Saturday, July 23, 2011

Unpaid Real Estate Taxes Leave Bronx Homeowners Scrambling To Get Off City 'Lien List'

In The Bronx, New York, the New York Daily News reports:

  • The latest realty industry statistics might signal an end to the foreclosure epidemic that ravaged New York neighborhoods in 2009, but for those in the hard-hit northwest Bronx, the fear of losing their homes is still palpable.(1)

  • Nearly 3,000 private homes and businesses face the threat of lien sales by next month, making them prime candidates for foreclosure, according to the nonprofit University Neighborhood Housing Program.

  • Ominous news like this drew dozens of Bronxites looking for help to the West Bronx Homeowner Resource Fair in the Davidson Center Wednesday night.

  • Attendee Wayne Mayo, 46, knows the fear of making the lien list. He recently scrambled to get his father's Highbridge home of 45 years off the city's list of properties to be sold by Aug. 2. Mayo said his father, an 80-year-old World War II veteran on a fixed income, fell behind on bills after becoming ill. "The reason I'm here today is to make sure he doesn't end up on the list again," he said.

For more, see Bronxites scramble to avoid lien list; Home-saving clinic big draw for residents facing forclosure.

(1) Once the liens are sold, homeowners have six months and thirty days from the date of the tax sale to satisfy this lien with the tax lien servicer before the servicer has the right to initiate a foreclosure action on the property.

Go here for more on New York City's Annual Lien Sale, and here for tax lien servicer FAQs.

Foreclosure Winds May Blow Cubs' Fans Off Roof As 'Windy City' Rooftop Club Faces Forced Sale Over Unpaid Mortgage

In Chicago, Illinois, the Chicago Tribune reports:

  • A suburban bank has obtained a foreclosure judgment of more than $3 million against the owners of a building that houses a Wrigley Field rooftop club.

  • The Lakeview Baseball Club, 3633 N. Sheffield Ave., has been operating in receivership since last year when First Personal Bank, based in Orland Park, filed a foreclosure suit alleging that the building's owners defaulted on two loans. The lender issued a $2.8 million loan in 2006 and a second, junior loan for $350,000.

  • Cook County Circuit Judge Darryl Simko ordered July 8 that the property be sold at public auction next month. But the owners are negotiating to sell the building privately before the public sale, said their attorney Martin Oberman, a former Chicago alderman.

  • Oberman represents the children of Robert Racky, a Chicago developer, who started the first rooftop business in 1988 as a private club. The Lakeview Baseball Club is best known for the tote board under its rooftop seats that details the years elapsed since the Cubs' last division, league and World Series titles.(1)

  • Since then many of the apartment buildings surrounding Wrigley have opened rooftop businesses, turning a novelty into multi-million-dollar businesses. The rooftops pay royalties to the Cubs as part of a 2004 legal settlement. Even in an uncertain economy, the Racky property is expected to draw much interest.

For more, see $3M foreclosure judgment issued against building with Wrigley rooftop club.

(1) A very long time, indeed!

Cook County Cops Score Indoor Pot Farm Bust, Confiscate Weapons Cache In Raid That Began As Routine Foreclosure Eviction

In Glenview, Illinois, the Glenview Patch reports:

  • A routine foreclosure eviction in Glenview Wednesday morning turned up a marijuana grow house and weapons cache, resulting in one arrest by the Cook County Sheriff’s department, according to witnesses and Glenview police sources.

  • Later that afternoon, Glenview police arrested two women on criminal trespass charges when they returned to the home at 1427 Evergreen Terrace to try and retrieve property.

  • The Glenview Police and Cook County Sheriff’s office indicated they would release further details of the eviction-turned-raid [], including the names of those arrested and a more detailed accounting of the property seized.

For more, see Routine Eviction Turns Up Grow House, Weapons (Cook County Sheriff arrests one man Wednesday morning; Glenview PD arrests two women that afternoon).

45 Minneapolis-Area Tenants Face The Boot As City Threat To Yank Rental Licenses For Sub-Par Housing Looms Over Landlord

In Minneapolis, Minnesota, the Star Tribune reports:

  • Only a year out of college, Alan Kwong became a landlord and eventually acquired 15 rental properties on the North Side of Minneapolis. Yet his business has struggled in recent years, and now Kwong has become the latest target of the city's crackdown on negligent landlords.

  • Kwong has lost two of his rental licenses already, and on Monday, a City Council committee will vote on a recommendation to revoke the rest of them. If the measure is approved by the full council, 45 tenants could be forced to find somewhere else to live in a rental market already shrunken by the devastating May 22 tornado.


  • [One] tenant of a Kwong-owned property, Amber Johnson, 27, worried about how the council's action would affect her and her three children. "I'm going to try to look for a place, but I don't have money to move right now," she said. "I don't really know where I would go; I'd probably be homeless."

For more, see Landlord's loss leaves tenants in limbo (Forty-five north Minneapolis residents could be out on the street if the city revokes his remaining rental licenses).

For story update, see North Minneapolis landlord allowed to keep rental license (A Minneapolis City Council panel overturned recommendations to revoke licenses for 12 rental units, involving 45 tenants).

Beaumont Homeowner Asks Court To Slam Brakes On Oncoming Bulldozer As City Votes To Add 'Below Code' Home To 'Demo' List

In Jefferson County, Texas, The Southeast Texas Record reports:

  • Hoping to save his home from being demolished, Kenneth Wilcox has filed an injunction request against the city of Beaumont. The petition was filed July 7 in Jefferson County District Court.

  • In his petition, Wilcox says that on May 10 the city, in spite of his protest, voted to demolish his home [...]. Wilcox claims that he is in the process of repairing the home but that he may not be able to finish the repairs before the city bulldozes the house. He is asking the court to issue a temporary injunction while he works to bring the house up to city code.

Source: Injunction seeks to stop city from bulldozing Beaumont home.

Friday, July 22, 2011

Chase Tagged With More HAMP Allegations As Bankster Threatens Foreclosure On Homeowner Currently Up To Date On Loan Modification Payments

In Los Angeles, California, the Los Angeles Daily News reports:

  • A Pacoima couple is suing the financial services firm JPMorgan Chase for allegedly disregarding federally backed loan modification agreements and illegally attempting to foreclose on their home, according to court papers [...].

  • Anabeht and Armando Velasco are suing Chase to prevent the bank from selling their home of 12 years at a foreclosure sale next week, according to their breach of contract complaint.

  • The suit filed Wednesday in Los Angeles Superior Court alleges that Chase entered into a loan modification agreement with the plaintiffs while continuing to move forward with foreclosure, even though the couple are making timely payments on their house.

  • "The very banks deemed 'too big to fail' refuse to comply with federal programs that aim to help families targeted by predatory lending practices," said Yvonne Mariajimenez, deputy director of Neighborhood Legal Services of Los Angeles County, a public interest law firm representing the plaintiffs.(1)

For more, see Pacoima couple accuses JPMorgan Chase of illegally foreclosing on home.

(1) Neighborhood Legal Services of Los Angeles County is a private, non-profit law firm advocating for low-income residents by providing effective legal representation and a variety of legal services and community education at no cost to qualifying residents in various areas of law.

Discovery Of 'Mental Health Issues' On Eve Of Sentencing Buys Convicted 'Bogus Lien' Extortion Racket 'Sovereign Citizen' Extended Freedom

In Albany, New York, The Associated Press reports:

  • An Ulster County man described by federal authorities as one of several self-proclaimed anti-government sovereign citizens recently convicted of similar fraud charges in upstate New York had his sentencing adjourned Tuesday for a psychological evaluation.

