Saturday, August 6, 2011

'60 Minutes' To Re-Air Robosigner Segment August 7

The Palm Beach Post reports:

  • The CBS news show 60 Minutes will re-air a segment Sunday featuring a Palm Beach County homeowner fighting an allegedly fraudulent foreclosure that exposed the now infamous robo-signer Linda Green.

  • The segment, which originally aired in April, led officials from Michigan, Massachusetts and North Carolina to pull court documents bearing Green's name and forward them to federal regulators and attorneys general.

  • Green was an employee of a defunct subsidiary of Jacksonville-based Lender Processing Services. The 60 Minutes episode interviews other employees of the company who admit to signing Green's name on thousands of foreclosure documents.

  • Palm Beach Gardens homeowner Lynn Szymoniak, whose foreclosure is highlighted in the show, said she approaches the re-airing with mixed feelings because she said lenders and politicians have largely ignored the evidence presented.


  • Of particular concern, Szymoniak said, was the May ouster of two former Florida assistant attorneys general who had been investigating foreclosure fraud and the involvement of Lender Processing Services, or LPS. The former investigators, Theresa Edwards and June Clarkson, were forced to resign May 20 despite positive performance reviews that lauded their foreclosure inquiries.


  • Szymoniak is still fighting her foreclosure. An update on her case and the issues with Edwards and Clarkson may be included in Sunday's 60 Minutes episode, which airs at 7 p.m. "Before the initial showing, I would have asked 'How can we get judges, prosecutors and legislators to watch this?'" Szymoniak said. "Now I am asking, 'How can we get judges, prosecutors and legislators to care about this?'"
For the story, see '60 Minutes' to re-air show featuring Palm Beach County foreclosure case.

BofA 'Piling On' Continues As 15 C-Wide Investors Opt Out Of One Class Action & $624M Settlement, Bring Another Demanding Bankster Cough Up More Cash

Reuters reports:

  • Bank of America Corp was sued by 15 former Countrywide Financial Corp institutional investors who said they lost money after being misled about the mortgage lender's financial condition and lending practices.

  • BlackRock Inc, the California Public Employees' Retirement System (CalPERS), T Rowe Price Group Inc, TIAA-CREF and the other plaintiffs, including some in Europe, sued in Los Angeles federal court, after deciding not to join a $624 million settlement that won court approval in February.(1)

  • These plaintiffs believed they could recover more by suing on their own over the "massive and pervasive" fraud at Countrywide, which Bank of America bought on July 1, 2008.


  • According to the 425-page complaint by the 15 plaintiffs, Countrywide and officials like former Chief Executive Angelo Mozilo abandoned prudent lending, reserved too little for bad loans and inflated earnings, in a drive to triple market share to 30 percent and enrich themselves. [...] The plaintiffs seek unspecified damages and class-action status for the March 12, 2004 to March 7, 2008 period.


  • Bank of America shares have fallen close to 60 percent since it bought Countrywide,(2) roughly three times as much as the KBW Bank Index.

For more, see BofA legal troubles deepen as big investors sue.

See also, Bloomberg: Bank of America Sued by Countrywide Financial Investors Alleging Fraud.

(1) According to Reuters, the February 25 settlement approved by U.S. District Judge Mariana Pfaelzer in Los Angeles called for Bank of America to pay $601.5 million to former Countrywide investors, and set aside $22.5 million for claims of investors that opted out.

(2) See 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 for more on Bank of America and its 'brilliant' move in allowing Angelo Mozilo to unload Countrywide on these geniuses and its decision to buy Countrywide.

Editor's Note: Reading about the seemingly continuous pounding BofA is taking by literally everyone (whether it be homeowners victimized by illegal trash-outs suing for thousands, well-heeled investors suing for hundreds of million$, and those in between - everyone seems to get a turn) reminds me of the the old schoolyard game we called 'Johnny-Ride-A-Pony' that we played as kids. For those who know what I'm talking about, BofA reminds me of the team that bends over (with the lead member wrapping his arms around a tree, telephone pole or similar object)), forming the 'horse,' and the members of the other team (the 'jumping' team), after getting a running start, each jumps on the backs of the 'horse' team, one at a time as they accumulate, pounding the living crap out of the 'horse' team until they collapse, causing them all to come crashing down onto the ground.

Outgoing FDIC Chairwoman: Loan Servicers ‘Didn’t Think Borrowers Were Worth Helping’; Felt Lied To, Calling Promises To Help Homeowners "Happy Talk"

The ProPublica Blog reports:

  • Outgoing Federal Deposit Insurance Corporation Chairwoman Sheila C. Bair's revealing exit interview by the New York Times' Joe Nocera has generated plenty of buzz. But while the interview provided a comprehensive look at Bair's role from 2006 to 2011, what caught our attention was her characterization of the foreclosure crisis. Bair said that the mortgage's industry's reluctance to provide mortgage modifications stems in part from the industry's "disdain for borrowers."

  • "I think some of it was that they didn't think borrowers were worth helping," she said. While Bair said that President Barack Obama's "heart is in the right place," she criticized his economic team for taking controversial steps to aid banks while, in Nocera's words, being "utterly unwilling to take any political heat to help homeowners."


  • "After doing some arm-twisting," Nocera wrote, "Bair felt she had extracted a commitment" that servicers would try to restructure mortgages—in particular, that they would be willing to freeze adjustable-rate mortgages at the original payment level, rather than the higher "reset rate," as Nocera reported in 2007.

  • But later that year, after the housing market had crashed, Bair learned from a survey of mortgage servicers that those conversations had been ignored. "It showed that like 1 percent of those reset mortgages were being restructured," Bair told Nocera. "They would just push people into foreclosure."

  • She told Nocera that she felt that she had been lied to, and that what mortgage servicers had promised in their meetings with the FDIC had simply been "happy talk."

For more, see FDIC Chairwoman: Mortgage Industry ‘Didn’t Think Borrowers Were Worth Helping

For Joe Nocera's NY Times column, see Sheila Bair’s Bank Shot.

SC Feds Score Pair Of Guilty Pleas In Mortgage Fraud Scam Involving Phony Home Sales That Failed To Deliver Title To Unwitting Homebuyers

In Florence, South Carolina, The Sun News reports:

  • A former mortgage broker and the owner of a defunct manufactured housing dealership in Conway pleaded guilty to felony mortgage fraud charges [] in federal court in Florence. Michael Fortenberry, the mortgage broker, and Glenn Vaught, former owner of G&E Home Sales, pleaded guilty to one charge each of conspiracy to commit loan application fraud, which carries a maximum sentence of five years in prison, a $250,000 fine and three years of supervised release.(1)


  • Fortenberry and Vaught said in plea agreements that they falsified information on loan applications to influence mortgage lenders to make loans that otherwise would not have been approved. The falsified information included appraisals that overvalued the property where the homes were to be located, doctored bank statements that made it appear as if buyers had more money and documents showing down payments that did not exist.


  • The two men obtained mortgages in the buyers’ names and had more than $2 million in loan proceeds sent to G&E Home Sales. Fortenberry and Vaught then split the loan proceeds but never provided any homes to their customers.

For the story, see Former home dealer, mortgage broker plead guilty.

(1) Cynthia Fortenberry -- Michael Fortenberry’s wife -- was indicted [] on seven felony charges of conspiracy to commit loan application fraud, according to the story. Reportedly, she was a mortgage broker who worked with her husband.

Homeowners Facing Foreclosure Among Those Targeted In NJ Straw Buyer Mortgage Fraud Scam

From the Office of the U.S. Attorney (Camden, New Jersey):

  • A New Jersey man admitted [] to conspiring to participate in a scheme which caused lenders to release more than $40.8 million based on fraudulent mortgage loan applications and conspiring to launder the proceeds of the fraud, U.S. Attorney Paul J. Fishman announced.

  • Charles Harvath, 33, of Lodi, N.J., pleaded guilty to an Information charging him with one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering. He entered his guilty plea before U.S. District Judge Joseph E. Irenas in Camden federal court.

According to documents filed in this case and statements made during Harvath’s guilty plea proceeding, financially distressed homeowners facing foreclosure were among those targeted by Harvath and other members of the conspiracy, and involved the recruitment of straw buyers who had good credit scores, but lacked the financial resources to qualify for mortgage loans to purchase their properties.

For the U.S. Attorney press release, see New Jersey Man Admits To $40.8 Million Mortgage Fraud Scheme.

