deckerd (exclusive means to challenge a voidable judgment is Civ.R. 60(B)); Brown v. Brown (Feb. 5, 1991), 2d Dist. No. 90-CA-41 (because the judgments were voidable and not void the appellant should have sought relief through Civ.R. 60(B)); McIntyre v. Braydich, 11th Dist. No. 96-T-5602 (a court has no inherent authority to vacate voidable judgments); Evans v. Supreme Court of Ohio, 10th Dist. No. 02AP-736, 2003-Ohio-959, ¶17 (voidable judgments may only be challenged on direct appeal); Mayfield Hts. v. N.K., 8th Dist. No. 93166, 2010-Ohio-909 (because the judgment was voidable the trial court did not have the authority to vacate it).

(2) See Beyond a Definition: Understanding the Nature of Void and Voidable Contracts for an analysis (in the context of contracts) of the problems encountered when making the distinction between what is truly void, and what is merely voidable (footnotes conained in the original text omitted):

  • Contract law has a problem. With predictable recurrence, court opinions, statutes, scholarly literature, and contract draftsmen use the words “void,” “voidable,” and “unenforceable” – as well as dozens of other terms of the same ilk – to describe flawed contracts.

    Yet the meaning of these declarations is persistently and maddeningly slippery. In the rare case where the precise meanings of these words are pressed into service in the courtroom, litigants are often surprised to find the court announce that a transaction formerly (and unequivocally) declared to be void is, in fact, merely voidable or unenforceable.

    The scope of the problem is as widespread as it is trifled; though the distinction between void and voidable is sometimes the most important issue in contract disputes, very little serious, scholarly attention has been paid to the nature of the distinction. DeedVoidVoidable

Tuesday, July 5, 2011

Feds Score Eight More Guilty Pleas In Northern California Foreclosure Auction Bid-Rigging Sweep; Sherman Act Violations Leave Investors In Hot Water

From the U.S. Department of Justice:

  • Eight California real estate investors have agreed to plead guilty for their roles in two separate conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.(1)


  • According to the felony charges, the real estate investors participated in a conspiracy to rig bids by agreeing to refrain from bidding against one another at public real estate foreclosure auctions in Contra Costa County and Alameda County, Calif.


  • The department said that the primary purpose of the conspiracies was to suppress and restrain competition to obtain selected real estate offered at Alameda and Contra Costa County public foreclosure auctions at noncompetitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.(2)


  • Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. [...] The Antitrust Division and the FBI have identified a pattern of collusive schemes among real estate investors aimed at eliminating competition at real estate foreclosure auctions, and [the] charges are part of the department’s ongoing effort to combat this conduct and restore competition to public auctions.(3)

For the Department of Justice press release, see California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (Investigation Yields Eight Plea Agreements).

(1) According to the press release, charges were filed in U.S. District Court for the Northern District of California in Oakland, Calif., against Thomas Franciose of San Francisco; William Freeborn of Alamo, Calif.; Robert Kramer of Oakland, Calif.; Thomas Legault of Clayton, Calif.; David Margen of Berkeley, Calif.; Brian McKinzie of Hayward, Calif.; Jaime Wong of Dublin, Calif.; and Jorge Wong of San Leandro, Calif.

(2) According to the Justice Department and/or court documents:

  • after the conspirators’ designated bidder bought a property, the conspirators would hold a secret, private auction at which each participant would bid the amount above the public auction price he was willing to pay;

  • secret, private auctions took place at or near the courthouse steps where the public auctions were held where the highest bidder at the private auction won the property;

  • the difference between the public auction price and that at the second auction was the group’s illicit profit, and it was divided among the conspirators, often in cash.

(3) The investigation into fraud and bid rigging at certain real estate foreclosure auctions in Northern California is being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office. The Justice Department urges anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660, visit or call the FBI tip line at 415-553-7400.

Faulty Affidavit Failing To Establish That Prior Notice Of Default & Acceleration Was Given To Homeowner Derails Another Foreclosure Action

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

  • The Ohio Court of Appeals for the Ninth District [] reversed another Summary Jugment granted by a Summit County Trial Court in the case Central Mortgage Company v. Elia.

  • The Court found that the conclusory averment within the plaintiff's affidavit that all conditions precedent had been satisfied was insufficient to prove compliance with Section 22 of the mortgage.(1) Does that sound familiar?