  • Richard Enrique Ulloa, 52, potentially faces decades in prison on seven federal mail fraud convictions. He told U.S. District Judge Thomas McAvoy that a jail therapy program for alcoholics and drug addicts helped him realize he has a delusional disorder — a mental illness he said was originally diagnosed two years ago — that he needs to deal with, and he shouldn't have represented himself at trial. "I've come to the realization I need therapy," Ulloa said.


  • According to federal authorities, Ulloa filed financial liens against a police officer and local justice in the Hudson Valley town of Rosendale for $552 million following two traffic tickets and a brief time in jail, and against mortgage lenders for $2.8 billion following foreclosure on his property.(1)

  • "But you're still filing bizarre papers," McAvoy said, citing recent papers purportedly signed by Ulloa naming McAvoy and other officials as his trustees and threatening to fine them if they failed in their responsibilities. The defendant said he didn't send or sign the papers. At the end of Tuesday's proceeding McAvoy cautioned him not to cause any more such filings or he could face a stiffer sentence.

For more, see Ulster County man's sentencing put off in liens case.

(1) See also Feds Indict Trio In Alleged $1.24 Trillion Bogus Lien Extortion Racket Targeting Government Officials, Bank Executives.

See County of Ulster, New York, et al. v. Ulloa, et al. for a related civil lawsuit tagging Ulloa that alleges a detailed description of his racket.

Cleveland Tenant Scores $482K Damage Award Over Sibling/Deadbeat Landlords With Reputation For Dodging Process Servers, Stiffing Judgment Creditors

In Cleveland, Ohio, the Cleveland Plain Dealer reports:

  • By some accounts, brothers Graig and Derek Brown are exceptionally bad landlords. Court documents and interviews portray the brothers as vindictive and mean-spirited with a track record of illegally shutting off utilities and locking out tenants for being a few days late with the rent or for complaining about conditions in their rental units.

  • Cleveland Housing Court Judge Raymond Pianka made his feelings clear when he recently awarded $482,000 in compensatory and punitive damages to Cindy Smith, a former tenant of the Browns.(1)

  • "The court has never, in its 31-year history, heard proof in so many cases of a landlord or landlords engaging in such repeated, ongoing, deliberate, cruel, harmful and illegal conduct," Pianka wrote. Neither the Browns nor their attorney, Fernando Mack, returned phone calls for this story.

  • The Browns are unrepentant bullies, according to an account by an aggrieved tenant included in a 2006 Cleveland Housing Court decision. The Browns reportedly told the mother of a former tenant that they were proud of their hardhearted tactics and had been employing them for years.

  • In this case, they had cut off a woman's electricity and water, locked her out and then took some of her family's belongings, including one shoe from each pair owned by her and her children.

For more, see Tenants, attorneys accuse Cleveland property owners of cruel treatment.

(1) The Browns, who reportedly own two apartment buildings and several houses in Cleveland, have also cemented their reputation in legal circles for their ability to evade service on subpoenas and for an inability to collect on judgments rendered against them, the story states. Judgments have been difficult to collect because the brothers often have transferred ownership of properties from one limited liability company to another, said one attorney, and when there are mortgages on properties, judgments are tough to collect because those claims are secondary to the mortgages themselves, according to the report.

Homeowner Faces Felony Charge For Ripping Off Fixtures From House While In Foreclosure; Claims He Still Owned Items Until Process Was Completed

In Menomonie, Wisconsin, the Leader Telegram reports:

  • A Colfax man is accused of damaging or removing items, including a furnace and water heater, from a foreclosure house in Menomonie that would cost more than $91,000 to repair, according to testimony during a preliminary hearing [].

  • Mark S. Mouledoux, 46, []was ordered to stand trial [] on a felony charge of removal or damage to encumbered property. The charge is for allegedly removing or damaging items from his then-Menomonie house that was mortgaged and later foreclosed on in November.


  • Menomonie police were told Nov. 4 by a default mortgage employee of Bremer Bank that Mouledoux had removed permanent fixtures [...] without the bank's permission. The bank completed the foreclosure Nov. 1.


  • Mouledoux told police he removed the items before the bank owned the home, and a neighbor confirmed some of the items were removed in late October. Mouledoux was told by police the bank owns the house until the mortgage is actually paid off.(1)

For more, see Colfax man accused in foreclosure damage.

(1) Under Wisconsin law, ripping off fixtures from a home encumbered by a mortgage can also subject the perpetrator to liability for triple damages under §895.80(1) of the Wisconsin statute. See generally, Tri-Tech Corp. v. Americomp Services, Inc., 247 Wis.2d 317, 633 NW 2d 683 (Wis. App. 2001).

Indianapolis Feds: Suspect Used Phony Mortgages, Bogus Repair Bills To Pocket Cash, Rip Off Lenders In Straw Buyer Scam

From the Office of the U.S. Attorney (Indianapolis, Indiana):

  • Joseph H. Hogsett, United States Attorney, announced that Roger D. McKuhen, age 66, formerly of Avon, Ind., and currently a resident of Virginia, was charged [] in an indictment with conspiracy to commit wire fraud, [...].

  • The indictment alleges that between April 2006 and January 2007, McKuhen and his coconspirators conspired to defraud various mortgage lenders by creating false, fraudulent, and bogus second mortgages and false estimates and fake invoices for repairs, which allowed McKuhen and his co-conspirators to use funds provided by the lenders at closing to settle the false second mortgages and repair bills as down payments on the properties, all without the lenders’ knowledge.


  • For each property, McKuhen created either: (1) a false second mortgage payable to a company owned by McKuhen; or (2) a fraudulent invoice or estimate (payable to a coconspirator) for repair work allegedly done or to be done to the property, even though McKuhen knew that the repair work would never be done. These false mortgages and/or repair invoices or estimates were presented at closing as genuine, and the title agent initiated payments to settle the bogus mortgages and repair invoices/estimates to McKuhen’s company and/or McKuhen’s coconspirators.

For the U.S. Attorney press release, see Hogsett announces indictment of ex-Indianapolis area realtor in mortgage fraud scheme.

Thursday, July 21, 2011

Adverse Possessions On Foreclosures Persist; Texan Coughs Up $16 To Stake Claim On $330K Home; Cops To Bellyaching Neighbors: "It's A Civil Matter!"

In Flower Mound, Texas, WFAA-TV Channel 8 reports:

  • A little-known Texas law and a foreclosure could have a man in Flower Mound living on Easy Street. Flower Mound's Waterford Drive is lined with well-manicured $300,000 homes. So, when a new neighbor moved in without the usual sale, mortgage-paying homeowners had a few questions.

  • "What paperwork is it and how is it legally binding if he doesn't legally own the house?" said Leigh Lowrie, a neighboring resident. "He just squats there." Lowrie and her husband said the house down the street was in foreclosure for more than a year and the owner walked away. Then, the mortgage company went out of business.

  • Apparently, that opened the door for someone to take advantage of the situation. But, Kenneth Robinson said he's no squatter. He said he moved in on June 17 after months of research about a Texas law called "adverse possession." "This is not a normal process, but it is not a process that is not known," he said. "It's just not known to everybody."

  • He says an online form he printed out and filed at the Denton County courthouse for $16 gave him rights to the house. The paper says the house was abandoned and he's claiming ownership.


  • The law says if he stays in the house, after three years he can ask the court for the title. He told News 8 his goal is to eventually have the title of the home and be named the legal owner of the home. "Absolutely," he said. "I want to be owner of record. At this point, because I possess it, I am the owner."

  • Robinson posted "no trespassing" signs after neighbors asked police to arrest him for breaking in. Flower Mound officers say they can't remove him from the property because home ownership is a civil matter, not criminal.