HOA Oversight Leads To Bill For 6 Years Of Accumulated Dues; Homeowner's Failure To Pay Leads To $6K In Add'l Legal Fees, Loss Of Home To Foreclosure

In Charlotte, North Carolina, WCNC-TV reports:

  • Not all the foreclosures emptying homes across the Carolinas originate from banks and lenders. Increasingly, the institution doing the foreclosing is made up of neighbors who run the homeowners association–known as the HOA.

  • Consider one family’s story: Michelle Roberts’ parents helped her and her husband buy their first home in Gaston County in 2003. [...] The Mountain View Community Association off of Spencer Mountain Road near Ranlo, North Carolina and its management company, Hawthorne Management of Charlotte, did not send a bill to the Roberts [for periodic HOA maintenance dues] for years. “Not one word for six years,” said Michelle, “Not one word.”

  • The HOA lost track of the Roberts lot and two others when the builder transferred the property to their family. Then in May of 2009 the HOA sent Michelle’s parents a statement asking for almost six years worth of dues at once–$945.


  • At first the Roberts say they called a neighbor who served on the board of the HOA.“She said, ‘Don’t worry about it. We’ll work it out. It’s not that big of a deal,’” said Darin. That was before the lien notices and threatening letters began arriving from the HOA’s law firm. “We were blindsided,” said Michelle. So the Roberts tried repeatedly to work out a payment plan. “They wanted a $444-a-month payment and refused to accept anything less than that,” said Michelle.


  • The Roberts made payments totaling $888 last May–which sounds like they’d paid off the bulk of their original HOA debt. [...] But no. By that point, the HOA’s attorneys were involved. And they charged far more than the original debt in fees and court costs to try to collect it all. Court records show the Roberts whole payment went to legal fees–not to the HOA.


  • And that original bill of less than a thousand dollars? The attorneys added almost $6,000 in court costs and legal fees. “The people that are benefiting are the attorneys,” said Michelle. “They’re getting five times what the original bill was.” [...] The Roberts say they made a good faith effort to try to pay an old debt during trying times and lost their home in the process.

For the story, see HOA forecloses on family; neighbors lose, attorneys profit.

'Stagecoach To Hell' Pair Nominated For Annual Hedda Hopper Multiple Corporate Hat-Wearing Robosigner Of The Year Award

From Fraud Digest:


    Nicholas Hoye from the Minneapolis, Minnesota offices of Wells Fargo Home Mortgage is the winner of the “Busiest Signer of 2011 Award.” Hoye signed thousands of mortgage assignments in the first six months of 2011. Hoye most often signs to convey mortgages to his employer, Wells Fargo. Hoye has signed as a Certifying Officer for MERS as Nominee for at least 40 mortgage companies.

    The runner-up is Ricky L. Thompson, also from Wells Fargo.

Such prodigious efforts by this duo have earned them nominations for the annual 'Hedda Hopper Multiple Corporate Hat-Wearing Robosigner Of The Year Award.'(1)


(1) For those youngsters in the under-age-60 crowd and others who have no clue who she is, the late Hedda Hopper was an actress and well-known gossip columnist during the first half of the 20th century, and who was aptly described by a noted Brooklyn, New York trial judge (in a 2008 foreclosure/robosigner case) as being "famous for wearing many colorful hats." HSBC Bank USA, N.A. v Charlevagne, 20 Misc 3d 1128, 2008 NY Slip Op 51652, NY Sup. Ct. Kings Cty. (2008) Schack, J.

Friday, August 5, 2011

R/E Agent Dodges Major Time; Gets 8 Months Prison, 6 Months House Arrest For Role In Illegal Short Sale Flipping Ripoff Using 'Back-To-Back' Closing

From the Office of the U.S. Attorney (Bridgeport, Connecticut):

  • David B. Fein, United States Attorney for the District of Connecticut, announced that ANNA McELANEY, 40, of Norwalk, was sentenced [...] to eight months of imprisonment, followed by three years of supervised release, the first six months of which McELANEY must spend in home confinement, for her involvement in a “short sale” mortgage fraud scheme.

  • A short sale transaction involves a mortgage holder or lender entering into an agreement to release its mortgage or lien on real property in exchange for payment of less than the total amount owed on the underlying debt. Many short sale transactions are legitimate.

  • According to court documents and statements made in court, McELANEY, a real estate agent, and Sergio Natera, also a real estate agent, defrauded Regions Bank, which held two mortgages on a residential property in Bridgeport.

  • On December 5, 2007, McELANEY, who was a listing agent for the property, received an offer to purchase the property for a price of $132,500. However, McELANEY and Natera informed Regions Bank that the highest offer to purchase the property was for $102,375 and that it was made by BOS Asset Management, LLC.

  • McELANEY and Natera concealed from Regions Bank that there was a higher offer by another bidder, that Natera owned BOS Asset Management, LLC, and that McELANEY and Natera planned to keep the difference between the two prices.

  • Based on the false and incomplete information provided to it, Regions Bank agreed to the short sale for the lower price, and released its mortgages on the property.

  • On June 9, 2008, McELANEY and Natera arranged for two sales of the property to occur on the same day [ie. 'back-to-back' real estate closing].(1) The first sale was from the owner of the property to BOS Asset Management, LLC for $102,375; the second sale was from BOS Asset Management, LLC to the original bidder on the property for $132,500. McELANEY and Natera retained the difference between the two sale prices.

For the U.S. Attorney press release, see Real Estate Agent Sentenced To Federal Prison For Defrauding Bank In Short Sale Mortgage Fraud Scheme.

(1) See The Spokesman Review: Short-sale fraud puts cash in wrong pockets for a related story on short sale fraud, particularly those using 'back-to-back' closings:

  • According to CoreLogic, the same-day turnaround of a short sale can be achieved by what is known as a “back-to-back” closing. In such, the investor has two separate contracts: a purchase contract with the short-sale lender as well as a sale contract with a third party.

  • The transactions are choreographed and presented to a title company on the same day. The purchase transaction is first executed, followed immediately by the sale contract.

  • Reasonably, an investor may buy a short-sale property, perform verifiable improvements to the home over a period of time, and resell the property for a legitimate financial gain,” the CoreLogic authors wrote.

  • Nearly one in six (16 percent) ‘suspicious’ short sales is resold on the same day, making legitimate increases in value doubtful.”

Rampant Robosigner, Sewer Service Allegations Targeting Zombie Debt Buyers Draw Attention, Action From Maryland High Court

In Baltimore, Maryland, The Baltimore Sun reports:

  • [C]ompanies that buy past-due consumer debts and sue to collect have won judgments against Marylanders even though, advocates and regulators say, the documentation to prove those cases often has been very thin.

  • "This is a $100 billion-dollar-a-year industry … the sale of 'accounts receivable,' " said Peter A. Holland, who runs a University of Maryland law school clinic that specializes in debt cases. "It's created a crisis in our small-claims courts. There's tens of thousands of cases filed without proof just in Maryland. Nationwide, it's in the tens of millions."

  • Debt buyers say problems are unusual. But as nationwide pressure for reform has mounted, an industry group has begun to call for original creditors to hang on to defaulted-account information longer.

  • Now Maryland's highest court is about to consider a change in the rules that would make it clear that debt buyers cannot expect a judgment against a no-show defendant without presenting sufficient evidence to back up their claims. A court committee recommended the move in June at the urging of the Maryland Attorney General's Office and the Department of Labor, Licensing and Regulation.

  • The chief judge of Maryland's District Court, where almost all these cases are filed, believes reform is urgently needed. Judge Ben C. Clyburn said small-claims courts sign off on more than 200,000 judgments in contract cases each year. Probably two-thirds, he said, are debt-collection matters.

  • Clyburn said some debt-buying companies have treated the courts as an extension of their collections offices, counting on the fact that unsophisticated consumers won't stand up for themselves and judges — hearing no defense — will sign off on claims without realizing they're deficient.

  • "They're just playing the odds," Clyburn(1) said. When Marylanders do contest the lawsuits, he said, "generally these debt collectors have dismissed the cases because they know if they go to trial, then they can't provide the necessary evidence of their claim."

  • When debt buyers purchase defaulted accounts from credit-card firms and other creditors, they pay a cut-rate price for what usually amounts to "only minimal information regarding each debt and debtor," the Maryland Court of Appeals' rules committee concluded.