He goes on to state:

  • After looking through a few Ohio cases I do think it is important to point out that the Plaintiff does seem to be getting an assignment done prior to commencement (about 30 days) but they constantly fail to plead an endorsed copy of the note, even in contested cases, they have failed to attach an endorsed copy of the note to a motion for [summary judgment].

  • There are also many deficiencies in the affidavits submitted by the Plaintiffs, it's important to know the cases and rules on what makes an admissible affidavit. Failure to raise the deficiencies in these affidavits will result in a waiver of the argument.

For Bill Roper's entire post thread, see Ohio Appellate Court Reverses Another Summary Judgment on Failure To Prove Conditions Precedent: Central Mortgage Company v. Elia.

For the ruling, see Central Mortgage Company v. Elia, No. 25505, 2011 Ohio 3188 (Oh. App. 9th Dist. June 29, 2011).

(1) Section 22 refers to the written requirement contained in the mortgage that the borrowers be given written notice by the foreclosing lender prior to the start of the foreclosure process specifying the default, the action needed to cure the default, and the time period within which to do so.

O'Brien After Land Doc Registry Audit: "My Registry Is A Crime Scene...This Is Disgusting & This Is Criminal!" Calls For Halt To AG Settlement Talks

From the Office of the Southern Essex District Registry of Deeds (Massachusetts):

  • Yesterday at the Annual Conference of The International Association of Clerks, Recorders, Election Officials and Treasurers (IACREOT), Register John O’Brien revealed the results of an independent audit of his registry.

  • The audit, which is released as a legal affidavit was performed by McDonnell Property Analytics, examined assignments of mortgage recorded in the Essex Southern District Registry of Deeds issued to and from JPMorgan Chase Bank, Wells Fargo Bank, and Bank of America during 2010. In total, 565 assignments related to 473 unique mortgages were analyzed.

McDonnell’s Report includes the following key findings:

  • Only 16% of assignments of mortgage are valid,

  • 75% of assignments of mortgage are invalid,

  • 9% of assignments of mortgage are questionable,

  • 27% of the invalid assignments are fraudulent, 35% are “robo-signed” and 10% violate the Massachusetts Mortgage Fraud Statute,

  • The identity of financial institutions that are current owners of the mortgages could only be determined for 287 out of 473 (60%),

  • There are 683 missing assignments for the 287 traced mortgages, representing approximately $180,000 in lost recording fees per 1,000 mortgages whose current ownership can be traced.


  • "My registry is a crime scene as evidenced by this forensic examination," stated John O’Brien. "This crime that has affected thousands of homeowners in Essex County who, through no fault of their own, have had their property rights trampled on and their chain of title compromised. This evidence has made it clear to me that the only way we can ever determine the total economic loss and the amount damage done to the taxpayers is by conducting a full forensic audit of all registry of deeds in Massachusetts. I suspect that at the end of the day we are going to find that the taxpayers have been bilked in this state alone of over 400 million dollars not including the accrued interest plus costs and penalties. The Audit makes the finding that this was not only a MERS problem, but a scheme also perpetuated by MERS shareholder banks such Bank of America, Wells Fargo, JP Morgan and others. I am stunned and appalled by the fact that America’s biggest banks have played fast and loose with people’s biggest asset – their homes. This is disgusting, and his is criminal," said O’Brien.

  • O’Brien continued "Once again I am asking Attorney General Martha Coakley and the other state Attorney’s General to follow the lead of New York Attorney General Eric Schneiderman and stop any settlement talks with the banks. The results of this report are only for my registry, but I can assure you that this type of criminal fraud is rampant across the nation. This leaves me to question why anyone would consider settling with these banks until we know the full extent of the damage that they have caused to the homeowners chain of title across this country and the amount of money they have bilked he taxpayers for their failure to pay recording fees."(1)

For more, see Southern Essex Registry of Deeds Audit Reveals That 75% of Assignments of Mortgage Are Invalid; O'Brien Says Banks Responsible for an Epidemic of Fraud (Once again urges Attorney’s General to stop Bank settlement talks).

(1) At the risk of emphasizing what may be obvious to many, this 'crappy title' problem can affect both those properties that have gone through foreclosure, as well as those that haven't.

For more on the crappy title problem in connection with the filing of bogus land documents and improperly foreclosing on homes, see:

Cops: Pair Pinched In Alleged Upfront Fee Loan Mod, Credit Repair Racket Used India Call Center, Local Mail Drop To Bag Victims From Around Country

In Fresno, California, KFSN-TV Channel 30 reports:

  • Police have broken up what they believe is an international mortgage fraud operation with a hub in Fresno. The operation is accused of taking advantage of people in the most desperate financial situations and making their problems even worse.