For more, see A $330,000 home for $16? 'This is not a normal process'.

Closing Agent Faces 57 Months After Copping Plea To Looting Escrow Funds From R/E Closings Intended For Existing Mortgage Loan Payoffs

From the Office of the U.S. Attorney (Sioux City, Iowa):

  • A real estate broker who stole mortgage loan proceeds received during real estate closings pled guilty on July 5, 2011, in federal court in Sioux City. Jean Teresa Hoffert, age 59, from Emmetsburg, Iowa, was convicted of one count of mail fraud. At the plea hearing Hoffert admitted defrauding others out of money and causing the United States mail to be used as part of the fraud.

  • According to information disclosed in court, when acting as a settlement agent, Hoffert failed to pay off prior mortgage loans that were supposed to be paid off following mortgage loan refinancings. In other instances, the prior mortgage loans were paid off late.

  • Sentencing [...] will be set after a presentence report is prepared. Under the plea agreement, Hoffert faces a sentence of 57 months’ imprisonment. Hoffert also faces a maximum possible fine of $250,000 or twice the amount of money involved in the offense, a special assessment of $100, and up to 3 years of supervised release following imprisonment. Hoffert will also be ordered to pay full restitution to all victims of her related criminal conduct.

For the U.S. Attorney press release, see Emmetsburg, Iowa, Real Estate Broker Convicted Of Mail Fraud.

Fla AG Slams Brakes On Meaningful Efforts In F'closure Fraud Probe; Political Arm-Twist Forces Pair Of Investigators Out Door; Duo Start Defense Firm

The Palm Beach Post reports:

  • A lead foreclosure fraud investigator for the state said she and a colleague were forced to resign from the Florida attorney general's office, unexpectedly ending their nearly yearlong pursuit to hold law firms and banks accountable.

  • Former Assistant Attorney General Theresa Edwards and colleague June Clarkson had been investigating the state's so-called "foreclosure mills," uncovering evidence of legal malpractice that also implicated banks and loan serv­icers.

  • Despite positive performance evaluations, Edwards said the two were told during a meeting with their supervisor in late May to give up their jobs voluntarily or be let go. Edwards said no reason was given for the move.

  • "It all happened very abruptly," said Edwards, who had worked in the attorney general's office for about three years. The foreclosure investigations were launched under former Attorney General Bill McCollum, but Edwards said she sensed changes were coming under Gov. Rick Scott and Attorney General Pam Bondi.

  • "I think they wanted to put people in there that were more in line with their thinking," Edwards said.


  • Edwards and Clarkson have opened their own foreclosure defense firm based in Hollywood and hope to help homeowners with the knowledge they gained in the attorney general's office.

For more, see Foreclosure fraud investigators forced out at attorney general's office.

San Bernardino Investigators Bust Six In Alleged Swindle That Stole Title To Vacant Land Out From Under Owners & Peddled It To Unwitting Buyers

From the Office of the San Bernardino, California District Attorney:

  • A $2.1 million dollar fugitive arrest warrant has been issued by the San Bernardino County Superior Court for Salvador Anzo Sr. Between November 2007 and January 2009 Anzo Sr., 44, along with additional suspects Salvador Anzo Jr., 22, Marlen Medina, 26, Jennifer Costa, 37, Yvette Costa, 36, and Milton Figueroa, 23, allegedly conspired to sell vacant land they did not own in the Hesperia area of San Bernardino County. Anzo Sr. recruited the others to assist by using their personal bank accounts to receive the proceeds of the fraudulent land sales.(1)

  • According to investigators from the San Bernardino County District Attorney’s Real Estate Fraud Unit, the suspects advertised the sale of vacant land in the "Pennysaver" which is how they met the unsuspecting buyers.

  • The actual owners of the land were alerted to the sale of their property when their property tax payments were returned to them. In San Bernardino County, the suspects are alleged to have sold 22 separate pieces of property with the total loss to the victims estimated at approximately $980,000.00.


  • "A lot of these victims who were taken advantage of were elders," said Senior Investigator Tina Greco of the San Bernardino County District Attorney’s Office. "I just hope that we are able to find him and take him into custody and then locate some of the stolen funds."

Source: Investigators Seek Public’s Help Locating Fugitive in Land Fraud Scheme.

(1) According to the press release:

  • Medina was located and arrested in Utah, and was subsequently extradited to the West Valley Detention and is being held there with a bail of $940,924.00 for the San Bernardino County charges, and INS hold and other outstanding warrants from Orange County;

  • Anzo Jr. was arrested in San Diego County and transferred to San Bernardino County where he is being held at the Adelanto Detention Center with a bail of $197,266.00;

  • Jennifer Costa, Yvette Costa and Figueroa pleaded guilty in plea agreements with the court.

Investigators are seeking the public’s assistance in finding Salvador Anzo Sr. If anyone has information of his whereabouts they are asked to contact Sr. Investigator Tina Greco at 909-891-3348.

Pair Of Alleged Long Island Loan Modification Rackets Get The 'Freeze' As Judges Limit Firms' Activities, Order Hold On Assets

In Nassau County, New York, Long Island Business News reports:

  • The assets of two Long Island mortgage modification companies will remain frozen after separate rulings by Nassau County Supreme Court justices.

  • On Tuesday, Justice Thomas Adams extended a temporary restraining order that limits the activities and freezes the assets of a group of companies in West Hempstead operating under the names Express Home Solutions and Home Preserve Law Group.

  • Last week, Justice John Galasso extended a similar order, which enjoins a group of individuals operating a business called Homesafe America in Levittown, also known as United Legal Solutions.


  • The cases were brought by the Lawyers’ Committee for Civil Rights Under Law(1) and its pro bono counsel Manhattan-based Davis Polk & Wardwell on behalf of more than 30 homeowners who allegedly lost money to the two companies. Plaintiffs are seeking a combined $3 million in punitive damages, as well as court orders permanently preventing their owners and employees from engaging in mortgage-related activities.

For more, see Judges freeze assets of LI mortgage mod firms.

(1) The Lawyers’ Committee for Civil Rights Under Law is a nonpartisan, nonprofit organization formed to involve the private bar in providing legal services to address racial discrimination. It implements its mission and objectives by marshaling the pro bono resources of the bar for litigation, public policy advocacy, and other forms of service by lawyers to the cause of civil rights. For more on this case, see:

Wednesday, July 20, 2011

D.C. City Council Tweaks New Foreclosure Law In Response To Bellyaching Title Insurers Who Threatened To Stop Issuing Coverage On REO Sales

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

  • The D.C. Council enacted emergency legislation Tuesday to amend a controversial clause in its foreclosure mediation law that threatened to stall the sale of foreclosed affected homes across the city.

  • The move came just days after The Washington Post reported that two large title insurers, which account for nearly 80 percent of the D.C. market share, stopped insuring sales of foreclosed homes because of concerns over the law.


  • The issue is resolved,” said Roy Kaufmann, a lobbyist for the D.C. Land Title Association, which includes the two insurers, Fidelity National Title Group and First American Title Insurance, which withdrew from the foreclosure market.

  • Fidelity and First American had argued that the council’s law, which requires lenders to begin mediation with a homeowner before foreclosing on a home, was too broad and posed too much risk for them in insuring foreclosed properties.

  • To allay their concerns, the council took out a controversial clause, which said that any violation of the law would void a foreclosure sale, and replaced it with specific language endorsed by the D.C. Land Title Association about what constitutes a violation.

For more, see D.C. Council alters foreclosure law, adds new consumer rights.