  • They then swear in affidavits that the information is accurate, though they frequently don't pay to acquire documents — such as signed agreements or a list of purchases — to verify the details in the databases they have purchased, the attorney general's office said.

  • Consumer attorneys, regulators and other officials — here and elsewhere — say these are not minor matters. Consumers, they say, have been sued twice on the same debt by different debt buyers. They've been sued on debts discharged through bankruptcy. They've been sued on debts they'd already paid off. And some have been sued for debts incurred by other people with similar names.

For more, see A push for more proof in debt-collection lawsuits (Consumer advocates cheer as Maryland's highest court considers a change in rules).

See Justice Disserved: A Preliminary Analysis of the Exceptionally Low Appearance Rate by Defendants in Lawsuits Filed in the Civil Court of the City of New York for a related report on the use of 'sewer service' to score court judgments on unsecured dubious debt.

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

(1) Chief Judge Clyburn is not the only jurist going on the record observing that zombie debt buyers are "playing the odds" when bringing these flimsy debt collection cases. See NYC Judge: "Rubber Stamp" Method Out-Of-Bounds When Granting Judgment To Zombie Debt Buyers Against Unwitting Consumers; Calls Racket "A Game Of Odds"

Go here for other posts on "sewer service."

Michigan Foreclosure Mill Sweatshop Feels The Heat; Responds With Press Release Denying Robosigner Allegations

Possibly in light of the obliteration of a South Florida foreclosure sweatshop after robosigning and fraud allegations against it picked up steam, a Michigan foreclosure mill has issued a press release responding to similar allegations:

  • Recently Marshall Isaacs, an attorney in the Orlans law firm, has wrongfully come under attack as an alleged "robosigner" of mortgage related foreclosure documents. [...] Unfortunately these false allegations have now been picked up by the mainstream media with little or no scrutiny of the source of the allegations or research into their factual basis. No facts have been proffered to support any of the unfounded allegations against Mr. Isaacs or Orlans.

For the entire press release, see Orlans Law Firm Not Involved in Robosigning.

Caution Urged For Novice Homebuyers, Rookie Sellers When Considering 'Rent To Own' & Lease-Option Deals

Ontario, Canada real estate lawyer and consumer advocate Bob Aaron writes in the Toronto Star:

  • The rent-to-own concept presents significant risk both to sellers/landlords and buyers/tenants. Perhaps the most significant challenge is that there are no standard lease purchase agreement forms accepted by the real estate industry, and the commonly-used templates that I have seen in my practice leave a great deal to be desired.

  • Trying to determine an option price for a transaction taking place in three to five years in the future is largely guesswork. If the price is too high on the option date, the buyer will back out, and if it’s too low, the seller will walk away for potential additional profit.

  • As well, tenant buyers may be paying more than market rent so that each month some money will be credited against the eventual purchase price. If the buyer backs out at the expiry of the lease option, he or she will lose the option fee and any monies paid along the way as a credit against the purchase price.

  • Buyers may also be exposed to unlicensed real estate agents like the ones who sent me the marketing email last month, or to unscrupulous sellers.(1) Back in September, 2008, the Toronto Star reported on Solution Homes, the operators of a rent-to-own scheme who leased houses from desperate sellers, subleased them to tenants, pocketed the rents without making mortgage payments, and left the tenant buyers to be evicted by the mortgage lenders.

  • For investor sellers, the worst case scenario is when the tenant buyer goes into default. The [Ontario] Landlord and Tenant Board has ruled that it does not have jurisdiction to evict a defaulting tenant who has an option to purchase. Power of sale and foreclosure proceedings cannot be used, and landlord sellers are forced to take defaulting buyers to Superior Court to evict them and terminate the option agreement.

  • This is what happened in the case of Novotny v. Fowler in 2009 [affirmed Novotny v. Fowler, 2010 ONCA 120 (2010)] where the parties retained lawyers and experienced significant delay and expense to unwind their rent-to-own deal when the buyer defaulted.(2)


  • Rent-to-own is not for everyone. For both sellers and buyers it involves a significant amount of risk. Participants in the program should only deal with licensed real estate agents and with real estate lawyers who are familiar with the concept.

For the column, see Rent-to-own deals can be risky business.

(1) Unscrupulous sellers could use these types of 'deferred title transfers' to unload, onto unwitting buyers, homes having significant defects (could be structural/construction defects, undisclosed surprises (ie. mold or meth contamination, etc.), or defects relating to the title to the home (ie. encroachments, code violations, improvements made without the proper permits, crappy title resulting from a defective foreclosure, etc.)). The point here is that a would-be buyer in these types of 'deferred title transfer' deals may not think to conduct the same types of inspections and title searches that a buyer would consider in a conventional, standard buy-sell real estate transaction. Consequently, the enumerated problems could go undetected/undiscovered.

(2) Rent-to-own, lease-option, and land contract (a/k/a agreement for deed, contract for deed, etc.) sellers in the U.S. face the risk that a tenant could claim that the arrangement constitutes an equitable mortgage, which, should a court agree, would make a standard tenant eviction proceeding unavailable to the landlord/seller. Regaining possession of the premises would require a full-fledged foreclosure action. See, for example:

Home Health Care Aid Gets Nearly 3 Years For POA Abuse; Used Stroke-Stricken Senior's Home As Loan Collateral, Then Stiffed Bank, Leading To F'closure

In Columbia, South Carolina, The Associated Press reports:

  • An Aiken woman has been sentenced to nearly three years for defrauding an elderly woman. U.S. Attorney Bill Nettles said [] Tabitha Ruth Smith-McDaniel was also ordered to pay more than $98,000 restitution to the estate of the woman, who has since died. Smith-McDaniel pleaded guilty to mail fraud in September.

  • Prosecutors say she provided home health care to a North Augusta woman who had suffered a stroke. With the woman's power of attorney, Nettles says Smith-McDaniel opened charge accounts in the woman's name and used her home as collateral for a loan.

  • The home was repossessed and sold in foreclosure. Nettles says Smith-McDaniel also terminated the woman's life insurance policy and deposited a refund check into her own account. The woman died shortly after filing for bankruptcy in 2006.

Source: Prosecutors: Aiken woman sentenced to nearly 3 years for defrauding elderly woman of savings.

Thursday, August 4, 2011

Baltimore Feds Squeeze Guilty Plea Out Of Title Agency Owner For Pocketing $3M+ In Closing Cash Intended To Satisfy Existing Mortgages

From the Office of the U.S. Attorney (Baltimore, Maryland):

  • Michael A. Gmeinwieser, age 38, of Crofton, Maryland, pleaded guilty [] to wire fraud in a scheme to divert over $3 million in settlement funds intended to pay off the previous mortgage on the properties to himself and his company.


  • According to Gmeinwieser’s plea, he was the sole owner of Innovative Title LLC (“Innovative”) located in Odenton, Maryland, and was responsible for preparing settlement statements, issuing title insurance, disbursing mortgage proceeds and other funds, and ensuring that relevant paperwork was properly completed for real estate closings.

  • Gmeinwieser arranged real estate purchase or refinancing transactions that entailed temporarily depositing funds from a mortgage lender into Innovative’s escrow account to pay off the lien secured against the property by a prior lender. Instead of transferring the funds held in escrow to the prior lender as promised, Gmeinwieser diverted the funds to other uses for himself and Innovative.

  • Gmeinwieser’s misappropriation of funds occurred during real estate transactions involving third party borrowers as well as transactions in which he refinanced mortgages secured by properties he owned. After carrying out refinancing transactions involving third party borrowers, Gmeinwieser made monthly mortgage payments on the borrower’s behalf in an effort to decrease the likelihood that the borrower would discover that their original loan had not been paid in full as agreed.

  • The losses to the lending institutions that distributed mortgage loans on the basis of Gmeinwieser’s false promises amounted to approximately $3,041,497.

For the U.S. Attorney press release, see Title Company Owner Pleads Guilty to Wire Fraud in Scheme to Divert over $3 Million Intended to Payoff Previous Mortgages.

Alexandria Feds Pinch Loan Modification Operator; Grand Jury Charges Suspect Of Ripping Off Each Homeowner Out Of $2.5K - $25K In Upfront Fees

From the Office of the U.S. Attorney (Alexandria, Virginia):

  • Howard R. Shmuckler, 67, of Virginia Beach, Va., has been charged by a federal grand jury of running a fraudulent mortgage-rescue business that received substantial fees but, in most cases, failed to modify clients’ mortgages.