  • Officers arrested Baljit Singh and Sharanjit Kaur at a Northwest Fresno home, and put them in jail on charges of grand theft. Police served four search warrants Wednesday, and they've uncovered more than 20 victims -- people in dire straits who were taken advantage of when they were looking for a quick way out.

  • A simple arrest in Northwest Fresno brought a complicated web of scams to an end, according to Fresno Police. Singh and Kaur lived in the home and operated a credit repair business and a mortgage modification business. Police say the companies were nothing more than fronts for financial crime.

  • Consumer Credit Repair and Consumer Financial Services targeted people with bad credit or homes in the foreclosure process and promised an easy fix. "We've found victims throughout the country," said Detective Ken Dodd of the financial crimes unit. "One victim in Oregon had also sent money in to Consumer Financial Services only to find out their home loan had not been modified and they received a default notice."

  • Investigators say callers from India contacted victims and convinced them to send money to an office in Fresno. This is the office -- nothing more than a mail drop box where police say the suspects picked up the cash and left their victims sinking even further into debt.

For the story, see International mortgage fraud operation bust in Fresno.

Two Get Prison In Contract For Deed Payment-Skimming Racket; Pocketed Deposits & Monthly Payments From Duped Buyers, Stiffed Existing Mortgage Lenders

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

  • United States Attorney John E. Murphy announced that 35-year-old Jason Heath Morrison, of Midland, Texas, was sentenced to 84 months in federal prison followed by ten years of supervised release for his role in a real estate fraud scheme, as well as for his failure to register as a sex offender. Morrison’s co-defendant, 35-year-old Marcus Jacob Rosenberger, of Odessa, Texas, was sentenced to 33 months in federal prison followed by three years of supervised release for his roles in the real estate fraud scheme involving Morrison as well as a separate real estate fraud scheme.(1)


  • In February 2010, the Midland Police Department began investigating Morrison and Rosenberger for real estate fraud. Morrison and Rosenberger’s scheme involved convincing distressed homeowners, whose homes were in foreclosure, to sign over their properties to Morrison and Rosenberger with only the promise that Morrison and Rosenberger would keep the house out of foreclosure, resell it, and retain any profit.

  • Morrison and Rosenberger then placed ads in local newspapers advertising the homes for sale by owner. Buyers gave Morrison and Rosenberger thousands of dollars in down payments, and then proceeded to pay monthly payments on their new homes.

  • But Morrison and Rosenberger did not apply the buyers’ monies towards the underlying mortgage, which resulted in several of the homes actually be foreclosed and sold at auction, unbeknownst to the original homeowner or the new buyer. Several of the new buyers were evicted and they all lost all the money they paid to Morrison and Rosenberger.

For the U.S. Attorney press release, see Permian Basin Residents Sentenced To Federal Prison For Real Estate Fraud.

(1) According to the press release, Judge Junell also ordered Morrison and Rosenberger to pay $173,495.79 in restitution to their victims; and he ordered Rosenberger to pay an additional $170,108.80 to the victims of a second real estate ripoff.

Who Are Bank Of America's Newest Robo-Signers?

From Fraud Digest:

  • Who are Bank of America's newest robo-signers? For several years, BOA turned to its subsidiary, BAC Home Loans Servicing, in Collin County, Texas, whenever mortgage assignments were needed in foreclosures. This office, formerly Countrywide Home Loans Servicing, produced hundreds of thousands of assignments, including most all of the assignments to Countrywide CWABS and CWALT trusts.

  • In recent months, however, BOA has turned to its office in Ventura County, California, as the Collin County, TX, signers have become too well known. These assignments are made primarily for CWALT and CWABS trusts that closed in 2005, 2006 and 2007.

  • These assignments claim to assign both the mortgages and the notes to the trusts. On each of these assignments, MERS is stated to be the HOLDER of the mortgage.

Source: Who are Bank of America's newest robo-signers?