BofA Tagged w/ Proposed Class Action Over Business Connection w/ Convicted Scammer Who Ran $30M Ponzi-Scheme, Equity Stripping Sale Leaseback Ripoffs

From a press release from law firm Capretz & Associates:

  • Bank of America has been named as a defendant in a class action lawsuit filed in Los Angeles Superior Court, Central District, on behalf of hundreds of LA homeowners and investors who lost millions of dollars in a highly complex Ponzi scheme run by one of Los Angeles' most notorious fraud operators, Juan Rangel.

  • The lawsuit, filed on behalf of the mostly Latino plaintiffs by the law firms of Pearson, Simon, Warshaw & Penny, LLP; Capretz & Associates; and Girardi & Keese, alleges that Bank of America employees as well as bank management were aware or should have been aware of the Ponzi scheme and despite such knowledge provided banking services to Juan Rangel and his associates.

  • Notably, Dony Gonzalez, a former Bank of America branch manager was indicted and pled guilty to receipt of bribes by Juan Rangel. The lawsuit alleges that from about November 2007 to July 2008, Rangel used his firm, Financial Plus Investments, as well as other financial companies he owned, to defraud middle-class working families through investment, mortgage and foreclosure rescue schemes that netted Rangel about $30 million. Rangel's firms shut down in July 2008 and Rangel was arrested by federal agents in August 2008.


  • According to the lawsuit, Rangel not only took investor monies, he also operated a mortgage fraud scheme that targeted distressed homeowners who had equity in their homes but were behind on mortgage payments.

  • Rangel offered these homeowners assistance in bringing their loans current and saving their properties. As part of these transactions, however, the homeowners' equity in their properties was invested with Financial Plus and, in some cases, Rangel also took title to their properties.

For more, see Class Action Lawsuit Filed Against Bank of America on Behalf of Latino Homeowners Who Lost Millions to LA Fraud Operator Juan Rangel.

For the lawsuit, see Arreola v. Bank of America, National Association, et al.

Ohio AG Tags Foreclosure Rescue Operator With Lawsuit For Allegedly Running Illegal Upfront Fee Loan Modification Ripoff

From the Office of the Ohio Attorney General:

  • Ohio Attorney General Mike DeWine [] announced a lawsuit against foreclosure rescue company Diversified Real Estate Consultants LLC (DREC), its affiliates, and its owner for multiple violations of Ohio consumer laws.


  • According to Attorney General DeWine's lawsuit, filed in the Cuyahoga County Common Pleas Court, DREC is a Florida registered company operating from Ohio that offered mortgage assistance relief services to Ohio consumers, even though it never registered to do business in Ohio. DREC charged and accepted fees of $500 to $3,495 from homeowners, promising them reduced monthly mortgage payments or better interest rates, and represented a "100% money-back guarantee." Despite the company's claims, consumers received no help and no refunds.

For the Ohio AG press release, see Northeast Ohio Foreclosure Rescue Company Sued for Consumer Law Violations.

For the lawsuit, see State of Ohio v. Diversified Real Estate Consultants, LLC, et al.

(1) In addition to DREC, the Attorney General's lawsuit names defendants DREAM Management USA (DREAM) and Precision Processing Solutions International LLC (PPSI) – Ohio companies that provided DREC research, analysis, and documentation processing services, in direct connection with DREC's mortgage relief assistance services. The suit also names North Canton resident Daniel J. DePasquale, owner and operator of DREC, DREAM, and PPSI.

The lawsuit charges the defendants with violations of Ohio's Consumer Sales Practices Act, Debt Adjusters Act, and Telephone Solicitation Sales Act. It seeks a declaratory judgment, injunctive relief, civil penalties, and full restitution for consumers.

"Strategic Defaulters" - Savvy Homeowners Choosing To Cut Their Losses On Underwater Homes

The Arizona Republic reports:

  • Many of the people who have been walking away from mortgages over the past few years don't fit the standard profile. Cash-strapped? Unemployed? Financially unsophisticated? Low-income?

  • None of those descriptions seem to apply to most "strategic defaulters" - homeowners who have chosen to cut their losses on properties that dropped in value, just as they might sell an old car with mounting repair bills or dump stock in a company that just reported a loss.

  • "Many are financially savvy people with higher credit scores and higher income," said Tracy Bremmer, director of decision analytics at credit-bureau Experian, which has studied the issue to help lenders identify people who might be default candidates. "They often own multiple properties, with larger original loan amounts."

  • Strategic defaulters, in other words, seem to know what they're doing. In fact, they're often angling to buy the foreclosed home across the street at a bargain price before abandoning their own property, Bremmer said. "They'll open a new mortgage before defaulting on the existing loan," she said.


  • Defaulting on a loan - that is, missing payments - will hurt your credit score. But many strategic defaulters apparently don't worry about this or consider it a lesser evil. [...] Still, strategic defaulters tend to keep current on other obligations such as credit cards and auto loans. In fact, this tendency to keep making other payments is how Experian sorts out strategic defaulters from more distressed borrowers. "They're skipping out on their mortgages but paying everything else," she said.(1)

For the story, see 'Strategic defaulters' tend to be affluent, savvy homeowners.

(1) See Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis for more on the phenomenon of strategic defaulting:

  • This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences.

  • Moreover, these emotional constraints are actively cultivated by the government and other social control agents in order to encourage homeowners to follow social and moral norms related to the honoring of financial obligations - and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision.

  • Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility.

Fla. Lawyer Gets 210 Months For Running Ponzi Scheme Preying On Elderly, Servicemembers w/ Investments In Phony Mortgages, Predatory & Usurious Loans

From the Office of the U.S. Attorney (Miami, Florida):

  • [A] federal judge sentenced attorney and C.P.A. Lorn Leitman, 61, of Miami, Florida, to 210 months’ incarceration for his role in a 10-year Ponzi scheme. In an unusual decision, the court departed upward from a sentencing guideline range of 121-151 months, commenting, “this case is exceptional.”

  • A federal grand jury charged the defendant with violating the mail fraud statute for defrauding elderly victims and retirees, among others, through the operation of a Ponzi scheme which sought investments in either phantom residential mortgages or a separate venture burdening U.S. military personnel with predatory and usurious loans.


  • Several victims appeared in court to address the impact of the fraud. As one victim explained, losses from the Ponzi scheme forced the end of his retirement and his return to work. He commented, “my dreams are dead.”

  • The court explained that the decision to sentence above the guidelines resulted from the defendant’s conduct preying upon his closest friends, fellow servicemen, the elderly and retirees, and noted that the defendant breached codes of conduct applicable to members of the Florida Bar and certified public accountants. In addition to the enhanced sentence, the court ordered the defendant to pay $3,308,435.03 in restitution to victims.

For the U.S. Attorney press release, see Ponzi Scheme Defendant Receives 17 1/2 Year Sentence.

Tuesday, July 19, 2011

'Sewer Service' Sinks Another Foreclosure; Sale Resulting In $120K Home Lost For $8K Voided; Crappy Affidavit Fails To Establish 'Diligent Search'

A ruling of a panel of the New Jersey appeals court affirmed a lower court ruling kiboshing a tax foreclosure sale by reason of a crappy attempt to serve process on a homeowner who was delinquent on his real estate tax bills. A 'butchered' summary of the case follows:

  1. The process server made a lousy attempt at finding the homeowner to serve him personally with the notice of a foreclosure action for unpaid real estate taxes.

  2. Instead, service of process was completed by an alternative method, in which the papers were served by mailing, both by certified and by regular mail.

  3. The affidavit filed by the process server to justify the use of the alternative, or substituted, method of service only contained the notation "that despite diligent effort and inquiry personal service cannot be made."