  • According to the indictment, Shmuckler owned and operated a mortgage-rescue business known as The Shmuckler Group (TSG), which claimed to be the “largest, most successful group of professionals…coming together to help home owners keep their homes in a manageable and affordable manner.”

  • Operating his business at various times from McLean or Vienna, Va., Shmuckler is accused of misrepresenting that TSG had a success rate of 97 percent and falsely portraying himself as an attorney licensed in Virginia. Based on these representations, made by Shmuckler or client recruiters to induce potential clients to sign up for TSG services, TSG’s clients provided the company with fees ranging from $2,500 to $25,000 to modify the terms of their mortgages.

  • The indictment alleges that Shmuckler instructed clients to terminate contact with their mortgage companies and to stop making payments to their lenders. TSG is alleged to have never facilitated a modification of the mortgages referenced in the indictment. It is also alleged that the company’s loan modification success rate was substantially less than 97 percent.

For the U.S. Attorney press release, see Owner of Northern Virginia Mortgage Rescue Business Arrested.

Illinois AG Tags Two Alleged Loan Modification Rackets In Separate Suits Charging Outfits With Screwing 40 Homeowners Out Of Upfront Fees

From the Office of the Illinois Attorney General:

  • Attorney General Lisa Madigan [] filed suit against two Chicago companies for mortgage rescue fraud schemes that illegally charged consumers more than $61,000 in upfront fees that resulted in little, if any, help to stay in their homes.

  • The Attorney General filed suit [] in Cook County Circuit Court against Avatar Realty Group Inc., formerly known as Monroe Realty & Financial Enterprises Inc. and Monroe Realty Corporation, and its president Arthur Monroe.

  • Madigan filed a separate lawsuit against Skyline Capital Inc. and Rahul Shah, company president.

  • The lawsuits seek to shut down the businesses and obtain restitution for the 40 consumers who have reported being victimized.

For more, see Attorney General Madigan Sues Chicago Area Mortgage Rescue Schemes (Companies That Promised Mortgage Help Defrauded Consumers of $61,000).

Indiana AG Tags California Loan Modification Outfit With Lawsuit Alleging Illegal Operations

In Shelbyville, Indiana, The Journal Gazette reports:

  • Indiana Attorney General Greg Zoeller was in Shelbyville [] to file a complaint against a California-based foreclosure consultant company. According to the lawsuit, homeowners in seven Indiana counties signed contracts with the company believing it would help prevent foreclosure based on claims made on the defendants’ website and advertising; but the company was operating illegally.

  • Named as defendants in the lawsuit were the company, Premier Legal Advocates which has addresses in Agoura Hills, Calif., and Westlake Village, Calif., and its owner, Brian Pascal. The Attorney General filed the lawsuit [] in Shelby County Court.

For more, see Indiana sues foreclosure consultant.

Central Florida Cops Refuse To Budge; Cite Lack Of Criminal Intent, Insist That 'Foreclosure' Home Trashing Is Nothing More Than A 'Civil Matter'

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

  • The Hernando Sheriff's Office was inundated with angry calls and e-mails after we reported criminal charges wouldn't be filed against a company which cleaned out and trashed a man's home. After our first story, the sheriff's office re-opened the case, but is now sticking to its guns.


  • But Detective Dustin Mormando says the SO's investigation pretty much contradicted what he was reporting. Mormando says Boudreau had abandoned the property when the mortgage company hired the contractor to clean out the home. However, there was a major problem: the mortgage company hadn't filed foreclosure papers.

  • Because the proper foreclosure papers had not been filed, 21 Mortgage really had no right to hire a contractor to go onto Boudreau's property and clean it up. But the sheriff's office says it couldn't file criminal charges, because the local contractor had no idea there was any problem with the paperwork.

  • "There was no criminal intent," Mormando says. "It's not up to them to verify the mortgage company filed the proper paperwork." He says the contractors are in a business relationship with this mortgage company, who've given them jobs for years.

  • The sheriff's department can't get involved, because as Mormando explains, there are no arrestable offenses committed. Boudreau's only recourse is a civil suit against the mortgage company.

For the story, see Hernando Sheriff's Office says it will not prosecute contractor who cleaned out a home for a mortgage company.

Utah Appeals Court Rejects Homeowner's Position In Foreclosure Battle With Banksters

In Salt Lake City, Utah, The Salt Lake Tribune reports:

  • A state appeals court decision could have a wide impact on dozens of lawsuits filed in Utah over home foreclosures that washed across the state in the wake of the Great Recession. The Utah Court of Appeals has agreed with a lower court that a key loan servicer and an entity created by mortgage bankers have the legal right to foreclose on an Eagle Mountain home.

  • Lower federal and state courts have dismissed numerous foreclosure suits in Utah on the same grounds, but this decision is the first from a higher court, and its ruling may guide future judicial actions. The decision invalidates one of the legal theories that have guided dozens of lawsuits challenging the tens of thousands of foreclosures in Utah.


  • But Craig Smay, the attorney for the homeowner, said he will either ask for reconsideration of the decision or appeal to the Utah Supreme Court. “Our intention is to not to let it stand. It’s obviously wrong.”

For more, see Utah ruling a setback for foreclosure challenges.

For the ruling, see Commonwealth Property Adcocates LLC v. Mortgage Electronic Registration System, Inc., 2011 UT App 232 (Ut. Ct. App. July 14, 2011).

Wednesday, August 3, 2011

AZ Appeals Court Sets Aside Judgment Based On Crappy Service Of Tax F'closure Notice; Says Mailing To Address Based On 8-Year Old Info Not Sufficient

A half-hearted attempt at serving a notification of a tax lien foreclosure action was at the heart of a recent ruling by a 3-judge panel of the Arizona Court of Appeals.

In another reversal of a trial court ruling in a foreclosure matter, the appeals court determined that the lien holder's failure to comply with the state statute in attempting proper notification, sending correspondence (to an address taken from an earlier-recorded document that was eight years old) that was returned unopened, after learning from a process server that the property owner was no longer at the address listed at that address, was enough to void a default foreclosure judgment against the property owner.(1)

For the ruling, see Advanced Property Tax Liens Inc. v. Sherman, 1 CA-CV 10-0371 (Ariz. App. Div. 1, Dept. D July 26, 2011).

(1) The court elaborated (bold text is my emphasis):

  • ¶18 On this record, we conclude that APT did not send the notice of intent to foreclose to the Shermans and therefore did not comply with A.R.S. § 42-18202(A). APT sent the notice to an eight-year-old address without, apparently, determining whether by doing so it was sending the notice to the "property owner of record," that is, to the Shermans.

    Having learned that the Pioneer address was no longer current for the Shermans and that the envelope containing the notice of intent to foreclose had been returned "unclaimed" and unopened, APT could no longer conclude that it had complied with the statutory requirement under A.R.S. § 42-18202(A) of mailing the notice to the Shermans. Section 42-18202(A) requires more than mailing the notice of intent to foreclose to an eight-year-old address that is no longer current, especially after learning the address was no longer current.

    ¶19 Our conclusion is further supported by the statutory provisions setting forth the alternative method of notification that requires the lien holder to send notification to one, two, or three specified addresses ascertainable from the records of the county assessor and county treasurer. A.R.S. § 42-18202(A)(1)(a)-(c).

    The legislature, by providing this alternative notice procedure, intended to provide lien holders with a notice procedure that could be reasonably satisfied and objectively proven, while at the same time achieving a high probability that the notice of the lien holder's intent to foreclose will reach the property owner.

    ¶20 If a lien holder tasked with sending notice of intent to foreclose under A.R.S. § 42-18202(A) has identified the "property owner of record" according to the county recorder's records and has a current address for that owner, the first alternative notice procedure in §42-18202(A) may be preferable. But if the lien holder is not confident that the available address for the owner of record is current, the lien holder may prefer to follow the more extensive notice procedure set forth in subparagraphs 42-18202(A)(1)(a)-(c).

    ¶21 Because APT failed to mail its notice of intent to foreclose to the Shermans, as required by A.R.S. § 42-18202(A), the trial court was not authorized to proceed with APT's action to foreclose. A.R.S. § 42-18202(C).

    As a result, the judgment is void and the court erred in denying the Shermans' Rule 60(c) motion.