(1) Who are the newest signers - who use MERS titles to assign mortgages TO BAC while actually working FOR BAC - signing as if they were MERS officers for dozens of different companies? According to Fraud Digest, The names appearing most often include:

  • Ricki Aguilar, Malik Basurto, Youda Crain, Diana DeAvila, Edward Gallegos, Christopher Herrara, Bud Kamyabi, Tina LeRaybaud, Jane Martorana, Martha Munoz, Srbui Muradyan, Debbie Nieblas, Yomari Quintanilla, Luis Roldan, Miguel Romero, Cynthia Santos, Swarupa Slee.

According to Fraud Digest, these individuals, in 2011, have signed as MERS officers for the following mortgage companies and banks, including many that no longer existed in 2011:

  • Aegis Wholesale Corporation, American Brokers Conduit, America's Wholesale Lender, Amnet Mortgage, Ampro Mortgage, Countrywide Bank FSB, Decision One Mortgage Company, First Choice Funding Inc., First Interstate Financial Corp., First National Bank of Arizona, Market Street Mortgage Corp., M/I Financial Corp., Millenia Funding Corporation, MortgageIt, One Mortgage Company, LLC, Pinnacle Direct Funding Corp., Pulte Mortgage, Quicken Loans, Universal American Mortgage Company, Service Mortgage Underwriters, Inc., Wilmington Finance, Inc.

CoreLogic in Chapin, South Carolina, is the keeper of these documents, and Bank of New York Mellon is the trustee for most of the CWABS and CWALT trusts that use these BAC documents, according to Fraud Digest.

Monday, July 4, 2011

BofA Director On Countrywide: "Worst Decision We Ever Made!" As Bank Settles 'Crappy Mortgage' Suit For $8.5B; Will Swallow Add'l $5.5B In Buybacks

The Wall Street Journal reports:

  • Just before Bank of America Corp. swooped in to buy Countrywide Financial Corp. in 2008, the bank's then-chief executive, Kenneth D. Lewis, told analysts why he had dropped his resistance to owning a mortgage lender.

  • "Arithmetic overcomes all your issues," he told analysts. "If I ever did anything in the mortgage business, I would have to eat about seven years of my words, so it would have to be pretty compelling."

  • The nation's largest bank by assets has been haunted by Countrywide's numbers ever since the $2.5 billion deal was completed.

  • On Wednesday, Bank of America announced, as expected, an $8.5 billion settlement with investors who took a beating on mortgage bonds issued by Countrywide before the housing market collapsed.

  • The Charlotte, N.C., bank also will swallow an additional $5.5 billion to buy back other defective mortgages in the future. And it took a $6.6 billion hit for lawsuits, foreclosure snarls, a write-off in the value of its mortgage business and loan-servicing adjustments.


  • Of all the deals Bank of America made during its climb to the top of the U.S. banking heap since the 1980s, Countrywide has spawned more regret than probably any other acquisition by Mr. Lewis or his predecessor, Hugh L. McColl Jr.

  • "It turned out to be the worst decision we ever made," said one Bank of America director who voted for the Countrywide deal in January 2008. Mr. Lewis declined to comment through his attorney.

  • Since the purchase, the bank's real-estate division has saddled it with more than $17 billion in losses, most of it coming from the assets inherited from Countrywide. Even Mr. Moynihan has hinted publicly that the deal was a mistake, telling shareholders in May that the bank agreed to take on Countrywide, based in Calabasas, Calif., "just when you shouldn't have done it."


  • Since then, Bank of America's mortgage division has racked up $17.7 billion in net losses amid rising numbers of homeowner defaults. The company has lost $22 billion since the start of 2010 to investors who demanded the bank buy back Countrywide mortgage bonds.

  • Other legal payouts include $8.4 billion for home-loan modifications, $108 million to the Federal Trade Commission to settle claims of excessive fees by Countrywide, and more than half of the $67 million fraud-suit settlement involving former Countrywide founder Angelo Mozilo. Mr. Mozilo declined to comment through his lawyer.

  • Bank of America still faces the prospect of billions of dollars in fines from U.S. and state regulators investigating foreclosure procedures. That mess could cost the company about $7.4 billion on a pretax basis, said Glenn Schorr, an analyst at Nomura Securities.

For more, see BofA Haunted by Countrywide Deal (requires subscription; if no subscription, GO HERE - then click appropriate link for the story).

NY AG: 'Quick, Cheap $20-25B Multi-State Foreclosure Fraud Settlement Not Enough!'; Scneiderman "Stunned" To Find Probe Lacking In Docs, Depositions

The Rochester (New York) Democrat and Chronicle reports:

  • New York Attorney General Eric Schneiderman expects to lead opposition to what he called a "quick, cheap settlement" of a 50-state investigation into foreclosure practices.