  4. The lower court ruled that this notation was not sufficient to justify use of the substituted method of service, stating that affidavits of diligent inquiry typically include the dates and times of attempted personal service and the circumstances of failure. Accordingly, it voided the judgment of foreclosure.

  5. In a shameless attempt to salvage the situation, the foreclosing plaintiff filed a motion for reconsideration, submitting a new affidavit from the process server. The new affidavit stated the dates, times, and circumstances of the five failed attempts to serve the homeowner personally.

  6. At oral argument, the lower court commented that the new affidavit would have been sufficient to show diligent effort, but that the original deficiency of service could not be corrected after the fact.

  7. The lower court confirmed its earlier ruling voiding the foreclosure judgment, and the New Jersey appeals court affirmed.

For the ruling of the appeals court, see Arianna Holding Companu v. Cummings, No. A-1420-10T1, N.J. Super. App. Div., July 11, 2011) (unpublished) (if link expires, TRY HERE).

See Opportunity To Reclaim Homes For Foreclosed Owners Victimized By "Nail & Mail" Sewer Service? for another post on how a crappy effort by a process server to serve lawsuit paperwork on a defendant can 'submarine' a plaintiff's effort to obtain a judgment.

Go here for links to court rulings involving "nail & mail" method of process-serving and the due diligence required before using this method.

(1) The appeals court affirmed the lower court ruling essentially for the reasons stated orally by the trial judge at the time of oral argument on the motions in the lower court proceeding, but saw fit to add this additional tidbit (bold text is my emphasis):

  • We reject plaintiff's argument that due process and the requirements of Rule 4:4-4(b)(1)(C) for substituted service by mail are satisfied if the facts later show that the defendant actually resided at the address to which process was mailed.

    "`[S]ubstantial deviation from service of process rules' typically makes a judgment void." M & D Assocs. v. Mandara, 366 N.J.Super. 341, 352-53 (App. Div.) (quoting Jameson v. Great Atlantic and Pacific Tea Co., 363 N.J.Super. 419, 425 (App. Div. 2003)), certif. denied, 180 N.J. 151 (2004).

    The court lacks jurisdiction to enter a judgment when there is violation of the rules pertaining to mailed service of process. Sobel v. Long Island Entertainment Products, Inc., 329 N.J.Super. 285, 293 (App. Div. 2000); see also Driscoll v. Burlington-Bristol Bridge Co., 8 N.J. 433, 493 ("The requirements of the rules with respect to service of process go to the jurisdiction of the court and must be strictly complied with. Any defects . . . are fatal and leave the court without jurisdiction and its judgment void."), cert. denied, 344 U.S. 838, 73 S.Ct. 25, 97 L. Ed. 652 (1952).

    Moreover, our courts have for many years strictly construed the procedural requirements for obtaining a judgment of foreclosure in tax sale cases. See, e.g., State v. Landis Twp., 50 N.J.L. 374, 379 (Sup. Ct. 1888).

    The purpose of the rule requiring an affidavit of diligent inquiry is to assure the court that it has personal jurisdiction to enter judgment and that the defendant's right to due process has not been violated. See M & D Assocs., supra, 366 N.J. Super. at 353-54. The court must carefully scrutinize the affidavit of diligent inquiry for sufficiency of its factual averments. Id. at 353.

    Permitting correction of defective service of process after the fact would weaken the purpose of the rule and risk violation of due process rights of foreclosure defendants. Here, Judge Buczynski scrutinized the affidavit of diligent inquiry, together with its attachments, and he found appropriately that the original document from Guaranteed Subpoena Services was not sufficient to show diligent effort to effectuate personal service.


One of the cases cited above, M & D Assocs. v. Mandara, 366 N.J.Super. 341 (N.J. Super. App. Div.) deserves highlighting in that, in deciding a case in the context of a tax foreclosure, it noted that a review of the affidavit of service merits hightened scrutiny in certain situations:

  • We are of the view that particularly in situations like the one involved in this case, where there is substituted service, as well as a tremendous disparity between the amount due on the tax certificates and the value of the property subject to foreclosure (here approximately $4,500 versus potentially $100,000 to $200,000 for the property), careful scrutiny of the affidavit of inquiry requires the Chancery Judge to demand more than cursory inquiries or recitals not only as a matter of due process, but also of fundamental fairness. See Bron v. Weintraub, supra (42 N.J. at 93-96, 199 A.2d 625).

    The Chancery Judge in such foreclosure cases should be alerted when the face of the documentation indicates that a significant windfall might result if adequate scrutiny of the affidavit of inquiry is not undertaken.

    Here, when on the surface M & D was to receive such a windfall, it was appropriate to require an expanded inquiry of any alleged diligent inquiry. This is especially so where M & D knew that one of the owners of the Property was not residing, and had not resided with the other owner and there was no evidence of communication between them.[5]

    Whether this situation might have required the hiring of an investigator rather than superficial checking of phone directories[6] and tax rolls is something we leave for future cases. In any event, we note defense counsel's argument that Carmelo's address can be found in the Division of Motor Vehicle records and at the Passaic County Voter Registration Board.[7]

    A diligent inquiry requires more than a search with election officials for the particular town where the property was located and where coincidentally one of the individuals on the deed resided. Moreover, a mere recital that a person does not appear in the voting records (apparently erroneous in this case), should not be based on hearsay statements, but requires a certification from a custodian of documents from the Board of Election.

    In this information age, adequate search instruments are available by computer or other means to make searches relatively simple and inexpensive. In sum, we are satisfied that there was not a sufficient diligent inquiry under the circumstances of this case, and that service by publication was improper and rendered the judgment void as to Carmelo Mandara.

Findings In Foreclosure Fraud Report Compiled By Squeezed-Out Florida AG Lawyers Significant In Recently-Booted Brooklyn Foreclosure Case

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

  • A foreclosure fraud report compiled by two ousted Florida investigators was instrumental this month in winning a New York homeowner her case. The report by former state assistant attorneys general June Clarkson and Theresa Edwards is a step-by-step account of how some lenders allegedly sidestepped foreclosure laws using flawed and possibly fraudulent paperwork. The report, which cites Ocwen Financial Corp., a loan servicer that has workers in West Palm Beach, was first reported in The Palm Beach Post.

  • Edwards said she and Clarkson were abruptly asked to resign or face firing from the attorney general's office in late May without reason and with no time to brief other employees on their foreclosure investigations.


  • "It is telling that, once again, a New York court is more interested in exposing fraud taking place right here in Palm Beach County than our own Florida courts, even citing to the investigation of the Florida Attorney General," said Tom Ice of Ice Legal in Royal Palm Beach.


  • New York Supreme Court Justice Arthur Schack in his July 1 ruling against HSBC Bank(1) questions variations in signatures of Ocwen employees, who serviced the home loan for HSBC. He also ruled that HSBC had no standing to file the foreclosure because of a faulty assignment of mortgage.

  • Schack read about the report by Edwards and Clarkson titled "Unfair, Deceptive and Unconscionable Acts in Foreclosure Cases" in a Palm Beach Post article published in January.(2) The article included information in the report on signatures of alleged Ocwen robo-signer Scott Anderson.

For more, see Florida fraud report key to New York foreclosure case.

(1) See:

(2) See The Palm Beach Post: State details foreclosure chaos.

Washington Man Gets 25 Years In "Bonded Promissory Note" Foreclosure Rescue Ripoff; Pocketed Upfront Fees, Rent From Bogus Sale Leasebacks

In Los Angeles, California, Central Valley Business Times reports:

  • Jeff McGrue, 51, of Tacoma, Wash., who was found guilty in January of swindling California homeowners facing foreclosure, has been sent to prison for up to 25 years for running a foreclosure rescue ripoff.