Another Upstate New York Foreclosure Mill Garners Attention For Role In Filing Dubious Documents In Recent Brooklyn Case

The Buffalo News reports:

  • A State Supreme Court justice in Brooklyn is threatening sanctions against the chief executive officer of HSBC Bank USA, blaming her personally as head of the bank for filing what he called false and misleading documents involving “robosigning” in a home foreclosure case.

  • In a complex decision issued in early July,(1) Justice Arthur M. Schack denounced what he called the “frivolous conduct” and the submission of fraudulent paperwork by HSBC and the attorney representing it in the case, Frank M. Cassara of Shapiro, DiCaro&Barak LLP in Rochester.

  • He said the documentation submitted to the court by Cassara and HSBC to support the foreclosure is full of defects and “material factual statements that are false.” And he criticized their case as a “waste of judicial resources.”

  • Schack threw out the foreclosure case itself, declaring that HSBC lacked the legal right to foreclose on a woman’s home because it did not own the loan.

  • But in an unusual move that went further than other judges, Schack threatened to impose fines or other actions against Cassara, his law firm and HSBC Bank USA CEO Irene Dorner. He cited cases in which fines of up to $10,000 were found to be appropriate for making a “frivolous motion.”

  • And he ordered a separate hearing that was held July 15 to review the conduct of HSBC and the law firm, and to give both entities and the two individuals a chance to appear before him to argue why they should not be penalized.

  • Courts have limited resources,” Schack wrote in his decision. “This conduct . . . must be deterred.”

  • Schack justified his threat by citing a new statewide requirement for attorneys in foreclosure cases to certify, under penalty of perjury and sanction, that they have taken reasonable steps to verify the accuracy and correctness of documents submitted to the court.


  • Dorner did not appear at the hearing, but the bank and law firm were each represented by attorneys. Schack has not issued a ruling on any sanctions, but said he hopes to do so by Labor Day.

For the story, see Judge threatens to sanction CEO of HSBC for ‘robo-signing’.

(1) HSBC Bank USA, N.A. v Taher, 32 Misc 3d 1208, 2011 NY Slip Op 51208(U) (N.Y. Sup. Ct. Kings Cty. July 1, 2011).

Backpeddling MERS Now Forbids Members From Foreclosing In Its Name, Requires Servicers To Obtain, Record Assignments Before Initiating Actions

Reuters reports:

  • MERS, the electronic mortgage registry that faces multiple investigations for its role in thousands of problematic foreclosure cases, changed its rules to lower its profile in court-supervised foreclosures. MERS, a unit of Merscorp Inc. of Reston, Virginia, owns the computerized registry, Mortgage Electronic Registration Systems.


  • In rule changes announced to MERS members on July 21, the company forbade members to file any more foreclosure actions in MERS's name. It also required mortgage servicers to obtain mortgage assignments and record them with county clerks before beginning foreclosures.

For more, see Facing criticism, MERS cuts role in foreclosures.

Philly Feds Sink Foreclosure Surplus Snatcher Who Used Forged Docs To Swipe Unwitting Ex-Homeowners' Proceeds From Forced Sales In Excess Of Liens

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):

  • Amin A. Rashid, a/k/a “Lawrence D. Wilson,” 62, of Philadelphia, was convicted [] of mail fraud and aggravated identity theft in connection with a three-year fraud scheme that defrauded former property owners and their families of over $650,000, announced United States Attorney Zane David Memeger. A sentencing date has not yet been scheduled.

  • From at least December 2005 to August 2008, Rashid operated “The Center for Constitutional and Criminal Justice” under the guise of assisting former owners of properties sold at Sheriff’s sales.

  • Rashid told these clients that he could help recover their properties or the proceeds from the Sheriff’s sales. Rashid took fees from these clients and photocopies of their drivers licenses but typically did nothing in return.

  • Rashid altered his clients’ driver’s licenses and submitted them to a title company along with forged power of attorney documents to steal Sheriff’s sale proceeds due to other former property owners.

  • The forged power of attorney documents carried signatures of former property owners who actually died years before they purportedly signed the documents. In addition, Rashid submitted bogus corporate resolutions that purportedly authorized him to collect Sheriff's sales proceeds that were due to these corporations. Rashid used his family members to pose as officers of these corporations.

For the U.S. Attorney press release, see Philadelphia Man Convicted Of Defrauding Former Property Owners And Their Families Of Over $650,000.

Voidable Or Void Ab Initio (Or "Void Unless & Until Later Ratified")?

In a 2010 court case, the U.S. Court of Appeals for the 5th Circuit was asked to determine, in an apparent ripoff where a 'rogue' member of a two member LLC deeded a 520-acre tract of land in Panola County, Mississippi owned by the LLC to a second LLC, 'wholly-owned' by the rogue member, without the knowledge of the other, unwitting member, whether the deed used in the conveyance was void ab initio, or merely voidable.

The reason this distinction was crucial was because, after illegally hijacking title to the property, the rogue member then went out an obtained a $300,000 mortgage loan in the name of his 'wholly-owned' LLC, secured by the ripped-off 520-acre tract, stuck substantially all of the loan proceeds in his pocket, and ultimately stiffed the bank out of its payments.

Consequently, the lender's interest in this deal hinged on whether the ripoff was merely voidable (in which case, it would hold a valid interest in the tract - provided, of course, that it otherwise qualified for protection as a bona fide purchaser/encumbrancer), or void ab initio (in which case the secured lender is really left unsecured and, regrettably for it, also left holding the bag).

In considering the question, the Federal appeals court made this analysis of the existing law of Mississippi:

  • Mississippi courts have held several types of deeds voidable rather than void ab initio. For example, when a corporation takes an ultra vires action not authorized by its charter, the result can usually be ratified and thus cannot have been void ab initio. See Home Owners' Loan Corp. v. Moore, 184 Miss. 283, 185 So. 253, 255 (1939) ("An act of a corporation relating to the subjects within its powers though it should exceed those powers is not void."); see also Haynes v. Covington, 21 Miss. (13 S. & M.) 408, 1850 WL 3405, at *2 (Miss.Err. & App.1850).[5]

    Similarly, a fraudulent conveyance is voidable rather than void ab initio—i.e., it is subject to the intervening rights of a bona fide purchaser for value without notice of the fraud. See Parker v. King, 235 Miss. 80, 108 So.2d 224, 226 (1959) (fraudulently induced execution of a mineral deed is voidable); see also Guice v. Burrage, 156 F.2d 304, 306 (5th Cir. 1946); Lee v. Boyd, 195 Miss. 794, 16 So.2d 30, 30 (1943); Sanders v. Sorrell, 65 Miss. 288, 3 So. 661, 663 (1888).

    A forged conveyance, on the other hand, is void ab initio and cannot pass title to a bona fide purchaser. See
    Securities Inv. Co. of St. Louis v. Williams, 193 So.2d 719, 722 (Miss.1967) ("The note and trust deed having been forgeries, even an innocent purchaser, for value and without notice that they were forgeries, could acquire no title.").

    Mississippi courts have held deeds void ab initio in homestead cases. A homestead occupied by husband and wife cannot be conveyed without the signature of both spouses, and any deed made without both signatures is absolutely void and passes no title. See
    Thornhill v. Caroline Hunt Trust Estate, 594 So.2d 1150, 1152 (Miss.1992).[6]

    Mississippi courts have also held unauthorized tax sales by the State to be void ab initio rather than voidable. See Pittman v. Currie, 391 So.2d 654, 655 (Miss.1980); see also In re Hardy, 910 So.2d 1052 (Miss.2005) (citing a tax sale case in support of its holding that certain deeds made by an agent who exceeded her power of attorney were void ab initio); Money v. Wood, 152 Miss. 17, 118 So. 357, 360 (1928); Hit-Tuk-Ho-Mi v. Watts, 15 Miss. (7 S. & M.) 363 (Miss.Err. & App. 1846).
In concluding that "[none] of these classes of cases answered the voidable/void ab initio question presented here" and that "[t]he issue has serious and potentially far-reaching public policy implications for Mississippi LLCs and those who do business with them[,]" the 5th Circuit appeals court did the only smart thing that any Federal appeals court could do when asked to address an issue of state substantive law where the state case law is not clear: it declined to rule on the case.

Rather than making what has been described as a "reasoned attempt to anticipate what the state's [highest] court[] would decide" (often referred to as making an "Erie guess"), it 'punted' the case over to the Mississippi Supreme Court (the court most qualified to interpret its own state law(1)), and respectfully requested that the state high court figure out the answer to the question.