  • Schneiderman put the monetary settlement being discussed with the largest U.S. mortgage servicers at $20 billion to $25 billion and said he will take "the hardest line" against it.

  • The probe began in October. New York launched its own investigation two months ago and, Schneiderman said, has found the problem is much deeper. He said he was "stunned" to find the multi-state probe so lacking that no documents or witness depositions had been obtained.

For more, see AG Eric Schneiderman opposes foreclosure deal.

Oregon Judge Slams Brakes On F'closure Eviction; Failure To Record Mortgage Assignment Violates State Law, Allows Homeowner To Unpack Bags & Stay Put

In Columbia County, Oregon, The Oregonian reports:

  • A Columbia County judge has blocked U.S. Bank from evicting a Vernonia woman whose home it purchased in foreclosure, concluding in a case with far-reaching implications that her lenders had not properly recorded mortgage documents.

  • Last week's action appears to be the first in which an Oregon judge has halted an eviction and declared a foreclosure sale void after the fact. The ruling, if it stands, raises questions about the validity of other recent foreclosures in the state and could create serious problems for lenders and title companies, as well as for buyers of such properties.


  • Nearly all foreclosures in the state occur without a judge's involvement under so-called nonjudicial proceedings. But this ruling, legal observers say, could potentially divert more foreclosure actions into courtrooms, a more time-consuming and costly proposition that could exacerbate the state's housing slump. "This will certainly be problematic for lenders," said David Ambrose, a Portland real-estate attorney.

  • It also casts doubt on the validity of already completed foreclosure sales in which lenders resold mortgages without recording the sales in county recorder offices. Many of those questionable transactions, [...] involve the Mortgage Electronic Recording System. MERS was created by the mortgage industry to rapidly securitize loans without recording them.

  • Federal judges in Oregon have ruled that MERS-involved foreclosure actions violated state recording law. MERS also has been tied to so-called robo-signing scandals that prompted a 50-state investigation of the nation's largest loan servicers and banks.

For more, see Oregon judge voids foreclosure sale, casting doubt on others.

For the ruling, see U.S. Bank v. Flynn, Case No. 11-8011 (Columbia Cty. Cir. Ct. June 23, 2011).

Appeals Court Says 'No Way' To BofA's F'closure Eviction Attempt; Crappy Affidavit Sinks Effort To Boot Homeowner; Another Lower Court Ruling Reversed

A defective affidavit filed by an officer ("Hiatt" - maybe a robosigner?) of loan servicer Bank of America in an action for ejectment targeting a recently-foreclosed borrower was the focus of another appeals court reversal of a lower court ruling adverse to homeowners.

After considered analysis of the facts of the case, and the state law applicable thereto, the Alabama Court of Civil Appeals ruled as follows:(1)

  • In the case now before us, Hiatt's affidavit did not show that Bank of America was a participant in the servicing of the mortgage or in the foreclosure.

    It did not explain how Hiatt, in his capacity as an officer of, and attorney-in-fact for, Bank of America, would have acquired personal knowledge of the information he testified to in his affidavit.

    Moreover, none of the documents that accompanied his affidavit were sworn, certified, or otherwise authenticated.

    Consequently, based on the holding of the supreme court in Crawford, we hold that the testimony contained in Hiatt's affidavit and the documents that accompanied his affidavit were inadmissible and, therefore, that the trial court erred in entering a summary judgment in favor of the Secretary.

    Therefore, we reverse the summary judgment and remand the cause for further proceedings consistent with this opinion.

For the ruling, see Smith v. Secretary of Veterans Affairs, No. 2100194 (Ala. Civ. App. June 24, 2011).

(1) Before addressing the admissibility of the affidavit, the court addressed BofA's defense that, because the homeowner failed to file a motion to strike the affidavit in the trial court, he effectively waived his right to challenge it:

  • In the case now before us, although Frank did not move to strike Hiatt's affidavit and the unsworn, uncertified, and unauthenticated documents that accompanied it, Frank's response to the summary-judgment motion called the trial court's attention to the inadmissibility of the affidavit and those documents by objecting to them and stating the grounds of the objection.

    Therefore, we find no merit in the Secretary's argument that Frank waived his objection to the Hiatt affidavit and the documents that accompanied it because he failed to move to strike them. See Ex parte Elba Gen. Hosp. & Nursing Home, Inc.