  • He had promised to prevent foreclosure through the paying off of their mortgages, but in reality doing no more than sending their lenders fake notes and keeping the money the homeowners sent to him, prosecutors say.


  • Mr. McGrue and the others identified homeowners who were facing foreclosure or who were “upside-down” on their mortgages. Relying on a network of “consultants,” many of whom were real estate agents, he recruited the homeowners into his “Gateway Program.”

  • Through the Gateway Program, Mr. McGrue and the others falsely told homeowners that, if they paid an enrollment fee and monthly rent and signed over title of their homes to Gateway, he would use “bonded promissory notes” purportedly drawn on a U.S. Treasury Department account to pay off their mortgages, thereby stopping foreclosure proceedings.

  • The homeowners were falsely told that lenders were legally required to accept the notes, that they would be able to buy their homes back from Gateway International at a discount, and that they would receive up to $25,000, even if they chose not to re-purchase their houses.


  • Mr. McGrue and his co-schemers enrolled more than 250 victims in the “Gateway Program,” but they did not save a single home. Instead, he collected approximately $1 million in the form of enrollment fees and rent from these victims, say prosecutors.

  • The evidence at trial showed that Mr. McGrue signed bogus documents to make it appear the victims’ outstanding mortgages had been paid off so he could re-sell the victims’ properties, which had been re-titled in Gateway’s name, to unsuspecting buyers.

For the story, see Foreclosure scammer sentenced to prison for $55 Million swindle (Faces a quarter century behind bars for ripping off desperate homeowners).

For the U.S. Attorney (Los Angeles) press release, see Washington State Man Sentenced To 25 Years For Orchestrating Foreclosure-Rescue Scheme.

Suit: DB Securtized, Then Dumped $1B+ In Already-Defaulted Loans While Betting $10B On Their Failure; NYS 6-Year Statute Of Limitations Comes In Handy

Thompson Reuters News & Insight reports:

  • Bernstein Litowitz Berger & Grossman filed a scorcher of a suit against Deutsche Bank Wednesday, claiming that the bank sold financial services group Dexia more than $1 billion in mortgage-backed securities at the same time Deutsche Bank bet $10 billion that those notes would fail. The 175-page (!) New York state supreme court complaint is Bernstein Litowitz's second major new MBS filing in a week, coming on the heels of Allstate's suit against Morgan Stanley (Go here for Allstate v. Morgan Stanley lawsuit).

  • The Deutsche complaint is filled with eye-popping allegations. Bernstein claims, for instance, that senior traders at the bank described the securities they were peddling to clients like Dexia as "crap," "pigs," and "generally horrible."

  • One trader, Greg Lippman, allegedly wrote, "DOESN'T THIS DEAL BLOW" in an e-mail to a colleague about an offering Dexia sank $23 million into.(1)

  • In another e-mail the complaint cites, this one to a hedge fund investor, Lippman allegedly disclosed a $1 billion short position on mortgage-backed securities that was going to make him "oceans of money." (That Lippman e-mail is from 2005, but thanks to New York State's convenient six-year statute of limitations, Dexia's fraud and negligent misrepresentation claims can go way back.)

For more, see Dexia sues Deutsche Bank over $1 billion MBS investment.

Thamks to Deontos for the heads up on the story.

(1) See also: Dexia suit: DB securitized mortgages it sued originators over"

  • But the new MBS complaint Dexia filed Thursday against Deutsche Bank includes an assertion I haven't seen before. Dexia's lawyers at Bernstein Litowitz Berger & Grossman claim Deutsche Bank securitized mortgage loans that had already defaulted by the time they were repackaged and sold to investors-and that Deutsche Bank engineered those securitizations even as it sued mortgage loan originators to demand that they repurchase the deficient loans.

  • According to the Dexia complaint, Deutsche Bank was deceiving both MBS issuers and loan originators. It was including the "early payment default" loans in MBS pools despite telling investors that the securities were backed by loans that met underwriting standards. And at the same time, Deutsche Bank was claiming in repurchase suits against mortgage originators such as Cameron Financial, First Capital, Lancaster Mortgage, and Liberty Mortgage that it couldn't include the early payment default loans in securitizations, even though it had already packaged the loans into offerings it sold to Dexia and other investors.


  • "This type of conduct--complaining in court that loans cannot be securitized due to early default and then securitizing those very loans and selling the securities to its clients--exemplifies the duplicitous nature of the fraud Deutsche Bank perpetrated against Dexia, and demonstrates Deutsche Bank's knowledge that these securities were destined to fail," said Dexia counsel Avi Josefson of Bernstein Litowitz.

For the lawsuit, see Dexia SA/NV, et al. v. Deutsche Bank AG, et al.

Chief Chase Bankster: "There Have Been So Many Flaws In Mtgs That It’s Been An Unmitigated Disaster [...] Everybody's Going To Sue Everybody Else!"

Bloomberg reports:

  • JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said clashes over faulty mortgages may drag on as investors and regulators demand compensation for soured loans issued at the peak of the housing market.

  • There have been so many flaws in mortgages that it’s been an unmitigated disaster,” Dimon said during a conference call today. “We just really need to clean it up for the sake of everybody. And everybody is going to sue everybody else, and it’s going to go on for a long time.”

For more, see Dimon Says Mortgage Clash Swells as ‘Everybody Is Going to Sue’.

Pro Se Homeowner Fails In Foreclosure Defense Attempt, Despite Involvement Of Notorious Robosigners In Executing Lender's Mortgage Documents

A recent ruling by a Florida appeals court should serve as a reminder to self-represented, "pro se" homeowners defending against a home foreclosure that it isn't enough to merely go into court, and point out generally that there are defects with the lender's paperwork due to the involvement of three prolific, nationally-recognized robosigners in the execution of those documents and expect the court to give the case the boot.(1)

As in any case, all litigants have to adequately plead their case, raise and brief all the issues, and submit evidence to support the allegations that are in a form that is admissible in court (in compliance with the court's rules of procedure).

While it is true that a court is to hold pro se litigants to less stringent standards in construing their pleadings than formal pleadings drafted by lawyers,(2) they must still adequately raise and brief the issues, and acquaint themselves and follow the applicable rules of procedure.(3)

Failing that, no matter how hard they work familiarizing themselves with the stories of robosigning, document-manufacturing, forgeries, etc. that are floating around on the Internet, pro se homeowners like the one in this case (who, in fact, may have had strong defenses and counterclaims) will find themselves on the dead-end road of disappointment.(4)

For the ruling, see Harvey v. Deutsche Bank National Trust, No. 4D10-674 (Fla. App. 4th DCA, June 29, 2011).

(1) In this regard, the court noted, in footnote 2 of its ruling:

  • As to this point, Harvey specifically argued that on April 16, 2009, an assignment of mortgage was executed by Korell Harp, vice president for MERS, as nominee for AHMAI, and Tywanna Thomas, assistant secretary for MERS. Harvey stated that on May 6, 2009, an assignment of mortgage in a different and unrelated foreclosure case was executed by Korell Harp; Harp was listed as vice president and assistant secretary for Argent Mortgage Company, LLC. Harvey further stated that in another unrelated foreclosure case, an assignment of mortgage was executed by Cheryl Thomas and Tywanna Thomas; Cheryl Thomas was listed to be vice president of Sand Canyon Corporation and Tywanna Thomas was listed as assistant vice president.