The Mississippi high court graciously granted the request (a grant that is purely discretionary, not mandatory), and for the reasons set forth in its ruling, found that the deed used in the ripoff was neither void ab initio, nor voidable.

It approached the issue by applying the rules of agency and found the deed to be "void unless and until later ratified." It went further and concluded that, because the rogue member "had neither actual nor apparent authority to transfer [the LLC's] property, and because [the LLC] did not ratify the transaction, [the deed] was void and of no legal effect ([alterations] mine, not in the original text).(2)

Having answered the 5th Circuit's question on what the state law was, it kicked the case back over to them, at which point, the 5th Circuit affirmed a ruling by a U.S. District Court which, in turn, affirmed a U.S. Bankruptcy Court ruling finding that the deed was to be treated as a nullity and of no legal effect (consequently restoring the unwitting LLC member's interest in the 520-acre tract of land, and leaving the unwitting mortgage lender, BancPlus, with an unsecured position on the $300,000 loan made to the rogue LLC member).

For the rulings, see:
(1) The U.S. Supreme Court has stated that, in cases when the Federal courts have been asked to rule on issues involving the interpretation and application of substantive (as opposed to procedural) state law, "the State's highest court is the best authority on its own law." Commissioner v. Estate of Bosch, 387 U.S. 456 (1967).

(2) Specifically, and for the reasons it set forth in its ruling, the Mississippi high court said (see In re Northlake Development II, at paragraphs 15-16):
  • ¶ 15. So where no actual or apparent authority exists to transfer a principal's property, we decline to characterize the deed as voidable. Rather, it is void unless and until later ratified. Ratification is a principal's after-the-fact, conscious decision to be bound by an agent's unauthorized act, and it is that decision that can trigger the principal's liability to third parties. Where the agent has no actual or apparent authority, a principal has no need to repudiate an agent's unauthorized act in order to "put things back" the way they were. Absent ratification—and prior to ratification—nothing changes.

    ¶ 16. Earwood was without authority (actual or apparent) to convey the property to Northlake. The conveyance therefore had no effect on Kinwood's interest in the property. Once Kinwood learned of the purported conveyance, it could have ratified it—but didn't. Kinwood's rights in the property are therefore unaffected by the actions of Earwood, Northlake, or any other subsequent party. DeedVoidVoidable

Bankster Turns To Title Insurer For $24M 'Cough-Up' For Losses Over Soured HELOCs

In Minneapolis, Minnesota, Courthouse News Service reports:

  • The foreclosure meltdown has led the U.S. Bank National Association to demand $24 million from First American Title Insurance Co., claiming the title company charged more than $20 million for a new product supposed to protect the bank from defaults on home loans, then walked away when the disaster came.

  • U.S. Bank claims the title company charged it more than $20 million in premiums and fees for its "FACT product," and new "service" that First American introduced in 2001.

  • First American claimed its product would "benefit institutions such as U.S. Bank when making home equity loans to consumers, by simultaneously allowing the lender to make faster lending decisions and insuring the lender against the risk that such faster decisions might fail to uncover, among other things, undisclosed intervening liens, title defects, errors in legal description, or vesting problems that would impair the lender's collateral in the even the customer later defaults on the loan," according to the federal complaint.

For more, see Bank Claims Title Company Scammed It.

Tuesday, August 2, 2011

Feds: 'Crappy-MBS' Peddler Unloaded $4.5B In Smelly Paper On Unwitting Fannie, Freddie; Suit Seeks $900M+ Loss Recovery; More Actions Planned

From the Office of the Federal Housing Finance Agency:

  • The Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac (the Enterprises), has filed a lawsuit [...] against UBS Americas, Inc., and related defendants alleging violations of federal securities laws in the sale of residential private-label mortgage-backed securities (MBS) to the Enterprises. FHFA seeks to recover losses and damages sustained by the Enterprises as a result of their investments in UBS Securities.

  • The lawsuit alleges that UBS Americas made numerous material misstatements and omissions about the mortgage loans underlying the private-label MBS, including the creditworthiness of the borrowers and the quality of the origination and underwriting practices used to evaluate and approve such loans. The defendants also failed to conduct adequate due diligence.

  • This lawsuit seeks to recoup the losses suffered by the Enterprises related to their $4.5 billion investment in securities sold by UBS.


  • "FHFA is taking this action consistent with our responsibilities as conservator of each Enterprise," said FHFA Acting Director Edward J. DeMarco. "From the issuance of 64 subpoenas last year to the filing of this lawsuit and further actions to come, we continue to seek redress for the losses suffered by the Enterprises."(1)

For the FHFA press release, see FHFA Sues UBS to Recover Losses to Fannie Mae and Freddie Mac.

See also, Reuters: Fannie/Freddie regulator sues UBS on $900 million loss.

For the 102-page lawsuit, see Federal Housing Finance Agency v. UBS Americas, Inc., et. al.

(1) The FHFA appears to be following the lead of its sister agency, the National Credit Union Administration (the federal regulator that oversees creit unions), in bringing civil lawsuits over the crappy, mortgage-backed investments that were unloaded on them (and, by extension, the U.S. taxpayer). See Feds' Campaign Tagging Banksters With Allegations Over Crappy Mortgage-Backed Paper That Led To Credit Union Failures Continues; More Lawsuits Planned.

Judge Speaks Out On Nationwide Squeeze Of Court Systems In Ruling That Bay State Couple's Promissory Estoppel Claim Scores Temporary Foreclosure Halt

In highlighting the problems facing state court systems "addled by budget shortfalls, which cannot remotely keep up with the pace of foreclosure lawsuits" that plays a role in the "terrible mess that is hindering the nation's economic recovery," Columnist Andrew Cohen with The Atlantic reports on the story of a Scituate, Massachusetts couple, homeownners Frank and Deana Dixon, and their experience with Wells Fargo in seeking a modification of their home mortgage:

  • Eighteen months [after being verbally instructed to default on their payments and supplying the bank with all requested financial documents], however, instead of modifying the loan, Wells Fargo told the Dixons that they had defaulted upon their payment obligations -- because they hadn't made their monthly payments.

  • The bank told the family it intended to foreclose upon their house. The notice from Wells Fargo, which arrived 17 days before Christmas 2010, gave the family roughly 30 days notice. The Dixons sued to stop the foreclosure and their case wound up in federal court, before Chief U.S. District Judge William Young of Massachusetts.

  • Last Friday, Judge Young issued a ruling that gives the Dixons an opportunity to win their case (the family sought merely to bring Wells Fargo back to the negotiating table to discuss the loan modification).

In refusing Wells Fargo's request to dismiss the Dixon's case, Judge Young simply applied the law in finding that "The facts as alleged in the complaint are sufficient to invoke the doctrine of promissory estoppel, and this common-law claim, as applied, is not preempted by federal law."(1)

In concluding his article, describing how courts nationwide have been so financially squeezed to the point where they can't keep up with foreclosure cases that keep flooding the system, The Atlantic columnist Andrew Cohen makes this observation:

  • Judge Young cited me in Dixon v. Wells Fargo (Footnote 11) for the proposition that the legislative and executive branches are abandoning the judicial branch just when people need their judges and courthouses most.

  • The Dixons got lucky. They were randomly assigned a judge who was willing to quickly move on their case and to speak out about the larger problem.

    But for every family like the Dixons there are thousands more whose lives are in limbo while they wait for their foreclosure cases to wend their way through court. It's yet another sign that America is slouching toward third-world justice for its citizens. Surely we can do better for these other families, if not for their own sake then for the sake of the nation's real estate market.

For more, see Justice Foreclosed (Financially battered state courts simply cannot keep up with rising mortgage defaults).

For Chief Judge Young's 52-page ruling, see Dixon v. Wells Fargo, Civil Action No. 11-10368-WGY (D. Mass. July 22, 2011).

(1) In elaborating further on the promissory estoppel claim, Chief Judge Young wrote (bold text is my emphasis):

  • In the present case, Wells Fargo convinced the Dixons that to be eligible for a loan modification they had to default on their payments, and it was only because they relied on this representation and stopped making their payments that Wells Fargo was able to initiate foreclosure proceedings.

    While there is no allegation that its promise was dishonest, Wells Fargo distinctly gained the upper hand by inducing the Dixons to open themselves up to a foreclosure action. In specifically telling the Dixons that stopping their payments and submitting financial information were the "steps necessary to enter into a mortgage modification," Wells Fargo not only should have known that the Dixons would take these steps believing their fulfillment would lead to a loan modification, but also must have intended that the Dixons do so.