    Harvey stated that in yet another unrelated foreclosure case, an assignment of mortgage was executed by Korell Harp and Tywanna Thomas. Harvey argued that the signatures of Harp and Tywanna Thomas "appear to be different when compared with the other assignments signed by Ms. Harp and Ms. Thomas," and "[b]ecause there was a dispute concerning either the facts of the controversy or the inferences to be drawn from those facts, a summary judgment was improper."

(2) See e.g. Estelle v. Gamble, 429 U.S. 97 (1976), which supports the mandate that trial judges cut pro se homeowners slack when bringing their cases:

  • As the Court unanimously held in Haines v. Kerner, 404 U. S. 519 (1972), a pro se complaint, "however inartfully pleaded," must be held to "less stringent standards than formal pleadings drafted by lawyers" and can only be dismissed for failure to state a claim if it appears " `beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' " Id., at 520-521, quoting Conley v. Gibson, 355 U. S. 41, 45-46 (1957).

(3) See e.g.:

Pliler v. Ford, 542 U.S. 225 (2004):

  • District judges have no obligation to act as counsel or paralegal to pro se litigants. In McKaskle v. Wiggins, 465 U. S. 168, 183-184 (1984), the Court stated that "[a] defendant does not have a constitutional right to receive personal instruction from the trial judge on courtroom procedure" and that "the Constitution [does not] require judges to take over chores for a pro se defendant that would normally be attended to by trained counsel as a matter of course."

Faretta v. California, 422 U. S. 806 (1975):

  • The right of self-representation is not a license to abuse the dignity of the courtroom. Neither is it a license not to comply with relevant rules of procedural and substantive law.

Rhodes v. Wathen, No. 10-10892 (5th Cir., March 2, 2011):

  • Although pro se briefs are afforded liberal construction, Haines v. Kerner, 404 U.S. 519, 520 (1972), even pro se litigants must brief arguments in order to preserve them. Yohey v. Collins, 985 F.2d 222, 224-25 (5th Cir. 1993).

Timson v. Sampson, 518 F. 3d 870 (11th Cir., 2008):

  • While we read briefs filed by pro se litigants liberally, Lorisme v. I.N.S., 129 F.3d 1441, 1444 n. 3 (11th Cir.1997), issues not briefed on appeal by a pro se litigant are deemed abandoned, Horsley v. Feldt, 304 F.3d 1125, 1131 n. 1 (11th Cir.2002). Moreover, we do not address arguments raised for the first time in a pro se litigant's reply brief. Lovett v. Ray, 327 F.3d 1181, 1183 (11th Cir.2003).

Childs v. Motor City Casino Hotel, Case No. 09-13108, No. 10-13458 (E.D. Mich., Southern Div. April 27, 2011):

  • A pro se litigant's complaint is to be construed liberally, Erickson v. Pardus, 551 U.S. 89, 94 (2007), and is held to "less stringent standards" than a complaint drafted by counsel, Haines v. Kerner, 404 U.S. 519, 520 (1972). Nonetheless, "[t]he leniency granted to pro se [litigants] . . . is not boundless," Martin v. Overton, 391 F.3d 710, 714 (6th Cir. 2004), and such complaints still must plead facts sufficient to show a redressable legal wrong has been committed, Fed. R. Civ. P. 12(b); Dekoven v. Bell, 140 F. Supp. 2d 748, 755 (E.D. Mich. 2001).

Caidor v. Onondaga Cnty., 517 F.3d 601 (2d Cir. 2008):

  • This Circuit makes certain allowances for pro se litigants. We recognize that the right to appear pro se "should not be impaired by harsh application of technical rules," and therefore we "make reasonable allowances to protect pro se litigants from inadvertent forfeiture of important rights because of their lack of legal training." Traguth v. Zuck, 710 F.2d 90, 95 (2d Cir. 1983).

    Nonetheless, "pro se litigants generally are required to inform themselves regarding procedural rules and to comply with them."
    Edwards v. INS, 59 F.3d 5, 8 (2d Cir.1995) (citation omitted);

Keeler v. Aramark, No. 10-3214 (10th Cir. April 7, 2011):

  • [A]lthough courts afford a pro se litigant's filings some leniency, they have no obligation to advise such a litigant of the authentication requirement, for even pro se litigants are expected to "follow the same rules of procedure that govern other litigants." Kay v. Bemis, 500 F.3d 1214, 1218 (10th Cir. 2007) (quotation omitted).

Petty v. Krause, No. 1:10CV573 (M.D. N.C. April 27, 2011):

  • Moreover, although the Supreme Court has reiterated the importance of affording pro se litigants the benefit of liberal construction, Erickson v. Pardus, 551 U.S. 89, 94 (2007), the United States Court of Appeals for the Fourth Circuit has "not read Erickson to undermine Twombly's requirement that a pleading contain more than labels and conclusions," Giarratano v. Johnson, 521 F.3d 298, 304 n.5 (4th Cir. 2008) (internal quotation marks omitted) (applying Twombly standard in dismissing pro se complaint). Accord Atherton v. District of Columbia Off. of Mayor, 567 F.3d 672, 681-82 (D.C. Cir. 2009) ("A pro se complaint . . . `must be held to less stringent standards than formal pleadings drafted by lawyers.' But even a pro se complainant must plead `factual matter' that permits the court to infer `more than the mere possibility of misconduct.'" (quoting Erickson, 551 U.S. at 94, and Iqbal, 129 S. Ct. at 1950, respectively)), cert. denied, 130 S. Ct. 2064 (2010).

Lomax v. Capital Rental Agency, Inc., (11th Cir. May 23, 2011):

  • "Pro se pleadings are held to a less stringent standard than pleadings drafted by attorneys and will, therefore, be liberally construed." Tannenbaum v. United States, 148 F.3d 1262, 1263 (11th Cir. 1998).

    Although we show leniency to pro se litigants, we will not serve as de facto counsel or "rewrite an otherwise deficient pleading in order to sustain an action."
    GJR Invs., Inc. v. County of Escambia, Fla., 132 F.3d 1359, 1369 (11th Cir. 1998),

C.P. v. Shepherd, No. E2010-00726-COA-R3-CV (Tenn. App. March 24, 2011):


  • Pro se litigants should not be permitted to shift the burden of the litigation to the courts or to their adversaries. They are, however, entitled to at least the same liberality of construction of their pleadings that Tenn. R. Civ. P. 7, 8.05, and 8.06 provide to other litigants. Irvin v. City of Clarksville, 767 S.W.2d at 652.

    Even though the courts cannot create claims or defenses for pro se litigants where none exist,
    Rampy v. ICI Acrylics, Inc., 898 S.W.2d 196, 198 (Tenn. Ct. App. 1994), they should give effect to the substance, rather than the form or terminology, of a pro se litigant's papers. Brown v. City of Manchester, 722 S.W.2d 394, 397 (Tenn. Ct. App. 1986); Usrey v. Lewis, 553 S.W.2d 612, 614 (Tenn. Ct. App. 1977).
(4) Homeowners expecting a court proceeding similar to those on "Judge Judy" (or other TV court shows) will be in for a big let down.

Monday, July 18, 2011

Texas AG: Zombie Debt Buyer Used Fraudulent Robosigned Affidavits To Dupe Judges Into Believing Dubious Claims Bought For "Pennies On $" Were Legit

From the Office of the Texas Attorney General:

  • Texas Attorney General Greg Abbott [] charged Encore Capital Group, Inc. with falsifying and robo-signing affidavits, attempting to collect debts based upon inaccurate or incomplete account information, and employing unlawful and deceptive debt collection tactics.


  • Encore, which is one of the nation’s largest debt collection companies, and its subsidiaries – Midland Funding, LLC and Midland Credit Management, Inc. – are named as defendants in the case.