Bankster Axes, Sues Now-Former Employee Alleging Improper Taking & Disseminating Of Confidential Foreclosure Information

Bloomberg reports:

  • Ally Financial Inc., among the five largest U.S. mortgage originators and servicers, sued a former employee who moonlighted as a foreclosure defense attorney over claims she stole confidential information.

  • Ally terminated the employee, Tanya L. Blackwell, last week for failing to disclose “a clear conflict” of her dual employment as a foreclosure specialist for Ally’s GMAC unit and as a practicing foreclosure defense attorney, according to court papers filed yesterday in federal court in Philadelphia.

  • Prior to her termination, Blackwell allegedly improperly obtained confidential company information including organization charts for Ally’s foreclosure operations, according to the complaint.


  • Ally, based in Detroit, is seeking a court order barring Blackwell’s use of the information, which she allegedly sent to third parties, according to court papers. The case is Ally Financial Inc. v. Blackwell, 11-cv-4694, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).

For more, see Ally Financial Sues Former Employee Over Secret Foreclosure Data.

Thanks to Deontos for the heads-up on this story, and to Foreclosure Hamlet for uploading a copy of the lawsuit.

Heat Rising For Alleged 'Ghetto Loans' Peddler As DOJ Focuses Crosshairs On 'Stagecoach To Hell' Over Reverse-Redlining Allegations

The Huffington Post reports:

  • The Department of Justice is preparing a lawsuit against Wells Fargo, the nation's largest home mortgage lender, for allegedly preying upon African American borrowers during the housing bubble and steering them into high-cost subprime loans, according to three people with direct knowledge of the probe.

  • The company, the fourth-largest U.S. bank by assets, is currently embroiled in pre-lawsuit negotiations with the Justice Department in hopes it will settle the accusations and avoid a public lawsuit, these people said. The allegations mirror those in public actions taken by the Federal Reserve and a separate lawsuit filed by the city of Baltimore.(1)

  • Last week, the Fed said that perhaps more than 10,000 borrowers were inappropriately steered into subprime mortgage loans or had their loan documents falsified by bank personnel. Wells Fargo agreed to pay $85 million to settle the civil charges.(2) It did not admit wrongdoing.

  • In its ongoing case against Baltimore, Wells Fargo stands accused of using those same practices, but deploying them against black borrowers in majority-black neighborhoods, an act commonly known as "reverse redlining." The city alleges that the bank targeted black borrowers, knowing they'd ultimately default on their loans, but did not fear shouldering the cost because Wells sold those loans to investors.(3) Wells Fargo denies the allegations.


  • The previously-undisclosed Justice probe, which is being led by the Civil Rights division's Fair Lending Unit, lends credence to the city's lawsuit, sources told The Huffington Post. [...] Taken together, the various investigations paint a picture of a lender that profited by knowingly targeting less-sophisticated borrowers, in particular preying upon those communities that traditionally lacked access to a full range of consumer credit products.


  • Wells Fargo has fought lawsuits from Baltimore and the city of Memphis alleging that the bank preyed upon black borrowers;(4) settled claims it illegally steered credit-worthy borrowers into subprime loans and misled investors about the risks of mortgage-backed securities it sold; and fought investigations and regulatory actions stemming from revelations that it employed so-called "robo-signers," the agents directed by lenders to process foreclosure filings en masse without examining the underlying paperwork.

For the story, see Wells Fargo Target Of Justice Department Probe; Agency Alleges Discriminatory Lending.

(1) See Baltimore Finally Gets Green Light To Continue Against Alleged "Ghetto Loans" Peddler In Reverse Redlining Suit; Ruling May Help Similar Memphis Case.

(2) See Fed $85M 'Pick-A-Pay' Settlement With 'Stagecoach To Hell' - Just Another Wrist-Slap?

(3) See The Daily Record: Ex-workers allege race-based loan approach at Wells Fargo, which describes, in Baltimore's earlier complaints, testimony from two former high-ranking Wells Fargo employees stating that Wells Fargo intentionally made bad loans to African-Americans.

The employees, who worked out of Virginia and Maryland but knowledgeable about the company's national lending practices, according to the complaints, said Wells Fargo marketed subprime loans to predominantly African-American ZIP codes and churches, used software to "translate" marketing materials into African-American vernacular, joked that borrowers who were deceptively steered from prime into subprime loans were "riding the stagecoach to Hell," and that company officials referred to the loans in minority communities as "ghetto loans" and to the borrowers as "mud people," according to The Daily Record story.

(4) See Memphis, Shelby County Get Green Light In 'Reverse Redlining' Fair Housing Litigation Against Alleged "Ghetto Loans" Peddler.

See also, Pennsylvania Joins Baltimore, Memphis With Pending Lawsuit Accusing Alleged "Ghetto Loans" Peddler With Reverse Redlining In Philly Neighborhoods, where the state of Pennsylvania also weighed in with 'reverse-redlining' allegations in a lawsuit against Wells Fargo in connection with loans made in the city of Philadelphia. See Commonwealth of Pennsylvania v. Wells Fargo Bank, N.A.

Illegal Bid Rigging Racket? Or Mere Innocent 'Joint Bidding' Arrangement?

Real estate investors and others who have gotten themselves pinched on charges alleging participation in an illegal bid rigging scam at a public auction(1) may wish to consider an observation made by a Colorado Appeals Court in a 2010 ruling in considering whether to mount a defense before deciding to 'race to the prosecutor's office' and spill their guts about the racket, throwing their co-conspirators under the bus in the process in an attempt to beat the rap, or at least reduce any anticipated prison sentence.(2)

In the ruling, the court made the following distinction between what you can do and what you can't do when teaming up with others when bidding at auctions (bold text is my emphasis):

  • Federal antitrust cases distinguish between unlawful bid rigging and lawful joint bidding. Bid rigging has been found when two or more competitors coordinate their bids to a third party. United States v. Mobile Materials, Inc., 881 F.2d 866, 869 (10th Cir. 1989).

    However, "[b]id rigging should not be confused with joint bidding, which allows bidders to pool their resources to place bids on property which they would otherwise be unable to afford."
    Love v. Basque Cartel, 873 F. Supp. 563, 577 (D. Wyo. 1995), aff'd sub nom. Dry Creek Cattle Co. v. Basque Cartel, 95 F.3d 1161 (10th Cir. 1996) (unpublished table decision).[7](3)

    In Love, 873 F. Supp. at 566, 568, on which the trial court relied, the court determined that the bidding at an auction for a 90,000-acre ranch did not constitute bid rigging because the auction encouraged joint bidding: in early rounds, bids were taken on individual subdivided parcels; in later rounds, bids were taken on the ranch as a whole. Id. at 567, 578.

    The Love court concluded that in pooling their resources to bid on the entire ranch, the individual defendants had not suppressed competition as to the individual parcels. Id. at 577. And it found no evidence that anyone had been prevented from bidding on the entire ranch. Id.


  • In United States v. Guthrie, 814 F. Supp. 942 (E.D. Wash. 1993), aff'd, 17 F.3d 397 (9th Cir. 1994) (unpublished table decision), a bidder who twice paid other bidders not to attend foreclosure sales at which he submitted winning bids for $1 above minimum bid levels was convicted of bid rigging.

    Although unlike here Guthrie rigged the bids before the sales, the court's explanation of the anticompetitive nature of bid rigging as "an agreement between two or more persons to eliminate, reduce, or interfere with competition for a job or contract that is to be awarded on the basis of bids," is instructive. Id. at 949.

For the court's ruling, see Amos v. Aspen Alps 123, LLC, No. 08CA2009 (Colo. App. 2010),(4) which decided how to apply the foregoing cases to the facts before it, and its legal analysis in considering whether a foreclosure sale tainted by illegal bid rigging should be voided.

(1) See e.g. California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (Investigation Yields Eight Plea Agreements).

(2) "When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed." United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) (referring to the not-uncommon 'race to the courthouse' that breaks out among participants in an uncovered criminal conspiracy).