  • According to state investigators, Midland Funding purchased debt portfolios from a broad spectrum of creditors for pennies on the dollar. As the purchaser of the debt, the defendants attempted to collect the money that was allegedly owed to various creditors.

  • However, the defendants’ debt collection letters contained very little information about the debt they were attempting to collect, provided no supporting documentation, and included no proof that they actually acquired the debt from the original creditor. When Texans contacted the defendant to dispute the legitimacy of an alleged debt or seek additional information, the defendants made little or no effort to investigate or verify whether their collection efforts were proper.

  • Court documents filed by the State indicate the defendants sometimes even used incomplete or inaccurate account information, targeted the wrong individuals for collection and attempted to collect debts that had been fully or partially paid.


  • When individuals refused to comply with Midland Funding’s improper collection efforts, the defendants hired attorneys to sue the accused debtors. Court documents reveal that the defendants’ lawyers filed breach of contract lawsuits demanding principal, interest and attorneys’ fees.

  • The defendants have filed more than 60,000 lawsuits in Texas since 2002. According to state investigators, the defendants’ lawsuits contained inaccurate information and used false statements to claim they were owed certain debts.

  • To protect Texans from being sued for debts they did not actually incur, the law may require that debt collectors verify the validity of their claims through “sworn affidavits.” However, the defendants submitted falsified affidavits, which the courts relied upon as proof that the debt collector properly verified the identity of the debtor and the amount owed.

  • The State’s investigation revealed that the defendants also employed robo-signers” to supply the legally required verification. Court documents filed by the State indicate the defendants’ robo-signers routinely signed more than 300 affidavits per day and did not actually review the underlying credit agreements or the alleged debtor’s payment history.

  • In sworn testimony provided to state investigators, the defendants’ robo-signers acknowledged that they also had no personal knowledge of the original debt or the defendant’s acquisition of the debt portfolios – which was contrary to the information contained in sworn affidavits that these defendants filed with the courts.

  • Because the court presumed the falsified affidavits were truthful, judges relied upon them to issue judgments against debtors. As a result, the Attorney General charged the defendants with defrauding the Texas judicial system by knowingly submitting false affidavits to state courts.

  • Because 90 percent of the defendants’ lawsuits named individuals who were not represented by counsel, these purported debtors did not have lawyers to challenge the legitimacy of the defendants’ claims. As a result, default judgments were improperly entered against them based upon the defendants’ falsified affidavits.

For the Texas AG press release, see Attorney General Abbott Charges Encore Capital Group with Violating Texas Debt Collection Laws (State’s enforcement action cites Encore for employing unlawful tactics against debtors, relying upon “robo-signers” to sign thousands of false affidavits).

For the lawsuit, see State of Texas v. Midland Funding LLC, et al.

'Enough Already!' Wails Beleaguered Bankster As Chase Moves To Unload $154B Mortgage Holdings; Litigation Over Crappy Paper, F'closures Drive Effort

Bloomberg reports:

  • JPMorgan Chase & Co. is winding down its $154 billion mortgage portfolio to “close to zero” as the bank works through mortgage losses and litigation over loan- servicing and foreclosure practices.

  • JPMorgan, which has reduced mortgage holdings by $19.3 billion in the past year, will continue shedding assets by about as much as 15 percent a year forever,” Chief Executive Officer Jamie Dimon told analysts on a conference call after the New York-based company reported a 13 percent increase in net income for the second quarter.

  • It’s going to go down 10 or 15 percent a year until it’s close to zero,” Dimon said in answering a question from Ed Najarian, the head of bank research at International Strategy and Investment Group in New York.

For more, see JPMorgan to Cut Mortgage Holdings to ‘Close to Zero’.

Report Profiles Fla. Foreclosure Defense Attorney Readying To Argue Case That May Decide Fate Of 1000s Of Suits Involving Robosigners, Phony Documents

In Palm Beach County, Florida, the Daily Business Review reports:

  • As a relative novice in the legal profession, Ice Legal senior associate Enrique Nieves III is prepping for his biggest case and his first appearance before the Florida Supreme Court. At 31, Nieves is assigned to argue a case that may decide the fate of thousands of mortgage foreclosures similar to his case, Roman Pino v. Bank of New York Mellon.

  • The question before the court seems straightforward: Can banks escape fraud claims in foreclosures by simply dropping their case?

  • But the ramifications are potentially severe, and with its decision the state's high court will likely decide what consequences lenders will face for the robo-signing scandal and allegedly fraudulent assignment-of-mortgage documents that has affected thousands of cases.

For more, see Newcomer to Argue High-Stakes Foreclosure Case Before Fla. Supreme Court.

See Initial Brief - Pino v. The Bank of New York Mellon for the initial brief filed by the homeowner's counsel with the Florida Supreme Court in this case (go here for Appendix to initial brief).

Go here for links to other documents filed with the Florida Supreme Court in this case.

Minnesota Judge Halts Foreclosure; Says Publication Of Foreclosure Notice In Wrong Newspaper Fails To Give Notice To Those To Whom It Is Directed

In Olmstead County, Minnesota, the Post Bulletin reports:

  • An Olmsted County District Court judge has ruled that a mortgage foreclosure sale notice published in an area newspaper was invalid because the notice wasn't in a legally recognized newspaper distributed in the area where the home is located.

  • The ruling was in regard to a foreclosure case involving a house in northwest Rochester. The legal notice was published by the lender in the Stewartville Star, and the home owner argued that the weekly isn't regularly distributed in "the area of the property," as required by statute.

  • Olmsted County District Judge Jodi Williamson agreed, granting a preliminary judgment Feb. 14. A declaratory judgment was entered June 8.


  • In the ruling, Williamson says that "publication in a qualified newspaper is not sufficient by itself to provide notice to the public." The legal notice must be published in a newspaper "that is likely to give notice in the affected area or to whom it is directed," according to the ruling."


  • The judge ordered the foreclosure process halted pending further proceedings or possible resolution by the parties.(1)

For more, see Foreclosure notice ruled invalid.

(1) Since no actual foreclosure sale took place in this case, and the rights of unwitting, 'downstream' 3rd party buyers (ie. potentially, buyers qualifying for protection as "bona fide purchasers") were not implicated, it was unnecessary for the court to determine whether the defect in the published notice would have rendered any resulting foreclosure judgment absolutely void/void ab initio (which would negatively impact on all 'downstream 3rd party purchasers), or merely voidable (which would not negatively impact on 'downstream' buyers if, and only if, they qualify for protection as bona fide purchasers - ie. did the downstream purchaser know, or should he have known, of the defect in the foreclosure notice?).

See, e.g. Harris v. Harris, 428 Pa. 473 (Pa. 1968), where the Pennsylvania Supreme Court made the following observation on this point (bold text is my emphasis):

  • Whether title will pass at an execution sale depends upon the validity of the underlying judgment.

    If the execution sale was based upon a voidable judgment, a bona fide purchaser will be protected against actions seeking to recover the purchased property.

    On the other hand, where a void judgment is the basis for an execution sale, one who purchases property will not acquire title even if a bona fide purchaser for value. See 33 C.J.S., Execution §§ 6, 230, 299a (1942); Restatement, Judgments § 115, comment j (1942) and Pennsylvania Annotations; 3 and 4 American Law of Property §§ 13.1, 18.60 (1952).

See Straw, Ralph L. Jr., Off-Record Risks for Bona Fide Purchasers of Interests in Real Property, 72 Dick. L. Rev. 35 (1967-1968) for a general discussion of the various 'hidden hazards' that face bona fide purchasers of interests in real estate.