(3) In Kearney v. Taylor, 56 U.S. 494, 520 (1853), the Court explained that if "[t]he property at stake might be beyond the means of the individual, or might absorb more of them than he would desire to invest in the article, or be of a description that a mere capitalist, without practical men as associates, would not wish to encumber himself with," an agreement established joint bidding, rather than bid rigging. Joint bidding does "not . . . prevent competition, but . .. enable[s] . . . the persons composing [the agreement] to participate in the biddings." Id. at 521. However, "shutting out competition, and depressing the sale, so as to obtain the property at a sacrifice" is bid rigging. Id.

(4) Subsequent History: Writ of certiorari granted in part and denied in part Amos v. Aspen Alps 123, LLC, 2011 Colo. LEXIS 279 (Colo. Mar. 28, 2011).

Nevada Foreclosure Defense Attorney Seeks $1M In Bankster Sanctions For 'Contemptuous' Bad Faith Approach To State's Mandatory Mediation Program

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

  • The Nevada Supreme Court altered the foreclosure mediation landscape in dramatic fashion earlier this month when, in two separate cases,(1) justices made it clear lenders must follow two simple rules -- bring all relevant documents to the table and make sure someone with loan modification authorization is readily available.

  • A homeowner's lawyer in one of those cases, Terry Thomas of Reno, plans to test the waters Monday by asking Washoe County District Judge Patrick Flanagan to impose a $1 million fine against a banker who a mediator found acted in bad faith.

  • "Lenders were saying the rules were not really mandatory," said Thomas, who represents about a dozen homeowners facing foreclosure in the Reno area. Now, lenders have been forewarned that the rules are not optional, and the two Nevada judges who review failed mediations have been put on notice that they must sanction lenders who fail to strictly comply with those rules.


  • Thomas said the high court's rulings send an unmistakable message to lenders, but homeowners who can't afford to file an appeal "are screwed," he said, making it all the more important for district judges to hold lenders accountable when they fail to abide by the program. Mosley and Flanagan will have to start enforcing the law, "or lenders will continue to scoff at the system," Thomas said.

  • He said the $1 million sanction he seeks is not aimed at a lender whose noncompliance is minor, but rather one who exhibited contempt for the program, and by extension the state Supreme Court, which created the foreclosure program following the 2009 legislative session. The lender, whom he did not identify, skipped two mediation sessions.

  • "My clients just get stonewalled," Thomas said. "They are already in financial peril, and they pay thousands of dollars just to get to a mediation, and the lender doesn't care about the rules. This does real harm to real people."

For more, see Lenders feel pressure in foreclosure process.

(1) See:

For a short commentary on these cases, see Credit Slips: Nevada Supreme Court: You Gotta Prove Chain of Title.

Monday, August 1, 2011

Disregard Of Paragraph 22, Unreasonable Failure To Allow Amendment To Answer, Defenses Lead To F'closure Reversal For Clueless Florida Judge

From a recent ruling by a Florida appeals court:

  • In this mortgage foreclosure action, Pedro F. Laurencio and Esteves Pedro appeal the trial court's order granting summary judgment in favor of Deutsche Bank National Trust Company.

    Laurencio argues, among several things, that Deutsche Bank failed to meet a condition precedent to filing the complaint and filed suit prematurely, without giving them adequate notice and an opportunity to cure the alleged default.(1)

    Laurencio also argues that the trial court erred in denying the motion to amend the answer and affirmative defenses.(2)

    We agree on both issues and reverse.(3)
The trial judge in this case, Lee County Senior Trial Judge Hugh E. Starnes, obviously failed to meet the judicial challenge of getting it right on a foreclosure ruling, swinging and missing on the legal basics. By the way, this is not the first time Starnes has attained notoriety for his work on the bench in foreclosure cases, and was the target of a less than flattering February, 2011 op-ed column in The News-Press (Fort Myers, Florida).(4)

Regrettably for Judge Starnes, allowing himself to get roped in from out of retirement (possibly succumbing to the lure of a paycheck to supplement his pension) for a role on the notorious Fort Myers, Florida Foreclosure 'Rocket Docket'(5) may have, in hindsight, been ill-advised in that it soiled what for all I know may have been an otherwise unblemished judicial career. To the extent he thought he was doing a good deed by helping out the local court with the foreclosure backlog, maybe he should have known better, being mindful of the old saw, "No good deed goes unpunished."

For the full ruling, see Laurencio v. Deutsche Bank National Trust Co., 2D10-2448 (Fla. App. 2d DCA July 27, 2011).

(1) This screw-up by the trial judge resulted from his blatant disregard in failing to force the bankster in this case to comply with Paragraph 22 of the mortgage, which sets forth pre-suit requirements, including a requirement that the foreclosing bankster first give the borrower thirty days' notice and an opportunity to cure the default prior to filing suit.

On this point, the court stated (bold text is my emphasis):

  • In this case, Deutsche Bank failed to meet its summary judgment burden because the record before the trial court reflected a genuine issue of material fact as to whether Deutsche Bank had complied with conditions precedent to filing the foreclosure action.

    In a case with nearly identical facts, this court recently reversed a summary judgment of foreclosure. See Konsulian v. Busey Bank, N.A., 61 So.3d 1283 (Fla. 2d DCA 2011). In Konsulian, we concluded that the bank was not entitled to summary judgment because it had not established that it had met the conditions precedent to filing suit. Id. at 1285. The record in that case did not establish that the bank had given the defendant the notice which the mortgage required. Id. We reach the same conclusion in this case.
(2) On this point, the court stated (bold text is my emphasis):
  • The trial court also erred in denying Laurencio's motion for leave to file an amended answer and affirmative defenses. Leave of court to amend a pleading shall be given freely when justice so requires. Fla. R. Civ. P. 1.190(a). Public policy favors the liberal amendment of pleadings, and courts should resolve all doubts in favor of allowing the amendment of pleadings to allow cases to be decided on their merit. S. Developers & Earthmoving, Inc. v. Caterpillar Fin. Servs. Corp., 56 So.3d 56, 62 (Fla. 2d DCA 2011).

    A trial court's refusal to permit an amendment of a pleading is an abuse of discretion unless it is clear that: (1) the amendment would prejudice the opposing party, (2) the privilege to amend has been abused, or (3) the amendment would be futile. Id. at 62-63. "Courts should be especially liberal when leave to amend `is sought at or before a hearing on a motion for summary judgment.'" Gate Lands Co. v. Old Ponte Vedra Beach Condo., 715 So.2d 1132, 1135 (Fla. 5th DCA 1998) (quoting Bill Williams Air Conditioning & Heating, Inc. v. Haymarket Co-op. Bank, 592 So.2d 302, 305 (Fla. 1st DCA 1991)).

    Here, the record does not show that Deutsche Bank established any of the three exceptions to amendment of pleadings. There is no basis for concluding that Laurencio abused the privilege to amend or that Deutsche Bank would be prejudiced by the amendment which alleges, inter alia, the bank's failure to comply with its own documents.

    And the amendment clearly would not be futile considering the unrefuted allegations that Deutsche Bank failed to comply with conditions precedent to suit. See Wayne Creasy Agency, Inc. v. Maillard, 604 So.2d 1235, 1236 (Fla. 3d DCA 1992) ("A denial of leave to amend a pleading is an abuse of discretion where the proffered amendment indicates that a plaintiff can state a cause of action. The same holds true where a defendant demonstrates he could prevail with the assertion of a properly available defense." (citation omitted)). Therefore, the trial court should have granted Laurencio leave to file an amended answer and affirmative defenses.

(3) In footnote 2 of the Florida appeals court ruling, the 3-judge panel noted that, since it decided this appeal based on the two issues discussed in the opinion, it was unnecessary to address the merits of the homeowner's other arguments. Maybe the court felt the need to show some mercy on Judge Starnes by declining to rule on the remaining (possibly erroneously-decided) issues, thereby avoiding the appearance of 'piling on' their 'senior' lower court colleague.

(4) Regrettably, the op-ed piece does not appear to be available any longer on The News Press website.

See Some 'Rocket Docket' Judges Remain Unabashed In Their Cluelessness As They Continue To Bulldoze Home Foreclosure Cases Through System for a 'copied-and-pasted' reasonable facsimile of The News Press op-ed column.

See: The Florida Foreclosure Fraud Weblog: Banks Don’t Have to Follow the Rules in Lee County, Says Judge Starnes for a somewhat scathing observation on one of Starnes' rulings in a foreclosure matter.

(5) For more on the no-longer-state-funded, and now-defunct Fort Myers, Florida Foreclosure 'Rocket Docket,' see: